Talking New Energy: Unlocking C&I decarbonisation opportunities?

[00:00:01.680] - Jon Slowe

Welcome to Talking New Energy, a podcast from LCP Delta. I'm Jon Slowe.

[00:00:07.730] - Charmaine Coutinho

And I'm Charmaine Coutinho. Together, we're exploring how the energy transition is unfolding across Europe through conversations with guests at the leading edge.

[00:00:16.690] - Jon Slowe

Hello, and welcome to the episode. I'm joined today by my co-host, Charmaine Coutinho. Hi, Charmaine.

[00:00:25.240] - Charmaine Coutinho

Hello, Jon. How are you doing?

[00:00:26.590] - Jon Slowe

Good, thanks. And also, by Marko Coh who's Chief Development Officer with Resalta. Hello, Marko.

[00:00:35.350] - Marko Coh

Hello. Good to be here.

[00:00:37.400] - Jon Slowe

Marko, today we're diving into the world of energy services, ESCOs (Energy Service Companys) and working with commercial and industrial clients. That's your day-to-day work at Resalta. Can you tell us a little bit about Resalta, an elevator pitch, where you're from, what you do, who you work with?

[00:00:58.060] - Marko Coh

Yeah, sure. Thank you for having me. Resalta is decarbonisation as a service provider operator in Southeastern and Central Europe. Currently, we're operating across five countries with operational presence, and we are expanding towards Western Europe as we speak. We are maybe slightly different in that respect because as we understand, independent energy services providers in this part of the world are not that many as we speak. So, we are, according to independent data, one of the largest, if not the largest independent decarbonisation as a service provider in Southern, Eastern and Central Europe. So, we have been operating for almost 15 years now, evolving mostly from the heating and cooling technologies applications for commercial industrial clients to become more of a comprehensive, as I said, decarbonisation of the service provider, including technologies such as solar PV, still heating and cooling, building retrofit energy efficiency. And in that respect, we cover the energy services end-to-end, because on top of developing and implementing these technologies for commercial and industrial (C&I) and importantly, public sector clients, we also provide operations and maintenance, so enabling that these long-term projects, because that's what they are quite often 10 years, 15 years and more, that the user of these projects basically get the efficiency that they contract for.

[00:03:05.120] - Jon Slowe

So, you're bringing a mix of the technical skills, the operational skills, the investment and the finance, all enabling that decarbonisation of commercial and industrial buildings that you described.

[00:03:21.850] - Marko Coh

Yeah, that's right. And maybe just add just a few numbers to the point so that the listeners I can get a picture for what that is and the magnitude. We have done about 300 projects, over 300 projects. Obviously, it's increasing every year. Over 400 energy and carbon audits in that time, avoided what we are quite proud of, 250,000 tonnes of CO₂ emissions. These are some of the KPIs that we're working to, and we're doing that currently with about 140 employees across seven countries.

[00:04:08.530] - Charmaine Coutinho

Lovely. Thank you. It's really interesting, actually, and I think it's really nice for our listeners to hear around a company that's... How long have you guys been going from? Sorry, I should have checked.

[00:04:18.080] - Marko Coh

Since 2011, so almost 15 years now.

[00:04:21.980] - Charmaine Coutinho

Okay, yeah. You did mention 15 years. I think just seeing how that trajectory is changing. On that, I think certainly in Western Europe, but then in other places we see that there are opportunities for decarbonising the industrial and the commercial building sector. But from your perspective, where do you think that we are in this journey? You mentioned focus on Central and Eastern Europe, but that you're moving Westwards. Do you think we're at the beginning, mid, halfway through? What do you think?

[00:04:53.280] - Marko Coh

Oh, very much at the beginning. You would expect me to say that, but I think there are some objective parameters to support that. Maybe we split that into two parts. If we first talk about industry and commercial, then we talk about buildings. Obviously, in many cases, this will overlap. But when it comes to industry, I think maybe just worth mentioning that a part of my background also includes being a buyer of energy services, energy products in a COO, C-level type capacity in conglomerate companies.

[00:05:38.440] - Jon Slowe

You've been on both sides of the fence, Marko.

[00:05:41.900] - Marko Coh

I have. I have, yeah. Sometimes when I do my day-to-day job, I think in my previous roles, what would I want to see in front of me, which then helps us develop accordingly. But to going back to your question, if you think about a standard offering that many of my colleagues that are buying these services and are trying to decarbonise their operations get onto their desk would be something like, we have this object, we have this factory or something else or hospitality site. And what can we do? Well, we can obviously deploy a solar energy. Then when you do the calculation, you realise that maybe 20 or 30% of your energy needs within that object can actually be served by deploying the project. And then you go, “Oh, is that all there is?” So, that underpins the notion that we are at the beginning. And we are at the beginning because we are approaching this I think, and from where we see it as more of an energy supply thing. Whereas actually, if you go into the operations, this can be much more of a We haven't really scratched surface of electrification of industrial processes, heating and cooling, et cetera.

[00:07:23.950] - Marko Coh

I can understand that. I mean, it's one thing to put as we do in personalised to put a solar power plant onto the roof or in the car park or ground mounted or something like that, if we're talking about distributed energy, obviously. But it's another thing to go into the operations and change how you power your steam production or how you power your, I don't know, chemical processes. That's much more of a core business.

[00:07:58.230] - Jon Slowe

When you look at that, Where Charmaine's question was around at the beginning or halfway through the journey and right at the beginning, to mix analogies between low-hanging fruit and journeys. But how much low-hanging fruit is there? You mentioned 400 energy audits. Are you seeing really quick payback times? Are the economics there? Is it not an economics challenge? So yeah, interesting. I'm interested to hear how compelling are the economics when you're doing your audit and you're proposing. Hey, if you change this in your plant room or if you did that, you get a payback of three years or IRR of whatever.

[00:08:42.450] - Marko Coh

I think in the industry, the economics are increasingly positive and attractive, especially once you move from considering projects in isolation and considering decarbonisation as a programme rather than as a set of disparate projects. Then as soon as you bring into the equation heating applications, then the economics change. I would say the most challenging economics, at least in this part of the world, from what we see, is actually in the building energy efficiency. There, quite often, there is a component of a subsidy that makes the economics viable. Having said that, even in commercial and industrial space, C&I space, once the different technologies are mixed together, especially heating and cooling, and of course, any solar application is a baseline, then I would say in most cases, the economics is viable. I think the barriers reside more on the... Not anymore so much on the economic side. And of course, the declining curve of cost of various renewables technologies that we're all aware of is helping that. But I think there's something about the resourcing on the side of clients or potential users, because what we find is that quite often the organisations, and we work with multinationals, we work with regional champions, we work with municipalities, those who have brought procurement of renewable projects into their standard operating procedures and resourced accordingly, those face, I would say, very few barriers.

[00:10:56.940] - Charmaine Coutinho

Yeah, I can see that. I've got a theory on this, which I'd be interested in your thoughts on it, Marko. Historically, energy has sat with an energy manager or a facilities manager. If they are recommending a project, they might recommend them in isolation because they think, it’s easier to get one project through than to get a broad suite of projects because they need to get buy-in from lots of senior management. It's easier to do smaller projects, but you don't get the same returns on your investment in place. I don't know. Have you seen much evidence of that or is that changing?

[00:11:31.340] - Marko Coh

To a degree, but I think that's changing. Here, ESG (Environmental, Social and Governance) helps a lot. A lot of larger organisations are being serious about ESG. Obviously, ESG gets different reactions and different interpretations depending on who you're listening to or who you're talking to. But I think that we are now in the world where there is enough awareness awareness at the sea level that doing it piecemeal would actually mean a lower return and put potentially more strain on the organisation than doing it in a more of a programme fashion, and that resourcing is being put in place to deal with that. And of course, an important element is the financing. We are… We at Resalta have been doing ecotype projects for over 10 years, supported by investors, energy transition funds and banks and others. So, we've learned many creative ways, creative in the best positive sense, but many creative ways to package financing in the right way to come to clients or potential clients with a proposition that works for them. Because obviously for a number of potential clients, the long return on investments, which are just the nature of the energy industry, can be a barrier. But if a provider comes, obviously, with funding, then this is less of a barrier.

[00:13:28.850] - Marko Coh

We're slowly I would say, or in some cases not even slowly moving through the barriers. I think we're now at a stage where the scene stage, the stage is set for… for take-off.

[00:13:47.620] - Charmaine Coutinho

Great. It's really interesting about the finance. Maybe it'll be worth us having a chat, if you're able to, about any projects just to give the listeners a flavour of what's going on comes to fix?

[00:14:02.020] - Marko Coh

Yeah, absolutely. As I said before, and as anyone working in this industry, especially on the provider side like we are, knows this is a risk management type exercise, I would say. Pretty much all of our large projects, major projects, are about managing risks. I mean, even the smaller projects are about managing risks for us and for funding provider, whoever it might be, and for the client, obviously. So, this is the name of the game. Just to give you an example, because components of risk management differs slightly according to the technology. If you take solar PV, for example. So, we've recently completed a project for a chemical multinational in Southeast Europe. So, multinational is present around the world, but it has a facility in one of our markets in Southeast Europe. It's a six megawatt rooftop installation, one of the largest in that part of the world, and actually one of the largest for the client as well. So, you would think that such project encountered many operational challenges. And I have to say, because this client has its procurement and operations set up to actually absorb renewables project, it wasn't such an issue. So, we were able to deliver with them on time and on budget.

[00:15:54.940] - Marko Coh

They were actually the investor in this particular case. Now, where the challenge came, and I'm sure this will be familiar, was with grid connexion. This is where the commercial C&I world faces the regulatory and more utilities side of the story. And there, obviously, regulation and also utilities do and can operate on-

[00:16:26.800] - Jon Slowe

On their own terms. Yeah, on their own terms How long would it wait, Marko?

[00:16:36.200] - Marko Coh

It can be six months in this particular case, which doesn't necessarily sound like a lot because here in some countries, it can be years, especially in Western Europe, which is quite interesting. But considering that the project itself was delivered within about seven or eight months, six months grid connexion weight, and it's not passive weight, its active weight, which requires resources and engagement, is quite long.

[00:17:11.260] - Jon Slowe

Was the customer okay with that? Did it cause any major difficulties or more like a pain in the neck rather than any risking the project going ahead?

[00:17:21.320] - Marko Coh

I would say it was managed. It was managed from our end, and it was managed by them. And a customer like that has several layers within their organisation. So, certain layers were managing other parts of the organisation. So, that was It's doable, but I would say it is a challenge. It is a challenge for us and anyone that's operating in that market. So, the more the regulation and the grid connectivity can be improved, and more investment can be put into that space, obviously, the more the whole renewables industry will be able to take off, I would say.

[00:18:16.740] - Charmaine Coutinho

Yeah. I mean, it's interesting, isn't it? If we were to do a survey where a level of frustration or timescales on grid connexion issues, I'm sure people have a similar response. That's a tricky one. Is those quick connection times, is that something you see with all your clients, or does it really change depending on the country and the region?

[00:18:39.060] - Marko Coh

It depends on the country. It really depends on the country. Some countries have put in the effort and have gone further down the learning curve or regulation, implementation curve, if you will. Some others less so. So, it's more dependent on the country itself than on the particular client. What I would say, though, is that this, again, speaks somewhat in favour of what we said before of renewables project that go under the hood of operations. If you can do a project and decarbonise operations within the four walls of your operation, you have more under control than if you need to go to the outside world, if that makes sense. So, say, heating, cooling operations or projects generally have less exposure to external elements like grid connexions. There just isn't that element present there. That's not to say that regulation doesn't matter. We recently, in one of the Central European countries, we had to change the technology with one of our automotive multinational clients. We've scoped a project in one technology. In that case, it was biomass boilers to be put into their boiler rooms and decarbonise heating and steam production. The municipality didn't allow it because even though it's biomass, there are still some emissions.

[00:20:34.300] - Jon Slowe

From an air quality perspective then.

[00:20:38.020] - Marko Coh

Exactly. And we turned that into a few of the different heat pump-based technologies, a few of smaller projects, and that's the direction we're taking right now. So, being independent enables us to customise the technology the scoping of projects in this way. So, that's what held us in good stat over the last few years.

[00:21:09.120] - Jon Slowe

And any other nice project example, Marko, you'd like to share?

[00:21:15.770] - Marko Coh

No, absolutely. We haven't spoken that much about buildings and building retrofit. So, maybe I would like to touch on this one.

[00:21:23.640] - Jon Slowe

Often the hardest one, isn't it?

[00:21:26.600] - Marko Coh

Yeah. We sometimes say that this is the Champions League of a renewable space. So, it's division one, division two, and then it's the Champions League because it basically brings everything together. It sounds simple. Oh, you're retrofit building. It's not. It's one element. But obviously, if you're doing building retrofits, you generally retrofit the heating components, cooling components. The any energy supply that the building receives or electricity supply. So, you end up doing everything in our world. And the numbers are just staggering. If you look at some of the markets, the assessments, we've read recently that Ireland is talking about €9 billion worth of building retrofit needing to be done over the next however many years. It's 1. 5% of GDP of Ireland, if my math is correct. We have that in Southeastern Europe, say Croatia, assessment is 1 billion, and that is 1% of GDP. So, you're probably looking at 1% to 2% of GDP in any given country that you take. So, it's a lot. The… The reason why this hasn't maybe been done so much is, again, probably a combination of regulation and also the incentives or just the decision-making processes that take place at the client side, because clients, in this case, are governments and municipalities.

[00:23:24.490] - Marko Coh

We were able to do quite a lot of that in our original market, which is Slovenia, which is a small European country, but quite advanced in terms of regulation for renewables. We were able to do projects in building retrofit for the capital city of Ljubljana, which actually won an award a few years ago at the European level for the best renewables project in building retrofit space. So, So-

[00:24:01.000] - Jon Slowe

Did you do much to the building fabric in that project? Is it insulation?

[00:24:07.850] - Marko Coh

Yes, we had. Yeah, absolutely. Insulation, the whole envelope of buildings. And what was important there was that this was done, and quite many of these projects are done on buildings like hospitals, schools, municipal buildings and so on. So, they do have a quality of life component for a large part of population, which is not often talked about, but is definitely a benefit that governments and municipalities are looking for. Our experience was that we were able to then take that model, which we've co-developed with the capital city and the representatives of the city to various neighbouring countries. And now, having done that in neighbouring countries, we're now putting that out into the Central and Western Europe because we have references in that space. We thought, oh, we are unlikely to do any of that stuff. Then we went there, and we realised that it's actually less developed than we expected.

[00:25:26.400] - Charmaine Coutinho

Yeah.

[00:25:28.200] - Jon Slowe

Just before we I'll bring out the Talking New Energy your energy crystal ball. One last question for me. The buildings projects that you just described, what's the biggest risk management element to those projects? You talked about risk earlier on. How would you think about risk with those?

[00:25:48.460] - Marko Coh

If we're talking about, again, building retrofit projects that contain many technologies, it's a energy world meets real estate world or construction industry world. You get risks from both worlds, and then they multiply. You have a combination of-

[00:26:13.570] - Jon Slowe

That sounds a bit scary.

[00:26:14.410] - Charmaine Coutinho

I mean, also, you like construction and energy and the health and safety involved. Yeah, it sounds like...

[00:26:22.100] - Marko Coh

Absolutely. It comes together and it gets multiplied. So, it comes back to what you would expect to see in construction projects. So, it's health and safety, it's working at heights, it's all of that. Then because there's energy, there's dealing with electricity, dealing with heat. And we've recently, not in this particular project that I referenced before, but another one, what we find as renewables developer and implementer that we are obviously in a value chain or in a supply chain, and a particular object caught fire had nothing to do with us. It was being rebuilt, and in the course of it being rebuilt, it caught fire. It delayed the implementation of, in this case, solar PV, solar power plant. It's that world of a world. We have quite a few construction engineers, civil engineers in the business, which maybe more than you would expect in a renewables company. That's what the real life of this business is.

[00:27:50.560] - Charmaine Coutinho

I think that's a really good point, the real life of trying to deal... A civil engineer, very used to dealing with multiple different factors as well as the construction process, as well as dealing with that whole supply chain of clients and suppliers and the customer, but then also the installers. Yeah, very complex group of people. Okay, I think we are getting close to time. Jon, I'm going to pull out Chris or Ball this time. Sure. Marko, I think we can look towards now 2035, and specifically your perspective on what types of changes or different types of projects in the decarbonisation world, the result will be walking on. So, it might be the same, right? Yeah. Over to you.

[00:28:38.790] - Marko Coh

Sure. Yeah. Let's talk about the world in the first, for instance. We did mention the electrification of industry. We think that's one trend that is likely to pick up, including heating applications.

[00:28:57.160] - Jon Slowe

Are you seeing that already? You're seeing that already, Marko?

[00:29:01.130] - Marko Coh

We are, and we think that technologies that enable service of higher temperature regimes will come along. As you know, say, for instance, heat pumps at the moment have a certain natural constrained with respect to temperature regimes where they can be efficient. We think this is going to evolve. We'll get new generations of heat pumps connected to even more efficient electricity generators, and this will give you a cycle of low or no emissions technologies. We do obviously expect to be a player in that market. We do expect to be a top European competitor in decarbonisation space. We are a part of Aggreko Group, which is obviously a premier provider of thermal generators all around the world. We are obviously working in synergy with our colleagues from Aggreko in geographical sense, technology sense, organisational sense. So, we do plan to do more global accounts, do more in Western Europe, possibly getting to 10 countries in a few years time, and doing the largest, most complex C&I projects in Europe. The market is there. The references that we bring to the table are there. The finance is there. The demand is there. The scope three and ESG is there.

[00:30:46.990] - Marko Coh

We think the ingredients are there for companies like ours to do much more in the European market than what we're seeing right now. So, there will be growth.

[00:30:59.520] - Charmaine Coutinho

Great. I'm going to summarise that as bigger, better, electrified and further afield. Not so many bees. I would like to put all the bees together. Thank you very much, Marko.

[00:31:13.030] - Marko Coh

We'll still reply if we may.

[00:31:15.740] - Jon Slowe

Have to work on your alliteration, Charmaine.

[00:31:18.920] - Charmaine Coutinho

Yeah, I know. Next time, right, Jon, that was great. I love that one. I like talking about the C&I sector. I think it's really fascinating, especially seeing the pace of change. What was What are the standouts for you, Jon?

[00:31:31.820] - Jon Slowe

Standouts for me, I think, are that the ingredients are there, as Marcus said. But we're right also, as Marko said, we're right at the beginning of the journey. I think maybe a little bit more in South at least in Europe, but across Europe, there's so much to do. Some of it is straightforward, but a lot of it is really hard and complex, and these are the different skills that Marko talked about being brought together. So, we need a lot more of this. Good luck to Resalta. There's lots to do, lots to go for. If we're to hit our decarbonisation goals, companies like Resalta are going to have to really do well with commercial and industrial customers.

[00:32:16.570] - Charmaine Coutinho

Yeah, I agree. I think also what was really heartening is that I got the feeling customers are ready, so it's not customers. There's no changing. You need to convince the customers to do it, which I think was some of the challenge, maybe, say, 10, 15, 20 years ago, maybe when the results started up. That's really heartening to see.

[00:32:34.790] - Jon Slowe

A bit more pulling a bit, not quite so much push maybe.

[00:32:41.700] - Charmaine Coutinho

Absolutely. Okay, well, thank you very much, Marko.

[00:32:48.070] - Marko Coh

Thank you.

[00:32:49.420] - Charmaine Coutinho

Jon, thank you. I'm going to say thank you to you. That's all right.

[00:32:53.160] - Jon Slowe

And thanks, of course, to our listeners. Hope you enjoyed the episode and look forward to welcoming you back next week. Thanks, and goodbye.

[00:33:01.530] - Charmaine Coutinho

Thanks for tuning in.

[00:33:03.990] - Jon Slowe

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[00:33:12.670] - Charmaine Coutinho

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