Energy Performance Contracting (EPC)
Promoting Investments in improved energy efficiency of public buildings based in whole or in part on the net present value of future energy savings.
EPC is an innovative financing model to realize EE measures in public buildings and infrastructure by means of outsourcing energy related services to an Energy Service Company (ESCO). The ESCO takes the responsibility for the planning, installation, financing, operation and maintenance, and optimisation of energetic applications. Under an EPC arrangement an ESCO implements a project to deliver EE and uses the stream of income from the realized energy cost saving to repay, in whole or in part, the cost of the project, including the cost of the investment.
Essentially the ESCO will not receive its payment from the client unless the EPC project delivers the expected energy savings. The ESCO gives a performance guarantee to the client transferring the technical and financial risks of the project from the client to the ESCO. The remuneration for the ESCO is therefore based on demonstrated performance; a measure of performance is the level of achieved energy savings.
EPC is a means to deliver infrastructure improvements to public authorities that lack energy engineering skills, manpower or management time, capital funding, understanding of risk, or technology information. Cash-poor, yet creditworthy customers are therefore good potential clients for EPC.
Compare various publications of the Joint Research Centre of the European Commission – Institute for Energy and Transport; JRC-IET.