Energy Performance Contracting Still Faces Barriers

EPC facilitators offer wide-ranging services but are still faced with many obstacles.
Published: Thu 08 Jan 2015

Currently, many European countries have yet to see energy performance contracting (EPC) develop significantly. This is according to Christiane Egger, Deputy Manager of the OÖ Energiesparverband (ESV), the energy agency of Upper Austria, and the manager of the Ökoenergie-Cluster, a network of 170 companies active in renewable energy and energy efficiency. She will be presenting at the upcoming ESCO Europe to be held in Milan, Italy.

Energy Performance Contracting (EPC) is a form of ‘creative financing’ for capital improvement which allows funding energy upgrades from cost reductions, according to the European Commission Research Centre. Under an EPC arrangement, an external organisation (ESCO) implements a project to deliver energy efficiency, or a renewable energy project, and uses the stream of income from the cost savings, or the renewable energy produced, to repay the costs of the project, including the costs of the investment. Essentially the ESCO will not receive its payment unless the project delivers energy savings as expected.

EPC facilitation services are wide-ranging

There are a number of reasons for this lack of development, suggests Egger. These include legal barriers, a lack of understanding and trust in EPC, the absence of experienced ESCOs and of organizations that facilitate EPC market development.

Egger points out that EPC facilitation services help to overcome the "no chicken, no eggs" problem, or in other words, the "no demand, no supply" challenge. EPC facilitators offer the following services:

  • Bundle knowledge on legal and technological matters, funding and finance

  • Actively spread information about EPC and how it can work in practice to establish knowledge about the instrument and trust in the feasibility of EPC projects

  • Collect good practice examples

  • Interact with banks, funding institutions and public bodies in their respective regions

  • Organise targeted events, provide checklists and guides, as well as targeted advice to firms and organisations interested in implementing EPC projects

We asked Egger to expand on ESV's own ESCO facilitation services. She says that on behalf of the region, ESV has been managing an EPC programme for over 10 years which has seen over 130 EPC projects come to fruition. In addition to financial support for EPC projects, the programme includes a comprehensive facilitation service. Egger lists the most important features of this facilitation service as follows:

  • Awareness raising activities targeting the “supply side” (ESCOs) as well as the “demand side” (municipalities, companies)

  • Events (conferences, information events) and training sessions (for ESCOs and for their clients)

  • Publications

  • Providing information and advice on an ongoing basis

  • Advice for clients at all project stages

Street lighting- a learning and testing ground for EPC

Street lighting has developed into a good "learning and testing ground" for EPC because of its lower technical and economic complexity when compared to building-related EPC.

According to Egger, the recent market introduction of LED technology for street lighting offers high savings with comparatively short pay-back times. And thirdly, according to European legislation, nearly 80% of all currently used street lighting lamps will be phased out by 2017.

This creates a unique opportunity to meet three goals at the same time:

  • Establish EPC markets and trigger the uptake of guaranteed energy services

  • Support the market introduction of innovative efficient lighting technologies

  • Support municipalities in the "phasing-out" of street lighting lamps which they would otherwise find very hard to finance

A need for proactive information

In conclusion, Egger points out that there is an urgent need for the provision of proactive information to many market players that have a potential role to play in establishing an EPC market. She adds, “It is very helpful if there is a "neutral" information provider that can be contacted both by ESCOs and clients. Setting-up an ESCO market in a region takes a significant amount of time, especially to establish trust in the instrument.”

“It would be very interesting to discuss at the event how the ESCO market for energy efficiency and renewable energy sources can be brought to a different order of magnitude across Europe.