Guidance in Public Buildings

European PPP Exper tise Centre European PPP Exper tise Centre European PPP Exper tise Centre
re European PPP Exper tise Centre European PPP Exper tise Centre
Guidance on Energy Efficiency

in Public Buildings
Terms of Use of this Publication

The European PPP Expertise Centre (EPEC) is a joint initiative involving the European Investment Bank (EIB),
the European Commission, Member States of the European Union, Candidate States and certain other states. For
more information about EPEC and its membership, please visit www.eib.org/epec.
This publication has been prepared to contribute to and stimulate discussions on public-private partnerships
(PPPs) as well as to foster the dissemination of best practices in this area.
The findings, analysis, interpretations and conclusions contained in this publication do not necessarily reflect the
views or policies of the EIB, the European Commission or any other EPEC member. No EPEC member, including the
EIB and the European Commission, accepts any responsibility regarding the accuracy of the information contained
in this publication or any liability for any consequences arising from the use of this publication. Reliance on the
information provided in this publication is therefore at the sole risk of the user.
EPEC authorises the users of this publication to access, download, display, reproduce and print its content subject
to the following conditions: (i) when using the content of this document, users should attribute the source of the
material and (ii) under no circumstances should there be commercial exploitation of this document or its content.
Guidance on Energy Efficiency in Public Buildings
ABBREVIATIONS AN D AC RO N Y M S
Abbreviations and Acronyms
COP Certificate of Participation

DB Design and Build
DB&M Design, Build and Maintain
DBFOM Design-Build-Finance-Operate-Maintain
DBO Design-Build-Operate
DBOM Design-Build-Operate-Maintain
ECM Energy Conservation Measure
EE Energy Efficiency
EEEF European Energy Efficiency Fund
ESCO Energy Service Company
ESP Energy Service Provider
EPC Energy Performance Contract
EVO Efficiency Valuation Organization
EIB European Investment Bank
G2G EPEC PPP Guide to Guidance A Sourcebook
for PPPs
GDP Gross Domestic Product

GHG Greenhouse Gas
IGA Investment Grade Audit
IPMVP International Performance Measurement
and Verification Protocol
JESSICA Joint European Support for Sustainable
Investment in City Areas
M&V Measurement and Verification
O&M Operation and Maintenance
O&MM Operation, Maintenance and Management
PPP Public-Private Partnership
RES Renewable Energy Sources
RPA Receivables Purchase Agreement
TA Technical Assistance
TELP Tax-Exempt Lease Purchase Agreement
TPF Third-Party Financing
C O NTENTS
Contents

1.
ABBREVIATIONS AND ACRONYMS
Introduction
1.1
Objective and Background
1.2
1.3
1.4
Challenges for EE Investments in Public Buildings

Structure and Content
How to Use this Guide
2.
Project Identification
2.1
2.2
2.3
Project Partners - ESCOS

Various Types of EPCS
EE Project Selection and EPC Feasibility
9
12
3.
Project Preparation
18
3.1
3.2
3.3
3.4
Getting Organised
Assessing Funding Sources and Selecting Method of Financing
Before Launching the Tender
Using Technical Assistance for Project Preparation
18
4.
Project Procurement
30
4.1
4.2
General Rules and Procedures

Specific EPC Procurement Issues
30
5.
Project Implementation
39
5.1
5.2
Steps for PPP Implementation

Measurement and Verification of EE Results
39
6.
EU Energy Initiatives
46
6.1
6.2
6.3
EU 2020 Targets
EU Funding for EE Renewable Energy Supply
EU Technical Assistance, Capacity Building and Policy Implementation
46
7.

Conclusion
51
FULL REFERENCE LIST
52
7
7
13
19
23
24
36
40
47
48
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

European energy policy and one of the main targets of
the Europe 2020 Strategy for smart, sustainable and
inclusive growth adopted by the European Council in June
2010. This includes the objective for a 20% reduction
in primary energy consumption by 2020. As energy
related emissions account for almost 80% of total EU
greenhouse gas (GHG) emissions, the efficient use of
energy can make an important contribution to achieving
a low-carbon economy and combating climate change.
t he application of private financing in most instances;

and
Buildings account for approximately 40% of final energy

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

EPCs require a different approach to the management
of the procurement phase. Correspondingly, an essential
element will be to design the methodology for measuring
and calculating the energy savings effectively at the
outset, in order to properly allocate risk sharing between
the various parties.
The aim of this Guide is to raise awareness and provide
guidance for EE PPPs by providing the best information
currently available from selected professional publications.
This Guide provides information on the structuring of
EPCs for public buildings and refers to additional sources
of good practice. Furthermore, the Guide is designed to
help readers address the challenges of reducing the energy
consumption and GHG emissions of public buildings while
transferring project risks to the private sector. This includes
Design, Build and Finance (DBF), and in some cases,
Operation and Maintenance (O&M).
The EC and EU member states have developed policies
to achieve ambitious goals in EE, promoting renewable
energy and curbing GHG emissions. Public buildings

represent a considerable opportunity given the estimated
large potential for savings of fossil fuel based energy.
PPPs can play a key role in the development of EE through
accelerating the pace of investment and mobilising
private sector finance.
This Guide is based on the EPEC PPP Guide to Guidance,
[Guidance 2] which readers may want to use as a general
introduction to PPPs across all sectors.
For the purpose of this Guide, EE PPPs in public buildings
are considered as such when:
T
he main emphasis is on implementing EE investments
aimed at reducing the energy consumption in physical
terms as opposed to simply trying to decrease
the energy bill in financial terms (e.g. through
renegotiating the energy supply conditions). The
integration of Renewable Energy Sources ("RES")
often features in such investments; and
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
INTRODUCTION
S avings-based EE services are delivered. Performance

risks are transferred to the private sector partner
through adequate financing mechanisms that ensure
a guaranteed level of energy savings.
Wherever possible, EE should be part of a holistic
solution to providing services for a building or a group
of buildings, thereby reducing not only energy costs, but
also achieving economies of scale on other maintenance
and management services, such as cleaning and catering.
1.2 Challenges for EE investments in

public buildings
Four main challenges remain for the development of EE
approaches in the public sector:
[Guidance 3,4]
Technical challenges: Public building owners or users
often lack the technical background and expertise to
understand EE methods and technologies for reducing
energy consumption and/or replacing the consumption
of fossil fuels with renewable energy sources. The first
challenge is to ensure that public building managers are
conscious that there is a gap between the level of energy
consumption of the facility they are administering and
the level which could be achieved if a specific energy
conservation effort were to be employed and its financial
value. This lack of awareness can usually be explained
by the absence of methods for monitoring energy
consumption and physical energy parameter regulations.
A further technical challenge is to demonstrate that there
are proven technologies, methods and services that can
be used to substantially reduce energy consumption or
substitute the energy consumed with other forms that
could be less expensive and/or less polluting. ESCOs,
when implementing EPCs, will install a measurement
system with a twofold objective: it will help the energy
manager of the building to reduce energy consumption
and it will create the measurement and verification
(M&V) framework that the ESCO needs to estimate the
level of savings achieved.
Economic challenges: Demonstrating the costeffectiveness of EE projects is generally problematic. EE
projects have been subject to erratic variations in energy

prices over the past 30 years. There is often no incentive
to save when budgets are allocated on an annual basis.
Similarly, if operating costs are matched by an operating
budget then, particularly, public authorities owning or
renting the building will have little incentive to reduce
the costs. In addition, it may be difficult to convince
managers to undertake projects which might become
uneconomic when energy prices decline for a limited
period. Guarantees regarding the profitability of such
investments are key, both from a technical (physical
savings) and economic (financial savings) standpoint.
Budget challenges: Public entities often encounter
difficulties in raising finance for investments. They
may not be able to finance their whole investment
programme directly from public funding. This requires
them to prioritise and, often, overlook EE investments.
Additionally, the capacity of public entities to leverage
debt is increasingly limited. In some cases, this may
be the result of restrictions imposed by the regulatory
framework or it may be due to their inability to increase
the level of debt while still meeting prudent borrowing
principles.
Legal and institutional challenges: The introduction
of EE measures or the implementation of EE investments
in public buildings may also be hampered by a series of
issues relating to the legal, regulatory or institutional
framework.
EPCs will be difficult to implement if some of the
following conditions exist:
s taff concerns, regarding their working conditions
and the possibility of outsourcing work carried out by
public employees;
a lack of expertise or awareness on the part of building
energy managers;
insufficient incentives to promote savings because
energy tariffs are partly subsidised;
c onditions not conducive to investment in EE
measures when operating budgets are lowered after
one year;
I N T RO D U CTION
c umbersome procurement procedures associated

with conducting energy audits leading to long delays;
t he challenge of involving several different public
sector stakeholders, as the PPP approach is more
comprehensive than conventional procurement; and
t he PPP requirement for organisational changes and
adjusted processes and structures, which could slow
down and complicate a project.
1.3 Structure and contents
Through the four core chapters, the case for EE PPPs

is assessed for project suitability for EPCs. The Guide
addresses the readiness of the procuring authority
to engage in such a project, the establishment of an
appropriate management structure, and the legal,
contractual, technical and financial issues to be
confronted in the course of procurement. Finally, it
addresses the planning of a project measurement and
evaluation framework to assess value for money (VFM)
and other potential benefits from the project.
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;
a n introduction to the information to be requested

from the EE PPP facilitator;
Project partners - ESCOs

Various types of EPCs
EE project selection and EPC feasibility
a starting point to learn more about EE PPP

characteristics; and
a guide to promoting the concept of EE service
contracting.
Project Preparation
Getting organised
Assess funding sources
Before launching the tender
Project Procurement
General rules and procedures
Specific EPC procurement issues
Project Implementation
Steps for PPP implementation
Measurement and verification of EE results
As the Guide has been designed as a good practice

sourcebook, its value depends on the value of the
information sources provided. These sources are noted in
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.
All sources have a symbol [Guidance n] next to the
reference number to direct the reader to further
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
web address. For publications such as printed books or
other published material that cannot be accessed via the
internet, the source description includes ISBN details.
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
Lapport du partenariat public-priv dans le financement des projets en efficacit nergtique, Institut de
lnergie et de lEnvironnement 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
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
the same process as conventional PPPs. However, in
the context of EE, the public partner has to consider a
number of additional aspects. Private partners have to
assume different liabilities and offer specialised skills, as
the business model is based on the energy performance
achieved rather than the standard DBO model.
Figure 2: Project Identification
An EPC is a contractual arrangement between the public

partner and the provider (normally an ESCO) of an EE
improvement measure, where payments are made based
on a contractually guaranteed level of EE improvement
and energy cost savings. [Guidance 5, Guidance 6] The
public partner contracts for a specific result (e.g. energy
savings in kw/h) rather than for specific products or
services. [Guidance 7]
Potential EPC benefits:
Project partners - ESCOs
Various types of EPCs
EE project selection and EPC feasibility
t he avoidance of upfront costs through third-party

financing or on-bill repayment schemes;
p
ayment is on results allowing the transfer of technical
risk from the public partners to the ESCO;
a significant contribution to energy security, through
the reduction of national energy demand;
2.1 Project partners - ESCOs

Public building managers are often not sufficiently aware
of the EE opportunities in the premises that they administer.
As a result, it can be difficult for a hospital director, an
office building manager or a municipal building manager
to define and implement the best means to reduce energy
consumption. Therefore, a partnership between public
building owners or managers and a qualified company
with the necessary expertise (and possibly a large range
of additional services such as maintenance, finance and/
or guarantees) is an attractive solution.
The private partner of the public building manager
provides EE services. The ESCO will receive payment for
the energy savings guaranteed. Building maintenance,
co-generation, new technologies and alternative power
production may be included in the range of services
provided by the ESCO and used to support guaranteed
performance.
e conomic efficiency, through the installation of more

energy efficient systems and controls, reducing utility
bill costs and providing a funding source for building
renewal projects;
e conomic development through increased building
and renovation activity than would normally be
possible through traditional contracting methods;
e nvironmental stewardship due to significant
reductions in energy use;
improvements of indoor air quality which may
not otherwise have been possible due to funding
constraints;
o
ffer complete energy services (called life-cycle
approach in PPP terms), including marketing, design
capability, installation, financing, maintenance and
measurement of energy management technologies;
and
PROJECT IDENTIFIC AT I O N
o
ffer shared-savings contracts (called payment
mechanisms and incentives in PPP terms) where
clients effectively pay for energy services from a
portion of the actual energy bill savings.
2.1.1 Types of ESCO services provided

While none of the discrete skills that an ESCO employs are
particularly unique, the added value from an ESCO is its
ability to integrate a wide variety of skills and apply them
efficiently to projects, irrespective of scale. [Guidance 8]
ESCOs package the following services:
[Guidance 9,10,11]
consulting engineering;
general contracting;
energy analysis;
project management;
project financing;
training;
performance guarantees;
energy measurement;
sustainable energy savings; and
risk management.
Successful ESCOs are generally acknowledged to have the
following strengths:
e nergy system analysis and technology integration.
ESCOs analyse energy systems in buildings and
industrial processes as thermodynamic systems in
order to select a comprehensive package of costsaving options that offer sustainable savings;
m
obilisation and market penetration capability.
ESCOs need to have proven ability to implement
projects quickly and efficiently by drawing on the
experience of the partners involved;
fi
nancial, legal and contract capacity. ESCOs arrange
for sophisticated credit analysis and enhancement,
offer project financing expertise, accommodate both
10
simple and sophisticated contracts and are conversant

with relevant legal issues;
p
roject and quality management. ESCOs have expertise
in selecting subcontractors, managing projects and
overseeing construction works. Furthermore, they
have learned how to implement quality and risk
management controls; and
d
elivering sustainable energy savings. ESCOs have
developed cost-effective techniques for measuring,
monitoring and ensuring sustainable energy savings
over time. These include client training and prompt
exception reporting.
E SCOs may differ in terms of ownership, target market,
technology focus/expertise and in-house capabilities. As
a result, not all ESCOs can be considered as potential
partners as far as EE PPPs are concerned.
Some of the key areas where ESCOs differ include the
following: [Guidance 9]
O
wnership: ESCOs may be privately owned,
utility subsidiaries, not-for-profit, joint ventures,
manufacturers or manufacturers subsidiaries. There
are also rare examples of state-owned or municipallyowned ESCOs;
T
arget Market: ESCOs, focus on various market niches
(hospitals, schools and municipally or state-owned
buildings) and project sizes. [Guidance 12, 13] This
has allowed them to develop specific skills in order to
bundle several projects or replicate them easily while
reducing transaction costs;
S ervice Specialisation: Some ESCOs perform project
installation using in-house expertise while others
specialise in engineering design and analysis. Other
ESCOs focus on measurement and evaluation. Public
partners need to consider the nature of services
delivered in order to ensure that a full service can
be provided, possibly through subcontractors or a
consortium;
T
echnology: Many ESCOs display some level of
technological bias (lighting, thermal storage, controls),
which may be a constraint;
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
Ownership
Targeted Market
Service Specialisation
Technologies
Geographic Preference
Project Financing
Educational building
Office building
Private company
Utility or manufacturer
subsidiaries
Small/medium size
project
Large project
Engineering design and

analysis
M&V
Installation and O&M
Lighting
Heating, Ventilation and AirConditioning ("HVAC")
Regulation and control
Local/regional company
Country-based company
European-based company
Internal financing
Private third-party financing
Funding mechanism
financing
G
eographic Preference: Some ESCOs focus their
business in specific geographic regions; and
P roject Financing: Financing arrangements vary with
the financial strength of the ESCO. Those with the
financial capacity will be able to own and finance
assets on behalf of the public sector. Some ESCOs have
significant, well-established financing capabilities
while others are limited. A number of ESCOs arrange
financing through their lenders and/or through other
ESCOs. It is important to note that all ESCOs rely
to some extent on third-party financing. Even the
larger ESCOs will have only limited internal financing
capabilities but many have access to a variety of
funding sources.
Table 1 shows various criteria that can help the public
partner select an ESCO private partner that will match
the EE project requirements.
2.1.2 Revenue streams

ESCOs will incur costs when implementing an energy
retrofit project, which then produces energy savings.
Regardless of the type of financing instrument used to
fund a project, ESCOs effectively share in the resulting
savings stream by guaranteeing a portion of the energy
savings achieved for a contracted period of time. If the
Non-profit company
present value of the ESCOs effective share of savings

over the life of the contract is greater than the present
value of all costs, the ESCO makes a profit. If not, it incurs
a loss.
An ESCOs share of savings typically falls within a range
from 50% to 90%, with 65% to 85% representing the
most common range of values. EPCs generally last from 5
to 10 years but sometimes may last up to 15 years when
they include long payback-period investments such as
wall insulation or window replacements. Shorter terms
are more common for private clients, while longer periods
are usual for institutional and government projects
(public buildings).
ESCOs can derive revenue and profit, if their estimates
are correct, in three ways:
Cost plus: Most ESCOs derive revenue from the design
and installation of cost-saving solutions at a clients
facility. These costs are then marked-up to cover
overheads and generate profit. ESCOs are required to
limit costs so that they can be paid from savings over
an agreed contract period. This motivates the ESCO to
maximise the number and size of cost-effective measures
in relation to the resulting savings stream.
11
Project financing: Some ESCOs derive income from

the provision of project financing, although this is
not generally the case. Acting as the source of project
financing and using their engineering skills as a risk
management tool for project investment decisions may
be part of the total package.
Guaranteed savings: In the early days of performance
contracting, ESCOs did not declare their costs since
revenue was derived from sharing in a savings stream with
the client. Thus, ESCOs were motivated to keep costs to a
minimum and savings to a maximum. Some ESCOs also
share savings that exceed original targets or estimates.
However, this practice has evolved and should always be
linked to a performance guarantee granted by the ESCO.
This ensures that shared savings are limited to the amounts
that exceed an established minimum guaranteed.
ESCOs usually refuse to take any risk related to energy prices
as fluctuations over time have proved to be unpredictable.
Instead, they measure the energy savings in physical terms,
valued at the energy price current at the time of signature of
the EPC or based on any other price commonly agreed upon
with the public client. They take the risk of the degradation
of performance due to aging equipment.
2.2 Various types of EPCs

The various criteria that characterise PPPs (financing by
the private partner, partial or total risk transfer, output
specification) also apply to EPCs, so that an EPC may
be considered an EE PPP. However, from a contractual
perspective, several variants of EPCs have been developed
over the past 30 years. The purpose of this section is to
describe the most common. [Guidance 15, 16, 17, 18]
There are four basic types of EPC contracts:
a) Contracts in which the ESCO offers financing and
provides a savings guarantee, meaning the ESCO
bears both the financial and performance risk.
b) Contracts in which the ESCO takes the performance
risk and the customer is responsible for the financing.
c) First out contracts, where all energy cost savings are
12
used to pay interest and amortise the debt until full

repayment.
d) Contracts for energy management in which the ESCO
is paid to provide an energy service such as space
heating or lighting chauffage (heating) contracts.
This section will focus on (a) and (d).
2.2.1 Guaranteed savings EPC

In a Guaranteed Savings EPC, the public partner obtains
project funds directly from a third-party financier and
takes on the financial risks. The ESCO is paid to provide all
necessary support activities and facilitate the financial
arrangement between the client and a financial institution.
It provides a guarantee of a minimum level of energy
savings, which allows for reimbursement of the loan. In the
case of a shortfall in realised savings, the ESCO is obliged
to make a reimbursement covering the difference between
the expected savings and the amount to be paid back to
the financial institution. If the actual energy savings exceed
the ESCOs guarantee, the public partner typically keeps the
excess, unless further sharing arrangements have been made.
In a guaranteed savings project, the contractor will sign a
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.
The public partner must ensure that the ESCO has the
financial capability to honour the guarantee.
2.2.2 Rebate or Chauffage EPC

In a chauffage agreement, the ESCO guarantees that
the public partners energy costs will be reduced by a
certain percentage. During the contract period, the ESCO
assumes responsibility for paying the owners utility bills
and the owner agrees to pay the ESCO a percentage of its
historical energy costs. Discounts of approximately 15%
are typically applied. Contract periods range from 7 to 10
years and, from the payments received, the ESCO must
recover its expenses and cover the owner's utility bills. The
ESCO generates a return by ensuring sufficient savings in
order to compensate for the discount given to the client.
In a chauffage contract, an ESCO contractor becomes
the owner of an energy conversion system located at its
clients premises. Cooling and hot water are energy flows
that have been converted, for example a chiller plant

can be used to convert electricity into cooling or a boiler
house to convert fuel into hot water. After the contract
is signed, the contractor will operate and maintain the
clients installations, pay the energy bills for the energy
conversion system and invest to increase its efficiency.
The contractor sells the converted energy at a
predetermined rebate rate to its client, complying with
a predetermined minimum quality level of converted
energy supply during the term of the contract.
Figure 3: Chauffage EPC
C L I E N T FA C I L I T Y
Public Sector
Client
Sale of converted energy at a predetermined rate
Energy
Conservation
System (e.g. Boiler,
Chiller or Genset)
Financial
Institution
Financing
Agreement(s)
Owns, operates,
maintains and
pays energy bills
ESCO
The chauffage contract is not based on any project

in particular. The ESCO does not need to present a
detailed retrofit design to the client before the deal is
closed. Instead, the ESCO will make the required system
improvements. The more the ESCO achieves a reduction
of the energy, maintenance and operating, the higher the
profit. The public partner does not benefit from this as it is
tied into the predetermined rate, unless it has negotiated
an additional shared-savings clause.
Chauffage contracts should not be seen as true EE PPPs.
However, many public sector clients prefer this type of
deal because they do not want to take responsibility for
their energy conversion system. They prefer to outsource
the operation and maintenance component of this part
of their facilities so that they can concentrate on their
core activities.
2.3 EE project selection and EPC

feasibility
The public partner rarely has the capacity to develop
a detailed scope of the potential EE measures for their
building pool. They should, however, take steps to develop
a general scope of work based on their priorities, time
constraints and other criteria. Wherever feasible, the public
sector should conduct preliminary audits, either in all or in
a representative sample of its project buildings, in order
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
responsibilities at each stage of a project. In particular,
the contract should describe the responsibilities of the
ESCO and the facility owner for each phase of the project
(i.e. audit and concept development, detailed design,
construction and post-construction). Issues concerning
the public procurement process are addressed in detail in
Chapter 3. [Guidance 20, 21, 22, 23 ]
Step 1
election of buildings: The public partner

S
selects one or more buildings for the
implementation of EE measures. The preferred
size of EE projects for ESCOs starts from
about EUR 2 million, with the average being
approximately EUR 5 million. The public partner
should select a building, or a pool of buildings,
that falls within this investment range. Larger
building pools will limit the participation of
smaller ESCOs.
Step 2 Preliminary assessment of energy savings

potential: Having selected one or more
buildings, the public partner undertakes a
preliminary assessment of the energy savings
potential in these buildings. This can be
performed on the basis of a sample of buildings
or on the basis of assessing each and every
building in the pool. The level and detail of
assessment depend on the internal capacity of
the public partner to conduct this assessment
and on its decision to outsource all or part of
this assessment to specialised advisers. These
preliminary estimates will help the public
13
partner in its negotiations with ESCOs. In

many cases the cost of the audits will be borne
by the ESCO.
Step 3
I nitial meeting: The initial meeting between

the public partner and ESCO is usuallly carried
out after the ESCO pre-qualification stage. The
objective for the public partner is to clarify
performance contracting issues with the ESCO
and to agree on a procedure to collect the
historical energy data and other operational
information. This will serve as a basis for
the calculation of the energy consumption
baseline.
Step 4
reliminary walk-through audit: This step

P
is essential for most ESCOs as, based on
experience and technical skills, it will provide
a rough estimate of the investment costs
required to achieve the expected savings. At
this step, these estimates will reassure the
ESCO that the time and investment up to the
signing of a contract is warranted. As a result,
it may be essential that this preliminary walkthrough audit be prepared with some of the
pre-qualified ESCOs prior to launching the
tender.
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
of the invitation to tender. The process for

confirming the elements calculated by the
ESCO during this feasibility phase must be
included in the general approach through a
detailed audit and inventory. This will allow the
ESCO to submit a plan detailing the work to
be performed and the savings to be achieved.
The detailed audit phase is essential to obtain
metrics stating the various ways through
which energy is consumed, including the use
of other commodities such as water. Similarly,
the analysis must take into consideration the
potential savings that could be generated
through changes in the energy production
system (e.g. co-generation when applicable
or renewable energy sources). The ESCO must
convince the public partner that it has the
resources and skills to develop a successful
business relationship. If the facility owner or
manager elects not to proceed with a particular
ESCO, the cost of the detailed audit will
generally be reimbursed to the bidder (usually
at a pre-determined cost). Otherwise, the cost
of the study is rolled forward into the EPC.
If the public partner and the ESCO proceed
with the EPC, the feasibility study becomes a
deliverable under the contract.
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 (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
15
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.
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
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 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
17
PROJECT PREPARAT I O N
3. Project Preparation
Prior to launching a tender or entering into a procurement
phase, it is important to carry out a market analysis at
national level or European level. This will assess the
presence of private partners likely to tender for EE PPPs.
public partner. The expert will also play a key part in the
commercial negotiations, advising on what technical risks
are to be transferred to the private partner and what
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,
financial risk assessment and risk allocation. This includes
feasibility analyses as well as assessing the financial
credibility of the prospective private partners. The financial
expert should have an understanding of EE transactions,
their related cash flows and budget implications.
Project Preparation
Getting organised
Assessing funding sources
Before launching the tender
3.1 Getting organised

The public partner has to undertake a project preparation
process prior to procurement and implementation. The
pubic partner must define all project parameters, assess
the potential involvement of private partners, evaluate the
costs, risks and benefits of the different options available and
prove that the PPP option is preferable to any alternative.
There are two major stages in the preparation process.
Initially the public partner ensures that it has the resources
and organisation to set the project in motion. [Guidance
24] Standard elements of the PPP preparation process are
detailed in Section 3.1 of the Guide to Guidance ("G2G").
3.1.1 EE Financial expertise

In addition to the team members outlined in the G2G, the
public partner needs to include an EE expert. [Guidance
25] The role of this expert is to help structure the project,
define technical performance indicators and develop
the technical part of the tender. The expert should have
experience in implementing EE projects in buildings, be
able to assess the technical proposals of bidders and
show proficiency in identifying the best solution for the
18
In infrastructure PPPs, the private partner is required

to implement the project in compliance with existing
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
VFM solution. Finally, the expert should be able to perform
technical checks and conduct analyses at different stages of
the project development and implementation.
There can be many instances where public partners will not
have sufficient internal capacity to assess or prepare aspects
of the EE PPP and it will be necessary to retain the services
of external advisers. This element is referred to in more
detail in the G2G. [Guidance 2, Section 3.1.2, page 25]
3.1.2 Plan and schedule

With the team structure in place, the public partner can
then develop a plan for procurement, contracting and
implementation. The plan should involve the following:
listing general tasks, activities and relevant documents
throughout the entire process;
c onsulting with the steering committee on the
process;
c onsulting with individual building management
teams;
P RO J E C T P R E PA RATION
a llocating relevant experts/third-parties to the

different tasks;
establishing interdependencies;
defining the timeline for each task;
s etting out any specific deadlines in the process (e.g.
EE implementation can only be carried out between
March and October or during holidays); and
c oordinating the plan and schedule with the steering
committee and getting approval.
A more general plan is outlined in the G2G.
[Guidance 2, Section 3.1.3, page 27]
3.2 Assessing funding sources and

selecting method of financing
There are three sources of financing for PPPs: (i) the public
sector through commercial banks, equipment suppliers
or other sources of third-party finance (e.g. asset based
leasing, investment from specially created EE funds), (ii)
the private partner through commercial banks, specialised
equity funds and/or securitisation structures or (iii) a
combination of both. [Guidance 26, 27, 28, 29, 30, 31, 32]
The main reason for entering into an EE PPP is to receive
a better quality of service and performance guarantees
through the transfer of risk and to mobilise private
sector financing. [Guidance 33] Private sector financing
provides the ability to significantly scale-up EE operations
in buildings. In addition, when public authorities face
constraints on their borrowing capacity, PPPs may provide
an attractive solution as private contractors can finance
projects through mechanisms that are different from
formal loans and can be tailored to the individual cash
flows of each project.
A key obstacle for many EE projects is, however, the
proportionally high transaction costs that are incurred
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
disproportionate unless an effort is made to maximise

opportunities for standardisation and economies of scale.
Transaction costs can therefore often be the decisive
element on whether a particular project will be feasible
and what financing method is to be employed. The EU
makes grants available for technical assistance under
European Local Energy Assistance (ELENA) [Guidance
34] as well as EEEF. [Guidance 35]
Example: The ELENA facility provided technical
assistance to the city of Paris for the preparation and
implementation of a refurbishment project regarding
three bundles of schools (100 schools each). The project
involves the improvement of the energy envelope of
the building, specifically management systems with
control and monitoring of the energy devices installed,
EE lighting, and installation of photovoltaic panels on
schools rooftops. The energy consumption and CO2
emissions are expected to reduce by 30% compared to
baseline levels. [Guidance 37]
Projects can be financed in a number of different ways. The
preferred approach will often be through a combination
of mechanisms and with finance sourced from various
entities. In the case of a city authority that is seeking
to upgrade its district heating system by replacing
boilers and reducing heat loss, a combination of funding
sources can be used. This can combine a soft loan from a
designated special fund, plus bank financing via the ESCO.
When selecting its financing options, the public partner
should also consider taxation implications such as VAT
and corporate income tax.
There are key trade-offs. If the EE project has the
potential to generate significant value (i.e. the payback
for investment is short and cash flows are high), then
the focus will be on selecting a financing structure with
the lowest cost debt or equity options. However, for the
majority of EE projects, funding will often be the limiting
factor and the primary emphasis will be on putting
together finance that meets all the requirements and
where restrictions such as the requirement for extra
security or guarantees can be minimised.
19
3.2.1 Internal sources

Public partners with sufficient funds can self-finance
EE projects. However, governments are currently under
enormous spending pressures and typically set a limit on
the amount of capital that a municipality can invest and
more specifically the amount of money that it can borrow.
There is also the potential issue that an authority funding
an EE scheme directly may not be able to retain all financial
savings due to various budgetary rules or controls.
Public authorities typically lack the necessary energy

consumption data and information about best value
technologies and project implementation required to
lead EE projects. This means that self-financing by the
public authority is significantly less attractive than using
PPPs. When assessing self-financing compared to other
means of financing, the public partner must consider the
following questions:
D
oes this project have higher priority compared to
other public projects competing for the same funding?
W
ill the benefits achieved by a particular project
outweigh the benefits of alternative projects?
A
re alternative financing mechanisms more expensive
than the returns on the project?
Is the timing of the project critical? Can the public
partner afford to wait until it can raise alternative
financing?
If the answer to all these questions is yes, the public
sector may finance the project with internal funds.
Asset-based finance
As an alternative to self-financing, leasing can be used to
20
Figure 5: Commercial leases
Public Sector
Client
C L I E N TCFA
Y CILITY
L I ECNI LTI TFA
In times of budgetary constraint and rationalisation,

there is a need for innovative financial schemes that
create synergies and attract investments by aligning
the interests of both public and private partners. To be
efficient and managed over the longer term, EE projects
will require tailor-made financing. Complex project
financing requires the involvement of commercial banks
and private partners. EPCs and ESCOs are able to support
an EE project when internal sources or on-balance sheet
investments are limited.
finance the purchase of EE equipment and services. It is

commonly used in vendor financing, ESCO projects and
as part of utility programmes. Lease financing can also
be applied to EE manufacturing ventures. Large numbers
of similar transactions facilitate a statistical approach to
managing end-user credit risk. Lease financing is possible
only in countries that have well developed capital markets
and a suitable regulatory framework.
Leased
Equipment
Other Energy
Savings Measures
Financial
Institution
Delivers savings
based Energy
efficiency services
The ESCO is
paid subject to
sufficient realised
savings
Financing
Agreement(s)
ESCO
The Equipment can be owned by

ESCO (if operational lease)
Leasing Company (if financial lease)
A lease agreement permits the use of equipment without

purchasing it at the outset. It is particularly suitable for
certain types of equipment used in EE projects, such as
generating plant. Ideally, the equipment should be mobile
(i.e. can be moved within a few hours) such as small CHP
units which are fitted into a container. Mobile plant is
much more likely to have a readily accessible second-hand
market. Other less mobile plant (e.g. boilers) is also suitable.
Leasing can form an important element of the financing
for an EE project, particularly if it can be combined with
other soft-funding sources and when it forms part of an
overall vendor sales package. For some time, sellers of
heavy plant and equipment have recognised the value of
after-sales support to their business. In certain sectors

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

ESCO financing
There are a number of ways in which an ESCO can be used
to support the funding required for an EE project. The
simplest option for funding EE is to obtain commercial
debt supported by an energy savings guarantee agreement
from the ESCO.The energy savings guarantee is key to the
perception of risk but its value will be strongly influenced
by the credit standing of the ESCO involved.
Some of the most effective EE schemes are where the
ESCO (often through third-parties) has combined separate
21
EE schemes and established a portfolio of buildings

undergoing EE. A widely quoted example and successful
model for public buildings was developed between the
Berlin Energy Agency and the Berlin Senate in the 1990s.
The co-operation resulted in the Berlin Energy Saving
Partnership. It permitted the efficient refurbishment of
public and private buildings over an extended period of
time. A number of ESCOs bid competitively for individual
projects and provided the financing and were responsible
for implementation. Buildings requiring refurbishment
were bundled together, increasing the potential energy
savings as well as providing key synergies and thereby
improving the overall viability of what was a major EE
project.
In addition, an ESCO may partner with other investors to
raise funding. An increasing number of special funds have
become established that provide equity investment for
EE. A good example is the recently established European
EE Fund (EEEF). The EEEF aims to provide market-based
financing for commercially viable public EE and renewable
energy projects within the European Union (EU). It is
supported by the European Commission, the European
Investment Bank (EIB), the Cassa Depositi e Prestiti
(CDP) and the Deutsche Bank.
There are also a variety of other ways in which a contract
with an ESCO can be used to obtain financing. Further
details are covered in Section 4.
3.2.3 Innovative debt funding

There are a range of sources of debt financing for EE
projects, however standard commercial bank financing
is often difficult to obtain. In particular, it is difficult
to achieve the requirement for clear delineation of a
particular EE scheme that identifies sources of repayment
and the underlying security supporting the financing. In
theory, the financing of an EE project can be based on
project finance principles as the investment cost should
be reimbursed by cash flow savings generated by the
project. However, commercial banks have typically been
reluctant to simply rely on the economics of the project
and require additional security in the form of collateral
and guarantees.
Guarantees can be provided by third-parties to support
commercial bank financing and provide additional credit
22
support. Guarantees can be made on part of a loan,

debt service or to assure an investors return on equity.
Commercial banks can also issue guarantees as thirdparties to support a particular project where other sources
of funding are available. For example, if the credit rating
of a municipality does not meet lender requirements,
it may be possible to obtain credit guarantees from
special facilities established by international donors and
international financial institutions). Similarly, central
government departments or the Ministry of Finance may
provide suitable guarantees.
A substantial element of financing for municipal EE
projects, particularly in the EU-12, over the past 15
years has come from Independant Financial Institutions
("IFIs"), such as European Bank for Reconstruction and
Development (EBRD), EIB, the IFC and the Nordic
Environment Finance Corporation. Given the priority
placed on achieving GHG and carbon emission targets,
there may be a variety of options available for utilising
grant funding. Grants will typically be provided on a
selective basis and will generally require some form of
co-financing. In certain cases, grants are made available
in the form of a Revolving Fund (RF), which is the main
concept behind the JESSICA (Joint European Support
for Sustainable Investment in City Areas) scheme. The
RF is usually established for a specific purpose with the
intention that it is repaid, at least in part (e.g. using
soft loan), in order to release money from successfully
operating projects, for investment in new initiatives.
RFs can minimise the transaction costs associated
with providing funding. A single entity manages the RF,
and it can accumulate valuable local knowledge and
expertise and apply this to standardising processes and
procedures.
The RF becomes self-sustaining and provides on-going
financing after the first capitalisation. As a fund, rather
than a specific project, the initial investment can be
raised from a combination of sources. However, one of
the issues often facing RFs is that the public partner may
be constrained by budgetary rules on the extent to which
it can recycle grant monies, since savings achieved may
simply reduce the overall budget.
A Receivables Purchase Agreement (RPA) is a less

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
three to four years. However, in Bulgaria, the publicly
traded Fund for Energy and Energy Savings finances and
operates the RPA scheme for local ESCOs purchasing
receivables on ESCO contracts of up to seven years.
Figure 6: Receivables purchase agreements
Public Sector
Client
Energy-Savings
Performance
Contract
Financier/Buyer
(usually a dedicated EE
investment fund)
ESCO
Financing against a pledge

of future receivables from the ESPC
3.3 Before launching the tender

Conduct additional preparatory work, if necessary
Often the public partner does not have all the information
needed to carry out the preparation in the necessary
level of detail. In such cases, additional preparatory work
and studies can be performed, either in-house by the
development team or outsourced to consultants with the
relevant experience. This step is covered in Section 3.2.1
of the G2G. [Guidance 2, page 32]
Prepare detailed PPP design
The PPP design must consider the needs of all parties and
the objectives of the project. Particular attention must
be paid to the design of procurement procedures and
contract management/monitoring systems. Issues to be
considered include:
the completion of the project design relative to the PPP
structure selected:
technical performance standards;
financial assessment to ensure viability; and
assessment of future contract forms.
The public partners pledges the projected future stream

of energy savings to the ESCO. The ESCO then sells this
pledge, minus annual costs earmarked for the O&M of
the project, to a third-party financier.
The primary advantages of an RPA are speed of execution
and transaction simplicity. Specific legal systems (e.g.
France and Germany) also underpin the use of RPA by
ensuring that the underlying obligations to pay by the
public sector become irrevocable The main disadvantage
is that the valuation and discounting of the future cash
flows created by the project depend on a third party
(usually a commercial bank) providing the funding. It is
generally more expensive compared with other forms of
long-term debt provided on a project basis.
Under RPA, the public partner has an obligation to pay up to
the amount of savings generated from the project. As this is
an estimate, the ESCO bears the risk of the energy savings
being insufficient to cover the payments on the financing at
certain points throughout the life of the project.
the selection and design of the tendering process:

type of tender process;
tender procedures;
evaluation procedures;
negotiation procedures; and
contract award procedures.
the implementation conditions:
monitoring and oversight conditions; and
redress and renegotiation.
It is of crucial importance that the invitation to tender
carefully defines the project while not being too
prescriptive, to allow for innovative responses from the
private sector.
23
For more information on preparing the detailed design

of the PPP arrangement, see Section 3.2.2 of the G2G.
[Guidance 2, page 36]
Select procurement method
In EE for public buildings, the public partner can choose
from a number of procurement methods that are
applicable to PPPs. [Guidance 30]
When the objective of the public sector is to use a
performance-based PPP to implement EE in public
buildings, the number of procurement approaches is
much more limited:
Indefinite contracting a procurement method that
pre-selects one or more ESCOs on the basis of general
qualifications. Government agencies are then allowed
to negotiate directly with one of these pre-selected
companies.
Project bundling a government agency bundles
together a pool of buildings to award a single contract to
a large ESCO.
Quality and cost-based selection (two steps) a
process where bidders present short proposals and
provide additional information. The proposals are then
evaluated in accordance with a set of project-specific
pre-qualification criteria. Bidders matching the criteria
are then requested to submit detailed proposals.
More detailed information on procurement methods is
available in the G2G. [Guidance 2, pages 40-41]
Define bid evaluation criteria
The evaluation of energy service projects is complex.
Although the EE measures implemented in public buildings
are fairly standard, proposals will still offer different
solutions to achieve varying degrees of energy savings.
They will also provide different M&V tools allowing for
various degrees of precision following implementation.
The number of factors included in proposals will make
them very difficult to evaluate on cost only. Balanced
scoring criteria that weighs and assesses all the key
elements in the EE project should be developed.
[Guidance 38, 39, 40]
24
General aspects of the bid evaluation criteria are detailed

in Section 3.2.4 of the G2G. [Guidance 2, page 44]
Prepare draft PPP contract
The contract must be structured to address the items
already discussed in Sections 2.2 and 3.2. Usually the
invitation to tender contains a draft contract but because
the bidders can propose solutions that achieve the desired
energy savings using different means, the final PPP contract
can significantly differ from its draft version. [Guidance
18, 20, 39] The contract will also include all the elements
of a standard PPP contract. [Guidance 2, page 23]
A key feature of the energy performance contracting
scheme is that, very often, at the stage of awarding
the contract, the precise costs of the project are yet to
be determined (see Section 5.1). As a result, the public
partner must have the ability to manage variations in
EE proposals and solutions. To address this, the in-house
procurement specialist can work under the guidance of an
experienced EE procurement agent, an approach adopted
in Austria, the Czech Republic, Germany and the Slovak
Republic. A procurement agent may be another public
agency, a utility, a PPP, an NGO or a private consulting
firm often hired on a fee-for-service basis throughout the
entire EPC procurement process, including negotiations
and contract supervision.
3.4 Using technical assistance for

project preparation
The development and supervision of the EPC is a crucial
element in a projects success yet most of the public
partners lack the necessary capability. To address this,
there are a number of initiatives to provide Technical
Assistance (TA) funding for the preparatory phase:
EU Structural Funds: For the 2007-2013 programming
period, TA is available to Member States or regions
under the Structural Funds, with divergent application
procedures across member-states.
National support schemes: TA funds for energy auditing
or certification activities may be included in national
support schemes, varying by country.
ELENA facility: European Local Energy Assistance is a

TA facility created under the Intelligent Energy Europe II
Programme. Launched in 2009, it provides TA grants to
local and regional authorities for the development and
launch of sustainable energy investments, covering up to
90% of eligible cost (see Section 5).
EEEF: The European EEEE Fund, launched in July 2011, aims
at financing projects in EE, RES and clean urban transport
through innovative instruments and, in particular,
promoting the application of the EPC. A TA grant support
(EUR 20 million) is available for technical and financial
project development services (see Section 5).
MLEI: Mobilising Local Energy Investment is a scheme

aiming at assisting the development of small scale
projects (minimum EUR 6 million). It provides grants of up
to 75% of the costs incurred by public authorities for TA
to prepare, mobilise financing and launch investments in
sustainable energy projects. [Guidance 41, Guidance 42]
Proposing authorities may work together with financial
institutions and/or ESCOs or other relevant stakeholders.
Grants are awarded for up to three years, during which
time the proposed investments must be launched and
tenders issued for construction or implementation.
(Section 5)
25
Project Preparation: LINKS
Guidance 2
Guidance 18
(January 2011)
Guidance 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
2008)
Section 2.3 presents the three fundamental financing options: ESCO, energy-user or TP financing.
26
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
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%3A%2F%2Fwww.euroace.org%2FPublicDocumentDownload.aspx%3FCommand%3DCore_
Download%26EntryId%3D205&ei=fXI7T7KsDcTG0QXAlKFt&usg=AFQjCNGtQGPhVTtseXFubuaXO7_
fzjkGVw
Guidance 33
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.
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
27
Guidance 35
European Energy Efficiency Fund (EEE F) and its technical assistance
http://www.eeef.eu/financing-terms.html
Guidance 36
The following link describes the housing development project in Weissensee:
http://www.berliner-e-agentur.de/en/services/contracting
Guidance 37
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 43
Guidelines for the Provision of Infrastructure and Capital Investments through Public Private Partnerships:
Procedures for the Assessment, Approval, Audit and Procurement of Projects. Comphirtocht Phoibl
Phromhideach (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 Majestys 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
29
PROJECT PROCURE M E N T
4. Project Procurement
This section focuses on the legal and contractual issues
related to the analysis of the bids and the negotiation
of the contractual arrangements with the selected bidder
prior to the implementation of the EE investment. It
details the generic competitive dialogue procedure, as
it is important the public authority understands what
specific aspects of the process require special attention
when procuring a private partner for EE PPPs (see Figure
7). [Guidance 43, 44]
4.1 General rules and procedures

Figure 8: General rules and procedures
Energy savings - Preliminary assessment
Client carries out pre-feasibility assessment or energy
audit(s) of its building(s)
Figure 7: Project procurement

Invitation to tender
Analysis of general rules and procedures
Energy audit of public buildings
Invitation to tender
Pre-qualifying ESCOs
Submitting detailed proposals
Other steps
Bid evaluation
Financing
Contract
Step 1 - Pre-Qualification of bidders

Step 2 - Submission of detailed proposals
Bid evaluation
Ranking of bidders
Negotiation with bidder ranked first
Specific procurement issues to EPCs

Country specifics
EPC specifics
Financing
Mobilising finance
Pledges and collaterals
Contract
Main components
Appendices
30
P RO J E C T P RO C U R EMENT
The major steps in the procurement process for an EPC are

similar to most public procurement models. Procurement
of PPPs is explained in detail in the G2G. [Guidance 2,
page 53] However, there are some issues unique to EE
projects. [Guidance 45]
The European regulations in public procurement of EE
in the different Member States are described in Energy
Efficiency in Public Procurement Member States
Experience, Barriers/Drivers and Recommendations.
[Guidance 6]
4.1.1 Preliminary assessment of energy savings

Initially, the client carries out a pre-feasibility assessment
of its building(s) to assess the energy savings potential.
This can be undertaken by the building energy manager
or outsourced to a third-party consultant. Depending on
the budget, size, specifications and number of buildings,
the client may also conduct a walk-through audit or a full
preliminary assessment of energy savings. This step can
confirm that cost-effective energy-saving opportunities
exist, help identify target systems to be retrofitted and
allow project parameters to be defined. It is important to
note that the information gathered in these documents
will only serve the public sector client. While the
ESCO may use it as a reference, it will conduct its own
preliminary assessment of energy savings.
4.1.2 Invitation to tender

In general, the development of the bidding documents
will involve the following steps:
defining the project and services to be provided;
preparing the invitation to tender;
pre-qualifying ESCOs; and
supplier conference with site visit.
Defining the project in the invitation to tender is a
challenging and critical step in the process. Whereas the
purpose of an EPC is to allow ESCOs to offer their best
solutions for the current energy systems, some basic
parameters need to be established and included in the
invitation to tender. [Guidance 48] These parameters
can include:
target systems;
minimum energy savings;
sharing of savings; and
s ervices required (e.g. engineering and project design,
procurement and installation, financing, M&V and
O&M).
Essential components of an invitation to tender are as
follows:
Background: Providing respondents with information on
the public partner and the project or the facility under
consideration, and a brief statement of the evaluation
criteria.
Scope of work: Providing information on the types
of services required, and the areas of competency that
ESCOs must demonstrate.
Invitation to tender procedure: Covering instructions
for preparing and submitting the proposals and sample
documents for inclusion.
Selection criteria: Defining the criteria that will be used
to judge and rank tenders. [Guidance 48, 49]
Qualifications, statement format, content and
specific criteria: Specifying the format content and
specific criteria for the invitation including examples of
how the ESCO usually handles specific circumstances.
Appendices: Suggested appendices to the invitation to
tender responses include:
resumes of assigned personnel;
s ample contracts; sample preliminary assessment of
energy savings; and
proprietary information (optional).
4.1.3 Pre-qualifying ESCOs

The pre-qualification step screens interested bidders and
ensures that those invited to submit detailed proposals
have the capability and resource to undertake the work.
Pre-qualification (as opposed to short-listing) requires
that the applicants meet a minimum set of specific,
objective criteria.
31
The criteria can be broadly divided in two sets technical

and financial. The former ensures that companies have a
proven track record of projects with a similar or greater
level of technical difficulty. The latter guarantees that the
ESCO has the capacity to secure the financing for the
project and will be able to fulfil its contractual obligations
even if the savings are less than estimated.
Corporate history and experience
How long has the ESCO been in business?
D
oes this ESCO have a proven track record in
performing energy services projects?
the selection of equipment, suppliers and installers?

D
oes the ESCO have any restriction or bias regarding
equipment, suppliers and installers?
Project performance
Will the ESCO guarantee the recovery of all project
costs and interest costs through the savings that are
to be achieved within a guaranteed period of time?
W
ill the ESCO guarantee all savings or just a portion
of savings?
Can it provide a list of satisfied clients?
W
ill the ESCO be ultimately responsible for every
element of the project?
W
hat has been its performance (savings) on past
projects? How did the results compare with the
original expectations?
Project financing
How will the project be financed and at what interest
rate?
Corporate capabilities
Does the ESCO have strong core competencies in
energy management and state-of-the-art technology?
Will all project costs be disclosed?
D
oes the ESCO have the organisational depth to
implement the project in a cost-effective and timely
manner?
D
oes the ESCO have standard operating procedures?
Are they documented? How much freedom does the
ESCO staff have to vary from them?
W
hat is the expertise and experience of the project
team (CVs and track record) that would be assigned
to the project and of the support staff who would
back them up?
Project implementation
How experienced is the ESCO in minimizing the
disruption to the workers in the public building(s)
renovated?
W
hat training will be provided to the public building
operations staff?
W
hat input will the public manager have regarding
the design, construction and implementation of the
project?
What input will the public manager have regarding
32
How will any additions or extras be charged?

How can good value be ensured?
Will fees be consistent through the entire project?
Project capabilities
Typical improvement measures installed
Design and project implementation procedures
Software support systems
Project management process
Selection, use and control of subcontractors
Project capacity
Number of concurrent projects that can be
comfortably performed
Project managers and their respective project team
Scope of services
Discrete services provided under energy performance
contracting
Particular strengths of the ESCO
Services contracted out including the following:
- preliminary assessment of energy savings;
- retrofit design;
- project management;
- construction including provision of trades;
- commissioning;
- operator training;
- procedure documentation;
- mechanical and electrical maintenance;
- invoicing system and methods for calculating
savings;
- remote measurement and savings performance
evaluation;
- project financing; and
- energy services agreement negotiation.
Experience in energy performance contracting

Description of EE and conservation projects during the
last three years, where payment was not predicated
on actual savings;
D
escription of experience in training of building
operators, provision of building mechanical and
electrical maintenance services, and energy use
measurement; and
Description of EPC projects completed and in progress.
Financial stability
Sufficient working capital and access to project
financing;
D
emonstration of adequate skills in financial
engineering at ESCO management level;
Adequate and appropriate insurance; and
Ability to comply with bonding requirements.
In general, companies are expected to:
D
emonstrate their capability to provide comprehensive
energy management services, in the relevant market
sector, for plant, processes or facilities, including but
not limited to:
- comprehensive preliminary assessment of energy
savings and feasibility analyses; design, engineering,
selection and installation of equipment, systems
and modifications to improve energy (and other
resources) efficiency without reducing the reliability
or performance of such equipment;
- construction management;
- training of clients operations and maintenance staff
in energy-efficient practices;
- maintenance and service of installed measures;
- measurement and verification of energy (and other
resources) savings; and
- financing for such projects.
G
uarantee that payments for EE improvements will be
contingent on energy savings so that the client will
not have any financial obligations that exceed the
avoided utility costs.
O
utline their capability with respect to other
related energy services including, but not limited to,
technologies and applications of particular relevance
to the client, e.g. boiler, compressed air, facility
management and operations, (or other systems,
power quality, HVAC, etc.).
T
he public partner evaluates the qualification
information against pre-specified evaluation criteria
producing a list of pre-qualified firms, which are
invited to submit detailed proposals. [Guidance 45,
49]
4.1.4 Submitting detailed proposals

All applicants that meet the pre-qualifying criteria are
invited to bid. Short-listing, as the name implies, restricts
the field of bidders to a fixed number (usually four to six).
It is generally recommended that there should be a prequalification to ensure that unqualified firms are spared
the high cost of preparing detailed bids and recommends
short-listing only for consultant procurement. Some
countries have sought to combine the two by developing
a short list of qualified firms. Under typical schemes, a
public agency issues an invitation for pre-qualification or
a request for expression of interest ("ELI"), the latter for
short-listing.
ESCO bidders are required to provide detailed technical
proposals as set out in the Terms of Reference (ToRs).
Bidders will already be familiar with the pre-feasibility
study conducted by the client and, at this point, will
conduct their own detailed preliminary assessment
of energy savings, also called Investment Grade Audit
(IGA).
33
The preliminary assessment of energy savings [Guidance

47] is the technical and economic foundation of a
successful EE project. It is a detailed document that
validates all savings and costs for each EE measure along
with savings calculations and methodologies. The audit
provides the ESCO and the public partner with sufficient
information to judge the technical and economic
feasibility of the project.
The preliminary assessment of energy savings includes
the following information:
d
etailed baseline data (including all operational
aspects of the facilities);
Energy Units:
- Electricity = demand (kW) and consumption (kWh);
- Fuel oil = units consumed (litres);
- Natural gas = units consumed as specified on utility
bill;
- Water = units consumed as specified on utility bil;
- Energy rates: lists historical rates for each unit of
energy (base rates) that will be used to calculate
savings payments;
- The preliminary assessment of energy savings in
effect details the EE solution proposed by the ESCO.
It is a major part of its technical proposal.
The full proposal will also include:
a full analysis of comsumption for each fuel and utility

type with costs and operating conditions;
the confirmed minimum level of guaranteed savings;
detailed cost of each measure and the total cost;
t he confirmed minimum net present value of the

proposed project and the actual net present value of
the proposed project;
a mount of expected savings during construction

period;
b
asis of savings and design/build cost for each
measure;
a full description of the analysis methods, calculations,
data input and all assumptions for each measure;
clarification of/dependencies between measures;
final M&V plan;
energy reconciliation and balance to historical actuals;
schedule of work;
carbon footprint for impact on CO2 emissions; and
risk analysis of the project.
The baseline is defined by the client, it is one of the most
important elements in the preliminary assessment of
energy savings. It contains the following details of all
major pre-existing site conditions and costs impacted by
project implementation:
Equipment: Inventory of all major energy-consuming
items.
34
t he final building capacity and awareness activities to

be implemented; and
the qualifications of the proposed experts.
4.1.5 Other steps

There are other optional steps that can be included, based
on the needs of the public partner and the capabilities and
experience of the pool of bidders. These include upstream
consultations with potential bidders, a pre-bidding
conference (to discuss the contents of the invitation
to tender and respond to questions) and site visits (to
allow bidding ESCOs to gather additional performance
information on the target facilities.
4.1.6 Bid evaluation

The public partner must assess proposals based on the
criteria specified in the invitation to tender. [Guidance
49, 50] EPC projects are very complex because the
agency must assess a combination of technical, financial,
project implementation and performance measurement
requirements. Technical evaluation may be more
straightforward because it is based on aspects that are
contained in most service contracts, such as methodology,
work plan and staffing. However, assessing the financial
proposals can be complicated as there is no single price.
Proposals will include multiple indicators, including the

investment amount, total energy and cost savings, share
of savings to be allocated to the agency, duration of the
contract and life of the equipment. The ESCO selected
should provide the best value to the public partner. The
value for money criteria have to be clearly defined. They
would normally include an assessment of how risks are
being transferred as well as the overall cost calculated after
taking into account the time value of money. This includes:
a detailed feasibility study is always required.
Generally a sophisticated computer simulation tool
capable of modeling all energy inflows and outflows is
required in order to avoid double counting of energy
savings or savings overlap;
4.1.7 Financing
In a typical EPC arrangement, the invitation to tender
requires bidding ESCOs to provide a plan for financing
the project. In underdeveloped markets, ESCOs may have
trouble raising all the financing on their own. Therefore,
some partial EU or government-sponsored financing
programme may be necessary.
In the assessment of the financing proposal for the EPC,
the public partner is interested in the following aspects:
T
o which partners balance sheet is the equipment
registered?
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
documented for review by all parties;
Is the financing reliant on the the public partner?
t he project should include a detailed scope of work

so that the public partner can have a simple yardstick
for use in confirming completion of the work;
4.1.8 Contract
d
etailed construction documentation to guide the
contractor and help the public partner follow the
progress of the installation. It also provides the public
partner with a troubleshooting tool once the work has
been completed and the term of the contract with the
ESCO has expired; and
t he methodology used to calculate cost avoidance
must be clearly stated in the contract. The energy-use
data and other assumptions required for input to the
methodology must be available to both parties.
Overall, the public partner needs to consider the following
financial elements:
t he cash flow of the ESCO from other projects in its
portfolio;
t he level of diversification of the ESCOs revenue
streams;
t he debt/equity ratio of the ESCO, compared to a
market benchmark; and
the credit rating of the ESCO.
A
re the cash flows from savings pledged against the
financing?
With reference to 4.1.6, the ESP which best meets the

value for money criteria that have been defined is then
invited to negotiate the final contract. This process may
be straightforward for many types of contracts, but
it is more complicated for EPCs because of the many
technical, financial and legal parameters and the possible
lack of experience of the public partner. [Guidance 49,
51] The contract must also include an M&V plan. The
M&V provisions are a very important part of the EPC
process since they determine the payments made to the
ESCO. The plan for the public procurement of EE services
may be specified in the invitation to tender but it may
also be proposed by bidding ESCOs. In either case, the
ESCO must develop detailed M&V protocols through
the completion of the IGA agreement with the public
partner. This M&V plan is then incorporated into the final
EPC. Many agencies and ESCOs use the M&V protocols
set out in the International Performance Measurement
and Verification Protocol (IPMVP) (EVO 2007). These
protocols may be adjusted by mutual agreement for the
specific EE measures being installed.
Apart from the contract items, termination arrangements
are an important component of the ESCO agreement.
35
Both parties should be able to terminate the agreement

if they have good reasons to do so. Common reasons for
termination are:
d
efault by the ESCO to deliver a workable project (e.g.
technological failure);
bankruptcy of either party;
irreconcilable differences where the parties cannot
agree and arbitration proves impossible; and
m
ajor changes in the building (sale of the facility,
major changes in an industry that will affect the
installed measures).
4.2 Specific EPC procurement issues

4.2.1 Country specific issues
EPCs have not been widely used in the public sectors of
emerging economies, and especially the Member States
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
international ESCOs with expertise and access to capital

were not keen to invest in these emerging markets
due to risk (e.g. small markets and projects, unclear
legal and regulatory regimes, concerns about client
creditworthiness, lack of access to appropriate local
project financing). Emerging economies also face limited
equity markets and a limited number of investors willing
to create new companies and test new business types.
Rigid procurement and budgeting guidelines within the
public sector often prevent public institutions from
engaging ESCOs, particularly where full project costs and
technical parameters have yet to be determined.
4.2.2 Specific energy performance contract

issues
Procuring energy services and signing a performance
contract differ from the traditional process of bid and
specifications. A good fit between ESCO capabilities and
public partnership is the foundation of a strong relationship
and successful project implementation. It involves a clear
understanding of the ESCOs capabilities and experience
relevant to the particular needs of the client.
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
Project Procurement: LINKS
Guidance 6
structures.
Guidance 45
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 dAide la Dcision - Audit Energtique dans les Btiments 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 Users 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
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
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.
37
Guidance 52
Discussion on certifications in the context of energy services (pages 66-69).
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-generalrequirements-and-qualification-proceduCEN CLC/JTF 189
38
P RO J E C T I M P L E M E N TATION
5. Project Implementation
The management of an EE PPP raises specific issues in
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
of the private sector partner. Chapter 5 of the G2G
[Guidance 2, pages 78-105] defines the steps for PPP
implementation.
Figure 9: Steps for PPP Implementation
Preparation of Implementation
Design/engineering approval
Pre-implementation measurement
Establishment of the baseline for M&V
Implementation
Installation
Training of operators and employees
Measurement of the Performance

Measurement results
Report to the client
Operation and Maintenance

Measurement results
Staff training
Energy Services payments
5.1 Steps for PPP implementation

5.1.1 Preparation of implementation
The typical sequence of events subsequent to the signing
of a performance contract includes finalisation of design,
installation of equipment and maintenance of the energy
services project. The initial design and construction
phases are superficially similar to a conventional
construction project. However, they include a number of
design/construction iterations and, site conditions and
the expectations of the building operating staff vary.
[Guidance 55, 56]
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
of contracts because of the multi-sector parameters
involved (technical, financial and legal) and the private
partners specific activities are neither well known nor
defined.
During this phase, the ESCO finalises the design of the EE
measures to be implemented. In a rehabilitation project,
the time-planning of the installation and regulation
measures are key because it must be in line with building
use and occupation.
The baseline for M&V (see Section 5.2) has to be
established before the implementation of the EE measures
during the reference period.
5.1.2 Implementation
In addition to the construction phase and M&V, the
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
and maintenance workers.
Recovery of costs-based on savings
39
PROJECT IMPLEMEN TAT I O N
The aim of an awareness programme is to create a sense

of ownership and provide information about the newly
installed energy-efficient equipment as well as the
measures to reduce energy consumption. The programme
should build a greater understanding of energy usage
and demonstrate how individuals can help reduce overall
consumption.
The type and nature of training will vary based on the
organisation and the EE measures involved. Programmes
include operational and procedural training on energy
management and newly installed technologies and
transferring the required know-how to specific audiences,
such as facility O&M staff.
5.1.3 Measurement of performance

The ESCO follows the M&V plan that is set out in the
contract to measure and calculate the energy savings. If,
during the reporting period the expected energy savings
are not reached, the reporting period can be reduced
to track the performance of the EE measures more
closely. The plan contains the calculations and formulas
used to determine the energy savings. This reduces
misunderstandings and conflicts between the public
organisation and the ESCO. [Guidance 55, 56]
5.1.4 Operation and maintenance

Public buildings being refurbished by an ESCO will usually
have arrangements in place for works associated with the
maintenance of the fabric of the building. Under EE PPP,
the ESCO will have the task of ensuring that maintenance
staff are properly instructed and managed in order that
the planned energy savings can be realised.
5.1.5 Energy service payments

Payment is based on project performance. While
adjustments can be made, they have to be provided for
under the contract. Payment is based on the quantum
of energy savings to which the ESCO is contractually
committed. It is the responsibility of the ESCO to
ensure that these efficiencies are actually achieved. The
payment mechanism will typically include some form of
penalty or reimbursement mechanism if the savings are
not realised. However, ESCOs should not be exposed to
energy price fluctuations since this is a risk that the ESCO
cannot directly manage. Being exposed to energy price
40
fluctuations would distract the ESCO from achieving

contracted levels of EE since short-term fluctuations in
energy prices then take on a more important role than
working on smaller, long-term savings.
The energy price is an issue that can affect project
performance and benefits. The aim is to avoid speculation
on energy prices by the ESCO and ensure that its focus is
on energy services.
5.2 Measurement and verification of

EE results
The M&V provisions generally determine the payments
due to the private partner for its services. The private
partner designs and implements the M&V plan, the
public partner receives the deliverables and a third-party
(optional) validates the results. [Guidance 57, 58, 59,
60]
While a retrofit project may reduce energy consumption,
a thorough M&V process is essential for two reasons. First,
M&V assesses resource savings against the performance
guarantee. Second, M&V helps ensure that savings will
persist over time.
The results of EE retrofits cannot be directly measured
as they can only be defined by the absence of energy
consumption. It is important to measure and verify
savings generated by the project, without which it is not
possible to value the results of an investment in EE.
The most widely used M&V procedure for EPC projects is
called IPMVP. The protocols are written and periodically
updated by the Efficiency Valuation Organization (EVO)
and are used in some European countries such as France
and Spain. Other M&V protocols can be agreed upon
between EPC stakeholders and while it is possible to build
a specific M&V protocol on a case-by-case basis it is also
possible to use other M&V procedures already developed
like ASHRAE 14 or FEMP protocols. [Guidance 61] In
this Guide, only the IPMVP is described because of its
worldwide recognition.
According to EVO, M&V is the process of using

measurement to reliably determine actual savings created
within an individual facility by an energy management,
energy conservation or EE project or programme. As
savings cannot be directly measured, the savings can
be determined by comparing measured use before and
after implementation of a project, making appropriate
adjustments XE "adjustments" for changes in conditions.
The public partner and EE project investors use M&V
techniques to mitigate the various risks that can arise
after project completion. M&V is specifically used for the
following purposes:
improving engineering design and project costing;
increasing energy savings through proactive
adjustments in facility operations and maintenance;
documenting financial transactions XE "verification";
5.2.1 IPMVP: the principles

The IPMVP consists of a library of documents that provides
an overview of current best practice for measuring and
verifying the results of EE, water efficiency, and renewable
energy projects (both in the public and private sector).
This library is available free of charge from http://www.
evo-world.org, a not for profit organisation dedicated to
providing key guidance in this area. IPMVP began in the
1990s as a voluntary initiative that came together under
the auspices of a US Department of Energy initiative to
develop an international M&V protocol that could be
used to determine energy savings from EE projects in a
consistent and reliable manner. It has since developed
to provide a core set of M&V standards that are in use
around the world and which are continually being refined.
IPMVP publishes detailed documentation on M&V as well
as providing a range of training materials and related
services.
enhancing the value of emission reduction credits;
The IPMVP provides four different approaches for

measuring and verifying savings, using the following
formula:
s upporting evaluation and development of broader

efficiency programmes; and
Savings = (Baseline Energy Reporting Period Energy)

Routine Adjustments Non-Routine Adjustments
increasing public and marketplace understanding of

energy management as a public policy tool.
The four approaches are covered in summary form in

Table 2. Considerably more information is available.
[Guidance 58]
managing energy budgets;
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.
41
Table 2: Options for determinating savings

IPMVP Option
A. Retrofit isolation: key parameter
measurement
Savings are determined by field
measurement of the key performance
parameter(s) which define the energy
use of the ECM XE "energy conservation
measure" s affected system(s) and/or
the success of the project.
How Savings Are Calculated
Typical Applications
Engineering calculation of baseline

XE "baseline" and reporting period XE
"reporting period" energy from:
- short-term or continuous
measurements of key operating
parameter(s); and
- estimated values.
A lighting retrofit where power draw

is the key performance parameter
that is measured periodically. Estimate
operating hours of the lights based
on building schedules and occupant
behaviour.
Short-term or continuous
measurements of baseline XE "baseline"
and reporting period energy, and/
or engineering computations using
measurements of proxies of energy use.
Application of a variable-speed drive

and controls to a motor to adjust pump
flow. Measure electric power with a
kW meter installed on the electrical
supply to the motor, which reads the
power every minute. In the baseline XE
"baseline" period, XE "baseline: baseline
period" this meter is in place for a week
to verify constant loading. The meter
is in place throughout the reporting
period XE "reporting period" to track
variations in power use.
Analysis of whole facility baseline XE

"baseline" and reporting period XE
"reporting period" (utility) meter data.
Multifaceted energy management

programme affecting many systems
in a facility. Measure energy use with
the gas and electric utility meters for
a twelve-month baseline XE "baseline"
period XE "baseline: baseline period"
and throughout the reporting period. XE
"reporting period".
Energy use simulation, calibrated with

hourly or monthly utility billing data.
(Energy end-use metering may be used
to help refine input data.)
Multifaceted energy management

programme affecting many systems in
a facility but where no meter existed
in the baseline XE "baseline" period XE
"baseline: baseline period".
Parameters not selected for field

measurement are estimated.
B. Retrofit isolation: all parameter
measurement
Savings are determined by field
measurement of the energy use of the
ECM XE "energy conservation measure"
-affected system.
Measurement frequency ranges from
short-term to continuous, depending on
the expected variations in the savings
and the length of the reporting period
XE "reporting period".
C. Whole facility
Savings are determined by measuring
energy use at the whole facility or subfacility level.
Continuous measurements of the
entire facilitys energy use are taken
throughout the reporting period XE
"reporting period".
D. Calibrated simulation
Savings are determined through
simulation of the energy use of the
whole facility, or of a sub-facility.
42
Simulation routines are demonstrated

to adequately model XE "model" actual
energy performance measured in the
facility.
Energy use measurements, after

installation of gas and electric meters,
are used to calibrate a simulation.
This option usually requires

considerable skill in calibrated
simulation.
Baseline energy use, determined using

the calibrated simulation, is compared
to a simulation of reporting period XE
"reporting period" energy use.
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%.
43
Project Implementation: LINKS
Guidance 55
ISBN: 978-0-8213-8102-1.
Guidance 56
Section 11 presents the implementation phase of an EPC project in state buildings.
Guidance 57
Guide de la Mesure et de la Vrification pour les Services dEfficacit Energtique, 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
Sections 13 and 14 contain information on how to develop and calculate a baseline.
44
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
45
EU EE INITIATIVES
6. EU Energy Efficiency Initiatives

6.1 EU 2020 targets
The EU has adopted a framework for energy end-use
efficiency and energy services. This includes an indicative
energy saving target for Member States, obligations on
national public authorities for energy savings and energyefficient procurement, and measures to promote EE and
energy services in the public sector. [Guidance 62]
use. Environmental problems associated with energy

consumption are both of a local and global nature.
Health and environmental impacts include air pollution,
smog, climate change, degradation of ecosystems, water
pollution and radioactive hazards. [Guidance 66]
EU countries transposed the Directive 2006/32/EC

on EE and energy services in their national regulation
framework. The Concerted Action for the Energy Services
Directive (CA ESD), was implemented to provide a
structured platform for exchange of information between
the 27 Member States and Croatia. [Guidance 63]
EE is central to the EUs Europe 2020 Strategy for smart,

sustainable and inclusive growth and the transition to a
resource-efficient economy. It represents the equivalent
of finding a new source of energy. The European Council
of March 2007 emphasised the need to increase EE in
order to achieve a reduction in energy consumption
of 20% by 2020. It reaffirmed the commitment to the
development of energy from renewable sources by
endorsing a mandatory target of a 20% share of energy
from renewable sources by 2020. [Guidance 64]
Under the Europe 2020 Strategy, the EU has committed

to reduce its energy consumption substantially. As
buildings count for 40% of the energy consumption of
the EU, huge efforts are required to improve EE in this
sector. [Guidance 64]
Substantial steps have been taken towards energy

consumption reduction, namely in the appliance and
building markets. Nonetheless, recent Commission
estimates suggest that the EU is on course to achieve
only half of the 20% objective. [Guidance 64]
There are two major challenges in the energy sector: (i) a

lack of sufficient, reliable and affordable supplies; and (ii)
environmental issues associated with energy production
and consumption. Key objectives are to reduce the
demand for fossil energy, diversify sources of supply
geographically, foster alternative energies to allow for a
wider distribution of energy resources and reduce GHG
emissions. [Guidance 65]
The European Council of 4 February 2011 called for

determined action to tap the considerable potential for
higher energy savings of buildings, transport and products
and processes. The EC has developed the comprehensive
new EE Plan 2011. It will be pursued alongside other
policy actions under the Europe 2020 Strategy's Flagship
Initiative for a Resource-Efficient Europe, including
the 2050 roadmap for a low carbon economy. This will
ensure policy coherence, assess trade-offs between policy
areas and the benefit from potential synergies. The EE
measures will be implemented as part of the EU's wider
resource-efficiency target that encompasses efficient use
of all natural resources and ensures high standards of
environmental protection. [Guidance 64]
At the current pace, known and proven oil and gas reserves
can support production for approximately 41 and 63
years respectively. The overall level of the EUs reliance
on imported energy was 52.3% in 2005 and is forecast
to rise as domestic resources dwindle. The energy sector
is responsible for most GHG emissions, and thus climate
change. At the present time, fossil fuel consumption
represents over 80% of GHG emissions, excluding land
46
Buildings are responsible for 40% of energy consumption

and 36% of EU CO2 emissions. The energy performance
E U E E I N I T I ATIVES
of buildings is key to achieving the EU Climate & Energy

objectives and is a cost-effective way of fighting climate
change and improving energy security while creating job
opportunities. [Guidance 64]
Public sector spending accounts for 17% of EU GDP and
publicly owned or occupied buildings represent about
12% by area of the EU building stock. A stronger emphasis
on EE in the public sector is crucial, covering public
purchasing, the refurbishment of public buildings and
the encouragement of higher building standards in cities
and communities. According to the EU Commission, the
public sector can create new markets for energy-efficient
technologies, services and business models. [Guidance 65]
The EU is seeking to set an example by showing that
environmental and energy considerations are being taken
into account in buildings occupied by public authorities
and buildings frequented by the public. [Guidance 64]
The EU Commission strategy includes a focus on triggers
to accelerate the refurbishment rate of public buildings:
the Commission proposal for a new EE Directive (adopted
in June 2011 and under negotiation) requires public
authorities to refurbish at least 3% of their building
stock by floor area each year. The Commission plans
guidance to help overcome the obstacles that hamper the
deployment of EPCs in various Member States, such as
ambiguities in the legal framework and lack of availability
of reliable consumption energy data to serve as baselines.
In addition, the Commission will continue to support
initiatives such as the Covenant of Mayors as a means to
boost the implementation of EE measures on the ground.
6.2 EU funding for EE/renewable

energy supply
Significant funding is available through EU programmes
to accompany and help Member States implementing EU
directives and support associated investments to fulfil
the EE objectives.
In addition to national public programmes supporting EE
projects (e.g. grants, soft loans, guarantees, subsidies, tax
reduction), EU funding have been increasingly focused on
EE and renewable energy supply (RES) investments in

line with its Europe 2020 Strategy. Most of the EU funding
co-finances projects with grants that are combined with
national/local financing. However, Member States can
use part of their structural fund's allocation in a JESSICA
structure, enabling repayable investments (see below).
There also exist financial instruments at EU-level (EEEF)
and Technical Assistance Facilities (e.g. ELENA, MLEI).
Cohesion policy
Cohesion policy aims to reduce economic and social
disparities among European regions. Three funds (the ERDF,
the European Social Fund and the Cohesion Fund) are used
to co-finance projects in the EU regions. Their management
is shared between the European Commission and the
Member States. In the current period, 2007-2013, every
Member State has defined a national strategic reference
framework, validated by the Commission, to be delivered
through operational programmes at national or regional
level. The operational programmes are implemented by the
Member States and their regions. This involves selecting,
monitoring and evaluating the individual projects. This
work is organised by 'managing authorities' (MAs) in
each country and/or region.
The planned allocations of funding in the 2007-2013
Cohesion Policy programmes for sustainable energy
investments amounts to approximately EUR 9.4 billion, of
which RES (including wind, solar, biomass, hydroelectric,
geothermal) is approximately EUR 4.8billion, and EE (EE,
co-generation, energy management) is approximately
EUR 4.6 billion. Allocation of funds to RES and EE differ
between Member States dependant upon the total
volume of funds available, and the national needs and
priorities set by each Member State.
Under the JESSICA initiative, MAs in the Member
States are offered the possibility to invest some of
their Structural Funds (SF) in financial engineering
instruments (revolving funds) supporting urban
development and thereby recycle and leverage financial
resources in order to enhance and accelerate investments
in Europe's urban areas. These financial instruments
are Urban Development Funds (UDFs) investing in
PPPs and other projects included in integrated plans for
sustainable urban development. Alternatively, MAs can
decide to channel funds to UDFs using Holding Funds
47
EU EE INITIATIVES
(HFs) which are set up to invest in several UDFs. This is

not compulsory, but does offer the advantage of enabling
MAs to delegate some of the tasks required to implement
JESSICA to expert professionals.
For the period 2014-2020, the Commission has proposed
to prioritise funding from the ERDF in order to increase
spending on EE and renewable energy. According to
the proposal, in more developed and transition regions
20% of the ERDF should be spent on EE and RES, in less
developed regions 6%. This would result in a minimum
allocation of EUR 17 billion from the ERDF for EE and RES
in 2014-2020, based on the amounts proposed by the
Commission in the multi-annual financial framework. In
addition, allocations from the Cohesion Fund could also be
made for EE and RES. A wider use of financial instruments
is proposed, which would enable better leverage of private
capital and renewed liquidity flow towards investments in
EE and RES measures.
Research, development and innovation
Under the current EU Research & Development
Framework Programme (FP7 2007-2013), approximately
EUR 2.3 billion is dedicated to energy. Most of the budget
is used to support research, technological development
and demonstration projects resulting from the annual
Calls for Proposals.
Under the proposal for the Future Horizon 2020
programme EUR 6.5 billion will be allocated to research
and innovation in "secure, clean and efficient energy"
in 2014-2020. A relevant share of this budget will be
allocated to the "Market uptake of energy innovation" for
projects facilitating the energy policy implementation,
preparing the ground for rollout of investments,
supporting capacity building and acting on public
acceptance; and continue the Intelligent Energy Europe
("IEE II") Programme activities.
support EE and renewable energy policies.

Under the programming period 2007-2013, EUR 730
million is available to fund projects and put into place
a range of European portals, facilities and initiatives. IEE
helps to create favourable market conditions, shaping
policy development and implementation, preparing the
ground for investments, building capacity and skills,
informing stakeholders and fostering commitment. This
includes projects for financing EE in public buildings.
The initiatives support three main objectives - more EE,
more renewables, and better transport and mobility. They
are carried out by public, private or non-governmental
organisations across Europe and include new training
schemes, promotion campaigns, and the transfer of good
practices.
ELENA Facility (Technical assistance facility created
under the IEE II), launched in 2009, provides the technical
assistance grants (of up to 90% of eligible costs) to local
and regional authorities for development and launch of
sustainable energy investments. The EU support must
lead to investments with a minimum leverage of 1:20.
It consists of 4 operational windows with the EIB, KfW
(Kreditanstalt fr Wiederaufbau), CEB and EBRD. To date,
approximately EUR 31.5 million has been assigned to
projects under ELENA and should trigger investments
approaching EUR 1.5 billion, within the 3-year duration
of ELENA contracts. About a third of these investments
are addressing the buildings sector and EPC.
Complementing the ELENA Facility, grant support (up to
75% of eligible costs) for project development assistance
is also provided through the 'Mobilising Local Energy
Investments (MLEI)' Action of the IEE II, mostly aiming
at small scale sustainable energy investment projects
(minimum EUR 6 million).
6.3 EU technical assistance,

capacity building and policy
implementation
Financial instruments
The EU has already some experience with financial
instruments (1.3% of the EU budget has been allocated
to such instruments during the current programming
period) and wants to rationalise and develop them further
in the next period (2014-2020).
Intelligent Energy Europe Programme ("IEE") is an EU

programme financing non-technological initiatives to
Financial instruments provide equity/risk or debt

financing (such as loans or guarantees) directly or via
48
E U E E I N I T I ATIVES
financial intermediaries to final recipients who have

difficulties with access to finance, or with sharing of
the risk with financial institutions. Their primary role is
to increase the volume of finance (or financing products
range) available by leveraging the public funds with
private capital. Financial instruments typically target
investments that are economically viable (in terms of
generated revenues) but which have difficulties attracting
affordable commercial financing.
The EEEF was launched on 1 July 2011, providing different
types of loans, guarantees and/or equity to local, regional
and (if justified) national public authorities or public
or private entities acting on their behalf. EEEF aims at
financing projects in EE (70%), RES (20%) and clean urban
transport (10%) through innovative instruments and in
particular promoting the application of the EPC. Technical

assistance grant support (EUR 20 million) is available for
project development services (technical, financial) linked
to the investments financed by the Fund.
The European Commission's Communication on the next
Multiannual Financial Framework, proposes to expand
and harmonise the rules for financial instruments. The
proposition contains a certain number of sector-specific
initiatives, as well as the possibility for the Member States
to use part of their structural funds allocation in financial
instruments, either to be implemented at regional level
(tailor-made or template instruments) or at EU level by
ring-fencing their contribution for specific regions and
priorities (joint instruments).
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.
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
C O N C LUSION
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.
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
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
Lapport du partenariat public-priv dans le financement des projets en efficacit nergtique, Institut de
lnergie et de lEnvironnement 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
structures.
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
R E F E R E N CE LIST
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.
Guidance 9
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 (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
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.
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
53
REFERENCE LIST
Guidance 15
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
2008)
Section 2.2 shows different kinds of EPC models.
Guidance 18
(January 2011)
Guidance 19
Website demonstrating the shared-savings model implemented by the municipality of Berlin.
http://www.berliner-e-agentur.de/en
Guidance 20
Guidance 21
Public Procurement of Energy Efficiency Services Getting Started, Energy Sector Management Assistance
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 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
2008)
Section 2.3 presents the three fundamental financing options: ESCO, energy-user or TP financing.
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/
55
REFERENCE LIST
Guidance 30
Public Procurement of Energy Efficiency Services Getting started, Energy Sector Management Assistance
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=http%3A%2F%2Fwww.euroace.org%2FPublicDocumentDownload.aspx%3FCommand%3DCore_
Download%26EntryId%3D205&ei=fXI7T7KsDcTG0QXAlKFt&usg=AFQjCNGtQGPhVTtseXFubuaXO7_fzjkGVw
Guidance 33
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.
Guidance 34
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
The following link describes the housing development project in Weissensee:
http://www.berliner-e-agentur.de/en/services/contracting
Guidance 37
The following link contains a list of project for which ELENA provided technical assistance
http://www.eib.org/elena
56
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
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. Comphirtocht Phoibl
Phromhideach (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 Majestys 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
57
REFERENCE LIST
Guidance 45
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 dAide la Dcision - Audit Energtique dans les Btiments 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 Users 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
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
B. Henderson, X. Shi (2010). The International Bank for Reconstruction and Development/The World Bank.
ISBN: 978-0-8213-8102-1.
Guidance 51
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.
58
Guidance 52
Discussion on certifications in the context of energy services (pages 66-69).
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-generalrequirements-and-qualification-proceduCEN CLC/JTF 189
Guidance 55
ISBN: 978-0-8213-8102-1.
Guidance 56
Section 11 presents the implementation phase of an EPC project in state buildings.
Guidance 57
Guide de la Mesure et de la Vrification pour les Services dEfficacit Energtique, 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
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
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.
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
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
For information:
98-100, boulevard Konrad Adenauer
L-2950 Luxembourg
3 (+352) 43 79-1
5 (+352) 43 77 04
www.eib.org/epec
EPEC Secretariat
3 (+352) 43 79-22022
5 (+352) 43 79-65499
U [email protected]
E IB 05/2012 EN
EI B G rap hi cTe am

Guidance in Public Buildings

Uploaded by

Copyright:

Available Formats

Guidance in Public Buildings

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Guidance in Public Buildings

Uploaded by

Copyright:

Available Formats

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

Guidance on Energy Efficiency

Terms of Use of this Publication

Guidance on Energy Efficiency in Public Buildings

Abbreviations and Acronyms

COP Certificate of Participation

GDP Gross Domestic Product

ABBREVIATIONS AND ACRONYMS

Objective and Background

Challenges for EE Investments in Public Buildings

Project Partners - ESCOS

General Rules and Procedures

Steps for PPP Implementation

FULL REFERENCE LIST

a focus on the specification of project outputs rather

Energy efficiency (EE) is at the cornerstone of the

t he application of private financing in most instances;

Buildings account for approximately 40% of final energy

Guidance on Energy Efficiency in Public Buildings

measured in terms of the reduction achieved. As a result,

energy and curbing GHG emissions. Public buildings

Guidance on Energy Efficiency in Public Buildings

S avings-based EE services are delivered. Performance

1.2 Challenges for EE investments in

Guidance on Energy Efficiency in Public Buildings

projects have been subject to erratic variations in energy

c umbersome procurement procedures associated

1.3 Structure and contents

Through the four core chapters, the case for EE PPPs

1.4 How to use the Guide

The Guide follows key phases of a PPP project cycle and

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

a n introduction to the information to be requested

Project partners - ESCOs

a starting point to learn more about EE PPP

As the Guide has been designed as a good practice

Guidance on Energy Efficiency in Public Buildings

Guidance on Energy Efficiency in Public Buildings

An EPC is a contractual arrangement between the public

t he avoidance of upfront costs through third-party

2.1 Project partners - ESCOs

e conomic efficiency, through the installation of more

Guidance on Energy Efficiency in Public Buildings

2.1.1 Types of ESCO services provided

Guidance on Energy Efficiency in Public Buildings

simple and sophisticated contracts and are conversant

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

Engineering design and

Installation and O&M

Heating, Ventilation and AirConditioning ("HVAC")

Regulation and control

Private third-party financing

2.1.2 Revenue streams

present value of the ESCOs effective share of savings

Guidance on Energy Efficiency in Public Buildings

Project financing: Some ESCOs derive income from

2.2 Various types of EPCs

Guidance on Energy Efficiency in Public Buildings

a focus on the specification of project outputs rather

t he application of private financing in most instances;

S avings-based EE services are delivered. Performance

1.2 Challenges for EE investments in

c umbersome procurement procedures associated

a review of procurement and implementation issues

a n introduction to the information to be requested

a starting point to learn more about EE PPP

t he avoidance of upfront costs through third-party

e conomic efficiency, through the installation of more

2.3 EE project selection and EPC

election of buildings: The public partner

Step 2 Preliminary assessment of energy savings

I nitial meeting: The initial meeting between

reliminary walk-through audit: This step

Step 5 Review of cost data: Analytical software

E stimation of savings potential: Combining

Step 7 Tendering process: The ESCO will prepare

a llocating relevant experts/third-parties to the

3.2 Assessing funding sources and

3.4 Using technical assistance for