Energy Performance Contracting

What is an Energy Performance Contract?

Energy Performance Contracts are a key tool in the decarbonisation of our buildings. EPC is a form of a Design, Build, Operate and Maintain (DBOM) contract. With an Energy Performance Contract, an Energy Services Company (ESCo) will look after the design, installation and management of the technology required for low-carbon buildings.

What makes an EPC different to traditional contracting is the focus on project outputs, such as carbon and energy savings, and not simply on supplying the technology. An EPC can be simply defined as the provision of energy services with a guaranteed outcome. With an EPC, the ESCo takes full responsibility for the design and installation of a particular energy or carbon saving measure in return for a share of the potential cost savings. The payments to the contractor are based on the resulting measured savings – if the savings are higher than expected, the ESCo will be paid more, but if the savings are less, then they are paid less. EPCs are multi-annual contracts, which include an installation works period followed by an ongoing services or maintenance period. If replacement is necessary during the contract term, this will be done at the ESCo’s own expense.

This type of contracting can help building owners to move away from individual energy efficiency or renewable projects in favour of whole building retrofits and the grouping or pooling of buildings into larger projects, with the reassurance of value for money.

It is vitally important for us to decarbonise our buildings quickly and efficiently in order to meet our climate targets, and EPC can help to accelerate this.