Overcoming Obstacles with Contracting

Public buildings offer significant opportunities for deep, cost-effective energy efficiency improvements. However, municipalities and other public institutions usually do not have the financial resources to effectively reach their energy savings potential. Other limiting factors include lack of time and manpower, which impede the conception and development of such projects. As a result, it can be difficult for a hospital director, an office building manager or a municipal building manager to identify ways and implement the best approach to reduce energy consumption and address aging facilities and equipment that consume energy at inefficient levels.

Retrofitting an existing public building can oftentimes be more cost effective than building a new facility. By initiating energy conservation retrofits to reduce energy consumption and the cost of heating, cooling, and lighting, the building will be less costly to operate, will increase in value and last longer. The impact of such retrofitting projects will be felt in the form of reduced operating costs, and improved occupant comfort and productivity, among other benefits.

A public-private partnership between public building owners and a contractor is a viable solution since contractors enable local governments to pursue substantial cost savings through heating, ventilation and air conditioning systems, LED and other efficient lighting, hot water systems, controls, appliance upgrades and solar systems to generate electricity.

EPC will result not only in energy and cost savings but also in better quality of indoor comfort and reduced environmental impact, thus addressing the environmental, economic and social issues, all in one.

Long Term vs. Low Hanging Fruits

Building owners tend to focus on collecting the "low hanging fruits" with short payback periods, or less than 10 years, which usually generate less than 30 percent savings. However, ambitious energy and climate policies require savings of up to 80 percent energy in buildings, which can only be reached through structural interventions, such as insulation of façades, replacement of windows, or ventilation systems. This is referred to as "deep renovation", and has payback time between 15 and 40 years at current energy prices.

No More Business as Usual

The contractor´s “performance guarantee” represents the core commitment to building owners. It ensures a project will yield a specified reduction in energy and water use over a contracted term, which is measured and verified at specific intervals. It guarantees coverage of all project costs and that savings produced will be sufficient to cover the cost of financing for the life of the project. This approach transfers the risks, as well as the burden of performance and guaranteed results  from the client to the contractor.

It provides a guarantee of a minimum  level of energy savings, which allows for the reimbursement of the loan. However, if the guaranteed reduction in energy use is not realized, or in the case of a shortfall in realized savings, the contractor is obliged to cover any difference between guaranteed and achieved savings.

© 2016 KEA