The need to carry out investments to improve the energy efficiency of a building can constitute a barrier for public administration bodies. Implementing an energy performance contract with an energy service company (ESCo) can overcome this obstacle, as it allows for energy-saving measures to be implemented in an alternative way to finance the initial cost of investment within a public-private collaboration framework.
Within this model, the ESCo organises a preliminary study, defines the improvements (such as those described in the best practice improving the energy efficiency of public buildings), develops and builds them with the guarantee of obtaining a set level of energy savings, and in many cases arranges financing to pay for the projects with repayments less than the savings. As energy cost savings will exceed the cost of the improvements, it will make it a financially viable plan.
There are two main models of energy performance contracts:
- shared-savings contract, where the ESCo and the public administration body share the cost savings at a predetermined percentage for a fixed number of years
- guaranteed-savings contract, where the ESCo guarantees a defined level of energy savings for the customer, which then receives a cheaper energy bill.
The measures implemented by ESCos can be of different complexity. They can range from simple operations and the use of inexpensive technologies (the replacement of installations and the regulation of energy systems such as monitoring, light steering, heat regulation and so on), to more costly investments with a longer payback period (monitoring and regulation in combination with building envelope).
Introducing such contracts and collaborating with the ESCos can provide another important advantage for public administration bodies as it allows them to acquire skills in relation to the refurbishment of buildings and new forms of public-private collaboration.
Energy-saving measures can also be carried out by the municipality staff. This in-house approach is not necessarily in contrast with the ESCo approach. In fact, the approaches should be able to reinforce each other, with the ESCo plan somehow contributing knowledge and experience to the in-house staff.