Financing energy efficiency projects with contracting

Contractors, who are neither customers nor suppliers, offer an ideal technological concept in combination with an ideal financing form.
They are specialist companies with expertise in energy planning and engineering and cover the entire process from planning, financing, invitations to tender and building supervision to commissioning of the plant. The actual investor does not require any money but entrusts the project to the contractor, who undertakes to provide a clearly defined energy service (or energy saving measure). The return to enable the investment to be repaid in the agreed period comes from the proceeds and cost savings. Once the contract has expired, ownership of the project is transferred to the contracting partner.

The aim of contracting models is to provide an energy service in the most cost effective way possible. The search for an energy efficient solution can include a change in energy supplier or a combination of several energy suppliers. Because of the different repayment and revenue expectations of the user and contractor, investments in more rational energy technology can be economically expedient for the contractor although they do not appear economical for the user (or tenant in an apartment block).

Savings from investments to increase energy efficiency should not be used only to cover the investment and capital costs, but also to provide a reasonable profit for the contracting partner. Once the contractual relationship with the user has come to an end, the later can also benefit from these savings as a result of the reduced operating costs. Contracting thus permits the implementation of rational energy utilization measures, which might not be possible without this instrument because of various dilemmas (competition between investment projects, lack of liquidity or exhausted credit line, conflicting interests of apartment tenants and landlords). The practical scope of contracting projects is currently restricted for the most part to power generation plants. Although contracting models have a positive ecological balance, heat recovery and energy optimization have tended to play a secondary role to date. As the future energy situation in Europe is also unclear, the risks for investments with the long term write down periods (over 10 years) typical of contracting would be too great. The rapid introduction of a pan European carbon dioxide or energy tax would thus have a positive impact on contracting.