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TOP 5 EEOS facts to know

28.11.2023.
4 mins
What will you read about?

Energy Efficiency Obligation Scheme: a new policy instrument to help achieve 7 PJ of new final energy savings per year from 2021 to the end of 2030 to meet the target set in the National Energy and Climate Plan.

Which projects are eligible for EEOS funding?

All projects that result in final energy savings are eligible. The only important exception to this is where an energy improvement does not result in final energy savings (i.e. a reduction in energy DEMAND), but in meeting the remaining demand, e.g. with renewable energy: such an exception is solar PV systems.

All other energy efficiency improvements (except where the replacement of a machine/equipment beyond its lifetime does not result in energy savings compared to the applicable EU minimum energy efficiency level: see next section) will result in an eligible final energy saving, but this is not exhaustive:

  • Building envelope modernisation (façade, roof insulation, replacement of windows and doors)
  • Energy efficiency upgrading of heating system (boiler replacement, heat pump, control system upgrading)
  • Energy efficient replacement and modernisation of technological equipment (motors, pumps, fans, air handlers)

End of useful life (early replacement or not?)

As yet, few people are aware or pay attention to the fact that the savings that can be claimed under the EEOS depend to a large extent on whether or not the useful life of the machinery/equipment/system to be modernised has expired.

  • If the useful life has not yet expired (the EEOS legal framework specifies how long this is for most investments), we talk about so-called early replacement, in which case the savings are compared to the consumption of the existing system.

If, however, the useful life has expired, the legal framework only allows for savings to be calculated compared to the current EU minimum energy efficiency level, which in many cases may be as low as 10-40% compared to early replacement

Example:

  1. Boiler replacement: a boiler has a useful technical life of 25 years, was installed in 2010, so has 12 years of useful life left. In this case the investment is an early replacement, the energy savings will be the difference in efficiency between the existing boiler and the new boiler.
  2. Installing a heat pump instead of a gas boiler: a boiler has a useful technical life of 25 years, installed in 1990, so its useful life is 8 years over. In this case, the investment is NOT an early replacement, the energy savings will be the difference between the current EU minimum energy efficiency level for heat pumps and the efficiency, seasonal coefficient of performance of the new heat pump being designed.

How much revenue can we expect?

In the market, currently, obligated parties are buying up the savings certified in the EIF system at a price of 10-15.000 HUF/GJ in order to meet their obligations. Thus, if we have an energy efficiency project with savings of 1000 GJ/year, we can expect a total revenue of ~10-15 million HUF after its validation by an energy auditing organisation (so it is important to compete properly, as there can be a large variation in the purchase price available), reduced by

  • Other subsidies used (e.g. attracting grant funding with 40% subsidy, also reduces the amount of savings that can be accounted for in the EEOS by 40%)
  • Energy auditing and certification fees (typically 40-50% of projects depending on the size and complexity of the project and the fees of the auditing organisation)

Expected revenue for the end user for savings of 1000 GJ/year ~7 million HUF

What are the key milestones to EEOS accounting/revenue?

Definition of the energy efficiency improvement target

This can be done by engaging an external energy consultant or by involving in-house engineers and colleagues responsible for rationalising energy use.

Implementation of the energy efficiency project

Energy savings can only be accounted for once the investment has been completed, i.e. after the construction work has been carried out, the EIF can be sold.

Audit and verification of the savings achieved by the project

This process can only be carried out by an energy auditing organisation registered with the MEKH. The audit will establish the actual energy savings that can be achieved (verifiable by calculation), for which the energy auditing organisation will be responsible. The calculation of the savings is followed by their validation and uploading into the EEOS system.

Selling the verified savings

With in-house resources or the involvement of an external consultant, the process of bidding for the obligated parties and soliciting bids for the sale of the savings can begin. Once the best price has been determined and the obligated party selected, the process ends with the conclusion of a contract and payment of the purchase price.

What should we look out for during the process, what can the EEOS project fail?

Documenting the baseline for early replacement

If the energy auditing organisation has not been involved in the pre-investment phase, proper documentation of the pre-investment baseline can be critical to the work and responsibility of the auditing organisation, so it is always worth paying close attention and being thorough.

Awareness of EU minimum requirements - NOT for early replacement

Already during the conceptual design phase of the investment (and especially during the implementation design phase) it is important to be informed about the EU minimum energy efficiency requirements, both to meet this requirement and to ensure that you will only have EEOS revenue from the project if you build a system with better energy efficiency.

Involvement of an energy auditing organisation at an early stage

Because of the above two points, and for the smoothness and efficiency of the whole process in general, it is worthwhile to involve the energy auditor organisation as early as possible (preferably before the investment, at the conceptual design stage), so that they can effectively support the project progress with their experience and energy expertise.


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