ENERGY PERFORMANCE CONTRACTING PLUS …epcplus.org/upload/ue/wp3/Training_final_WP3_3_Rev1.pdfENERGY...
Transcript of ENERGY PERFORMANCE CONTRACTING PLUS …epcplus.org/upload/ue/wp3/Training_final_WP3_3_Rev1.pdfENERGY...
ENERGY PERFORMANCE CONTRACTING PLUS (EPC+)SME Partnerships for Innovative Energy Services
through Standardisation
Training Module
WP3 3.2
Energy Performance Contracting Plus
ENERGY PERFORMANCE CONTRACTING PLUS (EPC+)SME Partnerships for Innovative Energy Services
through Standardisation
Training Module
WP3 3.2
1Energy Performance Contracting Plus
Training begins March 13th 2016
Ends: 30th September 2016
2
Module I: EPC concepts and EPC+ business model
Module II: Finance and Economics
Contents of the training
Energy Performance Contracting Plus
Module II: Finance and Economics
Module III: Project Selection and Tendering Procedures
Module IV: Measurement and verification of savings in EPC projects
EPC concepts and EPC+ business model
Finance and Economics
Contents of the training
Energy Performance Contracting Plus 3
Finance and Economics
Project Selection and Tendering Procedures
Measurement and verification of savings in EPC projects
CONTENTS OF THIS MODULE:
• Training Needs
• Results of Survey of Training Needs WP3.1
• Basic concept of EPC+
Module I EPC+ CONCEPTS AND
BUSINESS MODELS
Energy Performance Contracting Plus
• Basic concept of EPC+
• What is EPC
• Market niche for EPC+
• Definition of a SPIN
• Types of SPINs
• Toolboxes, Model Contracts
• Process of Implementation
• EPC Code of Conduct
EPC+ CONCEPTS AND
BUSINESS MODELS
Energy Performance Contracting Plus 4
Training Needs Analysis Report (W3.1) concluded that:
Topics that require most training:
EPC Training Needs Survey
Topics that require most training:
• Risk
• M&V
• Contracting & Public Sector Contracts
Energy Performance Contracting Plus
Training Needs Analysis Report (W3.1) concluded that:
Topics that require most training:
EPC Training Needs Survey
Topics that require most training:
Contracting & Public Sector Contracts
Energy Performance Contracting Plus
What is EPC?
EPC at a glance
Energy Performance Contracting Plus
What is EPC?
Energy Performance Contracting Plus
The Gap in the Market for EPC +p
roje
ctsi
ze
standard
inst
all
ati
on
option EPC+: new business model
pro
ject
EPC +
pay as you
save
pu
re i
nst
all
ati
on
ESC
Energy Performance Contracting Plus
The Gap in the Market for EPC +
standard EPC
EPC+ services target an
uncovered niche at the
market. Broadly speaking,
the competitor’s range
starts at pure installation of
service/guarantee
level EE
starts at pure installation of
equipment without
performance measurement
and ends with standard EPC.
In between, there is a lack
of available services that
reduce the performance risk
of the potential customers
with affordable transaction
costs.
Energy Performance Contracting Plus 7
“SME Partnerships for Innovative Energy Services (SPINs)”
Definition of a SPIN
SPINs are organized clusters of companies, mainly SME’s, which
jointly supply energy services and have a structured long
collaboration with commonly agreed objectives.
Energy Performance Contracting Plus
“SME Partnerships for Innovative Energy Services (SPINs)”
Definition of a SPIN
SPINs are organized clusters of companies, mainly SME’s, which
jointly supply energy services and have a structured long-term
collaboration with commonly agreed objectives.
Energy Performance Contracting Plus 8
• The aim of the project is to establish a
within the project duration of the project,
SPIN per partner country.
• Each SPIN should comprise of at least
SPIN Partnerships
establishment process is considered finalized
of a SPIN partnership contract.
• These organizational SPIN-model partnership
were specifically developed by the EPC+
on the EPC+ webpage. Two types of framework
at hand. One for a Simple SPIN and the other
Spin.Energy Performance Contracting Plus
a minimum of 12 SPINs
project, with at least one
least 3 members. The
SPIN Partnerships
finalized with the signing
partnership model contracts
EPC+ team and are available
framework agreements are
other for a Complicated
Energy Performance Contracting Plus 9
Simple SPIN
A Simple SPIN organisation is appropriate
circumstances:
• A market for EPC services or a market uptake
expected in the short term (6 months to one
• The principal (with its associates) should already
share or be able to acquire a market in the shortshare or be able to acquire a market in the short
• The associates should accept the central role
• The associates should not have the ambition
become competitors of the principal.
The reason for the appropriateness of a Simple
market situation is that without business (in
obvious that associates will not be interested to
or that they will lose their interest after some time
under the following
uptake of the EPC concept
one year).
already have a market
short term.
10
short term.
role of the principal.
ambition and capabilities to
Simple SPIN in a mature
the short term) it is
to join a Simple SPIN
time.
Complex SPIN
A Complex SPIN organisation is appropriate
circumstances:
• Pre-market situation where the EPC concept
used.
• An expectation that the EPC-concept will be taken
in the medium term (2 to 3 years).in the medium term (2 to 3 years).
• The expectation that the Complex SPIN can have
market growth (via lobbying and/or marketing)
competitive position of the SPIN partners in this
The reason for the appropriateness of a Complex
situation is that members in a Complex SPIN are
and experiment such a partnership with the
becoming a principal or associate in a Simple SPIN
in a Complicated SPIN once the market matures enough
under the following
concept is not well known or
taken up by the market
11
have an impact on the
marketing) and/or on the future
this market.
Complex SPIN in a pre-market
are willing to participate
ultimate objective of
SPIN or a leading partner
enough.
Complicated SPIN
A Complicated SPIN organisation is appropriate
circumstances:
• A market for EPC services or uptake of the EPC
short term (6 months to one year).
• Competitors (other SME ESCOs and/or large ESCOs)
market.
• Partners in the Complicated SPIN see a need• Partners in the Complicated SPIN see a need
competitive position by working together.
• Partners are complementary in terms of knowledge,
market focus.
• Partners in the Complicated SPIN are willing to
benefits.
The reason for the appropriateness of a Complicated
situation where other SME ESCOs and/or large ESCOs
due to the strengthening of the competitive position
through their partnership.
Complicated SPIN
appropriate under the following
concept expected in the
ESCOs) are present in the
need to strengthen their
12
need to strengthen their
knowledge, resources and/or
to share costs, risks and
Complicated SPIN in a market
ESCOs are present is mainly
position of the SPIN members
Preconditions for a wellhttp://epcplus.org/upload/ue/wp2/D2_1_Analysis_Report_150715_FINAL.pdf
Market approach
– SPIN needs to develop a clear strategy
– Commitment by all SPIN members is required
– Selection of suitable customer segments => cross– Selection of suitable customer segments => cross
– partners need to be willing to resume tasks and duties on
a long-term basis. Otherwise it is sub-contracting
Preconditions for a well-functioning SPINhttp://epcplus.org/upload/ue/wp2/D2_1_Analysis_Report_150715_FINAL.pdf
Commitment by all SPIN members is required
Selection of suitable customer segments => cross-selling
13
Selection of suitable customer segments => cross-selling
partners need to be willing to resume tasks and duties on
contracting.
Preconditions for a wellhttp://epcplus.org/upload/ue/wp2/D2_1_Analysis_Report_150715_FINAL.pdf
• Internal organization and management
– Definition of roles, responsibilities and duties
• who is the coordinator
• who is the face to the customer
• etc. • etc.
– Continuous exchange of information
• regular workshops
• fixed dates for web-based communication on a
weekly/monthly basis
– Clear and transparent contract
• no doubts on rules, duties, etc. should remain
• Everything should be clear and explicit
Preconditions for a well-functioning SPINhttp://epcplus.org/upload/ue/wp2/D2_1_Analysis_Report_150715_FINAL.pdf
Internal organization and management
Definition of roles, responsibilities and duties
who is the face to the customer
14
Continuous exchange of information
based communication on a
Clear and transparent contract
no doubts on rules, duties, etc. should remain
Everything should be clear and explicit
Business Plan for EPC+ Services
EPC+ Business Plan
An EPC+ Business Plan will provide SPINs with a information relating to the
EPC+ process from the product idea up to project realization. The Business Plan
will cover such areas as:
• Product Idea
• Targeted Markets & Clients Needs
• Providers of the Service
• Competitors, Threats & Risk
• Realisation Schedule
Energy Performance Contracting Plus
Business Plan for EPC+ Services
An EPC+ Business Plan will provide SPINs with a information relating to the
EPC+ process from the product idea up to project realization. The Business Plan
Energy Performance Contracting PlusSlide N
Business Plan for EPC+ Services
EPC+ Business Plan – Product Idea
The Business plan will provide an overview of the EPC+ product idea while also
outlining the main barriers associated with implementation of EPC in SME’s.
The Business Plan will also look closely at the following areas:
• Business Model Canvas, Principal of One
Contractual Relationships of EPC+ Services
• Performance Oriented Remuneration
• The Technical Offer: Establishing which EPC measures are to be
implemented
• The Financial Offer: Financing, Pricing and Cash Flows of EPC+ Services
Energy Performance Contracting Plus
Business Plan for EPC+ Services
Product Idea
The Business plan will provide an overview of the EPC+ product idea while also
outlining the main barriers associated with implementation of EPC in SME’s.
The Business Plan will also look closely at the following areas:
Business Model Canvas, Principal of One-Face-To-The-Customer &
Contractual Relationships of EPC+ Services
The Technical Offer: Establishing which EPC measures are to be
The Financial Offer: Financing, Pricing and Cash Flows of EPC+ Services
Energy Performance Contracting PlusSlide N
Business Plan for EPC+ Services
EPC+ Business Plan – Target Markets & Clients Needs
Although the markets targeted by EPC+ services are spread across several types
of clients, the needs of each separate market are similar. The main areas the
Business Plan will consider are the following:
• Small & Medium Sized Enterprises (SME)
• Public Sector
• Residential Sector
• Industry & Other Large Companies
Energy Performance Contracting Plus
Business Plan for EPC+ Services
Target Markets & Clients Needs
Although the markets targeted by EPC+ services are spread across several types
of clients, the needs of each separate market are similar. The main areas the
Business Plan will consider are the following:
Small & Medium Sized Enterprises (SME)
Energy Performance Contracting PlusSlide N
Business Plan for EPC+ Services
EPC+ Business Plan – Providers of the Service
The EPC+ Business Plan will also provide the requirements expected of SPINs
and outlining how a SPIN should be set up.
EPC+ Business Plan – Competitors, Threats & RisksEPC+ Business Plan – Competitors, Threats & Risks
EPC+ targets projects in niche markets, due to this the Business Plan will use
detailed analysis techniques to high the issues and outline what risk mitigation
may be required. An example of the type of analysis that is used is SWOT
analysis.
Energy Performance Contracting Plus
Business Plan for EPC+ Services
Providers of the Service
The EPC+ Business Plan will also provide the requirements expected of SPINs
Competitors, Threats & RisksCompetitors, Threats & Risks
EPC+ targets projects in niche markets, due to this the Business Plan will use
detailed analysis techniques to high the issues and outline what risk mitigation
may be required. An example of the type of analysis that is used is SWOT
Energy Performance Contracting PlusSlide N
Business Plan for EPC+ Services
EPC+ Business Plan – Realisation
Setting up an EPC+ service consumes resources, especially when collaborating
as a SPIN. The Business Plan developed will outline the how this can be
developed by through the implementation of numerous projects.
A detailed document covering the Business Plan can be found in the link below:A detailed document covering the Business Plan can be found in the link below:
http://ireland.epcplus.org/energy-service-packages/#
Energy Performance Contracting Plus
Business Plan for EPC+ Services
Schedule
Setting up an EPC+ service consumes resources, especially when collaborating
as a SPIN. The Business Plan developed will outline the how this can be
developed by through the implementation of numerous projects.
A detailed document covering the Business Plan can be found in the link below:A detailed document covering the Business Plan can be found in the link below:
packages/#
Energy Performance Contracting PlusSlide N
EPC+ Financial Toolbox
Financial Modules for All Types of EPC+ Contracts
A financial toolbox will be created and provide a framework of the financial
options available for the SPINs. It will look at the following financial options:
• Financing by Client• Financing by Client
• Financing by SPIN
– Loan/Credit on Accounts of the SPIN
– Sale of Claims
– Revolving Funds
– Crowd Investment
– National & Regional Subsidies
– Lease Finance, Special-Purpose-Vehicle-Solutions
A detailed document covering the Business Plan can be found in the link below:
http://ireland.epcplus.org/energy-service-packages/#
Energy Performance Contracting Plus
Financial Modules for All Types of EPC+ Contracts
A financial toolbox will be created and provide a framework of the financial
options available for the SPINs. It will look at the following financial options:
Solutions
A detailed document covering the Business Plan can be found in the link below:
Energy Performance Contracting PlusSlide N
A technical toolbox will be created and
measures with the following content:
• Technical description of the energy efficiency measure (design parameters
and calculation methods)
• A process flow for the implementation of the measure
Technical toolbox
• A process flow for the implementation of the measure
• The measurement & verification options.
This technical “toolbox” is a technical aid
simplified and standardized approach
monitoring and verification steps of the
toolbox will make reference to tools (both
available on the internet free of charge
national, EU and/or international projects)
by the project partners.
and compiled for a specific number of
Technical description of the energy efficiency measure (design parameters
A process flow for the implementation of the measure
Technical toolbox - 1
21
A process flow for the implementation of the measure
The measurement & verification options.
aid for the SPINs. It consists of a holistic,
approach for the design, implementation and
the EPC+ services. Where available, the
(both technical and financial) that are
charge (i.e. from technology suppliers,
projects). Some tools will also be developed
Technical toolbox
The choice of technical measures is crucial for the whole value
proposition, as it has to be customized to the specific needs of
the target group(s) of the SPIN. Moreover, to fit into the EPC+
service scheme the measures have to be:
• Standardisable, to minimize
preparation and supervision
• Approvable, to measure the performance with an acceptable
effort
• Suitable for the increase of demand side energy efficiency in
a facility
Technical toolbox - 2
The choice of technical measures is crucial for the whole value
proposition, as it has to be customized to the specific needs of
the target group(s) of the SPIN. Moreover, to fit into the EPC+
service scheme the measures have to be:
22
minimize transaction costs of design,
Approvable, to measure the performance with an acceptable
Suitable for the increase of demand side energy efficiency in
Technical toolbox
Energy efficiency measures
1. Indoor lights: LED lights + control
system
2. Hydraulic adjustment of heating
system
3. Modernization of pumps3. Modernization of pumps
4. Modernization of electrical motors
5. Energy efficient ventilation and/or
cooling HVAC control systems
6. Programmers of BMS-systems of
different suppliers
7. Renovation/replacement of heating
boilers
8. Energy-efficient windows
9. Industrial boiler blow-down heat
recovery
Technical toolbox - 3
Renewable energies
(in conjunction with an energy
efficiency measure)
1. Solar water heaters
2. Biomass heating systems
3. Micro CHP
23
3. Micro CHP
4. PV-panels
5. Small wind turbines
6. Heat pumps
Contents of Toolbox
1. General description and explanation how
Toolbox
2. Technical Description
3. Calculation Method
Energy Performance Contracting Plus
3. Calculation Method
4. Expected life-span of the measure and resulting
replacement-costs (if any)
5. Options on measurement & verification in order to
evaluate the performance in relation to the given
performance guarantee
Contents of Toolbox -4
General description and explanation how-to-use
Energy Performance Contracting Plus 24
span of the measure and resulting
Options on measurement & verification in order to
evaluate the performance in relation to the given
The model contract will be constructed
achieve a standardized procedure
between the client and the SPIN. This
then be adapted and modified quite easily,
requirements of the clients. In the contract,
in the several phases will be described
Modular Model Contracts
in the several phases will be described
pricing, indexing, causalities, etc.
The modules of this contract will be:
• Implementation phase
• Measurement and verification: responsibilities of the signatories
• Pricing + performance-oriented remuneration
• General terms and conditions
constructed in a modular way, in order to
in the stipulation of the contract
This standardized, modular contract may
easily, depending on the case-specific
contract, the responsibilities and duties
described as well as the regulations for
Modular Model Contracts
25
described as well as the regulations for
Measurement and verification: responsibilities of the signatories
oriented remuneration
Process of implementation
Energy Performance Contracting Plus
Process of implementation
Energy Performance Contracting Plus 26
European EPC Code of Conduct
The European Code of Conduct for Energy Performance Contracting
(EPC Code of Conduct):
� A voluntary commitment.
� Not legally binding.
� Launched by the Transparense project in 2014.
� Endorsed by:
� European Association of Energy Service Companies (eu.ESCO)
� European Federation of Intelligent Energy Efficiency Services (EFIEES)
Energy Performance Contracting Plus
� European Federation of Intelligent Energy Efficiency Services (EFIEES)
� More than 160 signatories across Europe, including 12 national associations of
EPC providers
The main role of the EPC Code of Conduct is to bring confidence to the EPC market
in the EU taking into account its variety across the member states.
Compliance with the Code of Conduct serves as a minimum guarantee of the
quality of EPC projects implemented.
www.transparense.eu/
European EPC Code of Conduct
The European Code of Conduct for Energy Performance Contracting
Launched by the Transparense project in 2014.
European Association of Energy Service Companies (eu.ESCO)
European Federation of Intelligent Energy Efficiency Services (EFIEES)
Energy Performance Contracting Plus Slide N° 27
European Federation of Intelligent Energy Efficiency Services (EFIEES)
More than 160 signatories across Europe, including 12 national associations of
The main role of the EPC Code of Conduct is to bring confidence to the EPC market
in the EU taking into account its variety across the member states.
Compliance with the Code of Conduct serves as a minimum guarantee of the
Module II: Finance and Economics
CONTENTS OF THIS MODULE:
• Finance
– Options– Options
– Current situation
• Economics
– Calculation of economics
– Effect of Sharing Savings
Module II: Finance and Economics
Slide N° 28
Finance Options for EPC+
1. EPC With Client Finance
Energy Performance Contracting Plus
Finance Options for EPC+
1. EPC With Client Finance
Energy Performance Contracting Plus
Finance Options
2. EPC with SPIN Finance
Energy Performance Contracting Plus
Finance Options
2. EPC with SPIN Finance
Energy Performance Contracting Plus
Financing models most commonly
applied for EPC in the
� Initially, EPC projects were mostly financed by the customer
acquiring credit from a bank (third party financing
� Later, the situation change gradually as the EPC market developed
and the bank sector became accustomed to the EPC schemes:
� Credit of the customer became rare.� Credit of the customer became rare.
� More and more ESCOs were taking credit from a bank
(third party financing - credit of the ESCO).
� For a few small projects ESCOs provided financing from their own equity
(ESCO financing).
� In the last 6-7 years, the sale of claims by ESCO to a bank has become the most
used method of third party financing.
Energy Performance Contracting Plus
Financing models most commonly
applied for EPC in the Czech Republic
Initially, EPC projects were mostly financed by the customer
acquiring credit from a bank (third party financing – credit of the customer)
Later, the situation change gradually as the EPC market developed
and the bank sector became accustomed to the EPC schemes:
Slide N° 31
More and more ESCOs were taking credit from a bank
credit of the ESCO).
For a few small projects ESCOs provided financing from their own equity
In the last 6-7 years, the sale of claims by ESCO to a bank has become the most
Source of information: Transparense
Energy Performance Contracting Plus
Based on the NPV method, projects may be summarized as follows:
• If the SPIN’s cost of an EPC project shall be
savings, the net present value of total project life cycle cost
subsidies)must not exceed the net present value of future savings
Economics in EPC projects
Energy Performance Contracting Plus
must not exceed the net present value of future savings
cost) accumulated during contract duration.
• If the net present value (NPV) of total project life cycle cost (minus
subsidies) is higher than the net present value of future savings
additional cost) accumulated EPC can be paid only in part from future savings.
, the major economic constraints for EPC
projects may be summarized as follows:
If the SPIN’s cost of an EPC project shall be paid completely from future
savings, the net present value of total project life cycle cost (minus
must not exceed the net present value of future savings (minus additional
Economics in EPC projects
Energy Performance Contracting Plus Slide N° 32
must not exceed the net present value of future savings (minus additional accumulated during contract duration.
net present value (NPV) of total project life cycle cost (minus
is higher than the net present value of future savings (minus additional cost) accumulated during contract duration, the SPIN’s cost of an
from future savings.
Calculation of the economics of EPC projects
A demonstration tool
(Excel-Sheet) for calculating
economics of projects
Courtesy of
Total investment cost Equipment cost2,000,000.00
Equipment replacement costYear of replacement cost 0.00
Yearly energy savings 2,600,000.00 kWhPrice of energy 200.00 Euro/MWh
Financing %Own 25.00Subsidy 25.00Loan 50.00Total 100.00
Other cost Euros/yearMaintenance cost 48,000Maintenance cost 48,000Insurance cost 2,379Personnel cost 0Other cost 6,500Total 56,879
Loaninterest, % 8.0%
Duration of loan (maximum 15 years) 15Value of Loan 0.0%
Taxation 10%
Discount rate, % 8.00Depreciation (years) 10.00Asset depreciation per year,% 21%
Calculation of the economics of EPC projects
Equipment cost1,500,000.00
0.00
kWhEuro/MWh
Euros500,000.00500,000.00
1,000,000.002,000,000.00 -3,000,000
-2,000,000-1,000,000
01,000,0002,000,0003,000,0004,000,0005,000,0006,000,000
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Cash Flows (€)
Slide N° 33
Cumulative Present Value, € 1,251,087Cumulative Cash Flow € (after taxes) 4,808,979IRR 15.4%
-2,500,000
-2,000,000
-1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Cumulative Present Values (€)
Module III: Project Selection and Tendering Procedures
CONTENTS OF THIS MODULE:
• Legal Framework ‒ European Directives
‒ National Rules
• Project Selection
– Tendering Option EPC vs Traditional
• Tendering Procedures
– Public vs Private
– Terminology
– Tendering Process
– Evaluation methods
– Templates, Documents
– Role of Facilitator
Project Selection and Tendering Procedures
Slide N° 34
Legal framework at EU level
EU Directives promoting EPC for public buildings
� Directive 2012/27/EC of the European parliament and of the Council of 25 October 2012 on
efficiency, (Energy Efficiency Directive; EED)
� The EED defines energy performance contracting as: “contractual arrangement between the
beneficiary and the provider of an energy efficiency improvement measure, verified and
monitored during the whole term of the contract, where investments (work, supply or service) in
that measure are paid for in relation to a contractually agreed level of energy efficiency that measure are paid for in relation to a contractually agreed level of energy efficiency
improvement or other agreed energy performance criterion, such as financial savings”
• Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the
performance of buildings (Energy Performance of Building Directive; EPBD)
� Member states shall encourage public authorities to take into account the leading role which they
should play in the field of energy performance in buildings.
• Directives 2009/72/EC and 2009/72/EC of the European Parliament and of the Council of 13 July 2009
concerning common rules for the internal market
� Member states shall strongly recommend that electricity and gas undertakings optimize the use of
electricity or gas, for example by providing energy management services.
Legal framework at EU level
EU Directives promoting EPC for public buildings
Directive 2012/27/EC of the European parliament and of the Council of 25 October 2012 on energy
The EED defines energy performance contracting as: “contractual arrangement between the
beneficiary and the provider of an energy efficiency improvement measure, verified and
monitored during the whole term of the contract, where investments (work, supply or service) in
that measure are paid for in relation to a contractually agreed level of energy efficiency that measure are paid for in relation to a contractually agreed level of energy efficiency
improvement or other agreed energy performance criterion, such as financial savings”
Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy
(Energy Performance of Building Directive; EPBD)
Member states shall encourage public authorities to take into account the leading role which they
should play in the field of energy performance in buildings.
Directives 2009/72/EC and 2009/72/EC of the European Parliament and of the Council of 13 July 2009
common rules for the internal market in electricity and gas
Member states shall strongly recommend that electricity and gas undertakings optimize the use of
electricity or gas, for example by providing energy management services.
Legal framework at EU level
EU Directive on public procurement
Directive 2004/18/EC of the European Parliament and of the Council of
31 March 2004 on the coordination of procedures for the award of
public works contracts, public supply contracts and public service
contracts, which is still implemented in national legislation of EU contracts, which is still implemented in national legislation of EU
Member States was replaced by:
Directive 2014/24/EU of the European Parliament and of
the Council of 26 February 2014 on public procureme
Directive 2014/24/EU is currently on its way of being implemented in
national legislation of EU Member States.
Energy Performance Contracting Plus
Legal framework at EU level
EU Directive on public procurement
Directive 2004/18/EC of the European Parliament and of the Council of
31 March 2004 on the coordination of procedures for the award of
public works contracts, public supply contracts and public service
contracts, which is still implemented in national legislation of EU contracts, which is still implemented in national legislation of EU
Directive 2014/24/EU of the European Parliament and of
the Council of 26 February 2014 on public procurement
Directive 2014/24/EU is currently on its way of being implemented in
national legislation of EU Member States.
Energy Performance Contracting PlusSlide N
Laws and regulations promoting EPC in public buildings
� Under S.I. 542 and theProcurement public bodies are encouraged to avail of energy performance contracting (EPC), including energy services companies (ESCOs), where appropriate.
Legal background of EPC at national level
Ireland
Laws and regulations ruling over the public procurement process
� Energy efficient procurement practices and energy performance contracting are now part of programme for government and central to EU and national policy.
� This legislation includes:
� S.I. No. 542/20092009)
� SI 151 of 2011 (Energy Efficient Public Procurement)
Energy Performance Contracting Plus
Laws and regulations promoting EPC in public buildings:
Under S.I. 542 and the National Action Plan on Green Public public bodies are encouraged to avail of energy performance
contracting (EPC), including energy services companies (ESCOs), where
Legal background of EPC at national level
37
Laws and regulations ruling over the public procurement process
Energy efficient procurement practices and energy performance contracting are now part of programme for government and central to EU and national
This legislation includes:
S.I. No. 542/2009 (Energy End-Use Efficiency and Energy Services Regulations
(Energy Efficient Public Procurement)
Energy Performance Contracting Plus
Legal background of EPC at national level
� Greece:
� Laws and regulations promoting EPC in public buildings:
� Law 3855/2010 ‘Measures to improve energy efficiency in end use, energy
services and other provisions’
� Ministerial Decision D6/13280/07.06.2011 (Government Gazette, Series II,
No 228) entitled “Energy Service Companies. Operation, Register, Code of No 228) entitled “Energy Service Companies. Operation, Register, Code of
Conduct and relevant provisions”.
� Law 4342/2015 on Energy Efficiency
� Laws and regulations ruling over the public procurement process
� Ministerial Decision D6/Β/14826/17.6.2008 ‘Measures to improve energy
efficiency and energy savings in the central and general government’
� Law 3855/2010 ‘Measures to improve energy efficiency in end use, energy
services and other provisions’
� Law 4342/2015 on Energy Efficiency
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Law 3855/2010 ‘Measures to improve energy efficiency in end use, energy
Ministerial Decision D6/13280/07.06.2011 (Government Gazette, Series II,
No 228) entitled “Energy Service Companies. Operation, Register, Code of
Slide N° 38
No 228) entitled “Energy Service Companies. Operation, Register, Code of
Conduct and relevant provisions”.
Law 4342/2015 on Energy Efficiency
Laws and regulations ruling over the public procurement process
Ministerial Decision D6/Β/14826/17.6.2008 ‘Measures to improve energy
efficiency and energy savings in the central and general government’
Law 3855/2010 ‘Measures to improve energy efficiency in end use, energy
Law 4342/2015 on Energy Efficiency
Legal background of EPC at national level
� Laws and regulations promoting EPC in public buildings:
� Energy Act (Energetski zakon EZ
� Non-binding guidelines and rules
� Guidelines for the conduction of energy efficiency measures in public sector buildings
with EPC (Smernice za izvajanje ukrepov izboljšanja energetske učinkovitosti v stavbah
javnega sektorja po principu energetskega pogodbeništva)
� Rules on efficient use of energy in buildings (Pravilnik o učinkoviti rabi energije v
stavbah - PURES)
Slovenia:
Energy Performance Contracting Plus
stavbah - PURES)
� Technical Guideline Efficient Use of Energy (Tehnična smernica TSG
� Laws and regulations ruling over the public procurement process
� Public Finance Act (Zakon o javnih financah ZJF)
� Public Procurement Act (Zakon o javnem naročanju ZJN
� Public Private Partnership Act (Zakon o javno
� Services of General Economic Interest
� Act Regulating Public Procurement in Water, Energy, Transport and Postal Services
(Zakon o javnem naročanju na vodnem, energetskem, transportnem področju in
področju poštnih storitev ZJNVETPS
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Energy Act (Energetski zakon EZ-1)
binding guidelines and rules
Guidelines for the conduction of energy efficiency measures in public sector buildings
with EPC (Smernice za izvajanje ukrepov izboljšanja energetske učinkovitosti v stavbah
javnega sektorja po principu energetskega pogodbeništva)
Rules on efficient use of energy in buildings (Pravilnik o učinkoviti rabi energije v
Energy Performance Contracting Plus Slide N° 39
Technical Guideline Efficient Use of Energy (Tehnična smernica TSG-1-004:2010 URE)
Laws and regulations ruling over the public procurement process
Public Finance Act (Zakon o javnih financah ZJF)
Public Procurement Act (Zakon o javnem naročanju ZJN-3)
Public Private Partnership Act (Zakon o javno-zasebnem partnerstvu ZJZP)
Services of General Economic Interest Act (Zakon o gospodarskih javnih službah ZGJS)
Act Regulating Public Procurement in Water, Energy, Transport and Postal Services
(Zakon o javnem naročanju na vodnem, energetskem, transportnem področju in
področju poštnih storitev ZJNVETPS)
Legal background of EPC at national level
Germany:
� Laws and regulations promoting EPC in public buildings:
� Law on Energy Services
Energiedienstleistungsgesetz (EDL
� Laws and regulations ruling over the public procurement process
� Law against restraints in competition of 26 August 1998
contracts
Gesetz gegen Wettbewerbeschränkungen vom 26. August 1998 Vergabe Öffentlicher Aufträge
� Law regarding modernisations
Vergaberechtsmodernisierungsgesetz
� Services Tendering and Contract Regulations
Vergabe- und Vertragsordnung für Leistungen (VOL/A)
� Construction Tendering and Contract Regulations
Vergabe- und Vertragsordnung für Bauleistungen (VOB/A)
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Energiedienstleistungsgesetz (EDL-G) vom 21. April 2015
Laws and regulations ruling over the public procurement process
Slide N° 40
Law against restraints in competition of 26 August 1998 – Section 4 on public
Gesetz gegen Wettbewerbeschränkungen vom 26. August 1998 – Vierter Abschnitt:
of procurement regulations from December 2015
ergaberechtsmodernisierungsgesetz – VergRModG 12/2015
Services Tendering and Contract Regulations
und Vertragsordnung für Leistungen (VOL/A)
Construction Tendering and Contract Regulations
und Vertragsordnung für Bauleistungen (VOB/A)
Legal background of EPC at national level
Bulgaria:
Laws and regulations promoting EPC in public buildings:
� Energy Efficiency Act (State Gazette 35 / 15.05.2015)
Закон за енергийната ефективност
� Regulation RD 16-347 from 2nd April 2009 on the conditions and procedure for the
determination of the amount and payment of the planned funds for energy
performance contracts, resulting in energy savings in State and municipal (public)
Energy Performance Contracting Plus
performance contracts, resulting in energy savings in State and municipal (public)
buildings.
Наредба РД 16-347 от 2 април 2009 г.
� Laws and regulations ruling over the public procurement process
� Public Procurement Act (State Gazette 13 / 16.02.2016)
Закон за обществените поръчки (ДВ
� Public-Private Partnership Act (State Gazette 13 / 16.02.2016)
Закон за публично-частните партньорства
� Municipal Debt Act (State Gazette 61 / 11.08.2015)
Закон за общинския дълг (ДВ 61 / 11.08.2015
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
State Gazette 35 / 15.05.2015)
Закон за енергийната ефективност
April 2009 on the conditions and procedure for the
determination of the amount and payment of the planned funds for energy
performance contracts, resulting in energy savings in State and municipal (public)
Energy Performance Contracting Plus Slide N° 41
performance contracts, resulting in energy savings in State and municipal (public)
347 от 2 април 2009 г.
Laws and regulations ruling over the public procurement process
State Gazette 13 / 16.02.2016)
(ДВ 13 / 16.02.2016 г.)
State Gazette 13 / 16.02.2016)
частните партньорства (ДВ 13 / 16.02.2016 г.)
Municipal Debt Act (State Gazette 61 / 11.08.2015)
61 / 11.08.2015 г.)
Legal background of EPC at national level
Portugal:
� Laws and regulations promoting EPC in public buildings:
� Energy Efficiency Program in Public Administration (Eco.AP), was launched in January 2011;
� Decree-Law Nº 29/2011 of 28 February 2011, establishes the legal regime for the formation and execution of EPCs to be concluded between Public Administration and
Energy Performance Contracting Plus
formation and execution of EPCs to be concluded between Public Administration and energy service companies;
� Legislative order nº 15/2012 - On 3 July 2012 the “Regulation of Qualification System of Energy Services Companies” (SQESE) was approved, establishing minimum requirements for technical and financial capacity of ESCOs.
� Laws and regulations ruling over the public procurement process
� DL n.º 18/2008, de 29 de Janeiro;
� DL n.º 214-G/2015, de 02/10 (introduces revisions to the above DL);
� Decree-Law Nº 29/2011 of 28 February 2011.
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Energy Efficiency Program in Public Administration (Eco.AP), was launched in January
Law Nº 29/2011 of 28 February 2011, establishes the legal regime for the formation and execution of EPCs to be concluded between Public Administration and
Energy Performance Contracting Plus Slide N° 42
formation and execution of EPCs to be concluded between Public Administration and
On 3 July 2012 the “Regulation of Qualification System of Energy Services Companies” (SQESE) was approved, establishing minimum requirements for technical and financial capacity of ESCOs.
Laws and regulations ruling over the public procurement process
G/2015, de 02/10 (introduces revisions to the above DL);
Law Nº 29/2011 of 28 February 2011.
Legal background of EPC at national level
Spain:
� Laws and regulations promoting EPC in public buildings:
� Law 6/2010 measures for economic and employment recovery. Art. 19 of ESCOs and Art. 20 of ESCOs contracting in public sector;
� Law 2/2011 of sustainable economy sets that Public Administration should adopt a plan for energy consumption optimization with energy services
Energy Performance Contracting Plus
adopt a plan for energy consumption optimization with energy services contracts that will be paid by the achieved savings.
� Law 3/2011 as recast of Public Sector Contracts Law.
� Royal Decree 56/2016 as partial transposition of EED 2012/27/EU for energy audits, accreditation of energy service providers and energy auditors.
� Laws and regulations ruling over the public procurement process
� Law 6/2010 measures for economic and employment recovery. Art. 19 of ESCOs and Art. 20 of ESCOs contracting in public sector;
� Law 3/2011 as recast of Public Sector Contracts Law.
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Law 6/2010 measures for economic and employment recovery. Art. 19 of ESCOs and Art. 20 of ESCOs contracting in public sector;
Law 2/2011 of sustainable economy sets that Public Administration should adopt a plan for energy consumption optimization with energy services
Energy Performance Contracting Plus Slide N° 43
adopt a plan for energy consumption optimization with energy services contracts that will be paid by the achieved savings.
Law 3/2011 as recast of Public Sector Contracts Law.
Royal Decree 56/2016 as partial transposition of EED 2012/27/EU for energy audits, accreditation of energy service providers and energy auditors.
Laws and regulations ruling over the public procurement process
Law 6/2010 measures for economic and employment recovery. Art. 19 of ESCOs and Art. 20 of ESCOs contracting in public sector;
Law 3/2011 as recast of Public Sector Contracts Law.
Legal background of EPC at national level
Italy:
Laws and regulations promoting EPC in public buildings:
� Legislative Decree of July 4, 2014, n. 102, Implementation
amending Directives 2009/125 / EC and 2010/30 / EC
� Legislative Decree of 30 May 2008, n. 115, Implementation
efficiency and energy services and repealing Council
Laws and regulations ruling over the public procurement
� Legislative Decree 12 April 2006, n. 163, Code� Legislative Decree 12 April 2006, n. 163, Code
implementation of 2004/17 / EC and 2004/18 / EC -
207, the implementing regulation and implementation
Code) - Outline of the legislative decree for the implementation
2014/25 / EU (New Procurement Code - not yet in force)
Guidelines and Certification:
� Contractual model of EU tender open procedure, pursuant
by the Consip S.p.A. a single shareholder, on behalf
art. 26 of l. n. 488/1999 and subsequent amendments,
D.M. May 2, 2001, for the awarding of the Integrated
notice sent for publication in the EU Official Journal on
Republic.
� UNI CEI 11352 in April 2010, Energy Management. Companies
Legal background of EPC at national level
Implementation of Directive 2012/27 / EU on energy efficiency,
EC and repealing Directives 2004/8 / EC and 2006/32/EC.
Implementation of Directive 2006/32 / EC on energy end-use
Council Directive 93/76 / EEC.
procurement process:
of public contracts for works, services and supplies
Slide N° 44
of public contracts for works, services and supplies
- Decree of the President of the Republic October 5, 2010
implementation - the State Law 28/01/2016 n. 11 (Reform Procurement
implementation of Directives 2014/23 / EU, 2014/24 / EU and
force).
pursuant to art. 54 of Legislative Decree. N. 163/2006 issued
of the Ministry of Economy and Finance, in accordance with
amendments, the D.M. February 24, 2000, art. 58 of l. n. 388/2000,
Integrated Energy Services for Public Administration under Contract
on 30.11.2015, published in the Official Gazette of the Italian
Companies providing energy services (ESCO).
Legal background of EPC at national level
Italy:� Laws and regulations promoting Energy Efficiency:
� Decrees of June 26, 2015, Application of energy performance
requirements for buildings and Adaptation of the decree
Guidelines for energy certification of buildings.
� Law Decree 4 June 2013, n. 63, Urgent measures for the transposition
the Council of 19 May 2010 on the energy performance for
Commission, as well as other provisions on social cohesion.,
� Legislative Decree of March 3, 2011, n. 28 Implementation
Energy Performance Contracting Plus
� Legislative Decree of March 3, 2011, n. 28 Implementation
sources and amending and subsequently repealing Directives
� Legislative Decree of 19 August 2005, n. 192, Implementation
Legislative Decree February 8, 2007, n. 20 Implementation
useful heat demand in the internal energy market and amending
the light of new decrees June 26, 2015.
� Ministerial Decrees of 20 July 2004, New identification of
renewable sources, according to art. 16, paragraph 4, of
quantitative targets for improving energy efficiency in end
Decree 16 March 1999, n. 79.
� Decree of Ministry of Industry, Trade and Crafts of 24 April 2001
� Law 9 January 1991 n. 10, Rules for the implementation of the
development of renewable energy sources.
Legal background of EPC at national level
performance calculation methods and definition of the requirements and minimum
of the Minister of Economic Development, June 26, 2009 - National
transposition of Directive 2010/31/EU of the European Parliament and
for the definition of infringement proceedings launched by the European
, converted into Law 90 of August 3, 2013.
of Directive 2009/28 / EC on the promotion of energy from renewable
Energy Performance Contracting Plus Slide N° 45
of Directive 2009/28 / EC on the promotion of energy from renewable
Directives 2001/77 / EC and 2003/30 / EC.
Implementation of Directive 2002/91/EC on the energy performance of buildings and
of Directive 2004/8 /EC on the promotion of cogeneration based on
amending Directive 92/42/EEC - new Coordinated text of D.Lgs.192/2005
of national quantitative targets of energy saving and development
of Legislative Decree 23 May 2000, n. 164 and New identification
end-use of energy, in accordance with art. 9, paragraph 1 of Legislative
2001, Efficiency and energy saving in the final uses.
the National Energy Plan on the rational use of energy, energy saving and
Legal background of EPC at
Austria:
� Laws and regulations promoting EPC in public buildings:
� Energy Efficiency Law, legit since 1/1/2014,
� Agreement between state and federal state according Art. 15a B
Energy Performance Contracting Plus
� Agreement between state and federal state according Art. 15a Bthe building sector for reduction of emission of greenhouse gases.
� Energy Performance Certificate Law (Energieausweisenhances transparency in the building
� Climate Protection Law (Klimaschutzgesetz), enhances the implementation of measures, which reduce GHG emissions.
� Laws and regulations ruling over the public procurement process
� Bundesvergabegesetz (Federal Procurement
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Energy Efficiency Law, legit since 1/1/2014, § 16.
Agreement between state and federal state according Art. 15a B-VG for measures in
Energy Performance Contracting Plus Slide N° 46
Agreement between state and federal state according Art. 15a B-VG for measures in the building sector for reduction of emission of greenhouse gases.
Law (Energieausweis-Vorlage-Gesetz), 2012, building sector.
Climate Protection Law (Klimaschutzgesetz), enhances the implementation of measures, which reduce GHG emissions.
Laws and regulations ruling over the public procurement process
Procurement Act )
Legal background of EPC at national level
Czech Republic:
� Laws and regulations promoting EPC in public buildings:
� Act No. 406/2000 , on energy management, which came into effect on 1 July 2015
� Includes newly a definition of energy services; requirements for energy services contracts;
and a list of energy services providers.
� According to Section 10f of the Energy Management Act, the Ministry of Industry and Trade
will maintain a list of energy services providers and will lay down basic conditions for
registration and deletion from this list.registration and deletion from this list.
� Non-binding guidelines and rules
� Guidelines for the preparation and implementation
� Process of procurment procedure preparation
� EPC model contract
� Laws and regulations ruling over the public procurement process
� Public Procurement Act 137/2006
Energy Performance Contracting Plus
Legal background of EPC at national level
Laws and regulations promoting EPC in public buildings:
Act No. 406/2000 , on energy management, which came into effect on 1 July 2015
a definition of energy services; requirements for energy services contracts;
and a list of energy services providers.
According to Section 10f of the Energy Management Act, the Ministry of Industry and Trade
will maintain a list of energy services providers and will lay down basic conditions for
registration and deletion from this list.
Slide N° 47
registration and deletion from this list.
implementation of the energy efficiency projects via EPC
preparation for EPC
Laws and regulations ruling over the public procurement process
Energy Performance Contracting Plus
Tendering Procedures
Energy Performance Contracting Plus
Tendering Procedures
Energy Performance Contracting Plus
Tendering procedures
Energy Performance Contracting Plus
Tendering procedures
Energy Performance Contracting Plus
Tendering Procedures
� In the public sector, the procurement procedure must be in compliance with
the national public procurement legislation (based on the EU Public Sector
Directive 2004/18/E2004/18/EC)
� In the private sector, the clients are not obliged� In the private sector, the clients are not obliged
requirements applicable for the public sector but their procurement process
may include similar steps (that may be applied in a simplified version)
Energy Performance Contracting Plus
Tendering Procedures
the procurement procedure must be in compliance with
the national public procurement legislation (based on the EU Public Sector
obliged to follow the legislative obliged to follow the legislative
requirements applicable for the public sector but their procurement process
may include similar steps (that may be applied in a simplified version)
Energy Performance Contracting Plus
Source of information: Transparense
Tendering Procedures
Basic Terminology for Tendering
• ITT: Invitation to Tender
• PQQ: Pre-Qualification Questionnaire
• RFT: Request for Tender
• MEAT: Most Economically Advantageous Tender
• OJEU: Official Journal of EU
Energy Performance Contracting Plus
Tendering Procedures
Basic Terminology for Tendering
Qualification Questionnaire
MEAT: Most Economically Advantageous Tender
51Energy Performance Contracting Plus
Tendering Procedures
Procurement Options
Procedure Characteristics
Open All qualified applicants must be given the
opportunity to bid
Restricted Two stage process with facility to shortlist
(PQQ + Tender)
Negotiated Two stage process with facility to negotiate at
second stage
Competitive
Dialogue
Two stage process with facility to enter into a
dialogue with potential suppliers to consider
potential solutions and refine specification
before invitation to tender
Framework
Agreement
Stage One: Suppliers selected through
open/restricted procedure to a panel of
suppliers for given period
Stage Two: Call-Off or Mini competition will
be held when services/goods required
Energy Performance Contracting Plus
Tendering Procedures
Procurement Options
When the procedure is adopted
For lower risk procurement where supplier
capability is less important or where the focus is on
price
Where capability of supplier is key determining
factor in the delivery of the contract, market
response likely to be huge to allow short-listingresponse likely to be huge to allow short-listing
facility to negotiate at Specification is not clear or some creative, artistic or
expert input is required.
facility to enter into a
dialogue with potential suppliers to consider
Complex procurement where suppliers expertise has
significant impact on the development of the
specification
Capability and Capacity is important and is generally
a recurring/constant requirement (max 4 years;
including extension options)
Energy Performance Contracting Plus 52
A basis to select suppliers using MEAT –
Partial selection criterion Weight
Amount of guaranteed savings in all forms of energy 45%
Tendering Procedures
Amount of guaranteed savings in all forms of energy 45%
during the contractual period (in technical or
financial units)
Bid price i.e. the total price to be paid by the contracting entity 35%
to the selected applicant for the duration of the contract
Quality of the technical design and contract 20%
Energy Performance Contracting Plus
– criterion (example)
Partial selection criterion Weight
Amount of guaranteed savings in all forms of energy 45%
Tendering Procedures
Amount of guaranteed savings in all forms of energy 45%
Bid price i.e. the total price to be paid by the contracting entity 35%
to the selected applicant for the duration of the contract
Quality of the technical design and contract 20%
Energy Performance Contracting Plus 53
Source of information: Transparense
Sample Tender Templates
� UK Department of Energy & Climate Change (DECC 2012)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/395240/contract_gu
idance_note_and_model_contract_energy_performance_contract.doc
� European Energy Services Initiative (EESI 2020) by Berliner Energieagentur GmbH / SCHLAWIEN
NAAB Partnerschaft
� Energy Performance Contracts Handbook - Sample Document: Invitation to Tender Document
Tendering procedures
Energy Performance Contracting Plus
� Energy Performance Contracts Handbook - Sample Document: Invitation to Tender Document
Template (SEAI Ireland)
http://www.seai.ie/Your_Business/Energy-Contracting/Support
Invitation-to-Tender-.docx
� Sample Tender Document Energy Performance Contracting
Provided from the South-African-German Energy Program (SAGEN). Mainly designed for EPC for industrial clientshttp://www.sanedi.org.za/wp-content/uploads/2014/03/ESCo
UK Department of Energy & Climate Change (DECC 2012)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/395240/contract_gu
idance_note_and_model_contract_energy_performance_contract.doc
European Energy Services Initiative (EESI 2020) by Berliner Energieagentur GmbH / SCHLAWIEN-
Sample Document: Invitation to Tender Document
Tendering procedures
Energy Performance Contracting Plus Slide N° 54
Sample Document: Invitation to Tender Document
Contracting/Support-and-Guidance/Sample-Document-
Sample Tender Document Energy Performance Contracting
German Energy Program (SAGEN). Mainly designed for EPC for
content/uploads/2014/03/ESCo-EPC_Sample_Tender.pdf
Tendering procedures
Tender documentation
Tender documents must define� Clear objectives: min % saving
� Organisational aspects:
� What tasks should be carried out by the SPIN?
� Technical aspects:
Energy Performance Contracting Plus
� Technical aspects:
� Buildings framework description
� energy statistics going back 3 years ( normalised for heating/cooling, etc., operation
times, list of equipment, building use, needed indoor climate (temperature,
ventilation, ...)...
� Consumption baseline
� Obligatory actions, desirable ones and options
� Financial aspects:
� Max payback time
� Financial organisation : must the SPIN make investment or not
Tendering procedures
What tasks should be carried out by the SPIN?
Energy Performance Contracting Plus 55
energy statistics going back 3 years ( normalised for heating/cooling, etc., operation
times, list of equipment, building use, needed indoor climate (temperature,
Obligatory actions, desirable ones and options
Financial organisation : must the SPIN make investment or not
Tendering procedures
Provide necessary know-how and experience to support and
guide client through all phases of an EPC project
Role and tasks of a facilitator
Energy Performance Contracting Plus
1. Project development phase:
‒ Financial and technical analyses
‒ Comparison of different supply options
‒ Project pre-structuring and business models
‒ Selection and adaption of SPIN business models
Tendering procedures
how and experience to support and
guide client through all phases of an EPC project
Role and tasks of a facilitator
Energy Performance Contracting Plus 56
Tendering procedures
Continued. . . .
2. Project procurement phase:– Selection of procurement procedure
– Definition of SPIN qualifications and selection criteria
Role and tasks of a facilitator
Energy Performance Contracting Plus
– Definition of SPIN qualifications and selection criteria
– Drafting of tender–SPIN contract design–Negotiations and selection of
best bidders
3. Construction phase – Representation and project management in some or all phases
4. Measurement and Verification
Areas of expertise:– Technical, economic, financing, industrial relations
Tendering procedures
Definition of SPIN qualifications and selection criteria
Role and tasks of a facilitator
Energy Performance Contracting Plus 57
Definition of SPIN qualifications and selection criteria
Negotiations and selection of
Representation and project management in some or all phases
industrial relations and legal know-how
CONTENTS OF THIS MODULE:
• Potential risks and risk mitigation strategies
‒ from the bank’s point of view
Module IV: Risk Mitigation and Monitoring and Verification
Energy Performance Contracting Plus
‒ from the bank’s point of view
‒ from the SPIN’s point of view
‒ from the building owner’s point of view
• Monitoring and Verification
‒ IPMVP
‒ Baseline Establishment
‒ Normalisation with Degree Days
‒ Examples of Projects Suitable for EPC+
Potential risks and risk mitigation strategies
Module IV: Risk Mitigation and Monitoring and Verification
Energy Performance Contracting Plus 58
from the building owner’s point of view
Examples of Projects Suitable for EPC+
Risk Mitigation
• Risk Strategies
• Dispute Resolution
Energy Performance Contracting Plus
• Dispute Resolution
• Contract Enforcement
• Risk Management and Transaction Cost
Risk Mitigation
Energy Performance Contracting Plus Slide N°
Risk Management and Transaction Cost
Risk Mitigation
• Scale and scope of project determines financing strategy
• SPIN balance sheet /loan
• Client loan with EPC guarantee
• Project finance
Energy Performance Contracting Plus
• Project finance
• Financing strategy details risk mitigation measures
• Technical risk often incorrectly overshadows other risks
• Client (and their activity) is a key component of risk
Risk Mitigation
Scale and scope of project determines financing strategy
Energy Performance Contracting Plus Slide N° 60
Financing strategy details risk mitigation measures
Technical risk often incorrectly overshadows other risks
Client (and their activity) is a key component of risk
• EPC needs scale to cover transaction & verification costs
Therefore….
• “traditional SME methods” of financing may not work for larger
projects
• “traditional SME methods” of risk management may need to be
strengthened
Risk Mitigation
Energy Performance Contracting Plus
strengthened
Clearly
• Streamlined transaction management required.
• Standard agreements
• Standard methods of project establishment required
• Standard and robust dispute resolution required.
EPC needs scale to cover transaction & verification costs
“traditional SME methods” of financing may not work for larger
“traditional SME methods” of risk management may need to be
Risk Mitigation
Energy Performance Contracting Plus Slide N° 61
Streamlined transaction management required.
Standard methods of project establishment required
Standard and robust dispute resolution required.
Potential risk s
from the bank‘s point of view
Risk mitigation options
� Insolvency or bankruptcy of the lender, if the
lender is the SPIN.
� Limit the duration of the loan
(may result in a reduction of acceptable EPC contract duration)� Include a risk premium
(higher interest rate � Request a high share of SPIN’s own equity to be included in the
financing concept
(high equity/loan ratio may limit the SPIN’s number of projects).
Risk Mitigation
Bank’s Point of View
Energy Performance Contracting Plus
(high equity/loan ratio may limit the SPIN’s number of projects).� Request for guarantees or collaterals/indemnity bonds.
(maybe to be provided by the building owner)
� Delay or cease of payment of annuities if the
lender is the building owner.� Request for guarantees and collaterals ‘.
� Dispute between the SPIN and the building
owner concerning delivery of agreed measures
and/or the achievement of guaranteed savings
in case of a sale of claims/forfaiting/ factoring)
from the SPIN to the bank.
� Request an objection
disputes on the building owner).
Risk mitigation measures taken by the bank
will in most cases increase the cost of EPC business models
Risk mitigation options
the duration of the loan
(may result in a reduction of acceptable EPC contract duration).Include a risk premium in the interest rate
(higher interest rate – higher cost of the EPC).Request a high share of SPIN’s own equity to be included in the
financing concept
(high equity/loan ratio may limit the SPIN’s number of projects).
Risk Mitigation
Bank’s Point of View
Energy Performance Contracting Plus Slide N° 62
(high equity/loan ratio may limit the SPIN’s number of projects).Request for guarantees or collaterals/indemnity bonds.
(maybe to be provided by the building owner).
Request for guarantees and collaterals ‘.
Request an objection waiver from the building owner (put the risk of disputes on the building owner).
will in most cases increase the cost of EPC business models.
Potential risks
from the ESCO’s point of view
Risk mitigation options
� Change of political framework conditions.
� Cease of payment by the building owner (e.g. if a
building is no longer in use, or if new owner wants
to terminate contract).
�
�
Risk Mitigation
SPIN Point of View
� Delays in payments of the building owner.�
� Dispute between the SPIN and the building owner
concerning delivery, or proper evidence of
delivery, of agreed measures and/or guaranteed
savings.
�
�
�
�
� Failures in achieving guaranteed savings. �
Risk mitigation measures taken by the SPIN will in most cases increase the cost,
and may reduce the customer’s acceptance of proposed EPC business models.
Energy Performance Contracting Plus
Risk mitigation options
Opt for as short contract duration as possible.
Include in the contract clear provisions for the full
compensation of the SPIN’s losses in case of termination of
contract prior to approved contract duration.
Risk Mitigation
SPIN Point of View
Request for compensation in case of delay of payments to be
established in the contract.
Plausibility check of the requested performance guarantee.
Involvement of a certified third party by contract agreement.
Establishment of monthly installments to be paid by the
building owner unconditionally during entire contract
duration.
Make penalties/incentives only after dispute being settled.
Use an insurance, if available.
Risk mitigation measures taken by the SPIN will in most cases increase the cost,
and may reduce the customer’s acceptance of proposed EPC business models.
Energy Performance Contracting PlusSlide N
Risk Mitigation
Client’s point of view
Potential risks
from the public building owner’s point of view
Risk mitigation options
� Bankruptcy of the SPIN prior to finalization and hand-
over of equipment, facilities, and devices due for
delivery according to the contract.
�
� Bankruptcy of the SPIN after the acceptance of due
delivery of equipment, facilities, and devices, in �
delivery of equipment, facilities, and devices, in
particular in the case of claims sold by the SPIN to a
bank/factoring agent.
� SPIN failing to deliver agreed measures and/or
guaranteed savings.
�
�
� SPIN failing to provide any evidence of achieved
savings within a certain period of time following the
end of the agreed reporting period.
�
�
� Dispute between the SPIN and the building owner
concerning proper delivery of agreed measures
and/or the achievement of guaranteed savings.
�
�
Risk mitigation measures taken by the public building owner may create additional barriers
for SPIN to enter the EPC market and/or to submit an offer for a specific project.
Risk Mitigation
Risk mitigation options
Request for a bank guarantee covering the cost of the building
owner that might occur in this case.
Request for a bank guarantee covering the cost of services to
be provided by a substitute for the SPIN in order to ensure be provided by a substitute for the SPIN in order to ensure
achievement of guaranteed savings.
Establish strong penalties in the contract.
Provide for the reduction of monthly instalments.
Establish in the contract the right to cease or reduce payments
until the SPIN provides proper evidence of achieved savings.
Involve a certified third party by contract agreement
Involve a certified third party by contract agreement.
Establish in the contract the right to cease or reduce payments
during the duration of the dispute, if this exceeds a certain
limit.
Risk mitigation measures taken by the public building owner may create additional barriers
for SPIN to enter the EPC market and/or to submit an offer for a specific project.Slide N
Risk Mitigation
For example: A dispute might occur between the SPIN and the Building owner
Building owner might assess data measured by the SPIN as
proof that guaranteed savings were under-achieved by far in
the last reporting period.��
Building owner’s concern:
Not pay for services not creating the expected effect. Not pay for services not creating the expected effect.
Buiding owner’s interest:
Be able to exert an agreed penalty on the SPIN (pay less)
Buidling owner’s prefered risk mitigation strategy:
Cease or reduce payment until disputes are settled.��
Risk Mitigation
A dispute might occur between the SPIN and the Building owner
SPIN might assess the same data as proof that the guaranteed
savings were over-achieved by far during the last reporting period.
SPIN’s concern: Get full pay for delivered services and achieved
savings.
Slide N° 65
savings.
Avoid insolvency during potential disputes.
SPIN’s interest:
Be able to invoice an agreed incentive
(get more)
SPIN’s preferred risk mitigation strategy:
Continue down-payments at any time during contract period, and
balance justified penalties/ instalments when related disputes
are settled (e.g. in arbitration).
After the equipment handover, it is necessary to provide M&V
‒ a rather frequent M&V in the beginning, conducted internally
least monthly)
Measurement & verification (M&V
Energy Performance Contracting Plus
It recommended to record any change in the way the buildings are being used
‒ the changes are reported in the annual calculation of savings
It is important to evaluate any deviation from standard conditions
– must be checked and recorded on an on-going basis
Preparation to hand over the installed equipment
– SPIN may offer to continue and provide services (M&V)
After the equipment handover, it is necessary to provide M&V
a rather frequent M&V in the beginning, conducted internally by the SPIN (at
Measurement & verification (M&V)
Energy Performance Contracting Plus
It recommended to record any change in the way the buildings are being used
the changes are reported in the annual calculation of savings
It is important to evaluate any deviation from standard conditions
must be checked and recorded on an on-going basis
Preparation to hand over the installed equipment
SPIN may offer to continue and provide services (M&V)
Measurement and Verification
The International Performance Measurement andVerification Protocol (IPMVP)
Options for M&VA. Retrofit isolation. Measure and estimate
Energy Performance Contracting Plus
A. Retrofit isolation. Measure and estimate
parameters. ("Key Parameter Measurement")
Example: Lighting retrofit
B. Retrofit isolation. Sub-meter actual energy use.
("All Parameter Measurement")
Example: Chiller replacement
Measurement and Verification
The International Performance Measurement and
Measure and estimate
Energy Performance Contracting Plus 67
Measure and estimate
parameters. ("Key Parameter Measurement")
meter actual energy use.
Measurement and Verification
IPMVP Options for M&V (cont'd
C. Compare before/after utility bills.
("Whole Facility")
Energy Performance Contracting Plus
("Whole Facility")
Example: Wind Turbine
D. Comprehensive computer modelling.
("Calibrated Simulation")
Example: HVAC controls retrofit
Measurement and Verification
IPMVP Options for M&V (cont'd )
Compare before/after utility bills.
Energy Performance Contracting Plus 68
Comprehensive computer modelling.
Example: HVAC controls retrofit
� The monitoring report must be elaborated and presented to client
once a year
� The monitoring report must follow the construction of referential
costs and calculation of savings set in the contract
Measurement and Verification
Energy Performance Contracting Plus
� The content of the reports differs based on the complexity of the
buildings and types of equipment
� Of crucial importance is the monitoring of the total energy
consumption (related to invoiced values)
always entered into the calculation
� Conversion of heat consumption used for heating/cooling in relation
to degree days heating/cooling
condition changes (used in calculation)
The monitoring report must be elaborated and presented to client
The monitoring report must follow the construction of referential
costs and calculation of savings set in the contract
Measurement and Verification
Energy Performance Contracting Plus 69
The content of the reports differs based on the complexity of the
buildings and types of equipment
Of crucial importance is the monitoring of the total energy
consumption (related to invoiced values) – the measured values are
always entered into the calculation
Conversion of heat consumption used for heating/cooling in relation
to degree days heating/cooling – interdependence on climate
condition changes (used in calculation)
Baseline Correction Example of Heating Energy Using Degree Days
Heating Consumption Normalised for Degree DaysLabel
(What
Year/period?)
Actual Consumption
(kWh/period
(typcially 1 year)) Applicable DD
Period 1 2010 100000 2100
Measurement and Verification
Energy Performance Contracting Plus
Period 2 2011 95000 2100
Period 3 2012 90000 2050
Period 4 2013 92000 2000
Period 5 2014 92000 2100
Period 6 2015 105000 2300
Average 2108
NB Normalised Energy Consumption is got by multiplying kwh/dd by average dd
For further reading on degree-day normalisation see http://www.energylens.com/articles/degree
Baseline Correction Example of Heating Energy Using Degree Days
Heating Consumption Normalised for Degree Days
Applicable DD
Consumption
(kWh/ Deg.
Day)
Normalised Energy
Consumption
kWH
% Savings (Period 1 as the
reference)
2100 47.6 100397 0%
Measurement and Verification
Energy Performance Contracting Plus
2100 45.2 95377 5%
2050 43.90 92561 8%
2000 46.0 96600 4%
2100 43.8 92365 8%
2300 45.7 96250 4%
2108
NB Normalised Energy Consumption is got by multiplying kwh/dd by average dd
http://www.energylens.com/articles/degree-days#normalization
Suitable Example for EPC+: School Building Ireland
Attic insulation
Cavity insulation
Energy Performance Contracting Plus
Cavity insulation
Old boiler replacement
Lighting upgrade
Lighting upgrade with controls
Replace heating distribution
Other heating controls
Flat roof insulation
Window replacement
Savings 33%
Suitable Example for EPC+: School Building Ireland
Energy Performance Contracting Plus 71
Savings 33%
www.overy .ie/
Results of an energy audit:• Baseline energy costs (heat and electricity): 99.600
• Possible savings: ~ 58.000 €/y (i.e. ~58%) savings
Quantification of the monetary value of expected
energy savings (an example)
Overview of expected savings Electricity savings
Lighting 45,250
Energy Performance Contracting Plus
Lighting 45,250
HVAC
Heat generation (better prices for wood chips
& improved efficiency of the boiler)
Heat circulation system 11,100
District heating system 3,380
New controls
New thermostatic valves
Totals of expected savings 59,730
Results of an energy audit:Baseline energy costs (heat and electricity): 99.600 €/y (electricity: 0,21 €/kWh; heat 0,06 €/kWh)
/y (i.e. ~58%) savings.
Quantification of the monetary value of expected
energy savings (an example)
Electricity savings Heat savings Cost savings
45,250 kWh/y 9,503 €/y
Energy Performance Contracting Plus Slide N° 72
45,250 kWh/y 9,503 €/y
40,280 €/y
11,100 kWh/y 22,000 kWh/y 3,651 €/y
3,380 kWh/y 4,310 kWh/y 968 €/y
38,600 kWh/y 2,316 €/y
27,600 kWh/y 1,656 €/y
59,730 kWh/y 92,510 kWh/y 58,374 €/y
The Partners wish to acknowledge
the financial assistance of the EU
under the Horizon 2020 Programme
Energy Performance Contracting Plus
Grant Agreement number: EPC_PLUS — H2020-EE2015/H2020-EE-2014-3-MarketUptake
Energy Performance Contracting Plus 73
Grant Agreement number: 649666 —EE-2014--