Energy Performance Contract |
A specific contract for energy efficiency
An Energy Performance Contract (EPC) is a tool available to public administrations and companies to increase the energy efficiency of their buildings and/or production processes in a lasting and structural way, with the possibility of investing without having to make an upfront payment.
The EPC, or Energy Performance Contract, is a specific type of contract designed to carry out energy efficiency upgrades and improvements that can be applied both the public and private sectors. This contract establishes the correlation between the payment and the guaranteed savings through the implementation of the improvement measures stated in the contract.
An EPC is the typical contract model used by Energy Service Companies (ESCo). The ESCo is responsible for implementing the necessary measures to achieve, and maintain the specified energy efficiency improvement targets over time, ensuring payment for the investment from the savings achieved compared to the historical energy cost.
Energy Performance Contract
Guaranteed energy savings
Gemmo implements and manages energy efficiency upgrades to buildings, improving the efficiency the systems owned by their customers through the EPC.
Gemmo finances the investment, using its own or third-party financial resources; guarantees the result in terms of improved energy performance; repays the investment through contractual fees, which are lower than the historical cost incurred by the customer.
Integrated process
The steps involved in an EPC may vary depending on the specifications of the contract, but usually include the following:
Determining the current consumption and identifying opportunities: the ESCo carries out an energy diagnosis to determine current energy consumption of facilities, systems or processes and identifies opportunities for energy efficiency improvement.
Sharing proposals: the ESCo shares the possible opportunities with the customer so that he/she is involved in decision-making as he/she is an active participant in pursuing and achieving the savings objective.
Planning: the ESCo draws up a detailed action plan to implement the energy efficiency improvements identified in the previous step.
Implementation: the ESCo implements the energy efficiency improvement solutions in accordance with the agreed action plan.
Monitoring and evaluation: the ESCo monitors the results to verify that the agreed energy efficiency targets are achieved and maintained over time.
Payment: depending on the duration and type of the contract, the ESCo
- collects the full amount of the savings to repay the investments for a specified time. At the end of this period, the entire benefit passes to the customer [first out contract]
- shares the actual savings achieved with the end customer, from the beginning, according to a predefined percentage [shared saving contract]
- guarantees a minimum level of performance by providing forms of compensation for the customer in the event of failure to reach the target (under-performance) and sharing in the event of savings greater than expected (over-performance) [guaranteed saving contract]
- guarantees a fixed saving with respect to historical energy expenditure from the outset by collecting the savings obtained for the entire duration of the contract [first in contract]
Note: this is only a general overview of the steps involved in an EPC and may vary depending on the specific conditions of a contract.
Who the EPC offer is for
Gemmo’s offer in terms of EPC is aimed at:
- public contracting stations, through Public Private Partnerships (PPP) in Project Financing (PF)
- private B2B customers, through specific contracts with performance guarantees.