European PPP Exper tise Centre • European PPP Exper tise Centre • European PPP Exper tise Centre

• European PPP Exper tise Centre • European PPP Exper tise Centre

Guidance on Energy Efficiency

in Public Buildings
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Guidance on Energy Efficiency in Public Buildings 1

ABBREVIATIONS AN D AC RO N Y M S

Abbreviations and Acronyms

COP Certificate of Participation GDP Gross Domestic Product

DB Design and Build GHG Greenhouse Gas
DB&M Design, Build and Maintain IGA Investment Grade Audit
DBFOM Design-Build-Finance-Operate-Maintain IPMVP International Performance Measurement
and Verification Protocol
DBO Design-Build-Operate JESSICA Joint European Support for Sustainable
Investment in City Areas
DBOM Design-Build-Operate-Maintain M&V Measurement and Verification
ECM Energy Conservation Measure O&M Operation and Maintenance
EE Energy Efficiency O&MM Operation, Maintenance and Management
EEEF European Energy Efficiency Fund PPP Public-Private Partnership
ESCO Energy Service Company RES Renewable Energy Sources
ESP Energy Service Provider RPA Receivables Purchase Agreement
EPC Energy Performance Contract TA Technical Assistance
EVO Efficiency Valuation Organization TELP Tax-Exempt Lease Purchase Agreement
EIB European Investment Bank TPF Third-Party Financing
G2G EPEC PPP Guide to Guidance – A Sourcebook
for PPPs
 C O NTENTS

Contents

ABBREVIATIONS AND ACRONYMS 2

1. Introduction 4
1.1 Objective and Background 4
1.2 Challenges for EE Investments in Public Buildings 6
1.3 Structure and Content 7
1.4 How to Use this Guide 7

2. Project Identification 9
2.1 Project Partners - ESCOS 9
2.2 Various Types of EPCS 12
2.3 EE Project Selection and EPC Feasibility 13

3. Project Preparation 18
3.1 Getting Organised 18
3.2 Assessing Funding Sources and Selecting Method of Financing 19
3.3 Before Launching the Tender 23
3.4 Using Technical Assistance for Project Preparation 24

4. Project Procurement 30
4.1 General Rules and Procedures 30
4.2 Specific EPC Procurement Issues 36

5. Project Implementation 39
5.1 Steps for PPP Implementation 39
5.2 Measurement and Verification of EE Results 40

6. EU Energy Initiatives 46
6.1 EU 2020 Targets 46
6.2 EU Funding for EE Renewable Energy Supply 47
6.3 EU Technical Assistance, Capacity Building and Policy Implementation 48

7. Conclusion 51
FULL REFERENCE LIST 52

INTRODUCTION

1. Introduction

1.1 Objective and background • a focus on the specification of project outputs rather
than project inputs;

Energy efficiency (“EE”) is at the cornerstone of the • t he application of private financing in most instances;
European energy policy and one of the main targets of and
the Europe 2020 Strategy for smart, sustainable and
• p
 ayments to the private sector which reflect the
inclusive growth adopted by the European Council in June
services delivered.
2010. This includes the objective for a 20% reduction
in primary energy consumption by 2020. As energy Experience over the past 30 years in the UK and North
related emissions account for almost 80% of total EU America has demonstrated that PPPs can be used to yield
greenhouse gas (“GHG”) emissions, the efficient use of energy savings in the public sector; the main features
energy can make an important contribution to achieving of EE PPPs are similar to those of accommodation PPPs.
a low-carbon economy and combating climate change. They use Energy Performance Contracts (“EPCs”) and
the private partners in these arrangements are known as
Buildings account for approximately 40% of final energy
Energy Service Companies (“ESCOs”). ESCOs can also be
consumption. Investing in EE measures in buildings
set up by public entities. [Guidance 1]
can yield substantial energy savings, while supporting
economic growth, sustainable development and creating There are different types of EPCs; including projects
jobs. Greater use of energy-efficient appliances and in which the private partner has the responsibility
technologies, combined with renewable energy, are cost for delivering a service (i.e. providing final users with
effective ways of enhancing the security of energy supply. heat and/or electricity) through the construction and
operation of a corresponding facility. The public entity
Despite substantial progress towards meeting the 20%
repays the cost of the service.
reduction target, a recent European Commission ("EC")
study shows that, if no additional measures are taken, the This Guide focuses on works to existing buildings. In an
EU will meet only half of its target. In 2011, the European EE PPP, the “design” normally refers to the optimisation
Commission adopted a new EE Plan, and a proposal for a of the EE of an existing public building or a pool of
new EE Directive is currently under negotiation. The latter buildings. The “build” phase of the project normally refers
will require public authorities to refurbish at least 3% of to retrofitting and the implementation of EE measures
their building stock by floor area each year. in existing buildings rather than to new constructions.
EE also plays an important role in PPP accommodation
Public and private sectors work in partnership to deliver
projects (e.g. hospitals and schools). In this case, EE
public infrastructure projects such as roads, railways,
forms part of the output specification, but it is not the
airports, schools, hospitals and prisons. PPPs generally
primary focus.
share the following features:
The most innovative aspects of the EPC is the energy
• a long-term contract between a public contracting
savings guarantee provided to the public partner and the
authority and a private sector company based on the
payment of fees proportionate to the EE performance.
procurement of services;
This innovative approach, may lead to preparation,
• t he transfer of certain project risks to the private establishment and implementation processes that are
sector; different from infrastructure PPPs. This is mainly due
to the fact that the expected output (energy savings) is

4 Guidance on Energy Efficiency in Public Buildings

 I N T RO D U CTION

measured in terms of the reduction achieved. As a result, energy and curbing GHG emissions. Public buildings
EPCs require a different approach to the management represent a considerable opportunity given the estimated
of the procurement phase. Correspondingly, an essential large potential for savings of fossil fuel based energy.
element will be to design the methodology for measuring PPPs can play a key role in the development of EE through
and calculating the energy savings effectively at the accelerating the pace of investment and mobilising
outset, in order to properly allocate risk sharing between private sector finance.
the various parties.
This Guide is based on the EPEC PPP Guide to Guidance,
The aim of this Guide is to raise awareness and provide [Guidance 2] which readers may want to use as a general
guidance for EE PPPs by providing the best information introduction to PPPs across all sectors.
currently available from selected professional publications.
This Guide provides information on the structuring of For the purpose of this Guide, EE PPPs in public buildings
EPCs for public buildings and refers to additional sources are considered as such when:
of good practice. Furthermore, the Guide is designed to • T
 he main emphasis is on implementing EE investments
help readers address the challenges of reducing the energy aimed at reducing the energy consumption in physical
consumption and GHG emissions of public buildings while terms as opposed to simply trying to decrease
transferring project risks to the private sector. This includes the energy bill in financial terms (e.g. through
Design, Build and Finance (“DBF”), and in some cases, renegotiating the energy supply conditions). The
Operation and Maintenance (“O&M”). integration of Renewable Energy Sources ("RES")
The EC and EU member states have developed policies often features in such investments; and
to achieve ambitious goals in EE, promoting renewable

Box 1: Definitions

Energy Service Company ("ESCO"): A natural or legal entity that delivers energy services and/or other EE
improvement measures in a user's facility or premises, and which accepts some degree of financial risk in so
doing. The payment for the services delivered is based (either wholly or in part) on the achievement of EE
improvements and on the meeting of the other agreed performance criteria. [Guidance 15]

Energy Performance Contract ("EPC"): A contractual arrangement between the beneficiary and the
provider (normally an ESCO) of an EE improvement measure, where investments in that measure are paid for
in relation to a contractually agreed level of EE improvement. [Guidance 15]

Energy audit: A systematic procedure to obtain adequate knowledge of the existing energy consumption
profile of a building or group of buildings, of an industrial operation and/or installation or of a private or public
service, identify and quantify cost effective energy savings opportunities, and report the findings. [Guidance
15]

Source: Directive on Energy End-use Efficiency and Energy Services, the European Parliament and the Council (April 2006)
Article 3: Definitions
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:114:0064:0085:EN:PDF

Guidance on Energy Efficiency in Public Buildings 5

INTRODUCTION

• S avings-based EE services are delivered. Performance projects have been subject to erratic variations in energy
risks are transferred to the private sector partner prices over the past 30 years. There is often no incentive
through adequate financing mechanisms that ensure to save when budgets are allocated on an annual basis.
a guaranteed level of energy savings. Similarly, if operating costs are matched by an operating
budget then, particularly, public authorities owning or
Wherever possible, EE should be part of a holistic renting the building will have little incentive to reduce
solution to providing services for a building or a group the costs. In addition, it may be difficult to convince
of buildings, thereby reducing not only energy costs, but managers to undertake projects which might become
also achieving economies of scale on other maintenance uneconomic when energy prices decline for a limited
and management services, such as cleaning and catering. period. Guarantees regarding the profitability of such
investments are key, both from a technical (physical
savings) and economic (financial savings) standpoint.
1.2 Challenges for EE investments in
public buildings Budget challenges: Public entities often encounter
difficulties in raising finance for investments. They
may not be able to finance their whole investment
Four main challenges remain for the development of EE programme directly from public funding. This requires
approaches in the public sector: them to prioritise and, often, overlook EE investments.
[Guidance 3,4] Additionally, the capacity of public entities to leverage
debt is increasingly limited. In some cases, this may
Technical challenges: Public building owners or users be the result of restrictions imposed by the regulatory
often lack the technical background and expertise to framework or it may be due to their inability to increase
understand EE methods and technologies for reducing the level of debt while still meeting prudent borrowing
energy consumption and/or replacing the consumption principles.
of fossil fuels with renewable energy sources. The first
challenge is to ensure that public building managers are Legal and institutional challenges: The introduction
conscious that there is a gap between the level of energy of EE measures or the implementation of EE investments
consumption of the facility they are administering and in public buildings may also be hampered by a series of
the level which could be achieved if a specific energy issues relating to the legal, regulatory or institutional
conservation effort were to be employed and its financial framework.
value. This lack of awareness can usually be explained
by the absence of methods for monitoring energy EPCs will be difficult to implement if some of the
consumption and physical energy parameter regulations. following conditions exist:
A further technical challenge is to demonstrate that there • s taff concerns, regarding their working conditions
are proven technologies, methods and services that can and the possibility of outsourcing work carried out by
be used to substantially reduce energy consumption or public employees;
substitute the energy consumed with other forms that
could be less expensive and/or less polluting. ESCOs, • a lack of expertise or awareness on the part of building
when implementing EPCs, will install a measurement energy managers;
system with a twofold objective: it will help the energy
manager of the building to reduce energy consumption • insufficient incentives to promote savings because
and it will create the measurement and verification energy tariffs are partly subsidised;
(“M&V”) framework that the ESCO needs to estimate the
• c onditions not conducive to investment in EE
level of savings achieved.
measures when operating budgets are lowered after
Economic challenges: Demonstrating the cost- one year;
effectiveness of EE projects is generally problematic. EE

6 Guidance on Energy Efficiency in Public Buildings

 I N T RO D U CTION

• c umbersome procurement procedures associated Through the four core chapters, the case for EE PPPs
with conducting energy audits leading to long delays; is assessed for project suitability for EPCs. The Guide
addresses the readiness of the procuring authority
• t he challenge of involving several different public to engage in such a project, the establishment of an
sector stakeholders, as the PPP approach is more appropriate management structure, and the legal,
comprehensive than conventional procurement; and contractual, technical and financial issues to be
• t he PPP requirement for organisational changes and confronted in the course of procurement. Finally, it
adjusted processes and structures, which could slow addresses the planning of a project measurement and
down and complicate a project. evaluation framework to assess value for money (“VFM”)
and other potential benefits from the project.

1.3 Structure and contents

1.4 How to use the Guide
The Guide follows key phases of a PPP project cycle and
consists of four core chapters. The Guide can be used in a number of ways. For example as:

Figure 1: Key Phases of a PPP Project Cycle • a review of procurement and implementation issues
with respect to EE PPPs;

Project Identification • a n introduction to the information to be requested

from the EE PPP facilitator;
• Project partners - ESCOs
• a starting point to learn more about EE PPP
• Various types of EPCs
characteristics; and
• EE project selection and EPC feasibility
• a guide to promoting the concept of EE service
contracting.
Project Preparation
As the Guide has been designed as a good practice
• Getting organised sourcebook, its value depends on the value of the
• Assess funding sources information sources provided. These sources are noted in
• Before launching the tender the guidance section and detail the title of the publication,
its author(s), the date of publication and a brief paragraph
explaining the topics covered.
Project Procurement
All sources have a symbol [Guidance n] next to the
• General rules and procedures reference number to direct the reader to further
• Specific EPC procurement issues information about the issue discussed in the text. Most
sources relate to existing documents that can be accessed
via the internet. In these cases, the references include the
Project Implementation web address. For publications such as printed books or
other published material that cannot be accessed via the
• Steps for PPP implementation internet, the source description includes ISBN details.
• Measurement and verification of EE results

Guidance on Energy Efficiency in Public Buildings 7

INTRODUCTION

Introduction: LINKS

Guidance 1
Energy-Efficient Buildings PPPs: Multi-Annual Roadmap for a Long Term Strategy , European Commission.
http://www.ectp.org/cws/params/ectp/download_files/36D1191v1_EeB_Roadmap.pdf

Guidance 2
The Guide to Guidance. How to prepare, Procure and Deliver PPP Projects.
www.eib.org/epec/g2g/index.htm

Guidance 3
Energy Efficiency in the Public Sector, Energy Charter Secretariat (April 2008)
Pages 23-26 present an international review of the barriers to energy efficiency in the public sector.
http://www.encharter.org/fileadmin/user_upload/document/Public_Sector_EE_2008_ENG.pdf

Guidance 4
L’apport du partenariat public-privé dans le financement des projets en efficacité énergétique, Institut de
l’Énergie et de l’Environnement de la Francophonie (2008). ISBN: 978-2-89481-040-8.
Section 1.3 explains the barriers to EE projects and Section 2.2.2 focuses on the risk related to EE PPPs.

Guidance 15
Final Publishable Report, EUROCONTRACT IEE (February 2008)
Presentation of adapted EPC models for refurbishment in the public sector (pages 49- 56).
http://ieea.erba.hu/ieea/fileshow.jsp?att_id=5828&place=pa&url=Eurocontract_Final_Report_Publishable.
pdf&prid=1576

8 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T I D E N T I F I C AT I O N

2. Project Identification

EE PPP investments in public buildings generally follow An EPC is a contractual arrangement between the public
the same process as conventional PPPs. However, in partner and the provider (normally an ESCO) of an EE
the context of EE, the public partner has to consider a improvement measure, where payments are made based
number of additional aspects. Private partners have to on a contractually guaranteed level of EE improvement
assume different liabilities and offer specialised skills, as and energy cost savings. [Guidance 5, Guidance 6] The
the business model is based on the energy performance public partner contracts for a specific result (e.g. energy
achieved rather than the standard DBO model. savings in kw/h) rather than for specific products or
services. [Guidance 7]
Figure 2: Project Identification
Potential EPC benefits:

Project Identification • t he avoidance of upfront costs through third-party

financing or on-bill repayment schemes;
• Project partners - ESCOs
• Various types of EPCs • p
 ayment is on results allowing the transfer of technical
• EE project selection and EPC feasibility risk from the public partners to the ESCO;

• a significant contribution to energy security, through

the reduction of national energy demand;

• e conomic efficiency, through the installation of more

2.1 Project partners - ESCOs energy efficient systems and controls, reducing utility
bill costs and providing a funding source for building
renewal projects;
Public building managers are often not sufficiently aware
of the EE opportunities in the premises that they administer. • e conomic development through increased building
As a result, it can be difficult for a hospital director, an and renovation activity than would normally be
office building manager or a municipal building manager possible through traditional contracting methods;
to define and implement the best means to reduce energy
consumption. Therefore, a partnership between public • e nvironmental stewardship due to significant
building owners or managers and a qualified company reductions in energy use;
with the necessary expertise (and possibly a large range • improvements of indoor air quality which may
of additional services such as maintenance, finance and/ not otherwise have been possible due to funding
or guarantees) is an attractive solution. constraints;
The private partner of the public building manager • o
 ffer complete energy services (called “life-cycle
provides EE services. The ESCO will receive payment for approach” in PPP terms), including marketing, design
the energy savings guaranteed. Building maintenance, capability, installation, financing, maintenance and
co-generation, new technologies and alternative power measurement of energy management technologies;
production may be included in the range of services and
provided by the ESCO and used to support guaranteed
performance.

Guidance on Energy Efficiency in Public Buildings 9

PROJECT IDENTIFIC AT I O N

• o
 ffer shared-savings contracts (called “payment simple and sophisticated contracts and are conversant
mechanisms” and “incentives” in PPP terms) where with relevant legal issues;
clients effectively pay for energy services from a
portion of the actual energy bill savings. • p
 roject and quality management. ESCOs have expertise
in selecting subcontractors, managing projects and
2.1.1 Types of ESCO services provided overseeing construction works. Furthermore, they
While none of the discrete skills that an ESCO employs are have learned how to implement quality and risk
particularly unique, the added value from an ESCO is its management controls; and
ability to integrate a wide variety of skills and apply them
• d
 elivering sustainable energy savings. ESCOs have
efficiently to projects, irrespective of scale. [Guidance 8]
developed cost-effective techniques for measuring,
ESCOs package the following services: monitoring and ensuring sustainable energy savings
[Guidance 9,10,11] over time. These include client training and prompt
exception reporting.
• consulting engineering;
E SCOs may differ in terms of ownership, target market,
• general contracting; technology focus/expertise and in-house capabilities. As
a result, not all ESCOs can be considered as potential
• energy analysis;
partners as far as EE PPPs are concerned.
• project management;
Some of the key areas where ESCOs differ include the
• project financing; following: [Guidance 9]

• training; • O
 wnership: ESCOs may be privately owned,
utility subsidiaries, not-for-profit, joint ventures,
• performance guarantees; manufacturers or manufacturers’ subsidiaries. There
are also rare examples of state-owned or municipally-
• energy measurement; owned ESCOs;
• sustainable energy savings; and • T
 arget Market: ESCOs, focus on various market niches
• risk management. (hospitals, schools and municipally or state-owned
buildings) and project sizes. [Guidance 12, 13] This
Successful ESCOs are generally acknowledged to have the has allowed them to develop specific skills in order to
following strengths: bundle several projects or replicate them easily while
reducing transaction costs;
• e nergy system analysis and technology integration.
ESCOs analyse energy systems in buildings and • S ervice Specialisation: Some ESCOs perform project
industrial processes as thermodynamic systems in installation using in-house expertise while others
order to select a comprehensive package of cost- specialise in engineering design and analysis. Other
saving options that offer sustainable savings; ESCOs focus on measurement and evaluation. Public
partners need to consider the nature of services
• m
 obilisation and market penetration capability. delivered in order to ensure that a full service can
ESCOs need to have proven ability to implement be provided, possibly through subcontractors or a
projects quickly and efficiently by drawing on the consortium;
experience of the partners involved;
• T
 echnology: Many ESCOs display some level of
• fi
 nancial, legal and contract capacity. ESCOs arrange technological bias (lighting, thermal storage, controls),
for sophisticated credit analysis and enhancement, which may be a constraint;
offer project financing expertise, accommodate both

10 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T I D E N T I F I C ATION

Table 1: Example of criteria for ESCO selection [Guidance 14]

Hospital Educational building Office building

Ownership Private company Utility or manufacturer Non-profit company
subsidiaries
Targeted Market Small/medium size Large project
project
Service Specialisation Engineering design and M&V Installation and O&M
analysis
Technologies Lighting Heating, Ventilation and Air- Regulation and control
Conditioning ("HVAC")
Geographic Preference Local/regional company Country-based company European-based company

Project Financing Internal financing Private third-party financing Funding mechanism

financing

• G
 eographic Preference: Some ESCOs focus their present value of the ESCO’s effective share of savings
business in specific geographic regions; and over the life of the contract is greater than the present
value of all costs, the ESCO makes a profit. If not, it incurs
• P roject Financing: Financing arrangements vary with a loss.
the financial strength of the ESCO. Those with the
financial capacity will be able to own and finance An ESCO’s share of savings typically falls within a range
assets on behalf of the public sector. Some ESCOs have from 50% to 90%, with 65% to 85% representing the
significant, well-established financing capabilities most common range of values. EPCs generally last from 5
while others are limited. A number of ESCOs arrange to 10 years but sometimes may last up to 15 years when
financing through their lenders and/or through other they include long payback-period investments such as
ESCOs. It is important to note that all ESCOs rely wall insulation or window replacements. Shorter terms
to some extent on third-party financing. Even the are more common for private clients, while longer periods
larger ESCOs will have only limited internal financing are usual for institutional and government projects
capabilities but many have access to a variety of (public buildings).
funding sources.
ESCOs can derive revenue and profit, if their estimates
Table 1 shows various criteria that can help the public are correct, in three ways:
partner select an ESCO private partner that will match
the EE project requirements. Cost plus: Most ESCOs derive revenue from the design
and installation of cost-saving solutions at a client’s
2.1.2 Revenue streams facility. These costs are then marked-up to cover
ESCOs will incur costs when implementing an energy overheads and generate profit. ESCOs are required to
retrofit project, which then produces energy savings. limit costs so that they can be paid from savings over
Regardless of the type of financing instrument used to an agreed contract period. This motivates the ESCO to
fund a project, ESCOs effectively share in the resulting maximise the number and size of cost-effective measures
savings stream by guaranteeing a portion of the energy in relation to the resulting savings stream.
savings achieved for a contracted period of time. If the

Guidance on Energy Efficiency in Public Buildings 11

PROJECT IDENTIFIC AT I O N

Project financing: Some ESCOs derive income from used to pay interest and amortise the debt until full
the provision of project financing, although this is repayment.
not generally the case. Acting as the source of project
financing and using their engineering skills as a risk d) Contracts for energy management in which the ESCO
management tool for project investment decisions may is paid to provide an energy service such as space
be part of the total package. heating or lighting “chauffage” (heating) contracts.

Guaranteed savings: In the early days of performance This section will focus on (a) and (d).
contracting, ESCOs did not declare their costs since 2.2.1 Guaranteed savings EPC
revenue was derived from sharing in a savings stream with
In a Guaranteed Savings EPC, the public partner obtains
the client. Thus, ESCOs were motivated to keep costs to a
project funds directly from a third-party financier and
minimum and savings to a maximum. Some ESCOs also
takes on the financial risks. The ESCO is paid to provide all
“share” savings that exceed original targets or estimates.
necessary support activities and facilitate the financial
However, this practice has evolved and should always be
arrangement between the client and a financial institution.
linked to a performance guarantee granted by the ESCO.
It provides a guarantee of a minimum level of energy
This ensures that shared savings are limited to the amounts
savings, which allows for reimbursement of the loan. In the
that exceed an established minimum guaranteed.
case of a shortfall in realised savings, the ESCO is obliged
ESCOs usually refuse to take any risk related to energy prices to make a reimbursement covering the difference between
as fluctuations over time have proved to be unpredictable. the expected savings and the amount to be paid back to
Instead, they measure the energy savings in physical terms, the financial institution. If the actual energy savings exceed
valued at the energy price current at the time of signature of the ESCO’s guarantee, the public partner typically keeps the
the EPC or based on any other price commonly agreed upon excess, unless further sharing arrangements have been made.
with the public client. They take the risk of the degradation
In a guaranteed savings project, the contractor will sign a
of performance due to aging equipment.
traditional turnkey contract with its client and, in an additional
agreement, commit to refunding any amounts received
where the corresponding energy saving are not achieved.
2.2 Various types of EPCs
The public partner must ensure that the ESCO has the
financial capability to honour the guarantee.
The various criteria that characterise PPPs (financing by
the private partner, partial or total risk transfer, output 2.2.2 Rebate or Chauffage EPC
specification) also apply to EPCs, so that an EPC may In a chauffage agreement, the ESCO guarantees that
be considered an EE PPP. However, from a contractual the public partner’s energy costs will be reduced by a
perspective, several variants of EPCs have been developed certain percentage. During the contract period, the ESCO
over the past 30 years. The purpose of this section is to assumes responsibility for paying the owner’s utility bills
describe the most common. [Guidance 15, 16, 17, 18] and the owner agrees to pay the ESCO a percentage of its
historical energy costs. Discounts of approximately 15%
There are four basic types of EPC contracts: are typically applied. Contract periods range from 7 to 10
a) Contracts in which the ESCO offers financing and years and, from the payments received, the ESCO must
provides a savings guarantee, meaning the ESCO recover its expenses and cover the owner's utility bills. The
bears both the financial and performance risk. ESCO generates a return by ensuring sufficient savings in
order to compensate for the discount given to the client.
b) Contracts in which the ESCO takes the performance
risk and the customer is responsible for the financing. In a chauffage contract, an ESCO contractor becomes
the owner of an energy conversion system located at its
c) First out contracts, where all energy cost savings are client’s premises. Cooling and hot water are energy flows

12 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T I D E N T I F I C ATION

that have been converted, for example a chiller plant 2.3 EE project selection and EPC
can be used to convert electricity into cooling or a boiler feasibility
house to convert fuel into hot water. After the contract
is signed, the contractor will operate and maintain the
client’s installations, pay the energy bills for the energy The public partner rarely has the capacity to develop
conversion system and invest to increase its efficiency. a detailed scope of the potential EE measures for their
The contractor sells the “converted” energy at a building pool. They should, however, take steps to develop
predetermined “rebate” rate to its client, complying with a general scope of work based on their priorities, time
a predetermined minimum quality level of “converted” constraints and other criteria. Wherever feasible, the public
energy supply during the term of the contract. sector should conduct preliminary audits, either in all or in
a representative sample of its project buildings, in order
Figure 3: Chauffage EPC to collect preliminary information about savings potential.

The public partner and the ESCO need to negotiate a

contract under which both parties will assume specific
Public Sector
responsibilities at each stage of a project. In particular,
C L I E N T FA C I L I T Y

Client
the contract should describe the responsibilities of the
ESCO and the facility owner for each phase of the project
Sale of converted energy at a predetermined rate (i.e. audit and concept development, detailed design,
construction and post-construction). Issues concerning
Energy
Conservation the public procurement process are addressed in detail in
System (e.g. Boiler, Chapter 3. [Guidance 20, 21, 22, 23 ]
Chiller or Genset) Owns, operates,
maintains and Step 1  election of buildings: The public partner
S
pays energy bills
selects one or more buildings for the
implementation of EE measures. The preferred
Financial size of EE projects for ESCOs starts from
Institution ESCO
Financing about EUR  2  million, with the average being
Agreement(s)
approximately EUR 5 million. The public partner
should select a building, or a pool of buildings,
The chauffage contract is not based on any project that falls within this investment range. Larger
in particular. The ESCO does not need to present a building pools will limit the participation of
detailed retrofit design to the client before the deal is smaller ESCOs.
closed. Instead, the ESCO will make the required system
improvements. The more the ESCO achieves a reduction Step 2 Preliminary assessment of energy savings
of the energy, maintenance and operating, the higher the potential: Having selected one or more
profit. The public partner does not benefit from this as it is buildings, the public partner undertakes a
tied into the predetermined rate, unless it has negotiated preliminary assessment of the energy savings
an additional shared-savings clause. potential in these buildings. This can be
performed on the basis of a sample of buildings
Chauffage contracts should not be seen as “true” EE PPPs. or on the basis of assessing each and every
However, many public sector clients prefer this type of building in the pool. The level and detail of
deal because they do not want to take responsibility for assessment depend on the internal capacity of
their energy conversion system. They prefer to outsource the public partner to conduct this assessment
the operation and maintenance component of this part and on its decision to outsource all or part of
of their facilities so that they can concentrate on their this assessment to specialised advisers. These
core activities. preliminary estimates will help the public

Guidance on Energy Efficiency in Public Buildings 13

PROJECT IDENTIFIC AT I O N

partner in its negotiations with ESCOs. In of the invitation to tender. The process for
many cases the cost of the audits will be borne confirming the elements calculated by the
by the ESCO. ESCO during this feasibility phase must be
included in the general approach through a
Step 3 I nitial meeting: The initial meeting between detailed audit and inventory. This will allow the
the public partner and ESCO is usuallly carried ESCO to submit a plan detailing the work to
out after the ESCO pre-qualification stage. The be performed and the savings to be achieved.
objective for the public partner is to clarify The detailed audit phase is essential to obtain
performance contracting issues with the ESCO metrics stating the various ways through
and to agree on a procedure to collect the which energy is consumed, including the use
historical energy data and other operational of other commodities such as water. Similarly,
information. This will serve as a basis for the analysis must take into consideration the
the calculation of the energy consumption potential savings that could be generated
baseline. through changes in the energy production
Step 4  reliminary walk-through audit: This step
P system (e.g. co-generation when applicable
is essential for most ESCOs as, based on or renewable energy sources). The ESCO must
experience and technical skills, it will provide convince the public partner that it has the
a rough estimate of the investment costs resources and skills to develop a successful
required to achieve the expected savings. At business relationship. If the facility owner or
this step, these estimates will reassure the manager elects not to proceed with a particular
ESCO that the time and investment up to the ESCO, the cost of the detailed audit will
signing of a contract is warranted. As a result, generally be reimbursed to the bidder (usually
it may be essential that this preliminary walk- at a pre-determined cost). Otherwise, the cost
through audit be prepared with some of the of the study is rolled forward into the EPC.
pre-qualified ESCOs prior to launching the If the public partner and the ESCO proceed
tender. with the EPC, the feasibility study becomes a
deliverable under the contract.
Step 5 Review of cost data: Analytical software
programs, often proprietary to the ESCO,
are used to develop patterns of energy use
and forecast probable areas for savings
and efficiency improvements. Additionally,
comparisons are made between the energy
intensity of the building and that of comparable
buildings.

Step 6 E stimation of savings potential: Combining

the analysis with the results of the initial
walk-through audit, the ESCO can determine
whether there is sufficient potential for cost
savings. If this is the case, the ESCO will proceed
but if the potential is too low, the ESCO may
withdraw or ask for alternative facilities to be
selected.

Step 7 Tendering process: The ESCO will prepare

a bid document based on the specifications

14 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T I D E N T I F I C ATION

Project Identification: LINKS

Guidance 5
EPC Watch – Watching the World of Energy Performance Contracting, information website
The website contains a Q&A section regarding the basics of EPCs.
http://energyperformancecontracting.org/

Guidance 6
Joint Public-Private Approaches for Energy Efficiency Finance: Policies to Scale up Private Sector Investment,
International Energy Agency (2011)
Pages 24 to 28 provide an introduction to ESPC (or EPC as referred to in this document), and illustrate various ESPC
structures.
http://www.iea.org/papers/pathways/finance.pdf

Guidance 7
Introduction to Energy Performance Contracting, ICF International, National Association of Energy Service
Companies (NAESCO) (October 2007). Prepared for the US Environmental Protection Agency – Energy Star
Buildings.
Section 2 (pages 6-7) explains the basics of an EPC (or ESPC as referred to in the NAESCO document).
http://www.energystar.gov/ia/partners/spp_res/Introduction_to_Performance_Contracting.pdf

Guidance 8
Energy Service Companies Market in Europe – Status Report 2010, Angelica Marino, Paolo Bertoldi, Silvia
Rezessy – JRC Institute for Energy (2010)
Section 2.1 presents the ESCO market and the types of ESCOs in each EU country.
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20
final%20esco%20report%202010.pdf

Guidance 9
Energy Service Companies in Europe – Status Report 2005, Paolo Bertoldi, Silvia Rezessy – JRC Institute for
Energy (2005)
Section 5 shows typical elements provided by ESCOs in a project.
http://re.jrc.ec.europa.eu/energyefficiency/pdf/ESCO%20report%20final%20revised%20v2.pdf

Guidance 10
Energy Service Companies in Europe – Status Report 2005, Paolo Bertoldi, Silvia Rezessy – JRC Institute for
Energy (2005)
Section 2.3 defines components of an EE project carried out by ESCOs.
http://www.grazer-ea.at/eesi/upload/download/diskussionspapiere/091018_gea_energy_contracting_
definitions-discussion_paper.pdf

Guidance on Energy Efficiency in Public Buildings 15

PROJECT IDENTIFIC AT I O N

Guidance 11
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Section 5 introduces the services that an ESCO can provide.

Guidance 12
Energy Service Companies Market in Europe – Status Report 2010, JRC Scientific and Technical Reports,
European Commission Joint Research Centre (2010)
Section 2 provides an overview of the European ESCO market in 2010, with detailed analysis for each Member State.
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20
final%20esco%20report%202010.pdf

Guidance 13
Eurocontract Guaranteed Energy Performance, Publishable Report, Berliner Energieagentur GmbH (2008)
The report provides an overview of EPCs, and information about the market development in Germany, Austria, Finland,
France, Greece, Italy, Norway and Sweden.
http://eaci-projects.eu/iee/page/Page.jsp?op=project_detail&prid=1576&side=downloadablefiles

Guidance 14
Client/ESCo SELECTION, IEE – BioSolESCo, TV Energy (2009)
The section on ESCO selection presents the criteria which a client should consider when choosing an ESCO.
http://www.biosolesco.org/guidance/uk/Biosolesco4_eng.pdf

Guidance 15
Final Publishable Report, EUROCONTRACT IEE (February 2008)
Presentation of adapted EPC models for refurbishment in the public sector (pages 49- 56).
http://ieea.erba.hu/ieea/fileshow.jsp?att_id=5828&place=pa&url=Eurocontract_Final_Report_Publishable.
pdf&prid=1576

Guidance 16
Third Party Financing – Achieving its Potential, Energy Charter Secretariat (2003)
Section 2.2 provides a summary of the main financing approaches for an EPC.
http://www.encharter.org/fileadmin/user_upload/document/Energy_Efficiency_-_Third-Party_
Financing_-_2003_-_ENG.pdf

Guidance 17
International Experiences with the Development of ESCO Markets, Berliner Energiagentur GmbH (December
2008)
Section 2.2 shows different kinds of EPC models.
http://www.gtz.de/de/dokumente/en-International-Experience-Developing-ESCO-Markets.pdf

Guidance 18
Standard EPC Documents – V. Energy Performance Contracts, EESI IEE, Prepared by SEVEn, Berliner Energieagentur
(January 2011)
Short description of EPC articles.
http://www.european-energy-service-initiative.net/fileadmin/user_upload/gea/standard_documents/
Standard5_Contracts.pdf

16 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T I D E N T I F I C ATION

Guidance 19
Berliner Energie Agentur
http://www.berliner-e-agentur.de/en

Guidance 20
Models and Contracts, PRIME IEE, Author: Wuppertal Institute for Climate, Environment, Energy (July 2006).
Section 5: The appendix presents a model contract for EPCs (in German) (pages 5-20).

Guidance 21
Public Procurement of Energy Efficiency Services – Getting Started, Energy Sector Management Assistance
Program, World Bank (November 2010)
Pages 17 to 23 expound the World Bank procurement guidelines dividing an EPC in two contract types: split design and
construction and combined design and construction.
http://www.esmap.org/esmap/sites/esmap.org/files/BN009-10_EECI-Public-Procurement-Getting-Started.
pdf

Guidance 22
Comprehension Refurbishment of Buildings with Energy Performance Contracting, EUROCONTRACT IEE,
Reported by Graz Energy Agency Ltd (December 2007)
Section 6: Guidelines and Components for Implementation.
http://www.european-energy-service-initiative.net/fileadmin/user_upload/bea/Documents/Contractual_
Issues/Comprehensive_Refurbishment-manual_main_part_071220.pdf

Guidance 23
Assessment of Policy Instruments for Reducing Greenhouse Gas Emissions from Buildings, UNEP SBCI
Sustainable Buildings and Construction Initiative (2007)
Table 14 on page 30 summarizes barriers to EPC in different sectors alongside possible solutions.
http://www.unep.org/themes/consumption/pdf/SBCI_CEU_Policy_Tool_Report.pdf

Guidance on Energy Efficiency in Public Buildings 17

PROJECT PREPARAT I O N

3. Project Preparation

Prior to launching a tender or entering into a procurement public partner. The expert will also play a key part in the
phase, it is important to carry out a market analysis at commercial negotiations, advising on what technical risks
national level or European level. This will assess the are to be transferred to the private partner and what
presence of private partners likely to tender for EE PPPs. levels of performance will be required.

Figure 4: Analysis of the various types of schemes The role of the EE financial expert includes a comprehensive
understanding of financing through the PPP mechanism,
Project Preparation financial risk assessment and risk allocation. This includes
feasibility analyses as well as assessing the financial
• Getting organised credibility of the prospective private partners. The financial
• Assessing funding sources expert should have an understanding of EE transactions,
• Before launching the tender their related cash flows and budget implications.

In infrastructure PPPs, the private partner is required

to implement the project in compliance with existing
3.1 Getting organised building standards only. In EE PPPs, there can be numerous
technical solutions that fit these standards. Specialised EE
assessment is therefore required to select the best value
The public partner has to undertake a project preparation VFM solution. Finally, the expert should be able to perform
process prior to procurement and implementation. The technical checks and conduct analyses at different stages of
pubic partner must define all project parameters, assess the project development and implementation.
the potential involvement of private partners, evaluate the
costs, risks and benefits of the different options available and There can be many instances where public partners will not
prove that the PPP option is preferable to any alternative. have sufficient internal capacity to assess or prepare aspects
There are two major stages in the preparation process. of the EE PPP and it will be necessary to retain the services
of external advisers. This element is referred to in more
Initially the public partner ensures that it has the resources detail in the G2G. [Guidance 2, Section 3.1.2, page 25]
and organisation to set the project in motion. [Guidance
24] Standard elements of the PPP preparation process are 3.1.2 Plan and schedule
detailed in Section 3.1 of the Guide to Guidance ("G2G"). With the team structure in place, the public partner can
then develop a plan for procurement, contracting and
3.1.1 EE Financial expertise implementation. The plan should involve the following:
In addition to the team members outlined in the G2G, the
public partner needs to include an EE expert. [Guidance • listing general tasks, activities and relevant documents
25] The role of this expert is to help structure the project, throughout the entire process;
define technical performance indicators and develop • c onsulting with the steering committee on the
the technical part of the tender. The expert should have process;
experience in implementing EE projects in buildings, be
able to assess the technical proposals of bidders and • c onsulting with individual building management
show proficiency in identifying the best solution for the teams;

18 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P R E PA RATION

• a llocating relevant experts/third-parties to the disproportionate unless an effort is made to maximise

different tasks; opportunities for standardisation and economies of scale.
Transaction costs can therefore often be the decisive
• establishing interdependencies; element on whether a particular project will be feasible
• defining the timeline for each task; and what financing method is to be employed. The EU
makes grants available for technical assistance under
• s etting out any specific deadlines in the process (e.g. European Local Energy Assistance (“ELENA”) [Guidance
EE implementation can only be carried out between 34] as well as EEEF. [Guidance 35]
March and October or during holidays); and
Example: The ELENA facility provided technical
• c oordinating the plan and schedule with the steering assistance to the city of Paris for the preparation and
committee and getting approval. implementation of a refurbishment project regarding
three bundles of schools (100 schools each). The project
A more general plan is outlined in the G2G. involves the improvement of the energy envelope of
[Guidance 2, Section 3.1.3, page 27] the building, specifically management systems with
control and monitoring of the energy devices installed,
EE lighting, and installation of photovoltaic panels on
3.2 Assessing funding sources and schools rooftops. The energy consumption and CO2
selecting method of financing emissions are expected to reduce by 30% compared to
baseline levels. [Guidance 37]
There are three sources of financing for PPPs: (i) the public Projects can be financed in a number of different ways. The
sector through commercial banks, equipment suppliers preferred approach will often be through a combination
or other sources of third-party finance (e.g. asset based of mechanisms and with finance sourced from various
leasing, investment from specially created EE funds), (ii) entities. In the case of a city authority that is seeking
the private partner through commercial banks, specialised to upgrade its district heating system by replacing
equity funds and/or securitisation structures or (iii) a boilers and reducing heat loss, a combination of funding
combination of both. [Guidance 26, 27, 28, 29, 30, 31, 32] sources can be used. This can combine a soft loan from a
designated special fund, plus bank financing via the ESCO.
The main reason for entering into an EE PPP is to receive When selecting its financing options, the public partner
a better quality of service and performance guarantees should also consider taxation implications such as VAT
through the transfer of risk and to mobilise private and corporate income tax.
sector financing. [Guidance 33] Private sector financing
provides the ability to significantly scale-up EE operations There are key trade-offs. If the EE project has the
in buildings. In addition, when public authorities face potential to generate significant value (i.e. the payback
constraints on their borrowing capacity, PPPs may provide for investment is short and cash flows are high), then
an attractive solution as private contractors can finance the focus will be on selecting a financing structure with
projects through mechanisms that are different from the lowest cost debt or equity options. However, for the
formal loans and can be tailored to the individual cash majority of EE projects, funding will often be the limiting
flows of each project. factor and the primary emphasis will be on putting
together finance that meets all the requirements and
A key obstacle for many EE projects is, however, the where restrictions such as the requirement for extra
proportionally high transaction costs that are incurred security or guarantees can be minimised.
when developing bespoke (i.e. customised, non-standard)
EE financing. Since capital requirements are generally low,
the costs associated with preparing technical feasibility
studies and negotiating key agreements become

Guidance on Energy Efficiency in Public Buildings 19

PROJECT PREPARAT I O N

3.2.1 Internal sources finance the purchase of EE equipment and services. It is

commonly used in vendor financing, ESCO projects and
Public partners with sufficient funds can self-finance as part of utility programmes. Lease financing can also
EE projects. However, governments are currently under be applied to EE manufacturing ventures. Large numbers
enormous spending pressures and typically set a limit on of similar transactions facilitate a statistical approach to
the amount of capital that a municipality can invest and managing end-user credit risk. Lease financing is possible
more specifically the amount of money that it can borrow. only in countries that have well developed capital markets
There is also the potential issue that an authority funding and a suitable regulatory framework.
an EE scheme directly may not be able to retain all financial
savings due to various budgetary rules or controls. Figure 5: Commercial leases

In times of budgetary constraint and rationalisation,

there is a need for innovative financial schemes that
create synergies and attract investments by aligning Public Sector
the interests of both public and private partners. To be Client
efficient and managed over the longer term, EE projects
will require tailor-made financing. Complex project
financing requires the involvement of commercial banks
C L I E N TCFA

Leased
and private partners. EPCs and ESCOs are able to support Equipment Delivers savings
an EE project when internal sources or on-balance sheet based Energy
efficiency services
investments are limited.
L I ECNI LTI TFA

Other Energy The ESCO is

Public authorities typically lack the necessary energy Savings Measures paid subject to
sufficient realised
Y CILITY

consumption data and information about best value savings

technologies and project implementation required to
lead EE projects. This means that self-financing by the
public authority is significantly less attractive than using Financial
Institution ESCO
PPPs. When assessing self-financing compared to other Financing
Agreement(s)
means of financing, the public partner must consider the
following questions:
The Equipment can be owned by
• ESCO (if operational lease)
• D
 oes this project have higher priority compared to • Leasing Company (if financial lease)
other public projects competing for the same funding?

• W
 ill the benefits achieved by a particular project A lease agreement permits the use of equipment without
outweigh the benefits of alternative projects? purchasing it at the outset. It is particularly suitable for
certain types of equipment used in EE projects, such as
• A
 re alternative financing mechanisms more expensive generating plant. Ideally, the equipment should be mobile
than the returns on the project? (i.e. can be moved within a few hours) such as small CHP
units which are fitted into a container. Mobile plant is
• Is the timing of the project critical? Can the public much more likely to have a readily accessible second-hand
partner afford to wait until it can raise alternative market. Other less mobile plant (e.g. boilers) is also suitable.
financing?
Leasing can form an important element of the financing
If the answer to all these questions is “yes,” the public for an EE project, particularly if it can be combined with
sector may finance the project with internal funds. other soft-funding sources and when it forms part of an
Asset-based finance overall vendor sales package. For some time, sellers of
As an alternative to self-financing, leasing can be used to heavy plant and equipment have recognised the value of

20 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P R E PA RATION

after-sales support to their business. In certain sectors Vendor finance

such as aircraft engines, it is common practice to sell Vendor financing typically involves major equipment
equipment on the basis of ‘power by the hour’, i.e. where suppliers (e.g. Philips, Siemens, Johnson Controls) using
finance and technical support are bundled and where the financial resources that permit them to offer “point
seller accepts the financial costs associated with the risk of sale” financing for their equipment. The funding is
of equipment failure. typically facilitated or provided directly by a financial
intermediary. Vendor financing is particularly suitable
From a financial reporting perspective, commercial leases for standard equipment that can be used for EE within
fall into two categories: an operating lease or a finance the residential and small commercial/industrial sectors.
lease, each with different tax and legal treatments. In an Vendor financing is similar to leasing in that it permits
operating lease, the lessor transfers the right to use the a statistical or portfolio risk approach for credit risk
EE assets to the lessee. At the end of the lease period, the management. In some respects, leasing can be considered
lessee returns the assets to the lessor. As the lessee does a sub-set of vendor financing.
not assume the risk of ownership, the lease expense is
treated as an operating expense in the income statement There are typically two types of agreement under vendor
and the lease does not affect its balance sheet. Due to the financing schemes. One involves the vendor and a financial
fact that assets installed in an EE project rarely have any intermediary and the other is an agreement between
residual value, this type of lease is rarely applicable to EE the vendor and the end customer. The vendor/funder
in buildings. agreement includes the specific terms for the funding
(e.g. interest rates, repayment period) while the vendor
In a finance lease, the lessee assumes some of the risks of agreement defines who is responsible for default and
ownership and enjoys some of the benefits. Consequently, non-payment by the end customer. Vendor agreements
the lease, when signed, is recognised both as an asset for EE related equipment are typically structured so that
and as a liability (for the lease payments) on the balance the amortisation schedule for the end customer is lower
sheet. The lessee claims depreciation on the asset and than the value of the energy savings achieved from the
deducts the interest expense component of the lease investment.
payment each year. In general, finance leases recognise
expenses sooner than equivalent operating leases. This In the case of a municipality, the equipment manufacturer
type of lease is applicable to EE transactions, subject sells plant and equipment to the municipality under a
to the lessor being satisfied with the general financial loan with specified repayments. The terms for the loan
standing of the lessee. are agreed between the municipality and the vendor
and will generally be short-term. Vendor funding is
Most energy-saving measures involve civil works. usually at preferential rates. The borrower is typically the
However, some elements of an EE project can be financed municipality that is purchasing the EE equipment.
through leasing. Usually, these elements include lighting,
heating and cooling systems as well as renewable energy 3.2.2 External sources
components such as solar panels. In a comprehensive EE ESCO financing
project, leasing finance has to be combined with other There are a number of ways in which an ESCO can be used
sources of funding. This financing structure obliges the to support the funding required for an EE project. The
ESCO to pay the lessor while its revenues are subject to simplest option for funding EE is to obtain commercial
sufficient savings. In the context of a commercial lease, debt supported by an energy savings guarantee agreement
the financial risk is shifted to the balance sheet of the from the ESCO.The energy savings guarantee is key to the
ESCO. In addition, the transaction does not impede perception of risk but its value will be strongly influenced
the borrowing capacity of the public partner for other by the credit standing of the ESCO involved.
projects. However, in the event of the ESCO defaulting,
the lessor will reclaim the equipment, which can disrupt Some of the most effective EE schemes are where the
the operations of the client building. ESCO (often through third-parties) has combined separate

Guidance on Energy Efficiency in Public Buildings 21

PROJECT PREPARAT I O N

EE schemes and established a portfolio of buildings support. Guarantees can be made on part of a loan,
undergoing EE. A widely quoted example and successful debt service or to assure an investor’s return on equity.
model for public buildings was developed between the Commercial banks can also issue guarantees as third-
Berlin Energy Agency and the Berlin Senate in the 1990s. parties to support a particular project where other sources
The co-operation resulted in the “Berlin Energy Saving of funding are available. For example, if the credit rating
Partnership”. It permitted the efficient refurbishment of of a municipality does not meet lender requirements,
public and private buildings over an extended period of it may be possible to obtain credit guarantees from
time. A number of ESCOs bid competitively for individual special facilities established by international donors and
projects and provided the financing and were responsible international financial institutions). Similarly, central
for implementation. Buildings requiring refurbishment government departments or the Ministry of Finance may
were bundled together, increasing the potential energy provide suitable guarantees.
savings as well as providing key synergies and thereby
improving the overall viability of what was a major EE A substantial element of financing for municipal EE
project. projects, particularly in the EU-12, over the past 15
years has come from Independant Financial Institutions
In addition, an ESCO may partner with other investors to ("IFIs"), such as European Bank for Reconstruction and
raise funding. An increasing number of special funds have Development (“EBRD”), EIB, the IFC and the Nordic
become established that provide equity investment for Environment Finance Corporation. Given the priority
EE. A good example is the recently established European placed on achieving GHG and carbon emission targets,
EE Fund (“EEEF”). The EEEF aims to provide market-based there may be a variety of options available for utilising
financing for commercially viable public EE and renewable grant funding. Grants will typically be provided on a
energy projects within the European Union (“EU”). It is selective basis and will generally require some form of
supported by the European Commission, the European co-financing. In certain cases, grants are made available
Investment Bank (“EIB”), the Cassa Depositi e Prestiti in the form of a Revolving Fund (“RF”), which is the main
(“CDP”) and the Deutsche Bank. concept behind the JESSICA (Joint European Support
for Sustainable Investment in City Areas) scheme. The
There are also a variety of other ways in which a contract RF is usually established for a specific purpose with the
with an ESCO can be used to obtain financing. Further intention that it is repaid, at least in part (e.g. using
details are covered in Section 4. soft loan), in order to release money from successfully
3.2.3 Innovative debt funding operating projects, for investment in new initiatives.
RF’s can minimise the transaction costs associated
There are a range of sources of debt financing for EE
with providing funding. A single entity manages the RF,
projects, however standard commercial bank financing
and it can accumulate valuable local knowledge and
is often difficult to obtain. In particular, it is difficult
expertise and apply this to standardising processes and
to achieve the requirement for clear delineation of a
procedures.
particular EE scheme that identifies sources of repayment
and the underlying security supporting the financing. In The RF becomes self-sustaining and provides on-going
theory, the financing of an EE project can be based on financing after the first capitalisation. As a fund, rather
project finance principles as the investment cost should than a specific project, the initial investment can be
be reimbursed by cash flow savings generated by the raised from a combination of sources. However, one of
project. However, commercial banks have typically been the issues often facing RFs is that the public partner may
reluctant to simply rely on the economics of the project be constrained by budgetary rules on the extent to which
and require additional security in the form of collateral it can recycle grant monies, since savings achieved may
and guarantees. simply reduce the overall budget.
Guarantees can be provided by third-parties to support
commercial bank financing and provide additional credit

22 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P R E PA RATION

A Receivables Purchase Agreement (“RPA”) is a less 3.3 Before launching the tender
common yet effective mechanism for financing and has
been used in the EU. RPA is mostly relevant for short-term
contracts where the investment payback period is around Conduct additional preparatory work, if necessary
three to four years. However, in Bulgaria, the publicly Often the public partner does not have all the information
traded Fund for Energy and Energy Savings finances and needed to carry out the preparation in the necessary
operates the RPA scheme for local ESCOs purchasing level of detail. In such cases, additional preparatory work
receivables on ESCO contracts of up to seven years. and studies can be performed, either in-house by the
development team or outsourced to consultants with the
Figure 6: Receivables purchase agreements relevant experience. This step is covered in Section 3.2.1
of the G2G. [Guidance 2, page 32]

Prepare detailed PPP design

Public Sector The PPP design must consider the needs of all parties and
Client the objectives of the project. Particular attention must
be paid to the design of procurement procedures and
Energy-Savings contract management/monitoring systems. Issues to be
Performance
Contract considered include:

the completion of the project design relative to the PPP

Financier/Buyer
(usually a dedicated EE ESCO structure selected:
investment fund)
• technical performance standards;
Financing against a pledge
of future receivables from the ESPC • financial assessment to ensure viability; and

• assessment of future contract forms.

The public partners pledges the projected future stream
the selection and design of the tendering process:
of energy savings to the ESCO. The ESCO then sells this
pledge, minus annual costs earmarked for the O&M of • type of tender process;
the project, to a third-party financier.
• tender procedures;
The primary advantages of an RPA are speed of execution
and transaction simplicity. Specific legal systems (e.g. • evaluation procedures;
France and Germany) also underpin the use of RPA by
• negotiation procedures; and
ensuring that the underlying obligations to pay by the
public sector become irrevocable The main disadvantage • contract award procedures.
is that the valuation and discounting of the future cash
flows created by the project depend on a third party the implementation conditions:
(usually a commercial bank) providing the funding. It is
• monitoring and oversight conditions; and
generally more expensive compared with other forms of
long-term debt provided on a project basis. • redress and renegotiation.
Under RPA, the public partner has an obligation to pay up to It is of crucial importance that the invitation to tender
the amount of savings generated from the project. As this is carefully defines the project while not being too
an estimate, the ESCO bears the risk of the energy savings prescriptive, to allow for innovative responses from the
being insufficient to cover the payments on the financing at private sector.
certain points throughout the life of the project.

Guidance on Energy Efficiency in Public Buildings 23

PROJECT PREPARAT I O N

For more information on preparing the detailed design General aspects of the bid evaluation criteria are detailed
of the PPP arrangement, see Section 3.2.2 of the G2G. in Section 3.2.4 of the G2G. [Guidance 2, page 44]
[Guidance 2, page 36]
Prepare draft PPP contract
Select procurement method The contract must be structured to address the items
In EE for public buildings, the public partner can choose already discussed in Sections 2.2 and 3.2. Usually the
from a number of procurement methods that are invitation to tender contains a draft contract but because
applicable to PPPs. [Guidance 30] the bidders can propose solutions that achieve the desired
energy savings using different means, the final PPP contract
When the objective of the public sector is to use a can significantly differ from its draft version. [Guidance
performance-based PPP to implement EE in public 18, 20, 39] The contract will also include all the elements
buildings, the number of procurement approaches is of a standard PPP contract. [Guidance 2, page 23]
much more limited:
A key feature of the energy performance contracting
Indefinite contracting – a procurement method that scheme is that, very often, at the stage of awarding
pre-selects one or more ESCOs on the basis of general the contract, the precise costs of the project are yet to
qualifications. Government agencies are then allowed be determined (see Section 5.1). As a result, the public
to negotiate directly with one of these pre-selected partner must have the ability to manage variations in
companies. EE proposals and solutions. To address this, the in-house
Project bundling – a government agency bundles procurement specialist can work under the guidance of an
together a pool of buildings to award a single contract to experienced EE procurement agent, an approach adopted
a large ESCO. in Austria, the Czech Republic, Germany and the Slovak
Republic. A procurement agent may be another public
Quality and cost-based selection (two steps) – a agency, a utility, a PPP, an NGO or a private consulting
process where bidders present short proposals and firm often hired on a fee-for-service basis throughout the
provide additional information. The proposals are then entire EPC procurement process, including negotiations
evaluated in accordance with a set of project-specific and contract supervision.
pre-qualification criteria. Bidders matching the criteria
are then requested to submit detailed proposals.

More detailed information on procurement methods is

3.4 Using technical assistance for
available in the G2G. [Guidance 2, pages 40-41]
project preparation

Define bid evaluation criteria

The development and supervision of the EPC is a crucial
The evaluation of energy service projects is complex.
element in a project’s success yet most of the public
Although the EE measures implemented in public buildings
partners lack the necessary capability. To address this,
are fairly standard, proposals will still offer different
there are a number of initiatives to provide Technical
solutions to achieve varying degrees of energy savings.
Assistance (“TA”) funding for the preparatory phase:
They will also provide different M&V tools allowing for
various degrees of precision following implementation. EU Structural Funds: For the 2007-2013 programming
period, TA is available to Member States or regions
The number of factors included in proposals will make
under the Structural Funds, with divergent application
them very difficult to evaluate on cost only. Balanced
procedures across member-states.
scoring criteria that weighs and assesses all the key
elements in the EE project should be developed. National support schemes: TA funds for energy auditing
[Guidance 38, 39, 40] or certification activities may be included in national
support schemes, varying by country.

24 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P R E PA RATION

ELENA facility: European Local Energy Assistance is a MLEI: Mobilising Local Energy Investment is a scheme
TA facility created under the Intelligent Energy Europe II aiming at assisting the development of small scale
Programme. Launched in 2009, it provides TA grants to projects (minimum EUR 6 million). It provides grants of up
local and regional authorities for the development and to 75% of the costs incurred by public authorities for TA
launch of sustainable energy investments, covering up to to prepare, mobilise financing and launch investments in
90% of eligible cost (see Section 5). sustainable energy projects. [Guidance 41, Guidance 42]
Proposing authorities may work together with financial
EEEF: The European EEEE Fund, launched in July 2011, aims institutions and/or ESCOs or other relevant stakeholders.
at financing projects in EE, RES and clean urban transport Grants are awarded for up to three years, during which
through innovative instruments and, in particular, time the proposed investments must be launched and
promoting the application of the EPC. A TA grant support tenders issued for construction or implementation.
(EUR 20 million) is available for technical and financial (Section 5)
project development services (see Section 5).

Guidance on Energy Efficiency in Public Buildings 25

PROJECT PREPARAT I O N

Project Preparation: LINKS

Guidance 2
The Guide to Guidance. How to prepare, Procure and Deliver PPP Projects.
www.eib.org/epec/g2g/index.htm

Guidance 18
Standard EPC Documents – V. Energy Performance Contracts, EESI IEE, Prepared by SEVEn, Berliner Energieagentur
(January 2011)
Short description of EPC articles.
http://www.european-energy-service-initiative.net/fileadmin/user_upload/gea/standard_documents/
Standard5_Contracts.pdf

Guidance 20
Models and Contracts, PRIME IEE, Author: Wuppertal Institute for Climate, Environment, Energy (July 2006).
Section 5: The appendix presents a model contract for EPCs (in German) (pages 5-20).

Guidance 25
Measuring Energy Efficiency. Indicators and Potential in Buildings, Communities and Energy Systems. VTT
Research Notes 2581, 2011.
Chapter 5 illustrates methods for EE measurement in buildings.
http://www.vtt.fi/inf/pdf/tiedotteet/2011/T2581.pdf

Guidance 26
Comparison and Evaluation of Financing Options for Energy Performance Contracting Projects, EUROCONTRACT
IEE, Reported by Graz Energy Agency Ltd (August 2010)
Chapters 4 to 6 show various financing options and their parameters: credit financing (Chapter 4), leasing financing (Chapter
5) and cession and forfeiting of contracting rates (Chapter 6).
http://www.ieadsm.org/Files/Tasks/Task%20XVI%20-%20Competitive%20Energy%20Services%20
(Energy%20Contracting,%20ESCo%20Services)/Publications/101126_GEA-T16_Finance%20Options%20
for%20Energy-Contracting%20incl%20Examples.pdf

Guidance 27
International Experiences with the Development of ESCO Markets, Berliner Energiagentur GmbH (December
2008)
Section 2.3 presents the three fundamental financing options: ESCO, energy-user or TP financing.
http://www.gtz.de/de/dokumente/en-International-Experience-Developing-ESCO-Markets.pdf

26 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P R E PA RATION

Guidance 28
Synthesis Report on ESCo Definition, Approaches, Drivers, Success Factors and Hurdles, A. Giakoumi & G.
Markogiannakis (CRES) – BIOLESCO (January 2012)
Section 3.1.3 describes the financial institutions and schemes used in several European countries.
http://www.biosolesco.org/download/Bio-SolESCo%20D2.2.%20Synthesis%20report.pdf

Guidance 29
Fund for Energy and Energy Savings, Bulgaria
Websites with information on the Fund (in Bulgarian and English).
The Fund is listed on the Bulgarian Stock Exchange (Code: 6EE/FEEI).
http://enemona.bg/english/index.php?97
http://www.investor.bg/companies/view/1122.html
http://www.eesf.biz/

Guidance 30
Public Procurement of Energy Efficiency Services – Getting started, Energy Sector Management Assistance
Program, World Bank (November 2010)
Presentation of financing options (pages 25-30).
http://www.esmap.org/esmap/sites/esmap.org/files/BN009-10_EECI-Public-Procurement-Getting-Started.pdf

Guidance 31
Energy Efficiency Retrofit Fund, Guide for Applicants. Sustainable Energy Authority of Ireland, May 2010.
This fact sheet describes the funding scheme available for EE retrofitting in Ireland.
http://www.seai.ie/Grants/Retrofit/EERF_Application_guide.pdf

Guidance 32
Working paper: current financial and fiscal incentive programmes for sustainable energy in buildings from
across Europe, Association for the Conservation of Energy, London (September 2009)
The document presents a country breakdown of the financial and fiscal incentives available in the European Economic Area
(EEA).
https%3A%2F%2Fptop.only.wip.la%3A443%2Fhttp%2Fwww.euroace.org%2FPublicDocumentDownload.aspx%3FCommand%3DCore_
Download%26EntryId%3D205&ei=fXI7T7KsDcTG0QXAlKFt&usg=AFQjCNGtQGPhVTtseXFubuaXO7_
fzjkGVw

Guidance 33
Joint Public-Private Approaches for Energy Efficiency Finance: Policies to Scale up Private Sector Investment,
International Energy Agency (2011)
Comprehensive report on the critical elements of joint public-private approaches to accelerating and scaling up private
investment in EE with particular focus on lessons learned with regard to energy performance contracts, risk guarantees and
dedicated credit lines.
http://www.iea.org/papers/pathways/finance.pdf

Guidance 34
European Local Energy Assistance (ELENA)
The following link describes the main facts of the ELENA initiative.
http://www.eib.org/epec/resources/epec-elena-factsheet.pdf

Guidance on Energy Efficiency in Public Buildings 27

PROJECT PREPARAT I O N

Guidance 35
European Energy Efficiency Fund (EEE F) and its technical assistance
http://www.eeef.eu/financing-terms.html

Guidance 36
Berliner Energie Agentur
The following link describes the housing development project in Weissensee:
http://www.berliner-e-agentur.de/en/services/contracting

Guidance 37
European Local Energy Assistance (ELENA)
The following link contains a list of project for which ELENA provided technical assistance:
http://www.eib.org/elena

Guidance 38
Public Procurement of Energy Efficiency Services – Lessons from International Experience, World Bank
(November 2010)
Chapter 4 (pages 43-55) details relevant procurement methods for EE.
Chapter 6 (pages 92-102) defines the bid evaluation process, lists evaluation criteria and provides project examples.
http://www.esmap.org/esmap/sites/esmap.org/files/P112187_GBL_Public%20Procurement%20of%20
Energy%20Efficiency%20Services_Lessons%20from%20International%20Experience_Singh.pdf

Guidance 39
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
Section on Bid Evaluation, Table 6.3 (Page 94) displays a sample list of evaluation criteria and their scoring points and weight
in the final evaluation.

Guidance 40
Guideline for Designing Energy Efficiency Services Contracts, PU-BENEFS IEE, Coordinator Crispen Webber,
Thamesenergy LTD (September 2007)
Section 3 consists of a guideline for EPCs.
http://www.iee-library.eu//images/all_ieelibrary_docs/pubenefs_guidelineformodelcontract_en.pdf

Guidance 41
Call for Proposals 2012 for Actions under the Programme “Intelligent Energy – Europe,” Intelligent Energy
Europe for a Sustainable Future (2012)
Pages 25-27 summarize the purpose and priorities of Mobilizing Local Energy Investments (MLEI).
http://ec.europa.eu/energy/intelligent/files/call_for_proposals/call_2012_en.pdf

Guidance 42
Mobilising Local Energy Investments (MLEI) Factsheet, Intelligent Energy Europe for a Sustainable Future (2011)
The factsheet contains information on how to apply for technical assistance funding under MLEI, and on the types of
eligible investment projects and public authorities.
http://www.nks-energie.de/lw_resource/datapool/__pages/pdp_100/IEE_Loc_Invest.pdf

28 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P R E PA RATION

Guidance 43
Guidelines for the Provision of Infrastructure and Capital Investments through Public Private Partnerships:
Procedures for the Assessment, Approval, Audit and Procurement of Projects. Compháirtíocht Phoiblí
Phríomháideach (July 2006)
Section 2 (starting page 18) provides detailed guidelines on the steps involved in the PPP procurement process.
http://ppp.gov.ie/wp/files/documents/guidance/central_guidance/ppp-procurement-assessment.doc

Guidance 44
Competitive Dialogue in 2008, OGC/HMT Join Guide on Using the Procedure, Office of Government Commerce
/ Her Majesty’s Treasury (UK)
Section 2 (pages 11-12) describes key steps in a competitive dialogue procurement.
http://www.ogc.gov.uk/documents/OGC_HMT_2008_Guidance_on_Competitive_Dialogue.pdf

Guidance on Energy Efficiency in Public Buildings 29

PROJECT PROCURE M E N T

4. Project Procurement

This section focuses on the legal and contractual issues 4.1 General rules and procedures
related to the analysis of the bids and the negotiation
of the contractual arrangements with the selected bidder Figure 8: General rules and procedures
prior to the implementation of the EE investment. It
details the generic competitive dialogue procedure, as
it is important the public authority understands what Energy savings - Preliminary assessment
specific aspects of the process require special attention
when procuring a private partner for EE PPPs (see Figure • Client carries out pre-feasibility assessment or energy
7). [Guidance 43, 44] audit(s) of its building(s)

Figure 7: Project procurement

Invitation to tender

Analysis of general rules and procedures • Step 1 - Pre-Qualification of bidders

• Step 2 - Submission of detailed proposals
• Energy audit of public buildings • Other steps
• Invitation to tender • Bid evaluation
• Pre-qualifying ESCOs • Financing
Bid evaluation
• Submitting detailed proposals • Contract
• Ranking of bidders
• Negotiation with bidder ranked first
Specific procurement issues to EPCs

• Country specifics Financing

• EPC specifics
• Mobilising finance
• Pledges and collaterals

Contract

• Main components
• Appendices

30 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P RO C U R EMENT

The major steps in the procurement process for an EPC are • target systems;
similar to most public procurement models. Procurement
of PPPs is explained in detail in the G2G. [Guidance 2, • minimum energy savings;
page 53] However, there are some issues unique to EE • sharing of savings; and
projects. [Guidance 45]
• s ervices required (e.g. engineering and project design,
The European regulations in public procurement of EE procurement and installation, financing, M&V and
in the different Member States are described in Energy O&M).
Efficiency in Public Procurement – Member States’
Experience, Barriers/Drivers and Recommendations. Essential components of an invitation to tender are as
[Guidance 6] follows:

4.1.1 Preliminary assessment of energy savings Background: Providing respondents with information on
Initially, the client carries out a pre-feasibility assessment the public partner and the project or the facility under
of its building(s) to assess the energy savings potential. consideration, and a brief statement of the evaluation
This can be undertaken by the building energy manager criteria.
or outsourced to a third-party consultant. Depending on
Scope of work: Providing information on the types
the budget, size, specifications and number of buildings,
of services required, and the areas of competency that
the client may also conduct a walk-through audit or a full
ESCOs must demonstrate.
preliminary assessment of energy savings. This step can
confirm that cost-effective energy-saving opportunities Invitation to tender procedure: Covering instructions
exist, help identify target systems to be retrofitted and for preparing and submitting the proposals and sample
allow project parameters to be defined. It is important to documents for inclusion.
note that the information gathered in these documents
will only serve the public sector client. While the Selection criteria: Defining the criteria that will be used
ESCO may use it as a reference, it will conduct its own to judge and rank tenders. [Guidance 48, 49]
preliminary assessment of energy savings.
Qualifications, statement format, content and
4.1.2 Invitation to tender specific criteria: Specifying the format content and
In general, the development of the bidding documents specific criteria for the invitation including examples of
will involve the following steps: how the ESCO usually handles specific circumstances.

• defining the project and services to be provided; Appendices: Suggested appendices to the invitation to
tender responses include:
• preparing the invitation to tender;
• resumes of assigned personnel;
• pre-qualifying ESCOs; and
• s ample contracts; sample preliminary assessment of
• supplier conference with site visit. energy savings; and

Defining the project in the invitation to tender is a • proprietary information (optional).

challenging and critical step in the process. Whereas the
purpose of an EPC is to allow ESCOs to offer their best 4.1.3 Pre-qualifying ESCOs
solutions for the current energy systems, some basic The pre-qualification step screens interested bidders and
parameters need to be established and included in the ensures that those invited to submit detailed proposals
invitation to tender. [Guidance 48] These parameters have the capability and resource to undertake the work.
can include: Pre-qualification (as opposed to short-listing) requires
that the applicants meet a minimum set of specific,
objective criteria.

Guidance on Energy Efficiency in Public Buildings 31

PROJECT PROCURE M E N T

The criteria can be broadly divided in two sets – technical the selection of equipment, suppliers and installers?
and financial. The former ensures that companies have a
proven track record of projects with a similar or greater • D
 oes the ESCO have any restriction or bias regarding
level of technical difficulty. The latter guarantees that the equipment, suppliers and installers?
ESCO has the capacity to secure the financing for the Project performance
project and will be able to fulfil its contractual obligations • Will the ESCO guarantee the recovery of all project
even if the savings are less than estimated. costs and interest costs through the savings that are
Corporate history and experience to be achieved within a guaranteed period of time?
• How long has the ESCO been in business? • W
 ill the ESCO guarantee all savings or just a portion
• D
 oes this ESCO have a proven track record in of savings?
performing energy services projects? • W
 ill the ESCO be ultimately responsible for every
• Can it provide a list of satisfied clients? element of the project?

• W
 hat has been its performance (savings) on past Project financing
projects? How did the results compare with the • How will the project be financed and at what interest
original expectations? rate?

Corporate capabilities • Will all project costs be disclosed?

• Does the ESCO have strong core competencies in • How will any additions or extras be charged?
energy management and state-of-the-art technology?
• How can good value be ensured?
• D
 oes the ESCO have the organisational depth to
implement the project in a cost-effective and timely • Will fees be consistent through the entire project?
manner?
Project capabilities
• D
 oes the ESCO have standard operating procedures? • Typical improvement measures installed
Are they documented? How much freedom does the
ESCO staff have to vary from them? • Design and project implementation procedures

• W
 hat is the expertise and experience of the project • Software support systems
team (CVs and track record) that would be assigned
Project management process
to the project and of the support staff who would
• Selection, use and control of subcontractors
back them up?
Project capacity
Project implementation
• Number of concurrent projects that can be
• How experienced is the ESCO in minimizing the
comfortably performed
disruption to the workers in the public building(s)
renovated? • Project managers and their respective project team
• W
 hat training will be provided to the public building Scope of services
operations staff? • Discrete services provided under energy performance
contracting
• W
 hat input will the public manager have regarding
the design, construction and implementation of the Particular strengths of the ESCO
project? • Services contracted out including the following:
- preliminary assessment of energy savings;
• What input will the public manager have regarding

32 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P RO C U R EMENT

- retrofit design; - construction management;

- project management; - training of clients’ operations and maintenance staff
- construction including provision of trades; in energy-efficient practices;
- commissioning; - maintenance and service of installed measures;
- operator training; - measurement and verification of energy (and other
- procedure documentation; resources) savings; and
- mechanical and electrical maintenance; - financing for such projects.
- invoicing system and methods for calculating
savings; • G
 uarantee that payments for EE improvements will be
- remote measurement and savings performance contingent on energy savings so that the client will
evaluation; not have any financial obligations that exceed the
- project financing; and avoided utility costs.
- energy services agreement negotiation. • O
 utline their capability with respect to other
Experience in energy performance contracting related energy services including, but not limited to,
• Description of EE and conservation projects during the technologies and applications of particular relevance
last three years, where payment was not predicated to the client, e.g. boiler, compressed air, facility
on actual savings; management and operations, (or other systems,
power quality, HVAC, etc.).
• D
 escription of experience in training of building
operators, provision of building mechanical and • T
 he public partner evaluates the qualification
electrical maintenance services, and energy use information against pre-specified evaluation criteria
measurement; and producing a list of pre-qualified firms, which are
invited to submit detailed proposals. [Guidance 45,
• Description of EPC projects completed and in progress. 49]

Financial stability 4.1.4 Submitting detailed proposals

• Sufficient working capital and access to project All applicants that meet the pre-qualifying criteria are
financing; invited to bid. Short-listing, as the name implies, restricts
the field of bidders to a fixed number (usually four to six).
• D
 emonstration of adequate skills in financial
It is generally recommended that there should be a pre-
engineering at ESCO management level;
qualification to ensure that unqualified firms are spared
• Adequate and appropriate insurance; and the high cost of preparing detailed bids and recommends
short-listing only for consultant procurement. Some
• Ability to comply with bonding requirements. countries have sought to combine the two by developing
a short list of qualified firms. Under typical schemes, a
In general, companies are expected to:
public agency issues an invitation for pre-qualification or
• D
 emonstrate their capability to provide comprehensive a request for expression of interest ("ELI"), the latter for
energy management services, in the relevant market short-listing.
sector, for plant, processes or facilities, including but
ESCO bidders are required to provide detailed technical
not limited to:
proposals as set out in the Terms of Reference (“ToRs”).
- comprehensive preliminary assessment of energy
Bidders will already be familiar with the pre-feasibility
savings and feasibility analyses; design, engineering,
study conducted by the client and, at this point, will
selection and installation of equipment, systems
conduct their own detailed preliminary assessment
and modifications to improve energy (and other
of energy savings, also called Investment Grade Audit
resources) efficiency without reducing the reliability
(“IGA”).
or performance of such equipment;

Guidance on Energy Efficiency in Public Buildings 33

PROJECT PROCURE M E N T

The preliminary assessment of energy savings [Guidance Energy Units:

47] is the technical and economic foundation of a - Electricity = demand (kW) and consumption (kWh);
successful EE project. It is a detailed document that - Fuel oil = units consumed (litres);
validates all savings and costs for each EE measure along - Natural gas = units consumed as specified on utility
with savings calculations and methodologies. The audit bill;
provides the ESCO and the public partner with sufficient - Water = units consumed as specified on utility bil;
information to judge the technical and economic - Energy rates: lists historical rates for each unit of
feasibility of the project. energy (“base rates”) that will be used to calculate
savings payments;
The preliminary assessment of energy savings includes - The preliminary assessment of energy savings in
the following information: effect details the EE solution proposed by the ESCO.
• d
 etailed baseline data (including all operational It is a major part of its technical proposal.
aspects of the facilities); The full proposal will also include:
• a full analysis of comsumption for each fuel and utility • the confirmed minimum level of guaranteed savings;
type with costs and operating conditions;
• t he confirmed minimum net present value of the
• detailed cost of each measure and the total cost; proposed project and the actual net present value of
• a mount of expected savings during construction the proposed project;
period; • t he final building capacity and awareness activities to
• b
 asis of savings and design/build cost for each be implemented; and
measure; • the qualifications of the proposed experts.
• a full description of the analysis methods, calculations, 4.1.5 Other steps
data input and all assumptions for each measure;
There are other optional steps that can be included, based
• clarification of/dependencies between measures; on the needs of the public partner and the capabilities and
experience of the pool of bidders. These include upstream
• final M&V plan; consultations with potential bidders, a pre-bidding
conference (to discuss the contents of the invitation
• energy reconciliation and balance to historical actuals;
to tender and respond to questions) and site visits (to
• schedule of work; allow bidding ESCOs to gather additional performance
information on the target facilities.
• carbon footprint for impact on CO2 emissions; and
4.1.6 Bid evaluation
• risk analysis of the project. The public partner must assess proposals based on the
The baseline is defined by the client, it is one of the most criteria specified in the invitation to tender. [Guidance
important elements in the preliminary assessment of 49, 50] EPC projects are very complex because the
energy savings. It contains the following details of all agency must assess a combination of technical, financial,
major pre-existing site conditions and costs impacted by project implementation and performance measurement
project implementation: requirements. Technical evaluation may be more
straightforward because it is based on aspects that are
Equipment: Inventory of all major energy-consuming contained in most service contracts, such as methodology,
items. work plan and staffing. However, assessing the financial
proposals can be complicated as there is no single price.

34 Guidance on Energy Efficiency in Public Buildings

 P RO J E C T P RO C U R EMENT

Proposals will include multiple indicators, including the 4.1.7 Financing

investment amount, total energy and cost savings, share In a typical EPC arrangement, the invitation to tender
of savings to be allocated to the agency, duration of the requires bidding ESCOs to provide a plan for financing
contract and life of the equipment. The ESCO selected the project. In underdeveloped markets, ESCOs may have
should provide the best value to the public partner. The trouble raising all the financing on their own. Therefore,
value for money criteria have to be clearly defined. They some partial EU or government-sponsored financing
would normally include an assessment of how risks are programme may be necessary.
being transferred as well as the overall cost calculated after
taking into account the time value of money. This includes: In the assessment of the financing proposal for the EPC,
the public partner is interested in the following aspects:
• a detailed feasibility study is always required.
Generally a sophisticated computer simulation tool • T
 o which partners’ balance sheet is the equipment
capable of modeling all energy inflows and outflows is registered?
required in order to avoid “double counting” of energy
savings or “savings overlap”; • Is the equipment used as collateral for financing and
what happens if the ESCO defaults for whatever reason?
• t he engineering study, its source data and the
associated assumptions and calculations should be • Is the financing reliant on the the public partner?
documented for review by all parties; • A
 re the cash flows from savings pledged against the
• t he project should include a detailed “scope of work” financing?
so that the public partner can have a simple yardstick 4.1.8 Contract
for use in confirming completion of the work;
With reference to 4.1.6, the ESP which best meets the
• d
 etailed construction documentation to guide the value for money criteria that have been defined is then
contractor and help the public partner follow the invited to negotiate the final contract. This process may
progress of the installation. It also provides the public be straightforward for many types of contracts, but
partner with a troubleshooting tool once the work has it is more complicated for EPCs because of the many
been completed and the term of the contract with the technical, financial and legal parameters and the possible
ESCO has expired; and lack of experience of the public partner. [Guidance 49,
51] The contract must also include an M&V plan. The
• t he methodology used to calculate cost avoidance M&V provisions are a very important part of the EPC
must be clearly stated in the contract. The energy-use process since they determine the payments made to the
data and other assumptions required for input to the ESCO. The plan for the public procurement of EE services
methodology must be available to both parties. may be specified in the invitation to tender but it may
also be proposed by bidding ESCOs. In either case, the
Overall, the public partner needs to consider the following
ESCO must develop detailed M&V protocols through
financial elements:
the completion of the IGA agreement with the public
• t he cash flow of the ESCO from other projects in its partner. This M&V plan is then incorporated into the final
portfolio; EPC. Many agencies and ESCOs use the M&V protocols
set out in the International Performance Measurement
• t he level of diversification of the ESCO’s revenue and Verification Protocol (“IPMVP”) (EVO 2007). These
streams; protocols may be adjusted by mutual agreement for the
specific EE measures being installed.
• t he debt/equity ratio of the ESCO, compared to a
market benchmark; and Apart from the contract items, termination arrangements
are an important component of the ESCO agreement.
• the credit rating of the ESCO.

Guidance on Energy Efficiency in Public Buildings 35

PROJECT PROCURE M E N T

Both parties should be able to terminate the agreement international ESCOs with expertise and access to capital
if they have good reasons to do so. Common reasons for were not keen to invest in these emerging markets
termination are: due to risk (e.g. small markets and projects, unclear
legal and regulatory regimes, concerns about client
• d
 efault by the ESCO to deliver a workable project (e.g. creditworthiness, lack of access to appropriate local
technological failure); project financing). Emerging economies also face limited
• bankruptcy of either party; equity markets and a limited number of investors willing
to create new companies and test new business types.
• irreconcilable differences where the parties cannot
agree and arbitration proves impossible; and Rigid procurement and budgeting guidelines within the
public sector often prevent public institutions from
• m
 ajor changes in the building (sale of the facility, engaging ESCOs, particularly where full project costs and
major changes in an industry that will affect the technical parameters have yet to be determined.
installed measures).
4.2.2 Specific energy performance contract
issues
Procuring energy services and signing a performance
4.2 Specific EPC procurement issues
contract differ from the traditional process of bid and
specifications. A good “fit” between ESCO capabilities and
4.2.1 Country specific issues public partnership is the foundation of a strong relationship
and successful project implementation. It involves a clear
EPCs have not been widely used in the public sectors of
understanding of the ESCO’s capabilities and experience
emerging economies, and especially the Member States
relevant to the particular needs of the client.
that most recently joined the EU. In many countries,
an initial focus on establishing local ESCO industries
envisioned that the companies could then develop the
EPC model in all sectors. However, they lacked the legal
and financial infrastructure to support such complex
business models. New ESCOs either lacked the technical
and operational expertise to carry out all the functions
typically associated with EPCs or lacked the balance
sheets to mobilise the financing that such business
models require. Local ESCOs often had no track record
in the market to perform sophisticated projects while

Box 2: Standardisation on Energy Management and Related Services

Two approaches can be used in the standardisation of energy services: the certification of the ESCO or the certification
for provided services. In EU-27, there are no directives that oblige the implementation of a national certification system.
Some countries such as Italy have developed their own certification standard. [Guidance 52]

The European Committee for Standardisation (“CEN”) has been developing an EU-wide standard on definitions,
requirements and qualification processes for ESCOs. However, the development of certification procedure and evaluation
methods for ESCOs was removed from the CEN CLC/JTF 189 standard on energy management. The European standard on
energy management will be redrafted. [Guidance 53, 54]

36 Guidance on Energy Efficiency in Public Buildings

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Project Procurement: LINKS

Guidance 6
Joint Public-Private Approaches for Energy Efficiency Finance: Policies to Scale up Private Sector Investment,
International Energy Agency (2011)
Pages 24 to 28 provide an introduction to ESPC (or EPC as referred to in this document), and illustrate various ESPC
structures.
http://www.iea.org/papers/pathways/finance.pdf

Guidance 45
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Page 50 presents the phases of an EPC project.
Section 9 contains information on project preparation and development including preliminary assessment of energy savings.

Guidance 47
Etude d’Aide à la Décision - Audit Energétique dans les Bâtiments – Cahier des Charges, ADEME (April 2011)
This document shows how to develop an preliminary assessment of energy savings.

Guidance 48
Standard Procurement Document – Prequalification Document for Procurement of Works and User’s Guide,
The World Bank (2006)
Section III (pages 19-24) describes how to set up the general qualification criteria and requirements for contractors, which
can also be applied to preparing bids for private partners for energy efficiency PPP.
http://siteresources.worldbank.org/INTPROCUREMENT/Resources/Prequal-EN-09-sep-10.pdf

Guidance 49
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
Section on Bid Evaluation, Table 6.3 (page 94) displays a sample list of evaluation criteria and their scoring points and
weight in the final evaluation.

Guidance 50
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
This section (pages 93-102) gives issues on how evaluate a proposal and the criteria which can be used.

Guidance on Energy Efficiency in Public Buildings 37

PROJECT PROCURE M E N T

Guidance 52
Final Publishable Report, EUROCONTRACT IEE (February 2008)
Discussion on certifications in the context of energy services (pages 66-69).
http://ieea.erba.hu/ieea/fileshow.jsp?att_id=5828&place=pa&url=Eurocontract_Final_Report_Publishable.
pdf&prid=1576

Guidance 53
Energy Performance Certification of Buildings: A Policy Tool to Improve Energy Efficiency, OECD/ International
Energy Agency (2010)
Comprehensive discussion on energy performance certification of buildings
http://www.iea.org/papers/pathways/buildings_certification.pdf

Guidance 54
NORM APME, Making standards better for SMEs
Energy Management: General requirements and qualification procedures webpage.
http://extranet.normapme.com/en/technical-committees/cen-clcjtf-189-energy-management-general-
requirements-and-qualification-proceduCEN CLC/JTF 189 –

38 Guidance on Energy Efficiency in Public Buildings

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5. Project Implementation

The management of an EE PPP raises specific issues in 5.1 Steps for PPP implementation
terms of construction, operation and maintenance of the
installed equipment and the methodology for the M&V
of energy savings, which serve as a basis for remuneration 5.1.1 Preparation of implementation
of the private sector partner. Chapter 5 of the G2G The typical sequence of events subsequent to the signing
[Guidance 2, pages 78-105] defines the steps for PPP of a performance contract includes finalisation of design,
implementation. installation of equipment and maintenance of the energy
services project. The initial design and construction
Figure 9: Steps for PPP Implementation phases are superficially similar to a conventional
construction project. However, they include a number of
Preparation of Implementation design/construction iterations and, site conditions and
the expectations of the building operating staff vary.
• Design/engineering approval [Guidance 55, 56]
• Pre-implementation measurement
• Establishment of the baseline for M&V Contract implementation starts once the ESCO wins
the tender and is invited to negotiate the final contract.
This step is more complicated than with other types
Implementation of contracts because of the multi-sector parameters
involved (technical, financial and legal) and the private
• Installation partners’ specific activities are neither well known nor
• Training of operators and employees defined.

During this phase, the ESCO finalises the design of the EE

measures to be implemented. In a rehabilitation project,
Measurement of the Performance the time-planning of the installation and regulation
measures are key because it must be in line with building
• Measurement results use and occupation.
• Report to the client
The baseline for M&V (see Section 5.2) has to be
established before the implementation of the EE measures
during the reference period.
Operation and Maintenance
5.1.2 Implementation
• Measurement results
In addition to the construction phase and M&V, the
• Staff training
private partner is also expected to adopt any measure
that will optimise the use of energy including awareness
campaigns for site occupants and training of operation
Energy Services payments and maintenance workers.

• Recovery of costs-based on savings

Guidance on Energy Efficiency in Public Buildings 39

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The aim of an awareness programme is to create a sense fluctuations would distract the ESCO from achieving
of ownership and provide information about the newly contracted levels of EE since short-term fluctuations in
installed energy-efficient equipment as well as the energy prices then take on a more important role than
measures to reduce energy consumption. The programme working on smaller, long-term savings.
should build a greater understanding of energy usage
and demonstrate how individuals can help reduce overall The energy price is an issue that can affect project
consumption. performance and benefits. The aim is to avoid speculation
on energy prices by the ESCO and ensure that its focus is
The type and nature of training will vary based on the on energy services.
organisation and the EE measures involved. Programmes
include operational and procedural training on energy
management and newly installed technologies and 5.2 Measurement and verification of
transferring the required know-how to specific audiences, EE results
such as facility O&M staff.

5.1.3 Measurement of performance The M&V provisions generally determine the payments
The ESCO follows the M&V plan that is set out in the due to the private partner for its services. The private
contract to measure and calculate the energy savings. If, partner designs and implements the M&V plan, the
during the reporting period the expected energy savings public partner receives the deliverables and a third-party
are not reached, the reporting period can be reduced (optional) validates the results. [Guidance 57, 58, 59,
to track the performance of the EE measures more 60]
closely. The plan contains the calculations and formulas
used to determine the energy savings. This reduces While a retrofit project may reduce energy consumption,
misunderstandings and conflicts between the public a thorough M&V process is essential for two reasons. First,
organisation and the ESCO. [Guidance 55, 56] M&V assesses resource savings against the performance
guarantee. Second, M&V helps ensure that savings will
5.1.4 Operation and maintenance persist over time.
Public buildings being refurbished by an ESCO will usually
The results of EE retrofits cannot be directly measured
have arrangements in place for works associated with the
as they can only be defined by the absence of energy
maintenance of the fabric of the building. Under EE PPP,
consumption. It is important to measure and verify
the ESCO will have the task of ensuring that maintenance
savings generated by the project, without which it is not
staff are properly instructed and managed in order that
possible to value the results of an investment in EE.
the planned energy savings can be realised.
The most widely used M&V procedure for EPC projects is
5.1.5 Energy service payments
called IPMVP. The protocols are written and periodically
Payment is based on project performance. While updated by the Efficiency Valuation Organization (“EVO”)
adjustments can be made, they have to be provided for and are used in some European countries such as France
under the contract. Payment is based on the quantum and Spain. Other M&V protocols can be agreed upon
of energy savings to which the ESCO is contractually between EPC stakeholders and while it is possible to build
committed. It is the responsibility of the ESCO to a specific M&V protocol on a case-by-case basis it is also
ensure that these efficiencies are actually achieved. The possible to use other M&V procedures already developed
payment mechanism will typically include some form of like ASHRAE 14 or FEMP protocols. [Guidance 61] In
penalty or reimbursement mechanism if the savings are this Guide, only the IPMVP is described because of its
not realised. However, ESCOs should not be exposed to worldwide recognition.
energy price fluctuations since this is a risk that the ESCO
cannot directly manage. Being exposed to energy price

40 Guidance on Energy Efficiency in Public Buildings

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According to EVO, “M&V is the process of using 5.2.1 IPMVP: the principles
measurement to reliably determine actual savings created The IPMVP consists of a library of documents that provides
within an individual facility by an energy management, an overview of current best practice for measuring and
energy conservation or EE project or programme. As verifying the results of EE, water efficiency, and renewable
savings cannot be directly measured, the savings can energy projects (both in the public and private sector).
be determined by comparing measured use before and This library is available free of charge from http://www.
after implementation of a project, making appropriate evo-world.org, a not for profit organisation dedicated to
adjustments XE "adjustments" for changes in conditions.” providing key guidance in this area. IPMVP began in the
The public partner and EE project investors use M&V 1990s as a voluntary initiative that came together under
techniques to mitigate the various risks that can arise the auspices of a US Department of Energy initiative to
after project completion. M&V is specifically used for the develop an international M&V protocol that could be
following purposes: used to determine energy savings from EE projects in a
consistent and reliable manner. It has since developed
• improving engineering design and project costing; to provide a core set of M&V standards that are in use
around the world and which are continually being refined.
• increasing energy savings through proactive IPMVP publishes detailed documentation on M&V as well
adjustments in facility operations and maintenance; as providing a range of training materials and related
services.
• documenting financial transactions XE "verification";
The IPMVP provides four different approaches for
• managing energy budgets;
measuring and verifying savings, using the following
• enhancing the value of emission reduction credits; formula:

• s upporting evaluation and development of broader Savings = (Baseline Energy – Reporting Period Energy) ±
efficiency programmes; and Routine Adjustments ± Non-Routine Adjustments

• increasing public and marketplace understanding of The four approaches are covered in summary form in
energy management as a public policy tool. Table 2. Considerably more information is available.
[Guidance 58]

Box 3: Who Conducts the M&V?

M&V is now recognised as a fundamental tool for the success of EE projects and programmes. The question of who should
develop and implement an M&V protocol for a specific project arises. Any of the parties involved in a project can design and
implement an M&V protocol. The design will be more credible if it follows recognised concepts and best practice as provided
by IPMVP definition? In the specific case of an EPC, the beneficiary (public partner), the ESCO, a combination of both of
these parties, and/or a third-party, are all acceptable options for the creation and implementation of a solid M&V plan.

Guidance on Energy Efficiency in Public Buildings 41

PROJECT IMPLEMEN TAT I O N

Table 2: Options for determinating savings

IPMVP Option How Savings Are Calculated Typical Applications

A. Retrofit isolation: key parameter Engineering calculation of baseline A lighting retrofit where power draw
measurement XE "baseline" and reporting period XE is the key performance parameter
"reporting period" energy from: that is measured periodically. Estimate
Savings are determined by field - short-term or continuous operating hours of the lights based
measurement of the key performance measurements of key operating on building schedules and occupant
parameter(s) which define the energy parameter(s); and behaviour.
use of the ECM XE "energy conservation - estimated values.
measure" ’s affected system(s) and/or
the success of the project.

Parameters not selected for field

measurement are estimated.

B. Retrofit isolation: all parameter Short-term or continuous Application of a variable-speed drive

measurement measurements of baseline XE "baseline" and controls to a motor to adjust pump
and reporting period energy, and/ flow. Measure electric power with a
Savings are determined by field or engineering computations using kW meter installed on the electrical
measurement of the energy use of the measurements of proxies of energy use. supply to the motor, which reads the
ECM XE "energy conservation measure" power every minute. In the baseline XE
-affected system. "baseline" period, XE "baseline: baseline
period" this meter is in place for a week
Measurement frequency ranges from to verify constant loading. The meter
short-term to continuous, depending on is in place throughout the reporting
the expected variations in the savings period XE "reporting period" to track
and the length of the reporting period variations in power use.
XE "reporting period".

C. Whole facility Analysis of whole facility baseline XE Multifaceted energy management

"baseline" and reporting period XE programme affecting many systems
Savings are determined by measuring "reporting period" (utility) meter data. in a facility. Measure energy use with
energy use at the whole facility or sub- the gas and electric utility meters for
facility level. a twelve-month baseline XE "baseline"
period XE "baseline: baseline period"
Continuous measurements of the and throughout the reporting period. XE
entire facility’s energy use are taken "reporting period".
throughout the reporting period XE
"reporting period".

D. Calibrated simulation Energy use simulation, calibrated with Multifaceted energy management
hourly or monthly utility billing data. programme affecting many systems in
Savings are determined through (Energy end-use metering may be used a facility but where no meter existed
simulation of the energy use of the to help refine input data.) in the baseline XE "baseline" period XE
whole facility, or of a sub-facility. "baseline: baseline period".
Simulation routines are demonstrated Energy use measurements, after
to adequately model XE "model" actual installation of gas and electric meters,
energy performance measured in the are used to calibrate a simulation.
facility.
Baseline energy use, determined using
This option usually requires the calibrated simulation, is compared
considerable skill in calibrated to a simulation of reporting period XE
simulation. "reporting period" energy use.

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5.2.2 The costs of M&V

M&V costs will vary depending upon the IPMVP options used in a project.

A report sponsored by NAESCO and the USEPA suggests that each IPMVP option will cost the client the following
percentages of total project costs:

Option A = 1-5%;

Option B = 3-10%;

Option C = 1-3% (if meters are already installed); or

Option D = 3-10%.

Guidance on Energy Efficiency in Public Buildings 43

PROJECT IMPLEMEN TAT I O N

Project Implementation: LINKS

Guidance 55
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
This section (pages 93-102) gives issues on how evaluate a proposal and the criteria which can be used.

Guidance 56
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Section 11 presents the implementation phase of an EPC project in state buildings.

Guidance 57
Guide de la Mesure et de la Vérification pour les Services d’Efficacité Energétique, Club S2E (February 2009)
Guide for M&V in line with the IPMVP (in French).
http://www.clubs2e.org/Content/Default.asp?PageID=137

Guidance 58
International Performance Measurement and Verification Protocol, Volume 1, Efficiency Valuation Organization
(September 2010)
M&V protocol available in different languages at www.evo-world.org. It contains all the information to build a valuable
M&V plan.
http://www.evo-world.org/index.php?option=com_form&form_id=38&Itemid=535
In M&V FAQ, the differences between IPMVP and others M&V Guide are explained.
http://www.evo-world.org/index.php?option=com_content&task=view&id=123&Itemid=98

Guidance 59
Measurement and Verification and the IPMVP, Clinton Foundation, Clinton Climate Initiative, President Climate
Commitment (April 2009)
Summary of the IPMVP.
http://www2.presidentsclimatecommitment.org/documents/ccitoolkit/Measurement_and_Verification_
and_The_IPMVP.pdf

Guidance 60
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Sections 13 and 14 contain information on how to develop and calculate a baseline.

44 Guidance on Energy Efficiency in Public Buildings

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Guidance 61
Climate Friendly Buildings and Offices – A Practical Guide, United Nations Environmental Programme (2010)
Section 3 contains information on baselining and benchmarking.
Section 6 contains three case-studies, including detailed energy analysis, on public buildings used by the United Nations
and the African Development Bank.
http://www.unep.fr/scp/publications/details.asp?id=DTI/1278/PA

Guidance on Energy Efficiency in Public Buildings 45

EU EE INITIATIVES

6. EU Energy Efficiency Initiatives

6.1 EU 2020 targets use. Environmental problems associated with energy

consumption are both of a local and global nature.
Health and environmental impacts include air pollution,
The EU has adopted a framework for energy end-use smog, climate change, degradation of ecosystems, water
efficiency and energy services. This includes an indicative pollution and radioactive hazards. [Guidance 66]
energy saving target for Member States, obligations on
national public authorities for energy savings and energy- EE is central to the EU’s Europe 2020 Strategy for smart,
efficient procurement, and measures to promote EE and sustainable and inclusive growth and the transition to a
energy services in the public sector. [Guidance 62] resource-efficient economy. It represents the equivalent
of finding a new source of energy. The European Council
EU countries transposed the Directive 2006/32/EC of March 2007 emphasised the need to increase EE in
on EE and energy services in their national regulation order to achieve a reduction in energy consumption
framework. The Concerted Action for the Energy Services of 20% by 2020. It reaffirmed the commitment to the
Directive (“CA ESD”), was implemented to provide a development of energy from renewable sources by
structured platform for exchange of information between endorsing a mandatory target of a 20% share of energy
the 27 Member States and Croatia. [Guidance 63] from renewable sources by 2020. [Guidance 64]
Under the Europe 2020 Strategy, the EU has committed Substantial steps have been taken towards energy
to reduce its energy consumption substantially. As consumption reduction, namely in the appliance and
buildings count for 40% of the energy consumption of building markets. Nonetheless, recent Commission
the EU, huge efforts are required to improve EE in this estimates suggest that the EU is on course to achieve
sector. [Guidance 64] only half of the 20% objective. [Guidance 64]
There are two major challenges in the energy sector: (i) a The European Council of 4 February 2011 called for
lack of sufficient, reliable and affordable supplies; and (ii) “determined action to tap the considerable potential for
environmental issues associated with energy production higher energy savings of buildings, transport and products
and consumption. Key objectives are to reduce the and processes”. The EC has developed the comprehensive
demand for fossil energy, diversify sources of supply new EE Plan 2011. It will be pursued alongside other
geographically, foster alternative energies to allow for a policy actions under the Europe 2020 Strategy's Flagship
wider distribution of energy resources and reduce GHG Initiative for a Resource-Efficient Europe, including
emissions. [Guidance 65] the 2050 roadmap for a low carbon economy. This will
ensure policy coherence, assess trade-offs between policy
At the current pace, known and proven oil and gas reserves
areas and the benefit from potential synergies. The EE
can support production for approximately 41 and 63
measures will be implemented as part of the EU's wider
years respectively. The overall level of the EU’s reliance
resource-efficiency target that encompasses efficient use
on imported energy was 52.3% in 2005 and is forecast
of all natural resources and ensures high standards of
to rise as domestic resources dwindle. The energy sector
environmental protection. [Guidance 64]
is responsible for most GHG emissions, and thus climate
change. At the present time, fossil fuel consumption Buildings are responsible for 40% of energy consumption
represents over 80% of GHG emissions, excluding land and 36% of EU CO2 emissions. The energy performance

46 Guidance on Energy Efficiency in Public Buildings

 E U E E I N I T I ATIVES

of buildings is key to achieving the EU Climate & Energy EE and renewable energy supply (“RES”) investments in
objectives and is a cost-effective way of fighting climate line with its Europe 2020 Strategy. Most of the EU funding
change and improving energy security while creating job co-finances projects with grants that are combined with
opportunities. [Guidance 64] national/local financing. However, Member States can
use part of their structural fund's allocation in a JESSICA
Public sector spending accounts for 17% of EU GDP and structure, enabling repayable investments (see below).
publicly owned or occupied buildings represent about There also exist financial instruments at EU-level (EEEF)
12% by area of the EU building stock. A stronger emphasis and Technical Assistance Facilities (e.g. ELENA, MLEI).
on EE in the public sector is crucial, covering public
purchasing, the refurbishment of public buildings and Cohesion policy
the encouragement of higher building standards in cities Cohesion policy aims to reduce economic and social
and communities. According to the EU Commission, the disparities among European regions. Three funds (the ERDF,
public sector can create new markets for energy-efficient the European Social Fund and the Cohesion Fund) are used
technologies, services and business models. [Guidance 65] to co-finance projects in the EU regions. Their management
is shared between the European Commission and the
The EU is seeking to set an example by showing that Member States. In the current period, 2007-2013, every
environmental and energy considerations are being taken Member State has defined a national strategic reference
into account in buildings occupied by public authorities framework, validated by the Commission, to be delivered
and buildings frequented by the public. [Guidance 64] through operational programmes at national or regional
The EU Commission strategy includes a focus on triggers level. The operational programmes are implemented by the
to accelerate the refurbishment rate of public buildings: Member States and their regions. This involves selecting,
the Commission proposal for a new EE Directive (adopted monitoring and evaluating the individual projects. This
in June 2011 and under negotiation) requires public work is organised by 'managing authorities' (“MAs”) in
authorities to refurbish at least 3% of their building each country and/or region.
stock by floor area each year. The Commission plans The planned allocations of funding in the 2007-2013
guidance to help overcome the obstacles that hamper the Cohesion Policy programmes for sustainable energy
deployment of EPCs in various Member States, such as investments amounts to approximately EUR 9.4 billion, of
ambiguities in the legal framework and lack of availability which RES (including wind, solar, biomass, hydroelectric,
of reliable consumption energy data to serve as baselines. geothermal) is approximately EUR 4.8 billion, and EE (EE,
In addition, the Commission will continue to support co-generation, energy management) is approximately
initiatives such as the Covenant of Mayors as a means to EUR 4.6 billion. Allocation of funds to RES and EE differ
boost the implementation of EE measures on the ground. between Member States dependant upon the total
volume of funds available, and the national needs and
priorities set by each Member State.
6.2 EU funding for EE/renewable
energy supply Under the JESSICA initiative, MAs in the Member
States are offered the possibility to invest some of
their Structural Funds (“SF”) in financial engineering
Significant funding is available through EU programmes instruments (revolving funds) supporting urban
to accompany and help Member States implementing EU development and thereby recycle and leverage financial
directives and support associated investments to fulfil resources in order to enhance and accelerate investments
the EE objectives. in Europe's urban areas. These financial instruments
are Urban Development Funds (“UDFs”) investing in
In addition to national public programmes supporting EE PPPs and other projects included in integrated plans for
projects (e.g. grants, soft loans, guarantees, subsidies, tax sustainable urban development. Alternatively, MAs can
reduction), EU funding have been increasingly focused on decide to channel funds to UDFs using Holding Funds

Guidance on Energy Efficiency in Public Buildings 47

EU EE INITIATIVES

(“HFs”) which are set up to invest in several UDFs. This is support EE and renewable energy policies.
not compulsory, but does offer the advantage of enabling
MAs to delegate some of the tasks required to implement Under the programming period 2007-2013, EUR 730
JESSICA to expert professionals. million is available to fund projects and put into place
a range of European portals, facilities and initiatives. IEE
For the period 2014-2020, the Commission has proposed helps to create favourable market conditions, shaping
to prioritise funding from the ERDF in order to increase policy development and implementation, preparing the
spending on EE and renewable energy. According to ground for investments, building capacity and skills,
the proposal, in more developed and transition regions informing stakeholders and fostering commitment. This
20% of the ERDF should be spent on EE and RES, in less includes projects for financing EE in public buildings.
developed regions 6%. This would result in a minimum
allocation of EUR 17 billion from the ERDF for EE and RES The initiatives support three main objectives - more EE,
in 2014-2020, based on the amounts proposed by the more renewables, and better transport and mobility. They
Commission in the multi-annual financial framework. In are carried out by public, private or non-governmental
addition, allocations from the Cohesion Fund could also be organisations across Europe and include new training
made for EE and RES. A wider use of financial instruments schemes, promotion campaigns, and the transfer of good
is proposed, which would enable better leverage of private practices.
capital and renewed liquidity flow towards investments in ELENA Facility (Technical assistance facility created
EE and RES measures. under the IEE II), launched in 2009, provides the technical
Research, development and innovation assistance grants (of up to 90% of eligible costs) to local
Under the current EU Research & Development and regional authorities for development and launch of
Framework Programme (FP7 2007-2013), approximately sustainable energy investments. The EU support must
EUR 2.3 billion is dedicated to energy. Most of the budget lead to investments with a minimum leverage of 1:20.
is used to support research, technological development It consists of 4 operational windows with the EIB, KfW
and demonstration projects resulting from the annual (Kreditanstalt für Wiederaufbau), CEB and EBRD. To date,
Calls for Proposals. approximately EUR 31.5 million has been assigned to
projects under ELENA and should trigger investments
Under the proposal for the Future Horizon 2020 approaching EUR 1.5 billion, within the 3-year duration
programme EUR 6.5 billion will be allocated to research of ELENA contracts. About a third of these investments
and innovation in "secure, clean and efficient energy" are addressing the buildings sector and EPC.
in 2014-2020. A relevant share of this budget will be
allocated to the "Market uptake of energy innovation" for Complementing the ELENA Facility, grant support (up to
projects facilitating the energy policy implementation, 75% of eligible costs) for project development assistance
preparing the ground for rollout of investments, is also provided through the 'Mobilising Local Energy
supporting capacity building and acting on public Investments (MLEI)' Action of the IEE II, mostly aiming
acceptance; and continue the Intelligent Energy Europe at small scale sustainable energy investment projects
("IEE II") Programme activities. (minimum EUR 6 million).

Financial instruments
The EU has already some experience with financial
6.3 EU technical assistance, instruments (1.3% of the EU budget has been allocated
capacity building and policy to such instruments during the current programming
implementation period) and wants to rationalise and develop them further
in the next period (2014-2020).
Intelligent Energy  – Europe Programme ("IEE") is an EU Financial instruments provide equity/risk or debt
programme financing non-technological initiatives to financing (such as loans or guarantees) directly or via

48 Guidance on Energy Efficiency in Public Buildings

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financial intermediaries to final recipients who have particular promoting the application of the EPC. Technical
difficulties with access to finance, or with sharing of assistance grant support (EUR 20 million) is available for
the risk with financial institutions. Their primary role is project development services (technical, financial) linked
to increase the volume of finance (or financing products to the investments financed by the Fund.
range) available by leveraging the public funds with
private capital. Financial instruments typically target The European Commission's Communication on the next
investments that are economically viable (in terms of Multiannual Financial Framework, proposes to expand
generated revenues) but which have difficulties attracting and harmonise the rules for financial instruments. The
affordable commercial financing. proposition contains a certain number of sector-specific
initiatives, as well as the possibility for the Member States
The EEEF was launched on 1 July 2011, providing different to use part of their structural funds allocation in financial
types of loans, guarantees and/or equity to local, regional instruments, either to be implemented at regional level
and (if justified) national public authorities or public (tailor-made or template instruments) or at EU level by
or private entities acting on their behalf. EEEF aims at ring-fencing their contribution for specific regions and
financing projects in EE (70%), RES (20%) and clean urban priorities (joint instruments).
transport (10%) through innovative instruments and in

Guidance on Energy Efficiency in Public Buildings 49

EU EE INITIATIVES

EU Energy Efficiency Initiatives LINKS

Guidance 62
Directive 2006/32/EC on energy end-use efficiency and energy services and repealing Council Directive 93/76/
EC, European Parliament and European Council (April 2006)
The article 5 deals with energy end-use in the public sector. The article 9 presents the financial instruments for energy
savings. The article 12 defines energy audits.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0032:EN:HTML

Guidance 63
CA ESD webpage.
http://www.esd-ca.eu/

Guidance 64
Energy Efficiency Plan 2011, Communication from the Commission to the European Parliament, the Council,
the European Economic and Social Committee and the Committee of the Regions (March 2011)
Section 2 (pages 4-5) explains why the public sector has to lead EE changes and Section 3 (pages 6-8) shows the importance
of reducing building energy consumption at European level.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0109:FIN:EN:PDF

Guidance 65
Directive on the Energy Performance of Buildings (recast), the European Parliament and the Council (May 2010)
The introduction of the directive traces the commitments of the European Commission concerning EE in buildings.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:153:0013:0035:EN:PDF

Guidance 66
Booklet - Key Facts and Figures about Europe and the Europeans.
Pages 56-57 provide statistics about the energy independence of the European Union.
http://ec.europa.eu/publications/booklets/eu_glance/66/en.pdf

50 Guidance on Energy Efficiency in Public Buildings

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7. Conclusion

EU Member States face a difficult challenge with the energy consumption of their public buildings stock. Due to current
budget constraints, both at national and local levels, the necessary investments have often been postponed and neglected
even when the aim is to maintain or overhaul these buildings in order to reduce their energy consumption.

As a result, the energy costs represent a large proportion of public buildings’ operating costs and the energy saving
potential is substantial. The public building sector is also responsible for a significant part of GGEs. The issues that
have prevented the public sector from investing in the refurbishment of its assets, continue to impede the launching of
dedicated EE programmes. These programmes would benefit both the public budget and the environment.

The lack of investment combined with the lack of awareness of the availability and performance of EE technologies
is the greatest challenge. As in many other areas in the field of infrastructure, one possible response to this is the use
of PPPs. In the EE field, this is a concept that has been developed for more than 30 years. Specialised private entities
known as ESCOs have accumulated experience in working with the public sector through agreements permitting the
identification of technical investment needs and their financing. The ESCO is reimbursed through the savings realised.

During the 1980s and ‘90s in Europe, a number of public buildings (including high schools, colleges, hospitals, barracks,
universities andmunicipal premises) engaged in such PPPs. They had a high rate of success in countries such as Spain,
Portugal, France and Belgium, followed by countries such as Hungary, the Czech Republic, Poland, Romania and
Bulgaria. Less attention has been paid since 2000 to the ESCO concept and the form of PPP it represents, in spite of
its unquestionable advantages for the public sector, though a number of such ESCOs still exist and operate in most
EU countries. The public sector now needs to capitalise on this experience and track record to start an ambitious EE
refurbishment programme in public buildings.

Guidance on Energy Efficiency in Public Buildings 51

REFERENCE LIST

Full Reference List

Guidance 1
Energy-Efficient Buildings PPPs: Multi-Annual Roadmap for a Long Term Strategy , European Commission.
http://www.ectp.org/cws/params/ectp/download_files/36D1191v1_EeB_Roadmap.pdf

Guidance 2
The Guide to Guidance. How to prepare, Procure and Deliver PPP Projects.
www.eib.org/epec/g2g/index.htm

Guidance 3
Energy Efficiency in the Public Sector, Energy Charter Secretariat (April 2008)
Pages 23-26 present an international review of the barriers to EE in the public sector.
http://www.encharter.org/fileadmin/user_upload/document/Public_Sector_EE_2008_ENG.pdf

Guidance 4
L’apport du partenariat public-privé dans le financement des projets en efficacité énergétique, Institut de
l’Énergie et de l’Environnement de la Francophonie (2008). ISBN: 978-2-89481-040-8.
Section 1.3 explains the barriers to EE projects and Section 2.2.2 focuses on the risk related to EE PPP.

Guidance 5
EPC Watch – Watching the World of Energy Performance Contracting, information web-site, accessed
26.12.2011
The website contains a Q&A section regarding the basics of EPCs.
http://energyperformancecontracting.org/

Guidance 6
Joint Public-Private Approaches for Energy Efficiency Finance: Policies to Scale up Private Sector Investment,
International Energy Agency (2011)
Pages 24 to 28 provide an introduction to ESPC (or EPC as referred to in this document), and illustrate various ESPC
structures.
http://www.iea.org/papers/pathways/finance.pdf

Guidance 7
Introduction to Energy Performance Contracting, ICF International, National Association of Energy Service
Companies (NAESCO) (October 2007). Prepared for the US Environmental Protection Agency – Energy Star
Buildings.
Section 2 (pages 6-7) explains the basics of an EPC (or ESPC as referred to in the NAESCO document).
http://www.energystar.gov/ia/partners/spp_res/Introduction_to_Performance_Contracting.pdf

52 Guidance on Energy Efficiency in Public Buildings

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Guidance 8
Energy Service Companies Market in Europe – Status Report 2010, Angelica Marino, Paolo Bertoldi, Silvia
Rezessy – JRC Institute for Energy (2010)
Section 2.1 presents the ESCO market and the types of ESCOs in each EU country.
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20
final%20esco%20report%202010.pdf

Guidance 9
Energy Service Companies in Europe – Status Report 2005, Paolo Bertoldi, Silvia Rezessy – JRC Institute for
Energy (2005)
Section 5 shows typical elements provided by ESCOs in a project.
http://re.jrc.ec.europa.eu/energyefficiency/pdf/ESCO%20report%20final%20revised%20v2.pdf

Guidance 10
Energy Service Companies in Europe – Status Report 2005, Paolo Bertoldi, Silvia Rezessy – JRC Institute for
Energy (2005)
Section 2.3 defines components of an EE project carried out by ESCOs.
http://www.grazer-ea.at/eesi/upload/download/diskussionspapiere/091018_gea_energy_contracting_
definitions-discussion_paper.pdf

Guidance 11
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Section 5 introduces the services that an ESCO can provide.

Guidance 12
Energy Service Companies Market in Europe – Status Report 2010, JRC Scientific and Technical Reports,
European Commission Joint Research Centre (2010)
Section 2 provides an overview of the European ESCO market in 2010, with detailed analysis for each member-state.
http://publications.jrc.ec.europa.eu/repository/bitstream/111111111/15108/1/jrc59863%20real%20
final%20esco%20report%202010.pdf

Guidance 13
Eurocontract Guaranteed Energy Performance, Publishable Report, Berliner Energieagentur GmbH (2008)
The report provides an overview of EPCs, and information about the market development in Germany, Austria, Finland,
France, Greece, Italy, Norway and Sweden.
http://eaci-projects.eu/iee/page/Page.jsp?op=project_detail&prid=1576&side=downloadablefiles

Guidance 14
Client/ESCo SELECTION, IEE – BioSolESCo, TV Energy (2009)
The section on ESCO selection presents the criteria which a client should consider when choosing an ESCO.
http://www.biosolesco.org/guidance/uk/Biosolesco4_eng.pdf

Guidance on Energy Efficiency in Public Buildings 53

REFERENCE LIST

Guidance 15
Final Publishable Report, EUROCONTRACT IEE (February 2008)
Presentation of adapted EPC models for refurbishment in the public sector (pages 49- 56).
http://ieea.erba.hu/ieea/fileshow.jsp?att_id=5828&place=pa&url=Eurocontract_Final_Report_Publishable.
pdf&prid=1576

Guidance 16
Third Party Financing – Achieving its Potential, Energy Charter Secretariat (2003)
Section 2.2 provides a summary of the main financing approaches for an EPC.
http://www.encharter.org/fileadmin/user_upload/document/Energy_Efficiency_-_Third-Party
Financing_-_2003_-_ENG.pdf

Guidance 17
International Experiences with the Development of ESCO Markets, Berliner Energiagentur GmbH (December
2008)
Section 2.2 shows different kinds of EPC models.
http://www.gtz.de/de/dokumente/en-International-Experience-Developing-ESCO-Markets.pdf

Guidance 18
Standard EPC Documents – V. Energy Performance Contracts, EESI IEE, Prepared by SEVEn, Berliner Energieagentur
(January 2011)
Short description of EPC articles.
http://www.european-energy-service-initiative.net/fileadmin/user_upload/gea/standard_documents/
Standard5_Contracts.pdf

Guidance 19
Berliner Energie Agentur
Website demonstrating the shared-savings model implemented by the municipality of Berlin.
http://www.berliner-e-agentur.de/en

Guidance 20
Models and Contracts, PRIME IEE, Author: Wuppertal Institute for Climate, Environment, Energy (July 2006).
Section 5: The appendix presents a model contract for EPCs (in German) (pages 5-20).

Guidance 21
Public Procurement of Energy Efficiency Services – Getting Started, Energy Sector Management Assistance
Program, World Bank (November 2010)
Pages 17 to 23 expound the World Bank procurement guidelines dividing an EPC in two contract types: split design and
construction and combined design and construction.
http://www.esmap.org/esmap/sites/esmap.org/files/BN009-10_EECI-Public-Procurement-Getting-Started.
pdf

Guidance 22
Comprehension Refurbishment of Buildings with Energy Performance Contracting, EUROCONTRACT IEE,
Reported by Graz Energy Agency Ltd (December 2007)
Section 6: Guidelines and Components for Implementation.
http://www.european-energy-service-initiative.net/fileadmin/user_upload/bea/Documents/Contractual_
Issues/Comprehensive_Refurbishment-manual_main_part_071220.pdf

54 Guidance on Energy Efficiency in Public Buildings

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Guidance 23
Assessment of Policy Instruments for Reducing Greenhouse Gas Emissions from Buildings, UNEP SBCI
Sustainable Buildings and Construction Initiative (2007)
Table 14 on page 30 summarizes barriers to EPC in different sectors alongside possible solutions.
http://www.unep.org/themes/consumption/pdf/SBCI_CEU_Policy_Tool_Report.pdf

Guidance 24
Energy Efficiency Building Retrofit Toolkit, Building Owners and Managers Association International and
Clinton Climate Initiative, March 2011
This paper describes the main step of an EE retrofit project development.
http://clintonfoundation.org/files/cci/cci_toolkit_boma.pdf

Guidance 25
Measuring Energy Efficiency. Indicators and Potential in Buildings, Communities and Energy Systems. VTT
Research Notes 2581, 2011.
Chapter 5 illustrates methods for EE measurement in buildings.
http://www.vtt.fi/inf/pdf/tiedotteet/2011/T2581.pdf

Guidance 26
Comparison and Evaluation of Financing Options for Energy Performance Contracting Projects, EUROCONTRACT
IEE, Reported by Graz Energy Agency Ltd (August 2010)
Chapters 4 to 6 show various financing options and their parameters: credit financing (Chapter 4), leasing financing (Chapter
5) and cession and forfeiting of contracting rates (Chapter 6).
http://www.ieadsm.org/Files/Tasks/Task%20XVI%20-%20Competitive%20Energy%20Services%20
(Energy%20Contracting,%20ESCo%20Services)/Publications/101126_GEA-T16_Finance%20Options%20
for%20Energy-Contracting%20incl%20Examples.pdf

Guidance 27
International Experiences with the Development of ESCO Markets, Berliner Energiagentur GmbH (December
2008)
Section 2.3 presents the three fundamental financing options: ESCO, energy-user or TP financing.
http://www.gtz.de/de/dokumente/en-International-Experience-Developing-ESCO-Markets.pdf

Guidance 28
Synthesis Report on ESCo Definition, Approaches, Drivers, Success Factors and Hurdles, A. Giakoumi & G.
Markogiannakis (CRES) – BIOLESCO (January 2012)
Section 3.1.3 describes the financial institutions and schemes used in several European countries.
http://www.biosolesco.org/download/Bio-SolESCo%20D2.2.%20Synthesis%20report.pdf

Guidance 29
Fund for Energy and Energy Savings, Bulgaria
Websites with information on the Fund (in Bulgarian and English).
The Fund is listed on the Bulgarian Stock Exchange (Code: 6EE/FEEI)
http://enemona.bg/english/index.php?97
http://www.investor.bg/companies/view/1122.html
http://www.eesf.biz/

Guidance on Energy Efficiency in Public Buildings 55

REFERENCE LIST

Guidance 30
Public Procurement of Energy Efficiency Services – Getting started, Energy Sector Management Assistance
Program, World Bank (November 2010)
Presentation of financing options (pages 25-30).
http://www.esmap.org/esmap/sites/esmap.org/files/BN009-10_EECI-Public-Procurement-Getting-Started.pdf

Guidance 31
Energy Efficiency Retrofit Fund, Guide for Applicants. Sustainable Energy Authority of Ireland, May 2010.
This fact sheet describes the funding scheme available for EE retrofitting in Ireland.
http://www.seai.ie/Grants/Retrofit/EERF_Application_guide.pdf

Guidance 32
Working paper: current financial and fiscal incentive programmes for sustainable energy in buildings from
across Europe, Association for the Conservation of Energy, London (September 2009)
The document presents a country breakdown of the financial and fiscal incentives available in the European Economic Area (EEA).
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CCYQFjAA&
url=https%3A%2F%2Fptop.only.wip.la%3A443%2Fhttp%2Fwww.euroace.org%2FPublicDocumentDownload.aspx%3FCommand%3DCore_
Download%26EntryId%3D205&ei=fXI7T7KsDcTG0QXAlKFt&usg=AFQjCNGtQGPhVTtseXFubuaXO7_fzjkGVw

Guidance 33
Joint Public-Private Approaches for Energy Efficiency Finance: Policies to Scale up Private Sector Investment,
International Energy Agency (2011)
Comprehensive report on the critical elements of joint public-private approaches to accelerating and scaling up private
investment in EE with particular focus on lessons learned with regard to energy performance contracts, risk guarantees and
dedicated credit lines.
http://www.iea.org/papers/pathways/finance.pdf

Guidance 34
European Local Energy Assistance (ELENA)
The following link describes the main facts of the ELENA initiative.
http://www.eib.org/epec/resources/epec-elena-factsheet.pdf

Guidance 35
European Energy Efficiency Fund (EEE F) and its technical assistance
http://www.eeef.eu/financing-terms.html

Guidance 36
Berliner Energie Agentur
The following link describes the housing development project in Weissensee:
http://www.berliner-e-agentur.de/en/services/contracting

Guidance 37
European Local Energy Assistance (ELENA)
The following link contains a list of project for which ELENA provided technical assistance
http://www.eib.org/elena

56 Guidance on Energy Efficiency in Public Buildings

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Guidance 38
Public Procurement of Energy Efficiency Services – Lessons from International Experience, World Bank
(November 2010)
Chapter 4 (pages 43-55) details relevant procurement methods for EE.
Chapter 6 (pages 92-102) defines the bid evaluation process, lists evaluation criteria and provides project examples.
http://www.esmap.org/esmap/sites/esmap.org/files/P112187_GBL_Public%20Procurement%20of%20
Energy%20Efficiency%20Services_Lessons%20from%20International%20Experience_Singh.pdf

Guidance 39
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
Section on Bid Evaluation, Table 6.3 (Page 94) displays a sample list of evaluation criteria and their scoring points and weight
in the final evaluation.

Guidance 40
Guideline for Designing Energy Efficiency Services Contracts, PU-BENEFS IEE, Coordinator Crispen Webber,
Thamesenergy LTD (September 2007)
Section 3 consists of a guideline for EPCs.
http://www.iee-library.eu//images/all_ieelibrary_docs/pubenefs_guidelineformodelcontract_en.pdf

Guidance 41
Call for Proposals 2012 for Actions under the Programme “Intelligent Energy – Europe,” Intelligent Energy
Europe for a Sustainable Future (2012)
Pages 25-27 summarize the purpose and priorities of Mobilizing Local Energy Investments (MLEI).
http://ec.europa.eu/energy/intelligent/files/call_for_proposals/call_2012_en.pdf

Guidance 42
Mobilising Local Energy Investments (MLEI) Factsheet, Intelligent Energy Europe for a Sustainable Future (2011)
The factsheet contains information on how to apply for technical assistance funding under MLEI, and on the types of
eligible investment projects and public authorities.
http://www.nks-energie.de/lw_resource/datapool/__pages/pdp_100/IEE_Loc_Invest.pdf

Guidance 43
Guidelines for the Provision of Infrastructure and Capital Investments through Public Private Partnerships:
Procedures for the Assessment, Approval, Audit and Procurement of Projects. Compháirtíocht Phoiblí
Phríomháideach (July 2006)
Section 2 (starting page 18) provides detailed guidelines on the steps involved in the PPP procurement process.
http://ppp.gov.ie/wp/files/documents/guidance/central_guidance/ppp-procurement-assessment.doc

Guidance 44
Competitive Dialogue in 2008, OGC/HMT Join Guide on Using the Procedure, Office of Government Commerce
/ Her Majesty’s Treasury (UK)
Section 2 (pages 11-12) describes key steps in a competitive dialogue procurement.
http://www.ogc.gov.uk/documents/OGC_HMT_2008_Guidance_on_Competitive_Dialogue.pdf

Guidance on Energy Efficiency in Public Buildings 57

REFERENCE LIST

Guidance 45
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Page 50 presents the phases of an EPC project.
Section 9 contains information on project preparation and development including energy audits.

Guidance 46
Energy Efficiency in Public Procurement – Member States' Experience, Barriers/Drivers and Recommendations,
Joint Research Centre, European Commission (May 2010)
Section 1.2 (starting page 13) provides an overview of the EU legislative framework.
Section 2 (starting page 18) provides a review and an assessment of the legislative framework policy and of the practical
implementation of EE procurement for each EU member state.
http://ec.europa.eu/energy/efficiency/studies/doc/2010_05_jrc_ee_public_procurement.pdf

Guidance 47
Etude d’Aide à la Décision - Audit Energétique dans les Bâtiments – Cahier des Charges, ADEME (April 2011)
This document shows how to develop an energy audit.

Guidance 48
Standard Procurement Document – Prequalification Document for Procurement of Works and User’s Guide,
The World Bank (2006)
Section III (pages 19-24) describes how to set up the general qualification criteria and requirements for contractors, which
can also be applied to preparing bids for private partners for EE PPP.
http://siteresources.worldbank.org/INTPROCUREMENT/Resources/Prequal-EN-09-sep-10.pdf

Guidance 49
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
Section on Bid Evaluation, Table 6.3 (page 94) displays a sample list of evaluation criteria and their scoring points and
weight in the final evaluation.

Guidance 50
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development/The World Bank.
ISBN: 978-0-8213-8102-1.
This section (pages 93-102) gives issues on how evaluate a proposal and the criteria which can be used.

Guidance 51
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
Section overview (pages 4-5), Table 2 provides a list of different types of contracts being used for EE.

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Guidance 52
Final Publishable Report, EUROCONTRACT IEE (February 2008)
Discussion on certifications in the context of energy services (pages 66-69).
http://ieea.erba.hu/ieea/fileshow.jsp?att_id=5828&place=pa&url=Eurocontract_Final_Report_Publishable.
pdf&prid=1576

Guidance 53
Energy Performance Certification of Buildings: A Policy Tool to Improve Energy Efficiency, OECD/ International
Energy Agency (2010)
Comprehensive discussion on energy performance certification of buildings.
http://www.iea.org/papers/pathways/buildings_certification.pdf

Guidance 54
NORM APME, Making standards better for SMEs
Energy Management: General requirements and qualification procedures webpage.
http://extranet.normapme.com/en/technical-committees/cen-clcjtf-189-energy-management-general-
requirements-and-qualification-proceduCEN CLC/JTF 189 –

Guidance 55
Public Procurement of Energy Efficiency Services – Lessons from International Experience, J. Singh, D. R. Limaye,
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development / The World Bank.
ISBN: 978-0-8213-8102-1.
This section (pages 93-102) gives issues on how evaluate a proposal and the criteria which can be used.

Guidance 56
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Section 11 presents the implementation phase of an EPC project in state buildings.

Guidance 57
Guide de la Mesure et de la Vérification pour les Services d’Efficacité Energétique, Club S2E (February 2009)
Guide for M&V in line with the IPMVP (in French).
http://www.clubs2e.org/Content/Default.asp?PageID=137

Guidance 58
International Performance Measurement and Verification Protocol, Volume 1, Efficiency Valuation Organization
(September 2010)
M&V protocol available in different languages at: www.evo-world.org. It contains all the information to build a valuable
M&V plan.
http://www.evo-world.org/index.php?option=com_form&form_id=38&Itemid=535
In M&V FAQ, the differences between IPMVP and others M&V Guide are explained.
http://www.evo-world.org/index.php?option=com_content&task=view&id=123&Itemid=98

Guidance on Energy Efficiency in Public Buildings 59

REFERENCE LIST

Guidance 59
Measurement and Verification and the IPMVP, Clinton Foundation, Clinton Climate Initiative, President Climate
Commitment (April 2009)
Summary of the IPMVP.
http://www2.presidentsclimatecommitment.org/documents/ccitoolkit/Measurement_and_Verification_and_
The_IPMVP.pdf

Guidance 60
Guidelines for Performance Contracting in State Building, F. Seefeldt, V. Kuhn, W. Trauntner, J-H. Wetter (April
2003). Berliner Energieagentur GmbH Anwaltskanzlei Schawien Naab Partnerschaft
Sections 13 and 14 contain information on how to develop and calculate a baseline.

Guidance 61
Climate Friendly Buildings and Offices – A Practical Guide, United Nations Environmental Programme (2010)
Section 3 contains information on baselining and benchmarking.
Section 6 contains three case-studies, including detailed energy analysis, on public buildings used by the United Nations
and the African Development Bank.
http://www.unep.fr/scp/publications/details.asp?id=DTI/1278/PA

Guidance 62
Directive 2006/32/EC on energy end-use efficiency and energy services and repealing Council Directive 93/76/
EC, European Parliament and European Council (April 2006)
The article 5 deals with energy end-use in the public sector. The article 9 presents the financial instruments for energy
savings. The article 12 defines energy audits.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0032:EN:HTML

Guidance 63
http://www.esd-ca.eu/
CA ESD webpage.

Guidance 64
Energy Efficiency Plan 2011, Communication from the Commission to the European Parliament, the Council,
the European Economic and Social Committee and the Committee of the Regions (March 2011)
Section 2 (pages 4-5) explains why the public sector has to lead EE changes and Section 3 (pages 6-8) shows the importance
of reducing building energy consumption at European level.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0109:FIN:EN:PDF

Guidance 65
Directive on the Energy Performance of Buildings (recast), the European Parliament and the Council (May 2010)
The introduction of the directive traces the commitments of the European Commission concerning EE in buildings.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:153:0013:0035:EN:PDF

Guidance 66
Booklet - Key Facts and Figures about Europe and the Europeans.
Pages 56-57 provide statistics about the energy independence of the European Union.
http://ec.europa.eu/publications/booklets/eu_glance/66/en.pdf

60 Guidance on Energy Efficiency in Public Buildings

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