Different service providers offer services to help customers improve their buildings energy performance. These are typically called energy service companies (ESCOs). They can help achieve energy savings by implementing energy-efficiency and renewable energy projects [e.g. Houseful]. Typically, the service is delivered through Energy Performance Contracting (EPC), a business model where the solution provider guarantees the performance and receives a performance-based remuneration from the client. The use of EPC in the public sector, and partially in industrial and commercial buildings, has been consolidating in the past few decades, whereas it is still not very common for residential buildings [7] [9].
Energy-saving measures implemented through EPC can be related to e.g., boiler and chiller systems, lighting, HVAC, roofing, insulation, windows and building management systems, as well as deep renovation [9]. ESCOs contracting models can differ, presenting various financing terms, repayment options and different allocation of risk between the service provider and the customer. Examples of EPC are provided in the projects STARDUST and STUNNING.
Source: OnePlace [11]
One of the most common is the EPC Guaranteed Savings model, where the ESCO guarantees a certain level of energy savings to the client and takes on any eventual performance risk. In this case, the customer assumes the credit risk, obtaining a bank loan or using his own equity to repay the debt and the contractually determined fees to the ESCO for the duration of the contract. In this case, the customer will use the savings as repayment, and any savings exceeding the guarantees are split between the consumers and the ESCO according to contractual provisions. In case the energy savings were not sufficient to cover the debt, ESCOs would have the obligation to cover the difference [4][5]. Clients will actually start to benefit from energy and cost savings after the end of the contract. Countries with ESCOs that use this as the main financing model include Czech Republic, Denmark, Canada and Thailand [4]. For instance, in Denmark the municipality of Middelfart implemented energy saving measures in approximately 100 public buildings [13]. The contracted guaranteed savings were 21%, but the actual results have showed savings up to 24% of the total energy use.
Another example is the EPC Shared Savings model, in which cost savings are split between the ESCO and the customer for the duration of the contract, based on a pre-determined percentage. The ESCO assumes the financial risk, by covering investment and implementation costs, as well as the technical risk – which can be of value to the client as it avoids the investment costs [4][5]. This model requires the ESCO to be creditworthy and to have sufficient revenue streams to pay back the loan. Examples of countries where this model is used are India, Chile, and Greece [4].
Source: STUNNING project, funded by H2020 (2017-2019)
SuperESCOs are governmental entities created to serve the public sector, develop the capacity of private ESCOs, and facilitate project financing. Existing programmes designed to engage clients with ESCOs – such as energy audits programs, rebates, direct install programs, demand side management bidding, or standard offer approach – rarely provide sufficient funding for implementation costs such as engineering, procurement and installation costs. As energy efficiency projects do not seem to be an investment priority for many businesses, even those with financial means, supporting ESCOs creditworthiness is important to increase the adoption of energy-saving measures [4]. Super ESCOs are typically bigger companies or energy utilities [13].
ESCOs services can produce even more interesting results when combined with active buildings. Active buildings typically have a passive design, smart monitoring capability, can generate renewable energy on-site as well as store it, can integrate electric vehicles, and can intelligently manage integration in micro-grids and national grids [1]. Active building Energy Performance Contracting (AEPC) builds on the EPC model by exploiting energy demand-response systems and demand-side flexibility. This means that active consumers are able to change energy consumption patterns in response to market signals, such as prices or incentives, or depending on their self-generation and storage assets [8]. The building can thus adapt the use of energy in the slots where energy is most available and cheaper. In addition, the building can feed the excess energy to the grid when self-generated energy surpasses building consumption. AEPC usually targets cluster of buildings, which makes it more attractive to the ESCO companies and allows application in the residential sector. For instance, in Belgium [AmBIENCEe], active energy performance contracting has been piloted, through the dynamic simulation of the building behaviour and the setting of active control targets [12].
Additional information can be found in a European Commission’s Joint Research Centre (JRC) ESCO library, including different financial models [10].
MATURITY:
Energy service guarantee providers (ESCO) are commercially available at building level systems, whereas at district or area level the solutions are not that common. However, ESCOs are mostly focussing on commercial/public buildings. Some examples of ongoing projects are:
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In Sweden, the County Council of Östergotland replaced oil boilers with heat pump and oil-fired boilers with pellets [14].
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In Austria, a school was energy renovated with room level control systems [14].
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In the UK, the University of Sheffield was renovating heat distribution systems and upgrading air-handling units [14].
The traditional EPC model has been successfully implemented for decades, focussing especially on commercial and public buildings [9].
The APEC model [e.g. AmBIENCe] is more recent, and attempts are made to extend the benefits of EPC to the residential sector by operating on clusters of buildings. Application to singular residential units is still sporadic [9]. This is due to the fact that that commercial and public buildings represent a more attractive business opportunity, having higher energy consumption and, consequently, higher potential energy savings.
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