European Energy Service Initiative

EESI Publishable Report

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The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of

the European Communities. The European Commission is not responsible for any use that may be made of the information

contained herein.

http://www.european-energy-service-initiative.net

Author: Berliner Energieagentur GmbH

September 2012

Project Coordinator

Berliner Energieagentur GmbH, Französische Straße 23, 10117 Berlin (Germany)

Partners

Graz Energy Agency (GEA), Austria

Josef Stefan Institute (JSI), Slovenia

Norwegian Energy Efficiency Inc. (NEE), Norway

The Energy Efficiency Center (SEVEn), Czech Republic

Cenergie, Belgium

Romanian Agency for Energy Conservation (ANRE), Romania

Rhônealpénergie-Environnement (RAEE), France

Energy Center Bratislava (ECB), Slovakia

Swedish Environmental Research Institute (IVL), Sweden

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Executive Summary

The European Energy Service Initiative (EESI) has broadly promoted the implementation of

Energy Performance Contracting (EPC), thus contributing strongly to the establishment of

effective energy service markets in Europe. Within EESI, existing standards and tools for EPC

and other energy services from earlier European projects such as ClearContract and

Eurocontract served as the basis for EPC promotion as well as for further development of

EPC models (such as EPC plus, EPC light, IEC).

Local and regional capacity-building has been achieved in the EESI project through national

online-help desks, frequent training events for local authorities, companies, and multipliers,

as well as consultancy for applying and advancing EPC-standard procedures and

instruments in concrete pilot projects. The promotional campaign implied the integration of

EPC issues in national trade fairs and the high-profile annual awarding events of the

“European Energy Service Award” (EESA). Based on the experience from pilot projects and

development of standards in all partner countries, policy recommendations were derived to

further support the energy services market in Europe.

EESI made a strong contribution to the further establishment and implementation of

standardized EPC models in Europe. This underlined the potential of EPC as a prime

instrument for the implementation of the Energy Service Directive, for the respective

National Energy Efficiency Action Plans (NEEAP) and for the further development of a

European Energy Service Market.

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Contents

1 European Energy Service Initiative.........................................................................................5

1.1 Project Data...........................................................................................................................5

1.2 Project Partners ....................................................................................................................6

1.3 Results ...................................................................................................................................7

1.4 Performance Indicators.........................................................................................................8

2 Introduction to Energy Performance Contracting....................................................................9

2.1 Definition of EPC ...................................................................................................................9

2.2 Energy Audits ......................................................................................................................10

2.3 Determination of the Energy Costs Baseline ......................................................................12

2.4 Public Tender ......................................................................................................................13

2.5 Energy Performance Contracts ...........................................................................................16

2.6 Energy Savings Verification.................................................................................................17

2.7 Financing .............................................................................................................................17

2.8 Advanced Models of EPC ....................................................................................................19

3 Market Overview of EPC in the EESI Countries......................................................................21

4 EPC Barriers ........................................................................................................................29

4.1 Legislative and regulatory barriers......................................................................................29

4.2 Awareness and knowledge barriers....................................................................................33

4.3 Financial barriers.................................................................................................................35

4.4 Implementation barriers .....................................................................................................37

5 Success and impact of EESI ..................................................................................................38

5.1 Overall success stories ........................................................................................................38

5.2 Success and impact by country ...........................................................................................40

6 Policy Recommendations.....................................................................................................61

7 Further Information ............................................................................................................64

8 Abbreviations......................................................................................................................65

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1 European Energy Service Initiative

1.1 Project Data

Project Duration: June 2009 – June 2012

Project Website: www.european-energy-service-initiative.net

Project Coordination: Berlin Energy Agency (BEA)

Target Groups:

• Representatives from public sector real estates and other decision makers in local

administrations with respect to communal building stock, e.g. representatives from

the Finance Department, Authorization Department, Planning and Housing

Department

• Private real estate companies

• Other public building users.

Key Actors:

• Energy Service Companies (ESCOs), Energy Agencies and Financial Institutions;

• Policy-Makers on National and European Policy Level;

• Climate Networks, National ESCO Associations, etc.

Main Objectives:

• Local and regional capacity-building through targeted

information and consultation for relevant decision

makers (e.g. real estate managers, local treasurers,

political stakeholders, financial institutions);

• Further development of a quality standards for EPC

projects;

• Broad promotion and implementation of EPC pilot

projects with the public sector as leading example;

• Advice to policy-makers on the potential contribution of

energy services to national energy efficiency objectives.

Fig. 1: EESI Countries

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1.2 Project Partners

• Berlin Energy Agency (BEA), Germany

• Graz Energy Agency (GEA), Austria

• Josef Stefan Institute (JSI), Slovenia

• Norwegian Energy Efficiency Inc. (NEE), Norway

• The Energy Efficiency Center (SEVEn), Czech Republic

• Cenergie, Belgium

• Romanian Agency for Energy Conservation (ANRE), Romania

• Rhônealpénergie-Environnement (RAEE), France

• Energy Center Bratislava (ECB), Slovakia

• Swedish Environmental Research Institute (IVL), Sweden

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1.3 Results

• 30 EPC pilot projects (classical & advanced models) in 10 countries initiated, resulting

in CO2 savings of more than 45.000 t per year;

• National EPC helpdesks in 10 countries;

• Websites on EPC online with constantly updated news, hotline contacts, good practice

examples and tools from 10 countries;

• Promotion of EPC in more than 80 events across Europe, among this three high profile

European Energy Service Award (EESA) events

• More than 60 EPC trainings carried out for municipalities, financial institutions and

ESCOs with more than 2000 participants;

• 195 national online newsletters, press releases and media coverings were placed to

promote EPC.

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1.4 Performance Indicators

Specific objectives Target of success Action achieved

Information and capacity

building of local and

national decision makers on

existing EPC standards

Help-desks in 10 European

countries

All 10 helpdesks have been installed.

The contacts can be found on the

national websites and on the national

leaflets

1 central website (English)

10 sub-sites in national language

1 central website and 10 national

websites are online with constantly

updated news, hotline contacts, good

practice examples, and tools

40 national fairs or similar events Promotion at 88 events

52 training events with projected

520 participants

62 Training events carried out with

more than 2000 participants

Initiating pilot EPC projects 24 pilot projects in 10 countries 30 pilot projects have been initiated

during the project, 2 of them are

Advanced EPC

Policy recommendations 10 country specific policy papers

1 European position paper on EPC

10 national policy recommendation

papers were developed during the

project and 1 European position paper

European Information and

Promotion of EPC

3 European Energy Service Award-

EESA events (2009, 2010, 2011)

EESA 2009 bestowed in 6 categories in

Brussels

EESA 2010 was bestowed in September

2011 in BOZAR in Brussels

EESA 2011 was bestowed in the

framework of the EUSEW 2012 in

Brussels

47 national online newsletters 42 newsletters have been sent to

stakeholder groups. Visitors of the

website can subscribe to 10 national

newsletters

29 national press releases

95 media coverings

34 press releases and 125 media

coverings were placed

40 presentations at national and

European seminars / conferences

88 presentations were held and several

more are planned

Final brochure (1.000 copies) The English brochure was elaborated,

printed and distributed

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2 Introduction to Energy Performance Contracting

2.1 Definition of EPC

Energy Performance Contracting is a proven and cost-efficient instrument for tapping

existing energy saving potentials in the buildings sector. An Energy Service Company (ESCO)

implements a customized energy service package, consisting of planning, building,

operation & maintenance, optimization, fuel purchase, (co-) financing and user behaviour.

The contract between ESCO and building owner contains guarantees for cost savings and

takes over financial and technical risks of implementation and operation for the entire

project duration of typically 5 to 15 years. The full EPC service or main share of it is paid off

by realized energy cost savings.

EPC deals with the optimization across the trades of automation installations in buildings

and building operation by an ESCO in the form of a co-operation based on partnership.

Typical modular performance components of the ESCOs services are financing, planning and

installation of components for energy generation, distribution and usage as well as their

operation and maintenance, see Fig. 2. Integration and training of the users are often part

of EPC as well.

Fig. 2 Typical modular structure of EPC projects.

Source: after Bleyl, Schinnerl, 2008.

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Since there are various European model contracts and different approaches for EPC, the

EESI project defines the main distinguishing feature of EPC as the financing of the

investments via the guaranteed cost savings achieved through improved energy efficiency.

Fields of application for EPC are objects of existing buildings. The most favourable customer

group in Europe is the public sector. Several buildings may be combined into one contract

as a building pool.

The following sections 2.2 to 2.8 give a brief description of key issues when developing and

implementing EPC projects1:

• Energy Audits

• Determination of the energy cost baseline

• Public Tender

• Energy Performance Contracts

• Energy Savings Verification

• Financing

• Advanced Models of EPC

2.2 Energy Audits

When preparing a project on energy savings in buildings and facilities, it is necessary to

begin with determination of the initial situation of the facility. Based on such an analysis, (a

combination of) measures to improve the energy efficiency and effectiveness of the facility

can be suggested. The final combination of measures that will be implemented depends

mainly on the economic analysis of the suggested options. An energy audit is one possible

option of performing such an initial analysis. The energy audit can also provide

recommendations whether EPC is suitable for the respective facility.

In any case, if the customer decides to use EPC, an energy audit cannot replace the

following in-depth analysis, which an ESCO needs to carry out when implementing the

measures under EPC. The reason for this is that the analysis carried out by the ESCO is very often

more focused (neglecting e.g. windows or other building parts not likely to be included in EPC) than

is usually the case in “regular” energy audits, and at the same time the analysis has to be much

more thorough in the relevant areas. Furthermore, if the energy audit has been prepared before an

EPC tender process, the ESCO may need to review all the data in the audit and additional other facts

necessary for EPC.

1 For more detailed information, please see the ”Standard Documents” on the EESI website:

http://www.european-energy-service-initiative.net/eu/toolbox/standard-documents.html

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With respect to EPC, the energy audit is therefore an important tool in the initial state of

the project. However, if not carried out by the ESCO itself for the purposes of EPC (or by an

external auditor, but with the view of the needs of EPC), it will always have to be

complemented by further analyses.

Content of Energy Audits

An energy audit as a tool for evaluation of the existing levels of energy use and

management in the facilities should contain:

• Identifying data;

• Description of the initial situation;

• Evaluation of the initial situation.

The description of proposed measures is accompanied by a calculation of the total amount

of technically attainable energy savings. The selected option which is then recommended

for realization should further contain:

• Economic evaluation;

• Environmental evaluation.

Outputs of the energy audit are:

• Evaluation of the existing energy management system;

• Total amount of attainable energy savings (in technical units);

• Proposal of optimum combination of measures (including economic evaluation);

• Recommendation of the energy auditor for the realization of an energy efficiency

project;

• Evaluation of the use of renewable energy (RE) sources and Energy Performance

Contracting for the specific audited subject (including economic evaluation).

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2.3 Determination of the Energy Costs Baseline

The basis of the energy costs baseline is the energy consumption in a reference year (e.g.

past year before implementation of EPC) in connection with the energy supply prices

applicable to the client at a certain key date (e.g. 31.12. reference year). In some EPC

projects it might be reasonable to demand the inclusion of additional media in the baseline

such as water supply and sewage disposal. For reasons of convenience, the term energy

costs baseline will be used hereafter.

The baseline is to be provided to all bidders in the invitation to tender. They will prepare

their saving forecast on this basis. In the context of the implementation planning, the

baseline might be finally checked and confirmed by the contractually bound ESCO.

Here are some general remarks regarding the determination of the energy costs baseline:

• The energy costs baseline should be above a certain threshold (about €200,000 in

most countries) for a project to be suitable for EPC. Only then the relation between

basic expenditure and achievable savings will be interesting for ESCOs in economic

terms. Pooling of several buildings into a single EPC contract can be an option to

aggregate a reasonable volume for the baseline. In special cases, e.g. involving self-

financing by the client, smaller project sizes can also be realized.

• Higher energy prices are a better refinancing basis for efficiency measures. Therefore,

higher reference prices should rather be estimated for the baseline in the case of

price fluctuation or foreseeable price increases.

• Maintenance costs are usually not included in the baseline and, accordingly, any

maintenance cost saving (which may well be achieved) will not be rated as a cost

saving within the meaning of the saving guarantee. Exceptions are possible at the

client's request if the amount of the achievable cost saving can be forecasted in the

run-up to the invitation to tender.

• All consumption units should be stated in kWh (if applicable with the appropriate

factors/calorific values) to take account of possible changes of the energy sources

(e.g. from oil to gas). For the calculation of CO2 emission savings, the current CO2

emissions and factors have to be shown in the baseline as well.

Baseline Design

The consumption of the respective energy demand types of the most recent completed

calendar year preceding the EPC project will be used as the basis for the ESCO's saving

guarantee and the annual proof of savings to be provided later on. That year is called

reference year (baseline year).

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To ensure that the selected year is representative, the underlying energy consumption

figures should be compared to those of the two preceding years. As an alternative, an

average consumption value of the three previous years may be defined as baseline. The

calculation methodology has to be defined in the EPC contract. As specific energy prices for

each metering point, if applicable broken down by price components such as kilowatt hour

rate and basic price, these prices should be shown explicitly as reference energy prices in

the EPC contract prior to the start of EPC.

Fig. 3 Baseline – step by step

2.4 Public Tender

Public organizations are usually required to carry out public tenders to implement EPC.

However, some essential parts of such procedures may also be useful for private customers

to obtain the best EPC bid (e.g. bid evaluation, demand definition, etc.). Based on the

acquired experience, it is recommended that the invitation for tenders for public contracts

takes place in the form of a negotiated procedure with disclosure. This method allows the

contracting authority to discuss with the best tenderers the final terms of the proposed

contractual relationship even after the bid submission and to select the future contractor

solely on the basis of these negotiations. Prequalification of eligble tenderers is

recommended since EPC is a complex energy service that needs experience for

implementation on both sides, client and ESCO.

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Fig. 4 Schedule of EPC tender procedure (example of German procedure, differences in other countries are

due to national procurement regulations).

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With respect to the long term duration of the EPC contract, it is always helpful to have the

decision on the future manner of the utilisation of the building or premises accepted by the

owner who is authorised to approve future commitments of the client. Public clients with

little experience in EPC may use the help of experienced organisations such as energy

agencies or consulting companies for project development and tender management.

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2.5 Energy Performance Contracts

The Energy Performance Contract between an ESCO and the building owner usually

contains guarantees for energy (cost) savings and regulates allocation of financial and

technical risks for implementation and operation during the entire project duration of

typically 5 to 15 years.

Since there are various European model contracts and different approaches for EPC the EESI

project defines not ONE European model contract but the main distinguishing features of

Energy Performance Contracts and makes different proven model documents available

(please refer to the EESI website http://www.european-energy-service-initiative.net).

The main components of an Energy Performance Contract (based on the reviewed model

contracts) can be summarized as follows:

1. Guarantee of savings – the Energy Services Company guarantees a certain amount

of yearly savings to be achieved throughout the duration of the contract. The

contract also has to clearly define what happens,

• If the guaranteed savings are not achieved, i.e. there has to be a clear

description of how the ESCO settles the negative difference between

guaranteed savings and actual savings or;

• If the guaranteed savings are exceeded, i.e. there has to be a clear description

of how the excess savings are distributed between the client and the ESCO.

2. The volume of investment to realize the guaranteed savings and a commitment by

the client to pay for the investment after its installation (via the fee to the ESCO).

3. Clear definition of a baseline (reference scenario) of the future energy consumption.

It is set in physical units (e.g. kWh). For all financial and economic purposes, the

reference scenario is calculated in prices of the reference year.

4. Obligation of the ESCO to provide a report on yearly savings evaluation. In this

evaluation, the ESCO documents to the client the actual amount of achieved savings

in the respective year – in physical as well as monetary units.

5. Responsibility of the ESCO for correct design of the energy saving measures and

their realization.

6. Obligation of the client to provide proper conditions for realization of the energy

saving measures.

7. Planned duration of installation of the investment.

8. Way of transfer of the installed energy saving technologies to the ownership of the

beneficiary.

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9. Means of payment for the services and savings. Usually these are paid as a monthly

fixed advanced payment agreed by both parties. At the end of each year of the

contract, after the savings evaluation (as in 4), the payments are settled.

10. Declaration of the purpose of operation of the facility on which the Energy

Performance Contract is effectuated.

11. Duration of the contract.

12. Method of recalculation of the guaranteed savings in case any of the input

parameters differs from the presumptions defined in the energy costs baseline.

2.6 Energy Savings Verification

In each contract year of the EPC, the ESCO has to provide a proof of energy savings. The

basis for this are the energy bills for the contract buildings which the client is obliged to

provide for the relevant settlement periods. If defined so in the contract, also meter reading

or reports of the energy management tools may be sufficient.

The ESCO then has to determine the adjusted net amount of savings actually achieved using

the calculation rules in accordance with the EPC contract, in a manner which is

comprehensible to the client, enter the amount and its remuneration claim into the

settlement sheet and present the sheet to the client.

The calculation method for the settlement is analogous to that for the baseline

determination. In addition, some adjustment steps are necessary (day, price, climate and

usage adjustment) that establish comparability between reference year and settlement

year. For the determination of the settlement, either the calculation file for the energy

costs baseline handed over upon signing of the contract is updated or the contractor uses

proprietary files/modules.

2.7 Financing

Availability of financial resources is one of the key success factors for the implementation of

EPC projects. (Pre-) Financing for energy efficiency investments has become increasingly

burdensome for ESCOs as well as their customers, because they put stress on their credit

lines, credit liabilities and fixed assets burden balance sheets. Various international

accounting guidelines (like Basel II, III, US GAP) cast their shadows to impede financing

routines.

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As a consequence financing is not a stand-alone-issue, but must be customized to the given

project circumstances. Therefore we advocate a comprehensive look at the sum of all

business implications of any finance option. A sole look at direct financing cost as expressed

in interest rates or fees will not deliver your optimal financing solution. The best financing

package depends on the borrower’s background, subsidies as well as the specific project

cash flow. And it requires the integration of bookkeeping and tax consultancy into the

financing decision.

Customer Demand Profile – A Systematic Approach

For the selection of the right financing tool a close look at a variety of categories concerning

all players of a project and the project itself has to be taken. Only a comprehensive look at

the sum of the financing implications will allow deciding for the best financing option.

The goal of any finance planning is to minimize overall capital cost, secure liquidity and to

reduce transaction cost. But also legal aspects, tax implications and balance sheet issues

have to be considered.

Of course, financing needs depend on the individual circumstances of the borrower. And

they depend on the specific project. Nevertheless we aim at developing a customizable

methodology for describing generic characteristics of financing needs for energy efficiency

projects, which can be adapted to the specific situation. Here, we are talking about

properties such as financing cost and terms, legal implications, tax and balance sheet effects

as well as management expenditure.

These financing characteristics should be put into a demand profile, which can be used to

get a structured overview of the different implications of energy efficiency project financing

issues. This profile can be applied to different financing options offered on the market in

order to find the best suited fit, taking all aspects into account.

In order to structure financing implications, the relevant categories are:

1. Direct financing cost (financing conditions, interest rates, fees …);

2. Legal aspects (Rights and duties, ownership, contract cancellation, end of term

regulations …);

3. Required collateral (securities) by financing institution;

4. Taxation implications (VAT and purchase tax, corporate income tax, acquisition of

land tax …);

5. Balance sheet & accounting implications (who activates the investment (� on or off

balance?) balance sheet effects like credit lines, performance indicators Maastricht

criteria …);

6. Management expenditure (transaction cost, comprehensive consultancy …).

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2.8 Advanced Models of EPC2

The idea of “Advanced EPC” is to develop and promote EPC models including new contract

models, additional services or specific objectives as quality-based products. This aims to

open up EPC to more customers groups by meeting their specific requirements. EESI

contributed to the cross-national establishment of such “Advanced EPC” with the following

models:

“EPC plus” – EPC with comprehensive refurbishment:

“EPC plus” extends the service of the ESCO to comprehensive

structural measures on the building shell like insulation or

window replacement. These services are usually not part of the

classical EPC because of excessively long pay-back periods. The

contractual arrangement contains special regulation on

financing. Usually the customer has to pay a share of the

investment through a grant or by combination of EPC with

subsidy programs. EPC plus is very suitable in buildings with

high need for renovation.

The combination of both structural renovation and energetic optimization leads to high

energy savings up to 50%. Examples have been developed in e.g. the Czech Republic and

France.

“Integrated Energy Contracting (IEC)”:

The Integrated Energy Contracting Model combines the objectives of reduction of energy

demand through the implementation of energy efficiency measures and efficient supply of

the remaining useful energy demand. The ESCO will take over implementation and

operation of the energy service package at its’ own expenses and responsibility according to

the project specific requirements set by the client. In return, the ESCO will get

remuneration for the useful energy delivered (i.e. per kWh), depending on the actual

consumption as well as flat rate service remuneration for operation & maintenance,

including quality assurance. IEC is a combination of elements of ESC and EPC. This model

has mainly been used in Austria so far.

“EPC light” – energy management with guaranteed elements:

EPC light aims at achieving energy savings mainly through optimization and organizational

measures with low or no investments in technical equipment. The ESCO acts as an external

energy manager taking over the responsibility to operate and optimize the energy related

installations (heat boilers, building automation, lighting control).

2 For more detailed information, please see the ”Advanced Models of EPC” on the EESI website:

http://www.european-energy-service-initiative.net/eu/toolbox/advanced-models-of-epc.html

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Since pay-back of high investments on hardware is not necessary in EPC light, the contract

duration is short (2-3 years). In this model the energy savings are still guaranteed by the

ESCO. This model is very interesting for customers with little capacity or few resources for

sustainable energy management. The first EPC light pilot project was developed in Berlin.

“Green EPC” – EPC with special focus on renewable technologies:

Since climate protection is one major concern of policy and

motivation to energy saving measures, advanced EPC models with

special focus on reduction of green house gas emissions are

essential. EESI developed in Sweden, Germany and France

standards, models and examples with special focus on the

implementation of primary energy savings and/or the technological

focus on renewable energy technologies.

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3 Market Overview of EPC in the EESI Countries3

Germany

Germany has a growing market for energy services and is one of the pioneers for

developing the European market for EPC. There are already high market standards and

consistent market volume and growth for both primary types of energy services – Energy

Performance Contracting and Energy Supply Contracting (ESC). There is a huge economic

usable potential with about 1.4 million buildings or objects for energy services, but only

between 5 – 7 % is currently addressed. The annual turnover in the energy services market

has roughly been estimated to be between €1.8 and €4.5 billion in 2010.

In recent years, the German energy service market has become a significant business for

many energy service companies – ESCOs, also called “contractors” in German. Of approx.

500 existing vendors for energy services, about two thirds are utilities. Some of the most

important and well known large international ESCOs and a lot of medium and small ESCOs

are operating in Germany.

The share of EPC contracts is about 10 % of all energy service contracts. There were more

than 300 EPC agreements concluded since the mid 90s – with high-tech and complex

individual buildings like hospitals, as well as building pools of up to 100 separate buildings.

The public sector remains the most favourable customer group for EPC. In view of the

annual total energy costs for public buildings of almost €4 billion (3.58 billion in 2005)

performance contracting can tap considerable cost-saving and investment potentials. There

is a potential of investment volume for EPC in the public building sector of about €2 billion

with an annual savings potential of more than €200 million.

The challenges for a further development of EPC in the public sector are mainly lack of

information, long project duration, the integration of constructional refurbishment

measures, transaction costs, and the mere focus on financial aspects (self realization). To

achieve a stronger market development for ESCO services a further development of EPC

models and contracts is necessary. This includes models that integrate the use of renewable

energies and/or thermal insulation of the building shell. Another option is the provision of

standardized single energy efficiency measures as a modular system (i.e. lighting

contracting or compressed air contracting). Standardization, simplification, transparency,

flexibility, and further adaptation of customer needs are challenges for the actors of the

energy service market.

3 This chapter provides a description of the market overview of the EESI countries at the beginning of the

project. For more detailed information, please see the ”National Reports” on the EESI website:

http://www.european-energy-service-initiative.net/eu/toolbox/national-reports.html

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Austria

The Austrian ESCO market includes 15 to 20 ESCOs offering EPC services. However, just

about 5 ESCOs cover about 70 to 80 % of all EPC-contracts. At present there are 8 ESCOs

organized in an umbrella association – called DECA – to communicate standardized

procedures for EPC to public customers.

The majority of objects in occupancy of the national government are in custody of the

Bundesimmobiliengesellschaft (BIG). Since 1999 a number of 500 buildings have been dealt

with in 12 EPC tenders. Plans for more tenders, which should bring cost reductions of 11

Mill Euro per year, are being prepared at the moment. About 60 Mill Euro is used for energy

efficiency measures every year, but is not likely to be utilized through standard EPC. There

is a chance through advanced models like comprehensive refurbishment.

Due to the 15A-B-agreement between state and federal state the public institutions in the

regions are obliged to expand the actions on energy services in direction of comprehensive

refurbishment.

The demand in cities and rural communes still exists, although various projects for cities

and pools of rural communes have been implemented in the past. Main barriers for further

development of this market are the high transaction costs of contracting in relation of the

typical project sizes in this sector.

In the residential sector buildings built between 1950 and 1980 from 10 apartments onward

are considered to be interesting for EPC. There are mainly 3 sectors:

• Rentals: The building owner is obliged by law (Mietrechtsgesetz) to make

conservation and improvement measures. EPC is legally possible, the main barrier is

that energy savings must be relayed to the tenant and cannot be transferred directly

to an ESCO. The solution to refinance the measures is to raise the rents (bilateral

agreement with tenant) and to use laybacks (if available). Both solutions bear

problems in their implementation because of the involvement of numerous parties.

• Housing associations: For housing associations the same obligations

(Wohnungsgemeinnützigkeits-gesetzes) count as for rental building owners (see

above). The conservation fee can be raised up to 15 years for measures with lifetime

more than 10 years. In case of comprehensive refurbishment the saved costs for

heating can be used for maximum 15 years for refinancing through an ESCO.

• Owner community: The owner community is obliged (Wohnungseigentumsgesetz) to

make conservation and improvement measures. The improvements have to be

approved with 50% majority of the shares of the owners.

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The sector of hospitals has not been touched so far by energy services. Increased awareness

and necessity for energy efficiency can open a path for energy services.

Street lighting has been a theme for EPC since many years. Still there is market potential in

this field, especially with the ascending development of LED technology.

Slovenia

The Energy performance contracting market in Slovenia is small (due to the size of country

and economy). After a promising start-up and several years of status-quo situation, it can

be marked as rather undeveloped. There are only few national EPC and/or ESC players

present in the market (some 3-5 ESCOs, only two ESCOs among them implement EPC,and

few energy utilities). The EPC market is almost exclusively oriented towards the public

sector (e.g. street lighting in municipalities)and ESCOs financed through commercial credit

lines. Market competitiveness of the EPC business model is low comparing to structural

funding energy efficiency projects being predominately implemented in the public sector.In

case of ESCOsmost of the contracts are in the form of some kind of combined energy

performance contracting and energy supply contracting, while energy companies,

recentlyobligated as energy efficiency service providers, prefer energy supply contracting.

After the first EPC project implemented in 2001, in average only two EPC projects per with

guaranteed savings year are carried out,however,range of investmentsrealised through

these projects are significant at national level, reaching values up to 3 million EUR per year.

The reason for the limited number of the EPC projects realised lies in numerous legal and

financial barriers, small market and few domestic SMEs ESCOs, being the key EPC market

developers. There are no EPC facilitators. Recently the EPC has been introduced as a

horizontal measure in the framework of the 2nd National Energy Efficiency Action Plan

(NEEAP) as it was estimated that national energy savings target could not be reached

without strong development of the EPC, especially in the public sector where sits the huge

potential.

Recent energy policy developments are in favour of further development of EPC in Slovenia.

These developments are reflected in the Energy Lawenergy efficiency, renewable energy

and EPC relatedprovisions, for example: energy book-keeping and annual energy efficiency

targets are mandatory for the public sector;energy efficiency dividend is introduced for the

public sector (energy cost reductions not resulting in equally future operational budget

decrease);local communities have to prefer energy efficiency solutions and RES heat supply

in their acts and plans.

24

Interest in ESC has grown since 2009 as renewable energy sources and high efficiency CHP

are supported through electricity feed-in scheme.For the last three years the EPC model is

competing with cohesion grant financing.Brighter future for the EPC market in terms of

financing has beenestablished through energy savings obligation: energy supply companies

are providing subsidies up to 50% of energy efficiency savings investments, including EPC, in

order to achieve obligatory 1% savings of energy supplied. The impact of energy saving

obligation already resulted in several EPC projects being implemented in 2012. Utilities and

energy suppliers started to acquire existing ESCO and establish new ones. Significant

increase of the EPC market is expected in the near futureas the City of Ljubljana is preparing

through the EIB facility ELENA more than 50 million EUR worth pipeline of EPC projects to

be carried out in the period 2013 – 2016.

Norway

The Norwegian EPC market is immature and small. There have been sporadic occasions of

EPC or similar projects over the last 15 years. Various companies have offered versions of

“energy saving with guaranteed results”, but the market response was not high. Some pilot

projects on outsourcing or result based contracts have been initiated, mainly in the private

sector, but the contents differ from the EPC concept as defined by EESI.

Low energy prices over the last few years and expected for the coming years result in low

interest in energy measures, and the recent financial crisis has lead to less interest from the

banking sector. Over the last 2-3 years there has been increased focus on EPC among

municipalities. Focus on climate both in media and in municipalities through municipal

“Climate Plans” (not mandatory but strongly encouraged) has led to focus on energy use in

public buildings, where EPC can be a strong tool. Also the work done by EESI in combination

with the project “Green municipalities” has been important In this regard. The EPC concept

is better known through dissemination activities and training. Pilot projects have resulted in

positive experiences. Model documents and help desk activities have been important in

project facilitation. The development of a national standard for EPC contracts will play an

important role in further market development.

The main barriers are lack of knowledge, time and trust in EPC. Establishment of EPC

projects is time demanding. Marketing of success stories and templates and training will

counteract these, and funding for project establishment and facilitation would be a strong

positive force.

Czech Republic

The EPC market in the Czech Republic can be characterized as moderately developed in the

sense that the ESCOs have a good knowledge and experience in carrying out EPC.

Nevertheless, still the number of projects is not high and there are no rules for EPC

implementation in the public sector (namely institutions run directly by the state).

25

So far most projects have been realized in the public sector (more specifically in the

education and health care facilities). The first EPC projects were carried out already in 1993.

Since then, some 150 to 200 EPC projects have been already realized, representing savings

of approximately 800 TJ, of which approximately one third concern the private sector.

In the last few years before 2009, the average value of the projects was approx. 2 million

EUR (50 million CZK). In 2009, the volume of contracts was more than 4 million EUR (100

million CZK). The volume of contracts is thus increasing progressively. The main types of

measures under EPC are complex building refurbishments, which will typically include HVAC

(i.e. anything concerning heat management). In specific projects, the savings are typically

approx.20 – 30 %.

The main challenges and thus also space for improvements lies in the political framework of

EPC. More support on the policy level is needed, i.e. showing the good example in the case

of state property or making the energy service market one of the energy policy priorities.

On the EPC level, the development of standard documents and its dissemination would help

in developing the EPC market.

Belgium

Concerning the political framework, in Belgium, energy policy is 'regionalized'. This means

energy policy - including policy about energy services - is realized independently by the

three regions: the Brussels, Flemish and Walloon region. In this report, we focus on the EPC

situation in the Flemish region. In the energy policy declaration of the responsible Flemish

minister (dd 28/10/2008), EPC was not mentioned. In general, EPC is a relatively new

energy service in Flanders.

The economic framework is characterized amongst other by the following:

• In September 2009 household gas prices were, compared to January 2006, increased

in real terms by 22% while oil prices were increased by 99%. Electricity prices

decreased by 10% in the same period;

• Taxes take a share of 20-25% in electricity and gas prices for households and for the

industry.

In the legal framework, the barriers for EPC are the following:

• Legal and political complexity of the country;

• No specific legal framework for EPC;

• Belgian normalization institute (NBN) not involved in new standard EN15900 ;

• VAT rules for public ESCOs are subject to interpretation;

• Restrictive public tendering law;

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• Total amount of internal and external debts of municipalities is legally restricted and

even limits the use of third-party financing (TPF)-services.

Legal instruments that will stimulate the development of EPC are the following:

• 2020 objectives of the European Commission translated to Belgium;

• European directives EPBD and ESD transposed in 3 regions, thus also Flemish region.

Concerning the financing framework, the Flemish economy suffers from financial and

economical crisis. Currently, it is more difficult for companies and ESCOs to get access to

money amongst other because of the restrictive granting of credits by banks. There are no

special national programs dedicated to EPC. Fedesco currently takes the lead in promoting

EPC-projects in Belgium and Flanders.

Concerning the technical and economical potential in public buildings Fedesco foresees for

the buildings of the Belgian federal government a CO2-reduction of 22% in 2013 compared

with 2008. The economic potential is highly dependent of the energy price. As a rule of the

thumb, one can say that a doubling of the energy price generates at the long term a halving

of the energy consumption.

The most promising target groups and buildings for EPC in the Flemish region are the

following: the public buildings of the Belgian government, the public buildings of the

Flemish government and of the big cities and health care facilities and other buildings with

high specific energy consumption (e.g. swimming pools).

Romania

The Romanian ESCO market is in an “embryonic state”, with few companies willing to enter

the market. In spite of efforts, the ESCO market has not been able to get off the ground

because of a number of strong barriers.

The cooperation between Romanian Government and European Commission is a very

efficient driving force for creating necessary conditions to speed up the energy services

market development in Romania.

In order to create an energy services market in Romania, the government addressed both

sectors: the offer for energy services by identifying and encouraging ESCOs and in the same

time the demand for services by increasing awareness and encouraging energy consumers

to understand the ESCO concept.

Having in mind the energy consumption amount and energy saving potential, the most

interesting public buildings are hospitals. In this case the target group can be the Ministry of

Health together with Local Councils or County Councils having the responsibility for

payment of energy bill.

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France The ambitious Grenelle Laws in 2009 and 2010, national transcription of the Energy

Efficiency Action Plan, has positively influenced the EPC market by :

setting up ambitious targets for reducing consumption (building refurbishments to achieve

an objective of 38 % of savings by 2020)

naming specifically EPC as solutions to implement for energy renovation.

The public contracting regulations have been changed in 2011 and 2012 to facilitate EPC

and model contracts have been published at national level.

The conditions are now favorable for EPC market development and ESCOs have set up new

offers. However, EPC market is still quite small and more dedicated to standard EPC.

The most important barrier is that the investment capacity of public bodies is poor and the

amounts needed represent several billion Euros. Investment partnership is essential but

public bodies are afraid of Public-Private-Partnership and the payback time for envelope

refurbishment is too long to attract private investors. To overcome this financial difficulty,

some French authorities like the regional Council of Rhône-Alpes are setting up public

ESCOS like FEDESCO in Belgium in order to support and finance advanced EPC projects.

Slovakia

Energy Performance Contracting in Slovakia is a quite known, but not widely used form of

ensuring energy efficiency in various sectors of the economy. As the relative energy

intensity of Slovak economy is significantly higher than European average, there is

substantial market for EPC applications. This is even more stressed by the low volume of

available financial resources for investments in public sector, caused by the worldwide

financial and economical crisis.

Although the EPC concept is not widely applied in Slovakia, the basic legislation exists and

creates good conditions for further development of ESCOs activities also in this type of

energy services.

Sweden

Sweden is one of the northernmost and also least densely populated countries in the EU.

Policy responsibility for energy and energy efficiency resides with the Ministry of Enterprise,

Energy and Communication and to some extent also the Ministry of the Environment. The

Swedish Energy Agency is the government agency responsible for energy policy issues. In

accordance with the Energy Service Directive (2006/32/EG) Sweden has developed a

national Energy Efficiency Action Plan. One of the instruments identified in the plan for

further energy efficiency in the housing and service sectors, is continued support for energy

services. Energy Performance Contracting is mentioned in particular.

28

Important economic instruments in the area of Swedish energy and climate policy are

energy tax, CO2 tax, emissions trading, electricity certificates and various time-limited

investment programs or grants. While these are not geared directly towards energy

services, in many cases they form an incentive structure for energy efficiency. Energy use in

the Swedish housing and service sector, which includes public properties, is mainly

comprised of electricity and district heating. Electricity prices in Sweden are well below the

EU15 average. Prices for district heating vary considerably across the country.

Sweden has a well-functioning financial sector. The majority of public sector EPC customers

take out bank loans themselves for the upfront investments in EPC projects. It is up to the

EPC customers to determine what payback time they require for their EPC projects.

Sometimes the political decisions in local authorities pose an upper limit for the payback

time of any investments in the municipalities.

The new Public Procurement Act came into force in 2008 as an implementation of EU

regulations. Many public authorities or public property owners have used EPC and the

Public Procurement Act is deemed to accommodate the procurement of EPC, while in some

instances being a complication (WSP Environmental, 2006; Miljöstyrningsrådet, 2009).

29

4 EPC Barriers4

A number of barriers to the progress of the EPC market, creating the “EPC gap” hindering

more cost-effective investments in energy efficiency in a faster timeframe, have been

identified during the EESI project implementation. As the advanced EPC business models

are a variation of ‘standard’ EPC, the majority of identified barriers are typical EPC barriers

already identified by numerous studies, market researches and projects, but still not

resolved. Barriers vary in importance between member states. For example, awareness and

governmental support for development and financing of initial projects play an important

role in less-developed EPC markets, whereas implementation of business models like

advanced EPC and innovative financing mechanisms (for example leasing, on bill financing)

are likely to be the biggest challenges in markets that have more experience in EPC.

Observed barriers to the implementation of EPC, predominantly in the public sector, are

divided into the following categories:

• Legislative and regulatory barriers

• Awareness and knowledge barriers

• Financial barriers

• Implementation barriers

These will be discussed in the following sections.

4.1 Legislative and regulatory barriers

Lack of clarification in the legal framework for implementing EPC

National primary legal frameworks are in place for EPC, and this provides the base for the

public procurement of energy services, the public private partnership and financing.

Adoption of the standardized approach to the accountancy treatment of EPC that would be

valid for all public private EPC contracts, have yet to be defined in some Member States.

The EU framework (directives and standards) provides different definitions for energy

services, EPC and ESCOs.

4 For more detailed information, please see the ” Aggregated European position paper on EPC” on the EESI

website: http://www.european-energy-service-initiative.net/eu/toolbox.html

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However, national energy legislative frameworks are incomplete, not supportive and

favourable for the EPC. Existing relevant legal frameworks, regulating public procurement,

public-private partnership, public finance, taxes, etc., are not directly addressing EPC

projects, causing different interpretations and therefore imposing barriers to straight-

forward implementation of these projects. A low level of confidence in EPC exists due to

absence of specific solutions for EPC or solutions enabling implementation of EPC. It is

necessary to bring greater clarity to legal frameworks currently hampering the deployment

of EPC and amend or even repeal some legislative provisions and regulations which impede

or restrict the use of the EPC.

There is a lack of secondary and tertiary legislation and the corresponding practical

guidance for practitioners, removing EPC constraints and clearly providing information that

EPC is allowed, and introducing all related procedures needed. Accounting rules, especially

in terms of operational and finance lease are in some Member States considered unsuitable

for the EPC models. The lack of legal clarity has led to a high perception of risk among public

decision makers, financing institutions and ESCOs. EPC procurement procedures, contracts,

public budget financing legislation and accounting are perceived very sophisticated, too.

Definitions, even at EU level, are not harmonized, causing legal uncertainty and confusion.

There is still a need for common understanding of energy contracting definitions when

designing EU and Member State policies, measures and legal framework. This goes

especially for definitions of energy efficiency services vs. energy services, energy

contracting and ESCOs vs. Energy Service Providers. Ambiguous legal definitions of the

service provided by EPC contracts often have important negative impacts, especially related

to the taxation status of EPC projects.

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Lack of official national EPC model contracts

Hundreds of projects all over Europe have proven EPC to be an effective, flexible and

market related product-service-system model providing energy efficiency retrofits and

capital improvements. The bread and butter sector for the EPC in all EU markets has been, it

is and it is going to be the public sector. For full activation of the EPC potential in this sector

it is necessary to provide a legal status for EPC contracts at Member States level that makes

their approval possible by public decision makers at the administrative level. The first step

towards this target has been done – numerous standardized model EPC contracts were

provided at the EU level (not yet harmonized models) and Member States level (mostly

unofficial ‘demonstration’ models, there are some shining examples e.g. few German

States), including advanced EPC models provided by the EESI project. The second step is

missing in the majority of the Member States: There should be a clear and strong

government support at all levels providing not just models but official federal/regional/local

EPC model contracts customized according to the national legal framework of each Member

State and approved by the relevant ministry, probably the Ministry of Finance. This should

be accompanied by tailor made contract packages assisting and guiding relevant authorities

through specific issues and procedures related to model contracts. Additional support to

the EPC-Market Facilitators and ESCOs to ensure that contractual framework is continuously

developed to reduce complexities that hinder companies providing EPC to the public sector

is unfortunately rare.

Uncertainty on how to procure EPC according to the public procurement rules

Energy performance contracting projects in the public sector are subject to public

procurement and therefore need to follow public procurement rules. Public procurement

acts in Member States seek to make good use of public funds by taking advantage of

competition in the relevant market and to ensure fair competition for suppliers. EPC

projects for all publicly funded institutions whose value exceeds a value (exclusive of value-

added tax) set in national procurement rules must be publicly tendered.

Unfortunately, the public procurement legislation hinders the development of the EPC

market, being very extensive, detailed, not flexible in terms of new business models and

non-supportive. Procurement rules and evaluation criteria in the public tendering process

remain a barrier for EPC projects development due to the following issues:

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• Responsibility and competency for energy efficiency public procurement is

fragmented and shared between central and regional/local governments in almost all

Member States, causing ambivalent information and slowing down EPC projects

implementation;

• Absence of EPC procurement models and generally applicable documents and

procedures, raising a transparency of rules and certainty in tendering procedures,

easy accessible to all stakeholders;

• Lack of experience, information and qualification on the public sector side in the area

of procurement of long-term energy services;

• Reluctance of local authorities to initiate necessary approval processes for launching

the EPC tendering missing policy acceptance of EPC;

• Complex and time consuming procurement procedures, increasing transaction costs

of projects;

• Tendering regulations requiring the applicants to have experience in all relevant

project specific sectors, hindering the entry of new actors and consortia;

• Rules and regulations not allowing EPC on government property, tendering

procedures requiring separate bids for the project preparation and implementation,

not eligible long term service contracts, energy companies being restricted to provide

specific energy efficiency services (in some Member States);

• Lack of clarity regarding which procedures to follow where there is an element of a

public private partnership (PPP);

• Restricted possibility to use PPP model for EPC - in some Member States PPP for EPC

is allowed only in case specific requirements are fulfilled;

• Restricted possibility to use EPC if not PPP (in some Member States) - PPP is

considered complex and not appropriate for small size EPC projects;

• Procurement guidelines often strictly demanding a precise and complete ex-ante

analysis of all measures to be performed, resulting in relatively low degree of

flexibility for gradual refinement of the project concept through on-going negotiations

between the ESCO and the customer in order to develop the best solution;

• Public authorities forbidden to deviate from an agreement once made which limits

the scope for a search for better solutions;

• Lack of specific guidelines on energy efficiency and energy savings as an assessment

criterion in competitive tendering for public contracts;

• Non-transparent inclusion of criteria for energy efficiency under existing public

procurement frameworks like green, sustainable and smart public procurement;

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• Procurement decisions often focused on assets rather than energy services and based

only on the "the lowest price" assessment criteria and not on "the most economically

advantageous tender" criteria taking into account the life-cycle costs including

maintenance and energy costs, and environmental characteristics;

• Missing specific indicators for energy efficiency public procurement to monitor

progress in terms of energy savings achieved and cost-effectiveness of services

provided;

• Absence of EPC targeted dissemination of information and training on public

procurement, including, for example the exchange of best practices on energy

efficiency and green public procurement.

4.2 Awareness and knowledge barriers

Limited awareness and knowledge asymmetries between customers and ESCOs

Energy end-users have limited information and technical, economic, financial and legal

knowledge on EPC, resulting in low awareness and priority of energy savings realisation,

notably at decision making level. They can hardly grasp what EPC entails, and hence are not

in a position to judge the benefits of outsourcing energy efficiency services for their

institutions/enterprises specifically. Lack of a sufficient level of understanding energy saving

potentials and the EPC concept and its financial benefits is immanent to policy decision

makers and third-party financing institutions, resulting in the perception that energy

efficiency and renewable energy investments are complicated and risky.

ESCOs usually inform and educate customers but this to some extent makes the customers

dependent on ESCOs. This dependence may lead to a caution to embark on EPC projects in

terms of mistrust concerning the range of energy savings and revenue mode. An additional

deficiency is caused by ESCOs’ limited information policies due to their incapability or

unwillingness to deliver specific types of energy efficiency measures and/or renewable

energy technologies, and their ignorance of rapidly advancing technological and business

models development. Information on bad experiences with EPC in the past led some

customers to the perception of high technical and business risks, too.

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On the other hand, some potential customers have unrealistic expectations of energy and

cost savings potentials and are disappointed when they face ESCO proposals not meeting

these expectations. Many customers cannot foresee the efforts needed and the amount of

transaction costs which may arise during EPC project preparation and implementation. The

complexity of contracting is often misjudged. The integration of experienced consultants

and project developers as neutral EPC project facilitators can help to avoid these problems

and uncertainties providing quality information and expert knowledge.

The EPC market development in Europe is demand side driven. The information and

knowledge shortfall is especially problematic in the public sector, considered to be a key

trigger for the successful ESCO market development. The EPC customers are not ‘educated’.

Taylor made EPC training sessions, customers and information forums, needed to

strengthen demand-side competence on EPC and providing standardized tools and

documents, are scarce and not continuously available. Focused and independent

information on EPC financing options and legal aspects of contracts is hard to obtain. All

that leads to lower number of requests for EPC proposals put on the market. Often these

requests are not as ambitious, in terms of energy and cost savings, as they could be.

Therefore, EPC-Market Facilitators are needed in order to underpin EPC market

development by provision of information on EPC, performing awareness campaigns,

disseminating information on financial instruments, tendering procedures and legal aspects

of contracting, making available model contracts, and training of customers, policy makers,

ESCOs and financing institutions.

Public buildings deep renovation EPC pilot projects needed

Hundreds of projects all over Europe have proven EPC as effective, flexible and market

related tool for energy efficiency. Best practice examples such as the ‘Berlin Saving

Partnership’ outline the advantages of EPC for more than 15 years. However, the public

building sector as role-model for necessary deep renovation is just at the beginning of its

mission and ESCOs have a short track record in deep renovation. Deep renovation EPC pilot

projects in the public sector, essential to increase awareness and knowledge of EPC,

establish standard procedures as well as trust in ESCOs among other potential customers

are scarce.

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4.3 Financial barriers

Financial barriers can be at the demand side (customer side), the supply side (ESCO side)

and/or financial institution side.

Customer side

At the customer side problems arise because EPC energy efficiency measures and

renewable energy technologies suffer from long payback times or even longer pay-back

time than the economic life-time (5 to 15 years are standard payback times in the ESCO

industry) and insufficient internal rate of return. Another barrier is strong competition

between EPC investments and core business related investments, paying for themselves

within 3-5 years, resulting in low priority of EPC investments. Investment assessments are

based on investment costs rather than on an integrated approach comprising life-cycle

costs (investment, operation, and maintenance), so investments in energy efficiency

measures and renewable energy technologies are put out on tender based on the

investment cost.

That hampers EPC projects because they are usually based on capital intensive upfront

investments enabling lower operating energy costs. Customers often face lack of internal

capital and have constrained operational budgets. Lack of access to finance on acceptable

terms due to perceived high EPC project risks and lower proportion of collateral asset value

due to high portion of ‘soft’ costs (project design and development) are the most common

financial barriers on the customer side. On the other hand, customers who have access to

finance do not tender financing services for a best offer.

Supply side

At the supply side it is an observed trend that for many new EPC projects ESCOs provide for

upfront investment costs placed on the asset side of their balance sheets, for instance as

financial fixed assets. This is influencing the credit risk rating of ESCOs and limiting their

capacity to implement new projects. Smaller ESCOs without support of a larger parent

company and without appropriate credit ratings are especially vulnerable, being not in

position to attract third-party financing.

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Financial institution side

At the financial institution side limited knowledge and experience of EPC market is an

impediment. Short or no track record of (domestic) EPC projects, comprising monitored and

registered achieved energy savings, set-backs, risks and returns, makes financial institutions

less willing to participate in their financing. Another barrier is a required high level of due

diligence of insolvency risks and creditworthiness of the ESCO and/or the customer,

performance risk, and volatile energy price risk, leading to high project development and

transaction costs and resulting in high cost of capital neutralizing the risks. The fact that EPC

projects are hardly standardized and often relatively small puts additional pressure on the

costs and makes EPC projects less attractive for financial institutions. The EPC-Project

Facilitators who could aggregate scaled bankable projects are lacking. Financial products

available at the financial market mainly are not customized to remove specific EPC financing

constrains. Public funds often are not used to leverage private financing.

Discontinuation of public grants

Public grants for investment in energy efficiency measures in publicly owned buildings have

not only lowered the energy efficiency measures and renewable energy technologies

investment costs for the local authorities and improved profitability of EPC projects and

allowed more improvement measures to be included in the EPC projects. The grants have

also urged action and spurred decisions in local authorities. Therefore, the discontinuation

of these grants may mean that EPC projects are not undertaken even if they would be

profitable. However, some publicly-backed grant support schemes, even from EU funds, are

distorting the commercial financing EPC market.

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4.4 Implementation barriers

Limited number of ESCOs

The number of ESCOs active in the market has been assessed to be insufficient or limited to

large actors. Their marketing activity is not very visible. The emergence of additional utility-

owned ESCOs and small and medium size ESCOs is too slow. At the moment there are no

specific incentives (fiscal, financial, etc.) for starting-up ESCOs nor technical assistance

facilities providing capacity building and training. However, it is expected that a number of

ESCOs will start to grow, considering the introduction of obligations for the comprehensive

renovation of central government buildings and Energy Savings Obligations. Yet it is

questionable if ESCOs are going to be able to provide the needed EPC services, in terms of

technical and especially financial capacity. ESCOs are rarely organized in a national

association of energy service companies that assesses and accredits its members.

Lack of reliable energy consumption data

The availability of baseline energy data for the screening, planning, monitoring and

verification of EPC projects remains low due to a low level of basic energy book-keeping

and/or energy management and high immanent measurement costs. The process before an

EPC contract can be seen as complicated and expensive because extensive amounts of

information have to be collected to develop tendering documents. Inclusion of external

factors influencing the energy consumption in guaranteed energy savings calculations

additionally hampers the establishment of contractual agreement. Absence of accepted

standardized EU measurement and verification procedures functionally linked to

recommended measurement and verification methods in the framework of Directive

2006/32/EC on energy end-use efficiency and energy services (ESD) is symptomatic.

Lack of reliable energy audits

There is a lack of transparent and neutral detailed energy audits on which prioritised energy

efficiency measures and renewable energy technologies could be developed. Obligatory

energy audits are observed in some Member States (Czech Republic, Romania) and have

proven to be crucial for scaling-up of the EPC introduction. There is no financial support for

the preparation of energy audits, necessary to secure needed information for the

establishment of baseline energy consumption and identify economically viable

investments and their energy and cost savings impact over project life-cycle, upon which

ESCOs can base their EPC proposals and guarantees.

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5 Success and impact of EESI

5.1 Overall success stories

Success story 1: “Impact of the development of pilot project”

One of the most important and visible outcomes of the project was the initiation of 30 pilot

projects in the partner countries and the resulting CO2 reduction. With these projects, EESI

reduced more than four fold its CO2 saving target from 12 000 t CO2/y to more than 45 000

t CO2/y.

The pilot projects comprise different kind of buildings including schools, hospitals,

universities and some historical buildings. The duration of the contract varies among the

projects between 2 and 15 years and the guaranteed savings between 10 and 58 %. EPC

advanced models were also used in some projects. As an example, the EPC light model was

applied for the first time during the EESI project.

The most important contribution of the pilot projects is that more and more local

authorities and key actors are aware of the advantages of EPC. With these projects EPC is

visible, tangible and explainable, increasing the interest of further development.

In section 0, a project example for each of the partner countries is presented.

Success story 2: “Raise awareness of EPC”

The EESI website and their country sub-sites also played an important role in the promotion

of all the activities, dissemination of tools, national reports and standard documents to the

key actors of each country. With nearly 200 newsletters, press releases and media coverings

EPC is now much better known in Europe.

However, the “face-to-face” dissemination such as presentations at national and

international seminars and conferences seems to be the most successful dissemination

channel and arouse the further interest on EPC. In many cases, the participants asked for

further EPC trainings.

A very successful high profile event to raise the awareness of EPC was the European

Energy Services Award (EESA), which honors outstanding efforts and achievements

for the development and success of energy services for energy efficiency in Europe.

The main objective of EESA is to highlight the ability and openness of the public

sector towards innovation, as well as the responsiveness and equally innovation on

the side of those driving processes and providing energy services.

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It is a means to increase awareness of options and opportunities of energy services and to

promote energy efficiency. In addition to the EESA, the European Energy Service Media

Award has been awarded as well. The Media Award honors the performance of committed

journalists who promote and illustrate the subject of energy services to the large public as

well as expert audiences and, hence, contribute to its stronger dissemination.

Year Categories Winners

Best Project

- Vellinge Municipality (Sweden)

- Town of Hnúšťa (Slovakia)

- Lorac Imtech Effizienz Programm –LIEP

(Germany)

Best Promoter - The Greater London Authority – GLA

(England)

2011 - 7th

EESA at the European

Union Sustainable Energy Week

(EUSEW) 2012 in Brussels

Best Provider - RENESCO (Latvia)

Best Project

- Sello shopping mall (Finland)

- Jewish Museum Berlin (Germany)

- Middlefart Municipality (Denmark)

Best Promoter - ICF Group (France)

Best Provider - SERVELECT (Romania)

2010 - 6th

EESA at the European

Convention 2011 of ICLEI – Local

Governments for Sustainability

Media Award - Bernward Janzing – Financial Times

(Germany)

Best Project

- Category Public Sector: Stewards

Hospital Energy Efficiency Project

(Ireland)

- Category Commercial Sector:

Elektromotory Mohelnice (Czech

Republic)

- Category Lighting: Staatstheater

Hannover (Germany)

Best Promoter - Klimaschutz- und Energieagentur Baden-

Württemberg (Germany)

Best Provider - ENESA a.s. (Czech Republic)

2009 - 5th

EESA at the

“European Energy Service Day -

Think European – Act Regional”

and the 20th

anniversary of

FEDARENE in 2010

Media Award - Joachim Mahrholdt – ZDF.Umwelt

(Germany)

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The innovative applications at the 3 European Energy Service Awards have demonstrated

the wide possibilities to develop energy services and their spreading throughout Europe.

The ceremonies had high profile guests including Günther Oettinger, EU Commissioner for

Energy at EESA 20111, David Cadman, President of International Council for Local

Environmental Initiatives (ICLEI) at EESA 2010 and Connie Hedegaard, Commissioner for

Climate Action at EESA 2009.

Success story 3: “Capacity building on EPC”

Due to the complexity of Energy Performance Contracting, information and specialized

capacity building are necessary for its successful implementation.

The European Energy Service Initiative offered these through trainings, workshops and

seminars. These were very successful and highly demanded: more than 2000 participants

took part of the capacity building offered by EESI, surpassing its target of 500 participants

by far.

Besides the knowledge-transfer and capacity-building a fair number of project initiatives

were the result of the EESI-trainings. Part of them has been dealt with in feasibility studies

and some are already in deeper discussion of project development. However, the journey

has only just begun and capacity building activities should continue.

5.2 Success and impact by country

The success of EESI is not only reflected in the outcomes, deliverables and results of the

project itself, but also by its impact after the end of the project.

During EESI, the partners started the cooperation with municipalities and regions through

workshops, trainings and initial consultations. In most of the cases, the contact and

execution of these activities will continue after the end of the project.

EESA Winners 2009 EESA Winners 2010 EESA Winners 2010 EESA Winners 2011

41

The preparation and adaptation of national standard documents will also continue. With

these, building owners will use “safe” and proven models with a minimum of risk and will

ease the further development of EPC projects.

In summary, most of the countries will continue encouraging the further implementation of

EPC in their countries. However, for the continuous development support of EPC in Europe

a framework project like EESI has proven extremely valuable.

The following sections describe the results, success and impact of EESI in the participating

countries. In order to show the impact on the ground, descriptions of selected projects

initiated during the course of EESI have been included, too.

Germany

On the European level BEA’s activities within the EESI project have focused mainly on

capacity building, know-how transfer, and the promotion of Energy Performance

Contracting. One of the main promotional activities was the bestowal of the European

Energy Service Awards (EESA) for 2009, 2010 and 2011.

BEA has been active in organizing European-wide training events on EPC: for start-up ESCOs

the “ESCO University” as a side event of the ESCO Europe conference 2009 - 2012; for

municipalities from Denmark, Serbia, Portugal and Germany to support their development

of EPC projects and for the European Investment Bank (EIB) on “ESCO Financing”.

Furthermore BEA has participated in a lot of European and national events and presented

EESI and the EPC concept and developed a European network of experts and contributors of

EESI.

On the national level, BEA has used findings and models from EESI to update the national

“Hesse”-Guideline on EPC. Furthermore BEA strongly worked on developing Advanced EPC

models. Currently BEA promotes three different models of advanced EPC:

• EPC with comprehensive refurbishment (EPC plus): Initial consultations and

workshops to develop the first pilot project have been organized, however decision to

tender one pilot projects has not been done within EESI;

• EPC light: a form of external energy management with an energy saving guarantee.

BEA has successfully started a pilot project for 15 schools in Berlin;

• “Green EPC”: an advanced version of the classic EPC model focusing on the reduction

of CO2 emissions by including renewable energy technologies for heating and

electricity in the model contract. However, a pilot project in Berlin (Police Station

Friesenstraße) did not go on tender during the course of EESI, due to the decision of

the building owner to switch to Energy Supply Contracting.

Classic EPC projects have been tendered successfully for one hospital

(Wenckebachklinikum) in Berlin and for the University of Applied Sciences in Hamburg, the

latter with newly designed M&V methodology.

42

Activities such as workshops and/or initial consultations in some German regions have the

clear focus to lead to EPC projects, so the long-term impact of EESI on the German market

development will be important. European wide, EESI was a perfect means to disseminate

the BEA experiences on EPC and cooperations have been started e.g. with municipalities or

institutions in Ireland, Portugal and other countries, that will most probably sustain.

In summary, BEA was able to initiate activities to almost double the targeted results on the

national and international level, specifically in the field of information and dissemination.

The international trainings together with the shared information and training material will

help to get more European EPC projects started.

Project example Germany: EPC-light in Pankow, Berlin

Facility:

- District of Pankow, 15 buildings:

• 12 schools

• 1 youth facility

• 1 cultural institution

• 1 public service building

Initial situation:

- Administration has no staff capacities to undertake adequate (technical) support /

energy management of the buildings

- No constant consumption control / existing saving potentials, particularly a possible

optimization of operations

- Classical EPC is not suitable:

• Too low project volume (energy costs)

• Buildings without long-term perspective of constant use

• No investment requirements (e. g. new buildings or modernized objects)

Goals of building owner:

- To reduce energy consumption by mid-2012 in schools and administration buildings

Measures (selection):

- Energy management: reducing energy consumption and energy costs through

external know-how

- System optimization and continuous monitoring

- Extension of existing savings potential (without investment)

- Guaranteed energy savings contract

43

Project example Germany: EPC-light in Pankow, Berlin (continued)

Facts:

Austria

GEA has succeeded to perform approx. 25 initial consultations and several feasibility studies

for the implementation of energy efficiency through EPC. 3 projects on IEC have been

tendered and the negotiations have already been concluded, one additional project on IEC

in the tendering phase. Moreover 4 projects for Rail Cargo Austria are in the preparation

phase for tendering and will presumably be awarded until December 2012.

In parallel, activities on the national level are running: the Bundesimmobiliengesellschaft

has tendered two federal pools of schools for EPC.

The 3 meetings of the national steering committee produced a number of

recommendations for policy makers while in trainings with building managers, national and

international experts EPC has been brought onto discussion level with inputs from all sides.

In these trainings, the basics of EPC and energy services in general as well as advanced

topics such as financing in EPC, the use of Integrated Energy Contracting and

comprehensive refurbishment with EPC were taught.

Accompanying a number of useful documents for energy services have been developed and

made public, ranging from measurement & verification guidelines, model contracts to

guidelines for performing financing in EPC, EPC for comprehensive refurbishment and a

manual for integrated energy contracting (IEC).

Type of contract EPC-light

Duration of contract 2 years

Investment No investment

Energy costs (Baseline) 882.714 €/a

Guaranteed savings 90.037 €/a

Guaranteed savings (share of baseline) 10.2 %/a

Reduction of CO2-Emissions 300 t/y

44

Project Example Austria: IEC at Residential School, Knittelfeld

Facility:

- The building consists mainly of two parts: school

building and residential part for pupils

- Year of construction: 1980

- Heated area: 11.000 m2

Initial situation:

- Heat supply through district heating

- Heat distribution system and controls in need of

renovation

- No efficiency measures have been established in the last few years

Goals of building owner:

- Renovation of heating system

- Outsourcing of maintenance of the heating system

- Reduction of energy demand, -cost and CO2 through demand side energy efficiency

measures

Possible Measures (selection):

- Installation of high-efficient pumps and thermostatic valves

- Efficient regulation controls

- Lighting and light controls

Facts:

(*)Preliminary estimations, tender in progress

Type of contract Integrated Energy Contracting

Duration of contract 15 years

Investment 170 k €*

Energy costs (Baseline) 131.7 k €/a

Guaranteed savings tbd

Guaranteed savings (share of baseline) tbd

Reduction of CO2-Emissions 340 t/y

45

Slovenia

The EESI project brought EPC back on the agenda in Slovenia - the whole spectrum of EESI

project activities has made EPC more visible.

The national website has become the focal hot spot for EPC in Slovenia, providing all

relevant information and playing the backbone role of the national EPC knowledge centre.

Information and dissemination was supported via national newsletters distributed to more

than 2.000 addresses. Almost 200 energy managers, energy experts and experts from

utilities and local energy agencies, civil servants and experts from financing business were

trained, including in-depth elaboration of EPC elements and introduction of advanced EPC

business models. One training was provided for municipalities from Serbia, too. Based on

information gained through the training, the Ministry of Justice and Public Administration

decided to start the preparation of EPC deep renovation projects for more than 200

buildings.

National standard procedures and documents were identified and made available to the

public. The standard EPC contract was upgraded according the recent legal framework

development. In order to establish long term performance of EPC in Slovenia, the EESI

project has supported the Ministry of Economic Development and Technology in

introduction of EPC in the 2nd National Energy Efficiency Action Plan for the period 2011-

2016 and 1st

National Renewable Energy Action Plan for the period 2010-2020. Bottlenecks

for the implementation of EPC were identified, resulting in an open dialogue with the

Ministry of Finance and design of follow-up pilot EPC project for the establishment of

national approved procedures, models and standard contracts.

The EESI project has supported the City of Ljubljana and University of Ljubljana in

preparation of two pools of EPC projects with a volume of more than 86 million EUR. In case

of the implementation of one of these two EPC projects, the existing EPC market is going to

expand for more than forty times. This potential was recognized by the SID Bank which

started market assessment activities in order to provide guarantees or finance for the

implementation of an EPC pilot project. Besides the aforementioned pool projects, the EESI

project has assisted to the advanced EPC project dealing with energy supply and demand

side energy efficiency measures and renewable energy technology implemented at the

Municipal Administration Facility in Kranj. Start-up ESCO support was provided for the

initiation of the EPC internal lighting project in Gorenje Households Appliances.

46

Project example Slovenia: City of Kranj EPC plus

Facility:

- Municipal administration buildings (3 buildings)

- Year of construction: 1957

- Roof renovation: 1989

- Area: 9.265 m2

Initial situation:

- Heat supply through inefficient heavy oil fuelled

district heating system to be shut down in

autumn 2012

- Split cooling, heat distribution system and controls inefficient

- Energy efficiency measures performed from the year 2012 through EPC

Goals of building owner:

- Heat and cool supply through highly efficient combined heat and power (CHP) and

renewable energies

- Refurbishment of central heating system including introduction of centralised

cooling system, refurbishment of air conditioning and ventilation systems for halls

- Outsourcing of heat and cool supply and maintenance of the heating and cooling

system

- Reduction of energy demand, -cost and CO2 through demand side energy efficiency

measures for heat replacement of the central heat-generation plant

Measures (selection):

- CHP gas engine, photovoltaic power plant, geothermal heat pump

- Heating and cooling convectors, air conditioning unit

- Efficient regulation controls and highly efficient pumps

- Remote monitoring and regulation system

- Sun shades

Business Model:

- Combination of energy performance and energy supply contracting

- EPC savings guarantee

- Malus-system for performing worse than allocated

- Awarding: Combined competition of price and ideas on the bases of a functional

service description

47

Project example Slovenia: City of Kranj EPC plus (continued)

Facts:

Type of contract EPC Plus

Duration of contract 15 years

Investment 1.500 k €

Energy costs (Baseline) 131.7 k €/a

Guaranteed savings 13 k €/a

Guaranteed savings (share of baseline) 16 %

Reduction of CO2-Emissions 167 t CO2 eq. /y

48

Norway

In Norway the EPC activity has increased significantly over the last years. This can be seen

directly in the number of EPC projects announced on the public tendering tool Doffin as

well as in interest in training etc. Active promotion by the EESI project and its partners has

played an important role in this. In addition, the general increase in focus on climate issues

and energy planning has caused an increased interest in new tools and methods for the

implementation of energy efficiency measures.

The municipalities are starting to see EPC as a valuable tool in reaching goals for energy

savings set in climate plans. EESI has cooperated actively with the national energy agency

Enova SF and KS (The Norwegian Association of Local and Regional Authorities) in

promoting EPC and assisting individual municipalities in preparing EPC projects. The role as

“project facilitator” has been crucial both for development of pilot projects and other

announcements.

A main result of the project is the work with Standards Norway to develop a formal national

standard for EPC contracts. This is foreseen as a draft by the end of 2012, with formal

adaptation in a years’ time. The standard will be built on the model documents developed

in the Eurocontract project and revised by EESI and KS. This has made the standardization

process significantly faster than normal.

In addition the training and dissemination activities have led to increased knowledge of EPC.

The pilot projects have paved the way for other municipalities to realize projects, and

helpdesk activities have provided valuable input in several projects that has been and will

be published for tenders.

The established cooperation is likely to remain based on the experiences made, but funding

is vital to ensure activity.

Project example Norway: Elverum kommune

Facility:

- Elverum has 20 152 inhabitants

- 40 buildings in EPC pool

Initial situation:

- High energy costs

Goals of building owner:

- 20 % energy reduction

Measures (selection):

- New ventilation system for 2 halls

- Optimization for ventilation of shower areas

49

Project example Norway: Elverum commune (continued)

Measures (continued):

-

- Air/water heat pump (hot water and heating)

- Energy monitoring

- Insulation in boiler room

- Water saving

Facts:

Czech Republic

National activities have focused on building know-how on EPC at stakeholders

(municipalities as well as the EPC supply side) and promoting the use of the method in the

Czech Republic. The main activities included 1) trainings and conferences, 2) dissemination

activities (leaflets, articles and competition on EPC) and 3) conceptual work (foundation of

the “Association of ESCOs”, strategic work with the Ministry of Industry and Trade). The

Association will continue to operate also after the end of the EESI project and SEVEn continues to

communicate with and support the activities of the Association.

Type of contract EPC

Duration of contract 9 years

Investment 3.162.500 €

Energy costs (Baseline) 1.600 k €/a

Guaranteed savings 400.000 €/a

Guaranteed savings (share of baseline) 25 %

Reduction of CO2-Emissions 541 t/y

50

Trainings and conferences: 6 training events have been organized during the project. The

trainings have been very successful in terms of attendance – some of the trainings have

attracted almost 100 participants each, the rest about 20-40 participants each. As an

additional activity, series of 10 seminars have been organized together with Siemens and

Enviros in spring 2011. Additionally, EPC has been presented by SEVEn in several events.

Further training events and conferences are planned at least for the rest of 2012

During the project, several information leaflets on EPC have been published reaching more

than 10 000 people.

The leaflets have provided information on the basics on EPC, but one edition was

specifically tailored towards municipalities and towns, providing a “cookbook” through the

whole EPC process. Tens of articles on EPC have been published in general as well as expert

media and two years (2011, 2012) of competition on the best EPC project preparation have

been organized.

Conceptual work: SEVEn has been closely cooperating with the

Ministry of industry and Trade (MoIT) who has EPC in their gesture.

As a result, MoIT has recently (finally) adopted EPC in its agenda,

providing in 2012 for the first time support for EPC initiation and

cooperating on the preparation of EPC standard documents. In 2012

the support scheme was launched for the first time and is likely to

continue in next years.

Project example Czech Republic: Jihlava Hospital

Facility:

- Continuous operation

- 780 beds

- Approx. 1200 employees

- 9 medical pavilions and other buildings for

operation of the hospital

Initial situation:

- High energy costs

- Need for reconstruction

Goals of building owner:

- Lower energy costs

- Better environment for patients and employees

- Heating system refurbishment

Fig. 5 EPC project in the

State Opera in Prague

51

Project example Czech Republic: Jihlava Hospital (continued)

Measures (selection):

- New gas boiler

- Cogeneration units and refurbishment of heat exchange stations

- Optimization of cooling system

- Heat recovery from waste air

- Energy saving measures in lighting (replacement, motion controls, day and night

operation)

- Water saving measures

- Individual heat regulation, energy monitoring and management system

Facts:

Type of contract EPC

Duration of contract 10 years

Investment 2.7 Million €

Energy costs (Baseline) 1 454 k €/a

Guaranteed savings 441 k €/a

Guaranteed savings (share of baseline) 26 %

Reduction of CO2-Emissions 1661 t/y

52

Belgium

The main results and achievements for Belgium are the following:

• An efficient EPC-promotion and dissemination campaign composed amongst other

out of 6 Newsletters, 13 National media coverings, 12 presentations at conferences

and 17 initial consultations;

• The development of a bilingual Belgian EPC-website containing the currently best

available EPC key-documents (manuals, model documents, market information,…)

needed for Belgian EPC-facilitators, local authorities and ESCOs for developing an EPC-

project;

• The availability of a brand new and highly innovative Belgian EPC-contract that meets

all requirements of Fedesco, and in general the Belgian market;

• The tendering of the first two Belgian EPC-projects in the public sector and the

expected rapid growth of the Belgian EPC-market starting from the second half of

2012.

Project example Belgium: Fedesco

Facility:

- 14 offices of the Belgian Federal Government

- Main occupant: Ministry of Finance

Initial situation:

- The maintenance contract of the mentioned buildings had to be renewed. This

opportunity was taken to implement a maintenance and energy performance

contract (MEPC).

Goals of building owner:

- Cost efficient maintenance

- Acceptable comfort

- Saving energy

- Saving costs

Measures (selection):

- Not available, tender in progress

53

Project example Belgium: Fedesco (continued)

Facts:

(*)Preliminary estimations of March 2012

Romania

EESI was one of the most important supports for the development of the energy service

market in Romania, especially for promotion of performance contracting in the public

sector.

Starting with concept dissemination and ending with successful implementation of pilot

projects, EESI addressed important barriers and is characterized by relevant results such as:

• Establishment of a well structured National Steering Committee coordinated at the

parliamentary level and having relevant representatives able to help project

implementation: representative of the ministry in charge with coordination of Energy

Efficiency Action Plan (including a specific task “Promotion of the development of

Energy Service Companies”);

• Establishment of strategic documents starting with country report - presenting a

comprehensive analysis of existing situation (political, economic, legal and financial

framework and a summary of the bottlenecks, challenges and opportunities) – and

ending with evaluation report, policy recommendation and position paper;

Type of contract EPC

Duration of contract 15 years

Investment 1.000 k € (*)

Energy costs (Baseline) 1.200 k €/a

Guaranteed savings 150 k-250 k €/a (*)

Guaranteed savings (share of baseline) 15 - 25 %*

Reduction of CO2-Emissions 700 t/y *

54

• Substantial transfer of know-how by translation and adaptation of model contracts

and related standard documents; this transfer was focused on both sides: central

administration responsible for legal framework clarification and improvement and

also local administration responsible for project identification and preparation of

tender procedure; additional and very efficient support have been offered by the

European Bank for Reconstruction and Development (EBRD) by preparation of the

“Energy Efficiency Program in Romanian Public Sector”; as a result, important legal

clarifications have been included in the minute signed by relevant institutions (ANRE,

ANRMAP and Ministry of Public Finance);

• Substantial training and dissemination activity based on the EESI website and

seminars organized all around the country, in 4 main cities, with the participation of

163 representatives of various institutions: municipal energy & procurement

departments, ESCOs, banks, ministries, etc.; an additional dissemination activity was

developed by presentations in different 12 national events, by the EESI newsletters,

good practices, more than 10 media coverings and the final brochure.

The most important impact have been obtained by the pilot projects: 4 pilot projects have

already finalized their investment activity (Agricultural Scholar Group “M.Kogalniceanu”-

Miroslava, Pulmonary clinic – Bisericani, Comlosul Mare School, University “Politehnica”

from Timisoara), 1 project is in the final stage of investment implementation (Municipal

Hospital from Medias) and 1 new project is in evaluation (Municipal Hospital from Giurgiu).

Many other projects are identified: a feasibility study is finalized for hospitals managed by

Bucharest municipality, meetings have been organized with hospital managers in the N-E

area of the country and different other actions have been reported by various ESCOs.

Project example Romania: Pulmonary clinic - Bisericani

Facility:

- Former monastery, built around 1650. With further

expansion stages from the 1920's and 1970's

- The building complex is the oldest of the three lung hospitals

in Romania

- Capacity: 350 beds

Initial situation:

- High energy costs

- Need for reconstruction

Goals of building owner:

- Redevelopment or replacement of the central heat-

generation plant

55

Project example Romania: Pulmonary clinic – Bisericani (continued)

Measures (selection):

- Installation of new boilers, incl. expansion vessel, hot-water tank (3000 liters)

connection with the plate heat exchangers, hydraulic connections, water softening

and pressurize unit, safety facilities, measuring and control devices, elements for

automation.

Facts:

France

The EESI project and activities have had an impact on the regional and national EPC context

at different levels.

First, EESI has contributed to a better EPC information collection and dissemination through

the website, the newsletters and the best practice examples which are the first

communication level. The presence in many events at regional but also at national level

allowed to reach different audiences.

As the government was working on EPC promotion at the same time, EESI has contributed

to national work with inputs from regional and European experience in the national EPC

Grenelle working groups: EPC definition, contracts models, EPC guidelines, regulation

adaptation.

Type of contract EPC

Duration of contract 15 years

Investment 158 000€

Energy costs (Baseline) 74 k €/a

Guaranteed savings 15.3 k €/a

Guaranteed savings (share of baseline) 29.5 %

Reduction of CO2-Emissions 4770 t/y

56

The regional committee and the training sessions have initiated discussions and exchanges

between the different EPC stakeholders leading to a common understanding of EPC

definitions and a real share of stakes and priority. A real cooperation between EPC regional

stakeholders has been initiated.

Otherwise, EESI has initiated and assisted the first EPC public projects in the Rhône-Alpes

with a wide range of EPC types: EPC light (services), standard EPC (only on energy

production) and EPC Plus with comprehensive refurbishment. The feedback of experience

from these projects has been used to adapt methods and tools like audits specification,

facilitator’s missions and to set up subsidies for the first’s projects assistance.

Last but not least, the first projects have shown a real lack of financing for ambitious

projects (EPC Plus) which led to the work to define a regional public third-party financing

tool. This new regional tool in form of a public company will propose assistance/facilitator

missions and third party financing (conception / realization / financing / maintenance).

Project example France: Museum of Modern Art in St Etienne

Facility:

- Saint Etienne Metropole manages a portfolio of 40

buildings including:

• High ceiling storage room

• 19 000 art works

• Conference room - Library

• Restaurant – Administrative area

Initial situation:

- In 2008, the community has initiated a Regional Climate Plan. To fulfil its

commitment to this comprehensive approach, the local authority opted to use the

Energy Performance Contracting (EPC) to renew the energy systems of the Museum

of Modern Art in St Etienne.

Goals of building owner:

- Need to renovate the heat production (9 000 m)

Two gas boilers at the end of life and a chiller for cooling

- Standard maintenance contract

- Goal of reducing energy consumption

Measures (selection):

- New boilers and chiller

- New automation system and implementation of a brand new BMS

- Electrical cabinets retrofit

57

Project example France: Museum of Modern Art in St Etienne (continued)

Facts:

Slovakia

The EESI implementation in Slovakia has been based on intensive cooperation with relevant

stakeholders from different sectors. This approach has provided important results on

different levels.

On the national policy level, the activities started with elaboration of national report on EPC

implementation status in Slovakia. The most important barriers have been identified within

this step. These barriers have been consequently addressed within other project activities

that have resulted in establishment of informal working groups (on the platform of National

Steering Committee) focused on respective EPC barriers (budgetary limitations, public

procurement, price regulation). The practical output of this area of activities has been

provided in form of Policy Recommendations that have been provided to relevant national

authorities (Ministry of finance, Ministry of Economy).

At least partial implementation of the proposed recommendations has been facilitated

through including the "Support of Energy Services Utilization" as one of horizontal measures

in the National Energy Efficiency Action Plan for years 2011 – 2013. It is expected that the

adapted EESI model documents will be further promoted in the public sector.

Type of contract EPC

Duration of contract 10 years

Investment 430 000€

Energy costs (Baseline) 95 k €/a

Guaranteed savings 23.9 k €/a

Guaranteed savings (share of baseline) 46 %

Reduction of CO2-Emissions 64% = 152 t/y

58

Important achievements have been reached also on the micro level. Here the activities

aimed at identification and development of pilot EPC project have been supported by

intensive promotion, awareness rising and trainings. The support activities have been caped

by series of training events organized (in cooperation with ESCOs and financial institutions)

in all eight regional capitals in Slovakia that have attracted a high number of stakeholders

and potential clients from the side of the municipalities, state and regional authorities and

others.

Contacts acquired within these trainings formed a base for further intensification of

communication with prospective EPC clients which was followed by detailed analyses of

energy efficiency and EPC potential in several cases. These analyses enabled the ECB to

create a pipeline of possible EPC projects. Various reasons (mentioned in previous parts of

this report) have slowed down the market development and thus none of these projects

has been promoted to the realization stage within the EESI duration. Although the slower

progress, the tenders for at least two projects have been published and for one project will

be published (by ECB) in July 2012. Realization of these projects is expected in second half

of 2012.

As these projects are based (or are in line) with the EESI model documents, it is expected

that they will serve as the so much needed references for further EPC market development

in Slovakia.

Sweden

IVL’s activities within the EESI project have focused on independent promotion of powerful

energy efficiency improvement mainly addressing networking, capacity building, trainings

and transfer of knowledge. Despite a target of three educations IVL total delivery amounts

to eight educations and trainings. One reason for this is the positive evaluation of the first

educations that clearly showed the need for and benefit of increased EPC know-how. The

last five trainings were arranged by the Swedish Energy Agency with IVL/EESI as co-

organizer. Another success story is the large number of good practice examples published

on the Swedish EESI website – as many as 62 examples are presented and we get regular

feedback and questions about these.

Dissemination through presentation at several national and international conferences and

seminars has also contributed to the increased awareness of EPC as a model for powerful

energy efficiency improvement generally and the EESI project specifically. Very important

for communication and dissemination is of course the Swedish EESI website which has been

very frequently visited. We have gathered general information on EPC and not only specific

EESI related information. Two press releases have been published; one after a two-day

education and one regarding the good practice examples. The latter, resulted in substantial

media covering and several journalists who were interested in writing more detailed

articles. Model documents and pilot projects are also very important achievements.

59

IVL has co-operated with ESCOs in developing and evaluating pilot projects and an

advanced EPC model with focus on environmental issues and primary energy savings have

been developed.

Project example Sweden: AB Väsbyhem

Facility:

- Mainly residential buildings

Initial situation:

- High energy costs and energy consumption

- Taking part in Skåneinitiativet since 2008 with the aim of 20 % decrease in energy

consumption by 2020

- Investments funds available due to prior sales of property

- Positive attitude towards EPC amongst politicians, management and officials

Goals of building owner:

- Reduction in maintenance costs

- Modernize existing buildings

- Final goal is 20% reduction in energy use by 2020, as undertaken in Skåneinitiativet

(2008)

Measures (selection):

- Additional insulation e.g. roof insulation

- Measures for warm water economization e.g. individual measuring and debiting

- New heat pipes

- Ventilation recovery

60

Project example Sweden: AB Väsbyhem (continued)

Facts:

Type of contract EPC

Duration of contract 3 years

Investment ca 5.7 million €

Energy costs (Baseline) ca 7 million €/a

Guaranteed savings ca. 600 000 €/a

Guaranteed savings (share of baseline) 15.3 %

Reduction of CO2-Emissions 850 t/y

61

6 Policy Recommendations

According to the European Commission, more than 20% of EU’s energy consumption is

wasted through inefficiency. This potential can be effectively targeted using energy services

and other market based efficiency measures. Despite this huge economically feasible

potential the European market development of energy services such as Energy Performance

Contracting is still poor. Efforts to foster energy services especially Energy Performance

Contracting by policy should consider the following recommendations5.

Introduction of supportive policy and legislation

• As the strong policy support for EPC market development is needed, it is

recommended to anchor EPC and related public supporting programs into Member

States National Energy Efficiency Action Plans and National Renewable Energy Action

Plans.

• Additionally, a deep renovation (comprehensive refurbishment) roadmap should be

prepared, allocating technical and financial energy savings and renewable energy

potential to be reached through EPC which is an important tool in the renovation of

buildings.

• EPC implementation processes should be streamlined through secondary and tertiary

legislation dedicated to EPC, standardized EPC Terms of Reference and model

contracts for EPC at national level (including EPC Plus, EPC Light, IEC, Green EPC).

• A change of tenancy/property law, energy and tax legislation is required, permitting

the refinancing of energy efficiency and renewable energy investments via

contribution by/charges to tenants, and linking EPC contracts to the building or utility

meter rather than to the owner.

• Support greater number of 3rd party EPC-Project Facilitators and EPC-Market

Facilitators (i.e. institutions that develop EPC-projects and support their

implementation).

• Mandatory checks if EPC is economically feasible and regulation for feasible EPC

implementation should be introduced.

• Obligatory energy audits should be introduced in the public sector or included in

energy management systems, in order to identify and quantify cost-effective energy

efficiency measures and renewable energy technologies as the crucial input to the

EPC.

5 For more detailed information, please see the ” Aggregated European position paper on EPC” on the EESI

website: http://www.european-energy-service-initiative.net/eu/toolbox.html

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• Considering poor availability of energy data and exemplary role of public bodies

buildings, obligatory energy management should be introduced, taking into account

relevant standards, such as EN ISO 50001 (Energy Management Systems).

Availability of information and know-how

• In order to support the establishment of public procurement processes enabling

implementation of EPC projects, clarifications of potential pitfalls and performance of

tailor made supportive activities are needed.

• Member States should make available officially approved standardized EPC tools to all

parties interested. These tools should include model contracts, too. The goal is to

minimize perceived energy contracting implementation and contractual arrangements

risks, transaction costs and time needed for the preparation of projects as well as to

enable the entry of new actors into the EPC market.

• Training sessions for a variety of officials in local authorities, as well as politicians, are

needed to strengthen demand-side competence on EPC.

• In order to remedy the lack of knowledge among potential EPC customers, and

knowledge asymmetries between customers/potential customers and ESCOs, a forum

is needed where customers may exchange experiences.

• The lacking availability of websites providing much needed information on EPC in

long-term, such as good practice examples, needs to be remedied and a longer term

solution established.

• The reported shortage of competent staff could be alleviated by further scientific

studies on the topic, preferably interdisciplinary (engineering, financial issues, etc.).

• A protocol and accompanying tools for the assessment of applicability of possible

business models, for deployment of energy efficiency measures and renewable

energy sources in the building environment, should be developed.

Provision of financing

• Budgetary provisions favourable for EPC should be established, based on positive

outcome of cost benefit analysis of the introduction of this market-oriented

instrument.

• Potential value of establishing EPC dedicated credit lines by a public entity (such as a

government agency and\or donor organization) should be assessed, in order to

provide low-interest loans to local financing institutions (LFIs) to encourage them to

offer sub-loans to implementers of EPC project. Inclusion of technical assistance to

the participating LFIs to enhance their technical capacity should be planned, too.

• Member States should consider establishment of risk-sharing facility by a public entity

(such as a government agency and\or multilateral banks), providing partial risk or

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partial credit guarantee to absorb some EPC project risks and facilitating involvement

of LFIs in EPC financing. Targeted technical assistance supporting both LFIs in the

marketing and delivering of financing services and EPC project developers in the

preparation of projects for investments should be planned as a part of the risk-sharing

facility activities.

• In order to increase the share of profitable energy efficiency measures and renewable

energy technologies, policy makers need to consider investment subsidies for local

authorities to undertake EPC.

• Member States should consider boosting of the deep renovation of the building stock,

both public and private, by introduction of specific financing facility, i.e. a deep

renovation fund and implementing public buildings deep renovation EPC pilot

projects.

• Financial support for further structuring of the EPC market should be provided by

financially supporting the establishment and first start-up activities of EPC-specialized

associations and federations, and EPC-information activities within existing

institutions. Due to high EPC transaction costs, especially at the inception phase of the

project, subsidizing of EPC preparation costs can decrease the reluctance towards this

business model.

• Member States and regions should make full use of the Structural Funds and the

Cohesion Fund to supplement EPC Plus financing, contributing to deep renovation of

public buildings and housing.

Further development of the market

• To achieve a stronger market development for ESCO services a further development

of EPC business models and related model contracts is necessary.

• EPC Light can be the first step into an external energy management, introduction for

EPC projects or the follow-up model for expiring classical EPC projects. Because the

EPC Light “soft” measures implemented are not “visible”, it is necessary to inform on

and promote the use of the EPC Light in targeted environment.

• EPC Plus should be preferentially used as the model for a deep renovation in the

public sector. It reduces both the delivered and the final energy consumption of a

building by a significant percentage compared with the pre-renovation levels.

• Further EPC market evolution should be underpinned by introduction of the EPC

Codes of Conduct as a tool to acquire customer trustfulness and to increase the

transparency of the EPC market setting quality principles and requirements.

• Member States should analyze level of technical competence, objectivity and

reliability in the EPC market in terms of recommendations on quality certification of

EPC Services.

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7 Further Information

European Websites

• European Energy Service Initiative: http://www.european-energy-service-

initiative.net

• Intelligent Energy Europe: The Webpage of the EU Intelligent Energy Europe program.

(http://ec.europa.eu/energy/intelligent/)

• Intelligent Energy eLibrary: The e-library holds a range of tools and guidebooks on

energy efficiency, renewable energy applications and sustainable mobility.

(http://www.iee-library.eu/)

• Energy Service Directive: The framework for energy end-use efficiency and energy

services in the EU. (http://ec.europa.eu/energy/efficiency/end-use_en.htm)

• BUILD UP: The European portal for energy efficiency in buildings.

(http://www.buildup.eu/)

• JRC Institute for Energy: The Joint Research Center of the European Commission,

Institute for Energy (http://re.jrc.ec.europa.eu/energyefficiency/)

• Energy Efficiency Watch: The platform of the Energy Efficiency Watch Initiative.

(http://www.energy-efficiency-watch.org/)

EU Projects

• FRESH: Financing energy refurbishment for social housing. (http://www.fresh-

project.eu/)

• Minus 3%: Shining Examples for the Implementation of the Energy End-use Efficiency

& Energy Services Directive. (http://www.minus3.org/Home.php)

• PERMANENT: Performance Risk Management for Energy efficiency projects through

Training. (http://www.permanent-project.eu/)

• Change Best: Assistance for energy companies and ESCOs in entering the markets for

energy services. (http://www.changebest.eu/)

Further Links

• IEA Demand Side Management Program: offers solutions to problems such as load

management, energy efficiency, strategic conservation and related activities.

(http://www.ieadsm.org/)

• Elios: alternative risk transfer solutions for the implementation of innovation and eco-

technologies in construction. (http://www.elios-ec.eu/)

• EU ESCO Association: The European ESCO Association. (http://www.eu-esco.org/)

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8 Abbreviations

• EBRD European Bank for Reconstruction and Development

• EESA European Energy Service Award

• EESI European Energy Service Initiative

• EIB European Investment Bank

• EnEff Energy Efficiency

• EPC Energy Performance Contracting

• ESC Energy Supply Contracting

• ESCO Energy Service Company

• EU European Union

• HVAC Heating, Ventilation, and Air Conditioning

• ICLEI International Council for Local Environmental Initiatives

• LFI Local Financing Institutions

• M&V Measurement and Verification Methodology

• MoIT Ministry of industry and Trade

• NEEAP National Energy Efficiency Action Plan

• PPP Public Private Partnership

• RE Renewable Energy

• VAT Value Added Tax