The energy performance contract - key towards energy efficiency in Europe?

Abstract

Abstract The paper focuses on the Energy Performance Contract (EPC) as a business model for energy efficiency. More precisely, it examines, using two case studies, enablers and disablers – from an economic, legal and institutional/managerial perspective – for advancing this arrangement across the EU. The EU has set a 20% energy savings target by 2020 (roughly equivalent to turning off 400 power stations), with an even more ambitious target of 27% by 2030. To reach these ambitious targets, the investments needed are approximately EUR 100 bn/year across the EU (according to the European Commission). Energy efficiency is not, as fervent proponents often claim, the low hanging fruit in terms of investment efforts. Like any other sub-sector, such as transmission and distribution, it demands innovative financing instruments to ensure adequate scale-up. In the paper, I use two comparative case studies to identify and classify the disablers and enablers of Energy Performance Contracting/Energy Services Companies (ESCOs) development: the European frontrunner, namely Germany, and a laggard, namely Romania. As research methodology, I use literature review, comparisons between similar government policy planning and evaluation documents, and stakeholder interviews. While academic literature on the topic (Seefeldt, 2003; Wilhelm, 2015) is developed for Germany, for Romania a critical reflection on EPC promotion policy is to be found only in industry documents (e.g.: ARPEE, 2013; Tractebel, 2015). The German success demonstrates that, contrary to the belief of Romanian stakeholders, it is not the lack of a standardized contract model that prevents EPC development, but lack of genuine commitment, drive and leadership of public officials in promoting this financing instrument. A solid communication between public authorities and private beneficiaries, and public administration capacity for impact assessment and evidence-based policy planning are two other significant enablers of EPCs, that could foster this financing instrument across the EU.