Practices

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European Structural and Investment Funds (ESIF) and Energy Performance Contracting (EPC) – Stimulating investments in energy efficiency

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Energy Performance Contracts (EPCs) are contractual arrangements typically between a building owner and an energy service company (‘ESCO’), where the ESCO invests in energy efficiency measures and guarantees energy savings over the duration of the contract. By linking compensation to the performance of the implemented projects, the client pays for actual savings and not for the investment.

 

The importance of EPC and its financing is underlined by Horizon 2020 that provides project development assistance for the development of EPC projects with innovative elements, such as combination with comprehensive renovation and the setup of innovative financing schemes for EPC.

EPC arrangements may concern different kind of investments. The present note focuses on comprehensive (or ‘deep’) energy efficiency refurbishment of buildings. Such EPC arrangements are able to generate savings above 40% but have a much longer repayment period, above 8 years, compared to EPC arrangements only covering energy management systems, heating, cooling and lighting. Only such comprehensive energy efficiency measures allow for reaching the 2050 decarbonisation targets set by the European Union (EU).

 

This report describes the key features of EPC, its advantages and how ESIF financial instruments can help upscale the EPC market in the future.