The SmartSPIN contractual template is now designed!
Lawler Sustainability together with EUNICE have designed a contractual template what will govern the relationship between the Energy Service Companies (ESCOs), landlords and tenants.
On the one hand, the template is based on the key features and recommendations gathered during the market evaluation carried out by IERC and the contractual service definition addressed by Lawler.
On the other hand, EUNICE compared 15-minutes consumption data for particular clients with the System Marginal Price (SMP) – i.e., the electricity market’s hourly clearing electricity price, with the electricity price paid by the customer – for every hour of every day suing data provided by the authorised Distribution System Operator (DSO). As a result, EUNICE could create a tariff for the demonstration site in Greece so that it can be tested in use during the demonstrations activities.
The contract template would preferably be a tri-partite model including Landlord/Tenant/ESCO. But in reality, this is not likely in the foreseeable future and it is envisaged that most contracts will be bi-partisan between Landlord and ESCO.
The fundamental stepping stones to getting to a contract stage are multi- staged and generally include an initial quick survey then followed by an Investment Grade Audit (IGA) that would need to include the Carbon neutrality based on implementing the Energy Conservation Measures outlined. The latter would show the division of savings between the Landlord and tenant. The engagement of both parties could be encouraged by the concept of green leasing to encourage transparency. In addition, a suggested Memorandum of Understanding (MoU) added to the existing lease – with terms mutually agreed – could be a means to incentiviSe cooperation.
In terms of estimation of saving, it will not only include energy but also Demand Side Management (DSM) type as outlined in previous European projects Novice and SENSEI. Moreover, the Services Level Agreement (SLA) should be added to the existing contract. This will generally bring more comfort conditions for all, as more accurate controls will also include indoor air quality as well as temperature. Based on the data generated by other EU projects, data storage and transfers and data protection measures are recommended.
Learning from the SmartSPIN project
To date, the main learnings obtained by the SmartSPIN project related to the contractual template are the following:
1. What Characterises Early Mover
- Asset risk awareness & actively seeking to mitigate
- Poor performing building that simple business case around performance can be made
- Tenant with strong Sustainability/ESG building agenda
- Tenant where operating costs are significant
- Tenant that values lower operational costs
- Long lease in place
- Tenant lenient towards operational disruption
- Moves ahead of legislative compliance
- Staff comfort and wellness very important
- Good building / moderate investment
- High energy and carbon footprint through conflicting landlord / tenant systems
- Brand protection / market differentiation
2. What Changes might we need to Leases / Agreements
- Move from serviced to paid utilities
- Share and disclose energy , water , waste & GHG reporting
- Cost recovery cluse inclusion
- Upgrade facilitation clause
- Move away from grey box reinstatement
- Tenant fit out to promote use of passive building features – cooling sink of structure
- Agreement alteration so that tenants buy on-site power generation
- Building energy / carbon /sustainability performance committee
- Min fit out ( accredited) standard by tenant and aligned credentialing
- Set KPI’s regarding sustainability
- Management and procurement team to have sustainability training
- Encourage single FM provider approach
Based on this information, the following questions have been identified to create the environment for progress.
- Equity of cost/benefit – so if investment brings asset protection and operational efficiency how might this be shared? Who assesses validates & confirms this – from tenants perspective preferably independent of landlord / owner.
- Who finances projects & how ?
- Who acts as guarantor for loans / funding ?
- Is there new financial products/ innovation required here ?
- Changes to lease agreements- cost recovery , sustainability collaboration, accommodation of improvement disruption
- What changes to legal landscape might be needed and how challenging might these be ?
- What recommendations to govt might be suggested ? – economic stimulus needed to kick start progress and unlock a huge amount of economic spin off in Engineering & Construction Projects.
- Mapping of where this issue sits on building owners list of competing priorities and how it can be brought to the top across all building typographies
