Energy Performance Contracting Research Articles

Research on the Driving Factors for the Application of Energy Performance Contracting in Public Institutions

Building energy efficiency in public institutions is crucial for achieving energy conservation and emissions reduction goals. The application of energy performance contracting (EPC) can effectively reduce energy consumption in these buildings and promote the development of the energy-saving service industry. However, there is a lack of initiative among public institutions to adopt EPC. This study aims to investigate the factors that drive the intention and behavior of public institutions to apply EPC and enhance their proactive engagement in building energy efficiency retrofitting. By considering the current status of EPC application in public institutions and drawing on relevant decision-making and behavioral theories, this paper identifies the key factors that drive the intention and behavior of public institutions, and constructs a theoretical model of the intentional and behavioral driving factors. In the empirical testing phase, research data are collected through online questionnaires. Structural equation modeling is employed to validate and analyze the extent of the driving factors and their interrelationships. The key findings are that (1) perceived usefulness, trust, and perceived risk significantly drive the behavior intention of public institutions to apply EPC; (2) perceived behavioral control and perceived ease of use significantly positively drive the behavior of public institutions, with behavior intention being the most influential factor; and (3) policy system and organizational support play a significant moderating role in the process from intention to behavior. Based on these findings, this paper proposes the critical tasks and suggests countermeasures for stakeholders in EPC projects.

Investment Strategy and Benefit Analysis of Power and Heat Hybrid Energy Storage in Industrial Parks Based on Energy Performance Contracting

To solve the problems of a single mode of energy supply and high energy cost in the park, the investment strategy of power and heat hybrid energy storage in the park based on contract energy management is proposed. Firstly, the concept of energy performance contracting (EPC) and the advantages and disadvantages of its main modes are analyzed, and the basic scheme of EPC for parks is proposed combined with the actual demand. Furthermore, the multiple energy storage model for power and heat storage in parks is established, which includes lithium batteries and heat storage tanks. Based on this, minimizing the annual operation cost of parks is taken as the optimization goal, and the capacity optimization model for power and heat storage is constructed, which considers the investment costs, operation and maintenance costs, purchased energy costs, peak-shaving subsidy, and environmental subsidy. Finally, an industrial park is selected as an example of EPC to verify the effectiveness of our proposed investment strategy. The results show that compared with the situation before the energy-saving renovation, the park can save 35.14 ten thousand CNY in annual cost expenses. When the unit power price of the lithium battery exceeds 3900 CNY/kW, the unit capacity price exceeds 5460 CNY/kWh, the unit power price of the heat storage tank (HST) exceeds 6000 CNY/kW, and the unit capacity price exceeds 1000 CNY/kWh, the configuration of the lithium battery and HST in the park is no longer the optimal choice to perform the energy-saving renovation.

Managing energy consumption by adapted energy performance contracting modes in rural China

Energy performance contracting (EPC) as a market instrument has been effective in promoting energy efficiency worldwide, but it has encountered many insurmountable obstacles in rural energy management. In this study, based on the characteristics of energy management in rural areas, three EPC modes are designed and tested in 24,000 rural households. The test results show that two adapted EPC modes of local government involvement and energy payment directly from the national grid can effectively overcome the barriers encountered in the traditional EPC modes and work well under the economic and social environmental conditions in rural areas. The key to the adaptation of the traditional EPC modes is the introduction of the local government as the third party. Participation of the third party can effectively reduce and remove the barriers and risks and increase the mutual trust between the clients (households) and the energy service companies (ESCOs). Based on the testing results, this study suggests that governmental departments should formulate relevant EPC policies and technical guidelines within the rural context. This research recommends that farmers should not manage their energy services by themselves and it is suggested to out-contracting ESCOs by applying the modes developed and tested by this paper.

A new coopetitive mode in a sustainable supply chain: Energy performance contracting and supplier encroachment

Energy performance contracting (EPC) is considered to promote the cooperation of low-carbon investment between supply chain members; however, few studies have examined the impact of supplier encroachment on EPC cooperation. This study investigated a new coopetitive mode in a sustainable supply chain with EPC and supplier encroachment. The supplier may provide an EPC service to curb carbon emissions for the downstream manufacturer and obtain a partial savings in carbon costs by bearing the entire cost of the EPC investment. However, the supplier is motivated to develop a new direct selling channel that engages in Cournot competition with the manufacturer in the final market. The consumer acceptance of a new encroaching channel and the unit incompatibility cost of EPC are two critical factors in supplier and manufacturer decisions. The results demonstrate that the lower the consumer acceptance of a new encroaching channel, the more radical the decision that will be made by the supplier to abate emissions after encroachment to reduce the manufacturer's emissions cost. Moreover, in contrast to the traditional result, encroachment might cause the supplier to charge a higher wholesale price when implementing EPC services. Furthermore, there exist win-win situation in the EPC scenario and lose-lose situation in which the two supply chain members are worse off whether the supplier provides either encroachment or EPC services.

A hybrid solar–biogas system for post-COVID-19 rural energy access

Abstract Solar home systems for rural electrification are often designed with a limited energy supply, which presents a drawback for the technology. Furthermore, uncontrolled livestock faeces in rural communities constitute environmental sanitation and health risks. Livestock excrement can be used through a biogas digester to supplement solar energy to provide adequate and sustainable electricity access to underserved rural communities while achieving waste management. Therefore, this study presents a hybrid solar–biogas system for a more dynamic energy supply and waste management for post-Covid recovery plans in rural communities. A parametric research approach that involves the use of the Integrated Environment Solution Virtual Environment software application and mathematical models to design the desired household load and the hybrid system sizing is used in the study. The findings show that the daily household energy consumption was 6.6 kWh, equivalent to 206.40 kWh/month. A 1.2-kWp and 1.2-m3 hybrid solar–biogas system was found to adequately power the house. Financially, the total initial investment cost of the system was $5777.20 with a net present value of $6566.78, net profit of $4443.6, a payback period of 14 years and 8 months, and a levelized cost of energy of $0.21/kWh; these include a 60% initial investment and maintenance costs subsidy. Energy performance contracting and energy-as-a-service were recommended to effectively run and operate the system. The study successfully revealed the design, specifications and upscaling mechanism of the proposed hybrid solar–biogas system. More research is required to unveil the efficacy of the system, the performance gap and the perception of the technology by the beneficiaries.

Towards automated stochastic Grey-Box Model Calibration for Heat Transfer Coefficient Inference

An accurate on-site measurement of the intrinsic thermal performance of the building envelope is a strong leverage to promote quality management and energy performance contracting. The building sector expects on-site measurements of the Heat Transfer Coefficient to be as short as possible and highly accurate. Perturbation measurement methods analysed by RC models have been shown to be promising with accurate results within 2 days. However, stochastic RC model calibration is highly dependent on expert knowledge. In particular, model initialisation jeopardises the calibration success if not carefully chosen a priori and all the more so with second or higher order models. This paper proposes and assesses a novel automated initialisation procedure for RC models. After having brought to light that the capacitance initialisation is critical to the calibration success, the paper shows how first-order models are almost always highly identifiable. The first-order model estimated parameters then serve as initial values for all second and higher order models. This novel procedure is in 78 % of the 156 cases tested better than or similar to expert knowledge initialisation. The results are very encouraging and suggest a successful integration in a global RC model calibration and selection workflow for a fully automated process.

Implementations of energy performance contracts in the energy service market of Turkey

Energy performance contracts (EPC) are important tools to spread energy efficiency (EE) applications in the energy service market of countries, encourage large-scale projects by overcoming the risk on the customer side, and provide financing on the projects implemented by energy service companies. This study aims to analyze the level of market participant knowledge, present the experiences of EE projects with and without the utilization of EPCs, evaluate the main market barriers, and draw policy recommendations for the expansion of the market in Turkey. For this purpose, an online survey was conducted on energy service company representatives, facility workers, and independent energy managers. The Chi-Square χ2 test, which is preferred in the analysis of non-parametric and qualitative data, was used in the statistical evaluation of the answers. Survey results show that there are no significant associations observed between projects with and without using EPC. Results show that EPC applications in Turkey do not meet certain EPC requirements. The study revealed that obtaining financing is the most difficult stage for both projects. For the correct and widespread implementation of EPCs in Turkey, there is still a need for more development including improving sector coverage, stakeholders' knowledge, and market conditions.

Risk Analysis in Implementing Building Energy Performance Projects: Hybrid DANP-VIKOR Model Analysis—A Case Study in Iran

Building energy performance contracts have emerged as a highly effective strategy for reducing energy consumption in both developed and developing markets. These projects inherently involve risks, and a comprehensive risk analysis can greatly enhance their successful implementation, especially in emerging markets. This research aims to analyze risks associated with building energy performance projects, considering their interrelationships, prioritization, and the ranking of optimal project types based on the analyzed risks. Given its position as the largest electrical energy consumer in the Middle East and its status as an emerging market, Iran was selected as the case study for conducting the risk analysis. Thirteen risk factors were classified into four distinct risk groups, and their relationships and priority weights were determined using a hybrid DANP approach. Subsequently, the VIKOR method was employed to rank the most-advantageous project types based on their risk priorities. The findings of this research identified project lifecycle risks as the highest-priority risks, while external risks were determined to be the most-influential among all identified risks. Moreover, the implementation of packaged public projects was identified as the most-favorable alternative for promoting building energy performance projects in Iran and similar emerging markets. By providing a comprehensive understanding of risks, this study offers valuable insights that can aid emerging and developing markets in successfully implementing energy performance projects and improving overall energy efficiency.

The Statutory Model of Energy Performance Contracting as a Means of Improving Energy Efficiency in Public Sector Units as Seen in the Example of Polish Legal Policies

The intensification of the EU’s institutional action to ensure an appropriate level of energy efficiency demonstrates the key role of pro-saving measures and energy efficiency measures to achieve a climate-neutral economy by 2050. Achieving this goal is therefore also possible through energy performance contracting (EPC), which enables specialised entities called energy service companies (ESCOs) to operate in the market. The creation of an appropriate and favourable framework at the EU level for the use of EPCs does not imply an identical approach by all individual member states. For this reason, the domestic policy of one member state, Poland, was contrasted with the EU framework. Under the influence of the EU guidelines and regulations, the EPC legislations in Poland was amended. This provided a reason to analyse the importance of legal factors (conditions) in implementing the EPC model, especially from the perspective of public institutions. In light of the above, it was attempted to show whether legal regulations would be sufficient to increase the number and level of ESCO projects in public sector units and whether they would remove the barriers to EPC development that are seen in public–private partnerships and the impact of obligations under an energy efficiency improvement agreement on the level of government debt or public finance sector deficit. This paper adopts research methods that are typical to studying EPC topics; however, the research conducted here is theoretical (descriptive analysis) and of dogmatic legal in nature.

Beyond Well-Being: The Assessment of the Energy Renovation in Latvia by the Residents

The renovation of the multifamily buildings represents a key policy area and at the same time largely affects the daily life of residents. In the time of energy crisis, when energy price rises and saving energy becomes especially important, the building sector is among the most affected and a key sector to mitigate the consequences. The paper tackles the energy renovations of multi-family buildings in Latvia that use energy performance contracts. Specifically, it investigates how the process of renovation affects the resident’s health and well-being, their perception, and understanding of the renovation process. To evaluate the perception of the residents, a survey was conducted in thirteen buildings renovated by using energy performance contracting in three cities in Latvia. The survey addressed the preparation and execution of the energy renovation project, the state of the building before and after the renovation, and the impact of the renovated building on the residents. The survey revealed the lack of communication between the parties involved and co-design as the roadblocks to upscale the renovation process in Latvia. In particular, the financial communication to the residents on the project costs was insufficient. Additionally, even though the resident’s perception of safety, health, and comfort improved, the survey showed a decrease in communication between the residents of the same building after the renovation. Assessment of the survey results revealed the need to improve the communication by the ESCOs on the costs of the energy renovation projects and address the lack of community engagement after it is completed.

Effect of risk aversion on supply chain performance and energy contracting design with financial asymmetry

AbstractEnergy performance contracting is a contractual arrangement between clients and energy service companies. At present, it is a key tool to implement energy efficiency measures in the existing supply chain management. In this paper, we study the efficiency of the energy performance contracting in a supply chain including one risk‐averse supplier and two risk‐neutral manufacturers with financial asymmetry. The manufacturer with weak finance has no funds to order enough raw materials; thus, the supplier offers a trade credit financing to ensure her normal operation and participate in the competition with the financially strong manufacturer in the market. However, neither manufacturer has extra capitals to develop emission reduction activities. Therefore, the upstream supplier acts as an energy service company and provides an energy performance contracting for two downstream manufacturers to reduce carbon taxes. We analyze important factors such as risk aversion coefficient, carbon tax saving sharing ratio, and variable cost coefficient to explore whether and which manufacturer the supplier should select to provide an energy performance contracting. The results show that, when the risk aversion is high, the supplier will not provide energy‐saving services for any manufacturer. When the risk aversion and the variable cost are low, the supplier tends to offer an energy performance contracting for the manufacturer with weak finance, because the supplier can get more utility from higher wholesale price. However, with the increase of costs, the supplier with a low risk aversion is more willing to provide emission reduction services for the financially strong manufacturer. Furthermore, sensitivity analysis demonstrates that there is always a Pareto region to optimize the utility of supplier and manufacturers, when the supplier provides energy performance contracting for both manufacturers.

The Role of Energy Performance Agreements in the Sustainable Development of Decentralized Energy Systems: Methodology for Determining the Equilibrium Conditions of the Contract

Energy performance contracts are a very promising area for attracting private investment in the renewable energy sector. The concept of energy performance contracting is a well-established mechanism aimed at increasing the energy efficiency of a facility and reducing annual maintenance costs. This paper presents a hierarchical model of a decentralized energy system with renewable energy sources and a battery energy storage system under an energy service agreement. This model reflects the interaction between the client and the performance company. The model includes the main parameters characterizing the energy service contract, such as net present value, contract duration and levelized cost of energy. As an example, a real decentralized power system is considered, which currently only uses diesel generation. In the case of building a photovoltaic system, the optimal equipment composition consists of a 100 kW solar station and storage batteries with a capacity of 240 kW·h. The optimal contract term is 5 years, and diesel fuel savings are 69%.

Energy Context: Analysis of Selected Studies and Future Research Developments

Energy context has been the subject of a great deal of research from different perspectives, including, but not limited to: energy transition, renewable energy, nuclear power, energy saving, energy use, energy level, energy trade, energy security, traction energy, energy communities, energy poverty, Energy Performance Contracting (EPC), climate change, climate policy, and climate sustainability [...]

A Rational Plan of Energy Performance Contracting in an Educational Building: A Case Study

Energy performance contracting (EPC) is the best solution for an educational building to implement energy conservation measures (ECMs) because of its high capital expenditure and operational expenditure needed for retrofit and maintenance. It is also considered a win–win mechanism for organising building energy efficiency retrofit projects. It aims to assist educational buildings in acquiring new high-efficiency equipment and maximising energy use reduction, as guaranteed by energy service company (ESCO). This study developed an EPC model using regression analysis, in which the inputs are based on the data collected during the preliminary energy audit in University A. As a result, with a quantum sharing ratio of 0.95/0.5 for ESCO/University A, the forecasted energy savings from the proposed ECMs, chiller optimisation and replacement, lighting retrofit, and energy management system are estimated to save 25.6% energy use, which reduces 5,672,057 kilowatt-hour (kWh) in electricity consumption; saves RM 2,762,291.76/year; carbon dioxide (CO2) mitigation equal to 3,771,061.22 kgCO2/year; return of investment of 4.2 years with a 5% interest rate; and building energy intensity of 93.55 kWh/m2/year. A sensitivity analysis of various quantum sharing ratios found that the saving value of ESCO is inversely proportional to that of University A as the client when the quantum sharing ratio for the former is increasing.

Contract decisions analysis of shared savings energy performance contracting based on Stackelberg game theory

Energy Performance Contracting is a contractual arrangement between energy users and Energy Service Companies (ESCOs) and is currently the main mechanism for implementing energy-saving retrofitting measures in existing buildings. The paper centers around the decision-making conundrum pertaining to the energy-saving sharing percentage and initial project investment within the realm of shared savings Energy Performance Contracting. By formulating a Stackelberg game-based decision-making game model, we examine the optimal contract decisions of both the energy user and the ESCO. The results of numerical experiments demonstrate that this method yields significant advantages for both energy users and ESCOs. Additionally, we observed that the employment of more sophisticated energy-saving technologies by the ESCO and a higher share of investment by the energy users result in superior energy-saving efficiency.

Beyond Well-Being: The Assessment of the Energy Renovation in Latvia by the Residents

Abstract Multi-family building renovation represents a key policy area at the same time, predominantly affects the daily life of residents. The paper tackles the energy renovations of multi-family buildings in Latvia. Specifically, it investigates how the renovation process affects the residents’ health and well-being, their perception, and their understanding of the renovation process. To evaluate the residents’ perception, a survey was conducted in thirteen buildings renovated using energy performance contracting to assess the preparation, execution, and impact of the renovation project. The survey revealed the lack of communication between the parties involved and co-design as the roadblocks to upscale the renovation process in Latvia using energy performance contracting. The paper shows aspects of the process that need to be improved to scale up the renovation in Latvia.

Research on energy performance contracting with shared savings under stochastic market demand

In practice, the market risk caused by stochastic market demand is a main risk affecting the shared savings contract implementation in energy performance contracting. We develop a game-theoretic model to characterize the strategic interaction between the manufacturer’s ex-ante capacity decision and the energy service company (ESCO)’s investment decision on digitization and intellectualization to save energy, through which we unfold the impact of stochastic market demand upon all the stakeholders, the supply chain efficiency and the total energy consumption. The results show that the demand uncertainty can significantly affect the decisions of the ESCO and the manufacturer. Specifically, when there is no demand uncertainty, the manufacturer’s capacity decision is independent of the ESCO’s decision on energy-saving effort. By contrast, under stochastic demand there exists a complementary relationship between the manufacturer’s capacity investment and the ESCO’s energy-saving effort. Moreover, by comparing the optimal equilibria in shared savings with that under centralized supply chain, we find that decentralization causes inefficiencies in the form of lower energy-saving effort, underinvestment or overinvestment in capacity, and lower supply chain profit. In addition, it is more valuable for the supply chain to coordinate the ESCO and the manufacturer when the market demand is more stochastic. Furthermore, though always cutting the manufacturer’s total energy consumption without demand uncertainty, implementing the ESCO’s energy-saving service can increase the manufacturer’s total energy consumption and carbon emission in the society in the presence of demand uncertainty. Hence, governmental agencies should not ignore the impact of stochastic demand upon the total energy consumption with the interplay between the endogenous capacity setup decision and energy-saving service, and to reduce the carbon emission in the society governmental policies should be designed by taking into account such an increase of the total energy consumption.

EPCHC - energy performance contracting (EPC) model for historic city centres

The current predominant obstacle for the implementation of energy retrofitting projects at the neighbourhood level is attributable to restricted funding options, which is especially relevant for the expensive renovation of buildings of cultural heritage importance. The first aim of the article is to articulate and identify the main characteristics which influence the funding processes for energy retrofitting historic urban districts. The second objective is to build a comprehensive approach/procedural funding model based on these identified specifics/characteristics. The “energy performance contracting model for historical city centres” (EPC HC ) is constructed with procedural processes (steps) associated with the main specific characteristics of urban central districts. The principal attributes which define and influence EPC in historical city centres are “district-level retrofitting”, the “multi-stakeholder approach” and “cultural heritage preservation”. First demonstrated are the benefits of the district level EPC’s “economy of scale”. Secondly, city centres are specific neighbourhoods with several public (municipal, governmental) and private entities, necessitating a particular tailor-made EPC approach is necessary for each stakeholder. Thirdly, the article focuses on the issue of higher retrofitting costs because as a result of historical building status and finding an optimal solution to overcome the conflict between sustainable renovation and cultural preservation. The procedural model for EPC HC in historical city centres offers step-by-step guidelines with suggestions to be followed in order to approach and involve all the various stakeholders. EPC HC could open a new perspective on district green retrofitting and could facilitate municipalities’ decision-making processes upon deciding to retrofit historical central districts.

Uncertainty and sensitivity analysis to moderate the risks of energy performance contracts in building renovation: A case study on an Italian social housing district

One of the pillars of the policies undertaken to achieve climate neutrality by 2050 in the European Union is the decarbonisation of the construction sector. Massive energy renovation of existing buildings is expected in the coming years and encouraged by supporting incentives. A considerable amount of resources will be invested in this area and the large-scale interventions will be conveyed by Energy Service Companies that usually employ Energy Performance Contracts for the implementation of the restructuring interventions. This form of contract is generally bound to the achievement of a certain level of energy performance, which ensures an adequate profit margin for the Energy Service Company and the users subscribing the contract. But how reliable is the forecast of energy consumption and to what extent could it constitute a well-founded guarantee based on an Energy Performance Contract? The analysis proposed in this paper aims at investigating in this direction and proposes a design methodology based on Uncertainty and Sensitivity Analysis that can be validly applied to reduce the investment risk. A case study consisting of an Italian social housing complex is considered for energy, economic, and environmental evaluations. The results show that the Uncertainty and Sensitivity Analysis allows for identifying corrective measures at the design stage, making it possible to increase the chances of success of the intervention by 60%, raise the earning potential by 4% compared to the predictions, and obtain an additional reduction in CO2 emissions of 40%. This makes the investment more attractive and safe promoting the participation of Energy Service Companies in the renovation of the existing building stock.

Industrial CHP with Steam Systems: A Review of Recent Case Studies, Trends and Relevance to Malaysian Industry

Malaysia’s energy intensity (GWh/GDP) shows an increasing trend since the 1990s, leading to the government’s efforts to promote energy efficiency via policies such as the National Energy Efficiency Action Plan (NEEAP), which includes the Energy Performance Contracting (EPC) initiative. This paper reviews recent publications in industrial Combined Heat and Power (CHP) with a focus on international case studies relevant to Malaysian industries that use industrial steam and highlights trends within the research area. It also provides the basis for more case studies to be performed in the Malaysian industry to improve energy efficiency while also supporting further academic research in the area. Additionally, the paper documents the importance of data collection and analysis as well as demand forecasting, not only for a better understanding of industrial energy systems but also to increase profitability since system loads may vary throughout a typical year. A multi-criteria and comprehensive approach is recommended in future case studies to ensure energy efficiency, economic returns and environmental impact are considered to ensure long-term sustainability. A summary of barriers to CHP implementation in the industry is also included to provide a broad understanding of industrial CHP.