Connecting energy performance contracts with public subsidy programmes

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CombinES offers valuable knowledge support in bridging the financial gap between technical possibilities and practical realisation of energy efficiency measures in the public sector, which can be quite a comprehensive task.Dr Vladimir Prebilič, mayor of Kočevje, SloveniaWhile we have the technology and desire to increase energy efficiency, most improvements require financing. Regions can pay for efficiency by applying instruments like energy performance contracting – where the contractor gives a financial guarantee of energy savings from a project. CombinES encourages transnational cooperation and policy changes to support such investments in energy efficiency.CombinES project partners pioneered ways of combining energy performance contracting. One effective way to pay for energy efficiency measures in public buildings is through energy performance contracting, whereby contractors guarantee that the energy savings from energy-efficient construction or renovation will cover the cost of the work. If expected energy savings are not realised, construction contractors have to pay a penalty to the public authorities who hired them.In the central European region, public subsidies have not till now been connected to such private co-financing. “As the EPC is used to implement energy-efficiency measures with short or medium payback, it is suitable for combining it with subsidised thermal insulation measures,” explains Jana Szomolányiová from SEVEn. “In such a way, the public expenditures are used only for the measures which could not be delivered based on the market conditions.”High-level recommendationsThe project carried out an initial evaluation of existing rules for providing public support for energy savings in individual countries, as well as future options for the realisation of savings. Based on this research, it produced several recommendations for policy makers and market players, such as rules and criteria for the programmes providing subsidies for thermal envelope measures.Among other recommendations the “CombinES comprehensive renovation” approach is being proposed.It defines a special form of comprehensive renovation, where the thermal envelope part of the renovation is subsidised and the technology part of the renovation is implemented with the intervention of an energy service company (ESCO), by application of the Energy Performance Contracting model (EPC). The main advantage of such an approach is that it is possible to inter-optimise both types of measures within one renovation. This leads to optimal results bringing maximum energy savings under the given volume of investment costs. Such results are impossible to be reached either by partial renovation, or by implementing the two types of measures without co-ordination. “The subsidy programme should also require that the subsidy recipients provide for the energy management after implementation of the thermal envelope measures,” says Ms Szomolányiová.Total investment and EU fundingTotal investment for the project “CombinES” is EUR 705 100, of which the EU’s European Regional Development Fund is contributing EUR 578 785 from the Operational Programme “CENTRAL EUROPE” for the 2007 to 2013 programming period.