Session 1: EnPC- INTRANS Project and the basic
concept of Energy Performance Contracting (EPC)
EPC CONCEPTS AND
BUSINESS CASES
Miodrag Gluščević, SKGO, Serbia
National Roadshow Event
Jelgava, Latvia - 18 October 2016
Contents of the Presentation:
 Definitions
 Basic concept of EPC
 Advantages of EPC for the public building
owner
 ESCOs
 EPC business models
 Economic assessment of EPC projects
 Calculation of the economic basics of EPC
projects
 Main stages of an EPC project
 Practical examples of EPC in public
buildings
Slide N° 2
EPC Definitions
EU Energy Services Directive
Joint Research Centre-Institute for
Energy and Transport
European Bank for Reconstruction and
Development
Environmental Protection Agency
 … a contractual arrangement between the
beneficiary and the provider (normally an ESCO) of
an energy efficiency improvement measure, where
investments in that measure are paid for in relation
to a contractually agreed level of energy efficiency
improvement.
 a form of ‘creative financing’ for capital
improvement which allows funding energy
upgrades from cost reductions.
 the procurement of works and services on the basis
of net present value of future energy savings.
 … a turnkey service, which provides customers with
a comprehensive set of energy efficiency, renewable
energy and distributed generation measures and is
accompanied with guarantees that the savings
produced will be sufficient to finance the full cost of
the project.
Slide N° 3
EPC concept
Saved energy cost
used for the repayment of ESCO costs
(contracting fees)
End of EPC contract
(investment paid back)
Actual energy cost
ESCO
Investment
investment
in EE measures
(20-40%
(20-40%
guaranteed
energy savings)
Continuous
energy cost savings
of the public
building owner
(20-40 %)
Source: GIZ
EPC contract period
time
Slide N° 4
Advantages of EPC for
the public building owner
Major advantages of EPC compared to
traditional owner-directed ways of project
implementation are:
(source of arguments : Transparense 2011)

The building owner does not use own funds and transfers
its investment risk to the ESCO.

EPC improves energy efficiency and thus also increases
operating reliability and security of supply, while energy
costs and environmental pollution are reduced.

The ESCO's technical know-how and professional energy
management are used.

The building owner t is relieved of essential planning and
operating work. More time remains for its own core tasks.

Value, productivity and comfort of buildings are enhanced.

The full set of services like e.g. planning, financing,
construction, operation, and maintenance may be covered
from one source, thus reducing the number of interfaces
and transaction cost.

Additional services such as user motivation and trainings
can be included in the scope of EPC.

Contract elements assign commercial and technical risks to
the ESCO´s to a large extent.

Authorities doing EPC on a regular basis appreciate also the
model's flexibility, combining compulsory measures or other
special requirements with EPC.
Slide N° 5
Energy Service Companies (ESCOs)
 An Energy Service Company (ESCO) implements a
customized energy service package, consisting of
planning, building, operation & maintenance,
optimization, (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 EPC service or main parts of it is paid by realized
energy cost savings.
Source: EESI 2010
Slide N° 6
EPC business models
Guaranteed
energy savings
(compared to
baseline)
No investment
Planned investments
(prior to investment stage)
Slide N° 7
Specific features of EPC business models
EPC light
EPC basic
EPC plus
Only equipment and
operating costs
Investments only in fastpaying energy saving
measures
Investments in comprehensive
rehabilitation (deep renovation) of
buildings including non-energy
related measures
Typically
10-20 %
Typically
20-60%
Ideally
>70%
In most cases
2-3 years
In most cases
5-15 years
Often
>15 years
State of building and
planned investment
All public buildings with
energy saving potentials
The building still serves its
purposed, but energy
systems installed and used
in the building are outdated
and inefficient
Building does no longer serve its
(current or future) purpose. Building
and installed energy systems are
outdated and/or dysfunctional, deep
renovation is planned
Design and planning of the
EPC project
Building owners or local
facilitators
Building owners or local
facilitators
Building owners or local facilitators
in cooperation with contracted
architects, and engineers
ESCO
ESCO
ESCO
Scope of investment
Energy savings achieved
Contract duration
Installation and operation of
equipment and facilities
Slide N° 8
Selection of EPC business models
Slide N° 9
Economic assessment of EPC projects
Net present value (NPV) method
comparing total life cycle cost and
savings
 Discounting all project cost and savings expected during
the entire life cycle of the project to the moment of
project start.
 Comparing NPVs of total life cycle cost and savings.
 If the ESCO’s cost of an EPC project are going to be paid
completely from future savings, the NPV of total project
life cycle cost must not exceed the NPV of future
savings accumulated during contract duration.
Annuity method
comparing equivalent annual cost
and savings
 Calculating the equivalent annual cost of the project
based on the
annuity of initial cost (preparation, planning,
investment etc.)
plus annual implementation cost.
 Comparing equivalent annual cost and guaranteed
savings.
 If the ESCO’s total cost of an EPC project are going to be
paid completely from future savings,
the equivalent annual cost must not exceed the
average annual future savings during contract duration.
Slide N° 10
Calculation of the economic basics of EPC projects
An Excel based demonstration tool for the calculation of economic basics of EPC projects is
provided by the EnPC-INTRANS project.
Slide N° 11
Main stages of an EPC project
Source of the underlying chart: Transparense.eu
Slide N° 12
Example of EPC projects in public buildings
Pool of public buildings in the city of Moravska Trebova
(Czech Republic)
Complex of five municipal buildings

Two primary schools

Three administrative buildings
Measures

Installation of new efficient heat sources

Installation of IRC system (heat consumption
is controlled in each room individually)

Savings in lighting

Efficient equipment for water consumption
Facts

Contract duration: 10 years

Investments: 430,000 EUR

Initial energy costs (baseline): 420,000 EUR/y

Guaranteed savings: 80,000 EUR/y

Guaranteed savings: 19%

Reduction of CO2 emissions: 285 t/y
Source of information: Transparense.eu
Slide N° 13
Miodrag Gluščević
Head of the Department for Communal services,
Urban Planning and Environment
[email protected]
+381648703311
Standing Conference of Towns and Municipalities National Association of Local Authorities in Serbia
Makedonska st. 22/VIII, Belgrade, Serbia
+381113223446
+381113221215
www.skgo.org