Energy Performance Contracting
This is a form of creative funding for capital enhancement that permits the upgrading of funding energy upgrades from cost reduction. In Energy Performance Contracting (EPC), and Energy Saving Company (ESCO) is assigned the responsibilities of executing an energy efficiency or a renewable energy project. The production of energy or saving in the project finances the initial investment of the project that is to be carried out. The ESCO is compensated in regard to the performance revealed and delivered towards the agreed energy saving. EPC is the most considered option for infrastructure investments when encountering a lack of technology or manpower information, energy engineering skills, and capital.
When ECP is done perfectly, it is considered today by most experts as the most appropriate and cost-effective method in delivering and optimising energy efficiency measures and investments in industrial and building facilities. So far, the EPC has been recognised for a long time, with its first application recording was established in the 1980s in North America. By then, it was used to deliver assured and sustainable energy savings (Novikova et al, 2017).
Energy Performance Contract (EPC)- Staggered savings
The staggered modernisation model addresses the disadvantages of the previous model by extending the modernisation process over a longer time period. Over several years or even decades, outdated luminaires are replaced with new, energy-efficient luminaires. At regular intervals during the contract term and again at the end of the contract, the city and private partner can establish a modernisation time schedule or specify the maximum age of luminaires (and poles, if these are included in the modernisation programme) (Novikova, 2017).
Advantages: The advantage of this model is that it provides for more regular investments. As a result, the city maintains reasonably modern street lighting infrastructure, and there are no sharp upticks in investment requirements or building activity. The model also helps to prevent a situation in which all luminaires are replaced at the same time. The least energy-efficient luminaires can be replaced first.
Disadvantages: The primary disadvantage is that the city realises the benefits of energy savings and lower maintenance costs later than it would if it applied the immediate savings model
Projects that can be financed with this model: Models with staggered modernisation are appropriate in cases in which age and lighting technology vary among existing luminaires. Under these circumstances, it makes sense to replace the oldest and least efficient luminaries first, and wait with other luminaries until their technical and economic performance indicates that they have reached the end of their useful life.
Case studies:
2. Streetlight OesteLED IP, Oeste Region- Portugal
References:
Novikova, A., Stelmakh, K., Hessling, M., Emmrich, J., and Stamo, I. 2017. Guideline on finding a suitable financing model for public lighting investment: Deliverable D.T2.3.3 Best practice guide. Report of the EU-funded project “INTERREG Central Europe CE452 Dynamic Light”, October 2017.
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