Contractual issues
Question: Where can I find examples of EPC contracts to see examples of EPC provisions?
Answer: A very comprehensive overview of model contracts is available on IEE website: http://ec.europa.eu/energy/intelligent/in-action/energy-performance-contracting/index_en.htm
Furthermore, on http://ec.europa.eu/energy/intelligent/in-action/energy-performance-contracting/index_en.htm, you'll find EPC documents per country and a very good and comprehensive overview of German model contracts, tender procedure etc (from 2012): http://www.energieland.hessen.de/dynasite.cfm?dsmid=17450
Question: Typically, which costs are paid by the ESCO and EPC facilitator?
Answer: This really depends on the type of EPC contract. Almost all solutions are feasible / possible. It depends on the agreement between all stakeholders, but in theory any financial design is possible.
However, it must be costs in relation to the technical preparation of the project, i.e. analyses of EPC suitability in the selected buildings, completion of technical data for next preparation of baseline and detailed description of the energy systems in selected buildings, etc. The volume of the costs, which the winner of the procurement procedure will pay, has to be included into the tendering documentation. And all competitors are obliged to include these costs as part of their quoted price, and to explain the exact calculation of these costs.
Question: How important are the evaluation criteria in EPC projects? Could you tell me more about the payback period?
Answer: Evaluation criteria for EPC projects are very important. It should be common place that the main criterion is the amount of energy savings, which are guaranteed by the ESCO companies. The volume of investments and all other payments payable by the customer to ESCOs (and which should be as low as possible) is also important, but it should be weighted down to second place. Distribution of weights between the criteria depends on the specific conditions of each project.
In any case, ESCO in their bids do not specify the payback period of the proposed measures. The tender documents should be determined whether or not the duration of the contract (expected to be 10 years), investments and other costs are fully paid from savings. If they are to be paid only from the savings, it can not be assumed by the customer that it will be suggested measures in the bids, which have a simple return more than 10 years (it would not make sense). In the event that the customer will want to implement the ten-year contract and measures with a longer payback period, they must acknowledge the fact that it is necessary to finance the project not only from savings, but also to supplement this source of financing from other sources, which will be saved in excess of operating costs.
And in that sense, it should be noted in the tender dossier that such measures are mandatory; and that it is necessary to specify exactly what has to be designed (for example by already prepared project documentation).
It follows that the NPV calculation is required by the customer when the project is being prepared, and can be used when evaluating the bids, but in this context must decide in advance on the main specification, what measures are to be implemented.
Question: Can customers be ensured that the investment's life will be long enough to guarantee savings for many years after the contract´s end?
Answer: Customers often ask if ESCOs can guarantee savings after payments of investment. This is only possible if the contract for monitoring and verification of savings is extended. And it is only possible through a new contract or by extension of the old contract (without payments of investments, because it is over - only energy services).
