Ö-quadrat - Ökologische und ökonomische Konzepte

How does performance contracting work?

Climate protection in the environmental policy of the Federal Government is a top priority. But how can climate change be practiced at the local level if no budget is available?

The "magic words" in such a case are "Energy Performance Contracting". This model does not use funds from the administration. The investment will be financed through energy cost savings from improvement measures. Ö-quadrat developed a brochure for the Federal Environment Agency outlining how energy performance contracting works and how it can contribute to climate protection and cost savings.  The brochure uses practical examples to demonstrate how the government can maximize the environmental and economic gain from energy performance contracting. In practice the administration is calling for a bid for one or a package of buildings. The best offer with the highest savings or the most interesting financial result is choosen to be implemented. The company selected as part of this process should enter into a contractual agreement with the city. The contractor has to gurantee the investment and the energy savings over a specified contract period. In return, the contractor receives the actual energy cost savings realized over the contract period, which lasts usually between seven and ten years. The investment capital and the maintenance of the newly installed equipment, as well as the proof of the energy savings should be the responsibility of the contractor.

As energy saving measures are economical in general, the contractor may make a deal based on the savings generated from energy conservation, - at least if the project goes according to plan. The city also benefits in such projects; after the expiry of the contract with the contractor, the installed systems will generate savings for the local government or building owner. In the opinion of the President of the Federal Environment Agency, Prof. Troge, everyone can benefit from energy performance contracting: “The environment, through reduced energy use, the city through lower energy cost accounting and the contractor, which ensures the project work and earns a profit." 

However, there are many reservations against energy performance contracting. Office Ö-Quadrat, Öko-Institut eV, and the Berlin Energy Agency prepared a booklet summarizing these issues which was published by the Federal Environmental Agency. Using many practical examples, the guide shows the right approach to performance contracting and does away with old prejudices and reservations.

The booklet "Energy Performance Contracting as a contribution to climate protection and cost reduction" is free available through the bureau of the Federal Environmental Agency in Berlin.

The brochure "Eco-Watt. Klimaschutz als Kapitalanlage" (Eco - Watt. climate change as an investment) shows the basis of the practical use of performance contracting as a viable investment option. The brochure provides a comprehensive overview of the successful model employed in Staudinger Gesamtschule, which used performance contracting and citizen participation.

Further information
The brochure can be obtained from the Regio Energy Agency Freiburg.