The Energy Performance Contracts to enhance the energy efficiency in public sector. The case of Piemonte Region

. Energy performance contracts (EPC) are able to tackle most of the existing barriers for the upscaling of energy efficiency investments in the public sector. Since EPC are complex, a project development assistance service (PDA) supporting small and medium municipalities is essential for their successful implementation. This PDA should be designed following the one-stop shop approach and should provide assistance and solutions along the entire investment chain (from the decision making process, to the monitoring of performance). The case studies of Piemonte Region implemented in the context of EU funded projects demonstrate that this approach is effective and successful. Nevertheless, further actions could ease the wider use of such an approach, such as the specific modification of the legislative framework, the standardisation of tender documents and procedures, tools for de-risking the financial support of EPC and the institutionalisation of the PDA approach among regional authorities and other territorial coordinators.


Introduction to Energy Performance Contracts
Durig the sessi the techgica way ad gd practices" f Sciece fr Future's cferece e piar was dedicated t the Eergy tpic Techgica ivati is essetia but fiacia ad ctractua ivati is as required t ehace eergy efficiecy e f the st prisig ivati f such is ffered by Eergy Perfrace Ctracts ad the best practices ipeeted by Piete Regi were preseted as a exape Accrdig t EU Directive 201227  eergy efficiecy a Eergy Perfrace Ctract (EPC) is a ctractua arrageet betwee the beeficiary ad the prvider f eergy efficiecy iprveet easures verified ad itred durig the whe ctract where ivestets i that easure are paid fr i reati t a ctractuay agreed eve f eergy efficiecy iprveet r ther agreed eergy perfrace criteri such as fiacia savigs The EPC thus ust guaratee the achieveet f a aut f eergy efficiecy which ust be easured ad verified thrugh the ctract durati The payet f such a ctract is based  a fee that is bud t the eve f perfrace reached every year T d s a EPC ust ist a the easures ad ivestets that eed t be ipeeted i rder t achieve the guarateed perfrace ad a verview f the fiacia cditis f the ivestet pa The EPC is a ivative apprach fr the ipeetati f ivestets i eergy efficiecy sty fr the pubic sectr because it is t based  the purchase f wrs but  the purchase f a guarateed eve f eergy efficiecy The ivestets are decided by the cpay wh is cittig itsef t reach the guarateed perfrace Geeray speaig the ctractr is a eergy services cpay (ESC) ad the ivestet is usuay ipeeted thrugh a third party fiacig schee I this way the fiacia ris is trasferred t the ESC (the private party f the ctract) ad the pubic authrity cits t payig a fee fr the durati f the ctract which shud be g eugh t prvide sustaiabiity fr the ivestet itsef Sice the retur  the ESC is csey cected t the achieveet f the perfrace it is i the iterest f the ESC t ipeet it i a effective way ad t aage the revated assets i the best way fr durati f the ctract Pubic authrities have started ig at EPCs favuraby aiy because they are see as a way t ipeet ivestets eve i the presece f fiacia cstraits ad budget shrtages This apprach requires cse atteti t the way the ctract is drafted i rder t fw the EURSTAT rues ad be sure t recrd the EPC ivestet crrecty i the baace sheet  ay 2018 a very cear EPC guide 1 was issued by the Eurpea Ivestet Ba i rder t estabish which party t the EPC is the ecic wer f the easures cprisig capita expediture (eg cstructi wrs equipet) that are ipeeted uder the EPC (the EPC assets) Geeray speaig the ecic wer is the party that bears st f the riss ad has the right t st f the rewards assciated with thse assets If the assesset f riss ad rewards idicates that gveret is the ecic wer f the EPC assets then the EPC must be recorded on the balance sheet for government

The policy framework
The Iteratia Paris Ciate Agreeet recgises eergy efficiecy as e the st csteffective ways t supprt the trasiti t a wcarb ecy ad the Eergy Ui Fraewr Strategy is strgy fcused  eergy efficiecy A arge share f the target fixed fr eergy efficiecy (325% at EU eve ad 40% at the atia eve f priary eergy cpared t the treds recrded i the referece sceari PRIES 2007) is t be achieved i the buidig sectr Accrdig t the recet prpsa f the atia Pa fr Eergy ad Ciate this wud ea 33 te ess priary eergy fr Itay 2 There is the eed t acceerate the rate f revati i Eurpea buidigs which stads at abut 1% per year This ca be de either with a chage i the re f the fiacia sectr r a icreasig re fr IT ad sart techgy 34 At a atia eve it is estiated that arud 8 bii eur per year are eeded i rder t achieve the 2030 eergy efficiecy gas s that a additia 110 bii ivestet  a cuuative basis wud be biised S far Itay has prvided abut 4 bii f pubic fuds per year which is aready a huge aut but this ctributi eeds t dube ad private fiacig wi have t be uced at scae 34 EPC with third party fiacig is thus a pti which ffers the pprtuity t trigger ivestets i eergy efficiecy fr pubic sectr attractig private fudig Eergy picy shud thus create re favurabe ivestet cditis ecurage dead fr eergy efficiecy ad hep ed users t udertae reated ivestets re easiy

Barriers for public sector and possible solutions
Thas t the EU Sart Fiacig fr Sart Buidigs iitiative 5 severa prects have bee supprted by the EU Cissi uder the EEA Prgra the Eergy Efficiecy Fud Hri ad Iterreg Prgras The Piete Regi is aagig se prects prvidig techica assistace t uicipaities fr prtig the use f EPC At the basis f such prects there is the wi t address the ai barriers ad cstraits that prevet the pubic sectr fr ipeetig eergy efficiecy ivestets The ai barriers are • ac f techica wedge ad ac f ey t recruit extera expertise • ac f tie t eep existig r ptetia sis updated due t the fact that the staff ust dea with a wide rage f tpics ad issues ad cat devep specific cpeteces i eergy efficiecy • difficuties eepig the pace f ivati i eergy efficiecy ad be abe t be  the aret at the right tie • difficuties i assessig ivestet prpsas deivered by the private sectr (ESCs utiities etc) s that the pubic iterest r a webaaced iterest betwee pubic ad private is pursued • a scae factr which prevets uicipaities auchig ivestet pas which are i the iterest f the aret The diesi f ivestets is usuay t sa ad t prfitabe eugh t attract private ivestrs • pr cuicati sis s that gd practices are t prted ad disseiated i the right way st f the abve cstraits ca be taced with tw ai actis The first is the estpshp apprach ad the secd e is the aggregati f dead f curse bth beefit fr each ther A recet EU pubicati 6 prvides a verview f existig estpshp appraches defiig the as services that usuay cver the whe r a arge part f the custer chai fr ifrati techica assistace structurig ad prvisi f fiacia supprt t the itrig f savigs These faciities shud ead t re caydeveped prect pipeies ad strg ad trustwrthy parterships with ca actrs (eg SEs fiacia istitutis ad eergy agecies) the ey beig t cect the suppy f fiace with the dead fr it Aggregati f the dead is essetia i rder t reach the required scae factr t geerate ecies i ters f ivestets ad trasacti csts

Case studies in Piemonte Region
This first case study t pace i Piete ipeetig the 2020TGETHER prect It aied t start a crdiated acti ivvig regia prvicia ad ca authrities fiacia istitutis ad ca idustriesivestrs ad t auch a ivestet prgrae based  EPC ad third party ivestet (TPI) The prect prvided the ivestet f 125 ii f eur fr the eergy revati f pubic buidigs ad street ights 7 Thas t EU c fiacig a prect devepet assistace (PDA) service was set up i cabrati with Eviret Par ad the etrpita City f Tri ad was ffered t a uber f uicipaities The prect ipeeted a arge ivestet prgra fr the repaceet f heatig biers i 118 pubic buidigs wed by the City f Tri fr a ivestet f 75 ii f eur Tw ivestet prgras based  the budig apprach were as ipeeted • e fr 18 pubic buidigs wed by five differet uicipaities with a 13 year EPC durati • ather fr abut 3000 pubic street ight pits wed by six uicipaities with 13 year EPC durati Bth f the abve ivestet pas were the st ivative part f the prect ad have bee successfu The budig f buidigs guarateed average eergy savigs f abut 61% ad a ecic savig fr the uicipaities f abut 12%  average (i cparis with baseie eergy bis ad csts) The ivestet was abut 25 ii f eur (VAT excuded) with a et preset vaue f abut 540  ad a itera iterest rate f abut 7% Budig fr the street ights guarateed average eergy savigs f abut 68% ad ecic savigs fr the uicipaities f abut 115%  average (i cparis t baseie eergy bis csts) The tta ivestet is expected t be abut 24 ii f eur (VAT excuded) with a et preset vaue f abut 400 thusads f eur ad a itera iterest rate f abut 10% A siiar apprach has bee ipeeted i severa ther prects acrss eurpe st f thse prects have bee ipeeted thas t the supprt f Eea Prgra 8 aaged by the Eurpea Ivestet Ba r the Aggregati  Prect Devepet Assistace easure i the fraewr f Hri 2020 Prgra 9 Such id f prects 1011 have deat with the pubic sectr 1217 scia husig 1819 ad private buidigs 2023 expitig differet ipeetati schees f a siiar apprach

The project development assistance approach
The PDA i ie with the estpshp apprach prvided a set f services fr bth the abve budig ivestets icudig • crdiati ad supprt acti (aggregati f the dead ifrati ad defiiti f the agreeets betwee the ivved uicipaities) • techica assistace i the devepet f the ivestet pa (eergy audits ad fiacia ad ecic assesset defiiti f eergy ad ecic baseies) • ega assistace i auchig the teder prcedure (draftig f teder dcuets assistace i sigig ctracts etc) • cuicati supprt (press reeases draftig rgaisati f site visits cfereces prducti f brchures etc) The idea behid the PDA is that every sige step f the prcess is essetia ad the absece f ay e cud hider the success f the whe prcess itsef This is the reas why a PDA with a estpshp apprach ust be cprehesive The ai utce f the crdiati ad supprt acti was the sigature f a agreeet betwee uicipaities ad the ctractig authrity (i this case the etrpita City f Tri) that was i charge f aagig the teder prcedure ad awardig the ESC At the ed f the experiece it was pssibe t ae the fwig rears abut the budig apprach 1 If the agreeet is betwee the uicipaity ad the ctractig authrity the uicipaities are t a bud tgether This is very iprtat i rder t give fexibiity t the prcess Sice teder preparati requires quite a t f tie it is iprtat that the vera prcess is t epardised by the resigati f ay actr 2 The agreeet shud fix the deadies bigatis ad ctractua iabiities f the parties 3 The ctractig authrity ust be abe t ifuece the uicipaities (pitica pwer) adr the ther way arud s that there is a c iterest As s as a budig prect starts its preparati it is iey that ESCs wi apprach uicipaities fr a ete egageet fr aterative appraches 4 The buded sape f buidigs ust be iterestig fr ESCs i ters f the aut f ivestets ad returs This eas that atteti ust be paid t techica ad adiistrative cstraits (ivestets aready ipeeted architectura cstraits ad aageet ctracts i pace) 5 Give that the best buidigs are thse with w perfrace ad high csupti whagig fruits" ca be buded tgether with ess prfitabe es bearig i id that the budig itsef ust be iterestig fr ESCs As far as the techica assistace service is ccered the ethdgy is based  duar steps as fws the seecti f the assets the eergy audit ecic ad fiacia siuati ad seecti f the baseie sceari The seecti f the assets is ade i such a way that the fwig cditis are respected • A absece f cstraits that cud hider the ipeetati f eergy revati (ie fr buidig architectura seisic etc) • absece f iprtat itervetis i recet years r paed i the cig thsyears • the pubic adiistrati is t y the wer f the asset but it is as payig its eergy bis • the asset has iprtat eergy csupti Fr the atter criteria the fwig geera cditis are csidered ad appied with a certai degree f fexibiity Tab 1. Conditions for the selection of the buildings

Condition Threshold
Net Surface > 1.000 mq Heated Volume > 4.000 mc Natural gas consumption >30.000 Smc Energy bill for heating >20.000 € Eergy audits were carried ut usig the Eurpea Stadard E 162472014 Based  its resuts the EPC cditis are defied i rder t ae the ctract attractive fr ESCs eepig a fair baace betwee private ad pubic iterest Durig this phase ad after a ecic ad fiacia siuati f the feasibe ivestets differet scearis with differet ubers are preseted t the pubic authrity (wer f the asset) i rder t seect the best pti Pssibe scearis ca defie a ger durati with csequety greater vaue f bth ivestets ad savigs (either way eergy ad ecic) r a shrter durati with a wer vaue f ivestets ad csequety f eergy ad ecic savigs 24 Fiay the pubic authrities with the supprt f the PDA structure decide  the fwig data icuded as the baseie i the tederig dcuets • egth f the ctract (the paybac tie f eergy savigs easures shud be wer tha ctract durati) • iiu eergy savigs required • iiu cst savig required • iiu ivestet vaue required The abve data was used t fix the baseies fr the tederig prcedure The bidders were ased t subit a prpsa that wud siutaeusy icrease the iiu eergy savigs percetage the ivestet vaue ad the cst savigs I csequece the uicipaities receive a eergy refurbishet f the assets with ivestets ipeeted ad ecic savigs  the curret expeditures The fixed cditi is the ctract durati which is reativey g (13 years i this case) i cparis t ra stadards The durabiity f the ivestets was a ar evauati criteria The ai was t give preferece t thse ivestets with a ifespa ger tha the ctract durati (ie fr buidigs the isuati f the evepe r chages t widws was weighted re tha a chage t the bier r istaati f therstatic vaves) The utce fr the ivestet pa f the 18 buidigs has bee very prisig as e buidig was EB certified ad 13 received a fu r partia isuati f the evepe 7 Wrs were ccuded durig 2018 The ega assistace service prvides the draftig f teder dcuets ad the decisi f the teder prcedure that the ctractig authrity fws The teders dcuets icude 25 26 • teder specificati with rues ad prcedures t aage the prcureet phase • aageet ad techica specificatis The dcuet highights the ey issues ad aspects that dea with the aageet phase It is a crucia dcuet as the EPC ctract asts fr severa years • itrig ad Verificati Pa This is a pa that sets the rues ad prcedures fr checig the eve f perfrace  which the peratia payets are based • EPC ctract schee This defies duties iabiities rights ad bigatis regardig the ESC awarded ad the pubic adiistrati It as carifies the ris acati ag the ivved parties The itrig ad Verificati Pa is very pecuiar t the ist abve The guarateed savigs are set i the ctract ad the ESC guaratees the aua vue f eergy savigs i physica uits (such as Wh) If the savigs are saer tha the guarateed vue f savigs the crrespdig aut wi be fuy reibursed by the ESC t the pubic adiistrati (PA) accrdig t the ctract If the savigs are higher tha the guarateed vue excess savigs are t be divided betwee ESC ad the PA accrdig t the ethdgy defied i the ctract Eurstat ceary states that it is t pssibe t give ess tha twthirds f the extra savigs t the ESC 1 The trasparecy f the savigs achieved depeds  the quaity f easureet ad verificati (&V) prvided I geera the re idepedet the &V  the ESC the re trasparet are he eergy savigs

Follow up activities in Piemonte Region
After the experiece eabed by the regi i the 2020Tgether prect at east tw ther prects were ipeeted fwig a siiar apprach PEACEAps 27 ad STEPPIG 28 A additia 40 buidigs ad 10000 street ight pits have bee assessed ad prepared fr revati i these prects with EPC ad third party fiacig i differet ivestet pacages

Conclusions
Give that eergy efficiecy is a ust i the picy fraewr ad the buidig sectr is where st f the ivestets ust be triggered i a decade differet ptis are wadays avaiabe EPC is e f the st prisig because it is based  perfrace (ie rea savigs) ad t  cstructi wrs It fcuses  the gas rather tha  the eas t reach the It is we w that seties the expected savigs are t achieved fr a uber f pssibe reass The EPC itrduces a syste ad prcedures based  itrig ad verificati that substatiate the rea achieveet f the perfrace with a series f extra gais r sses The ptetia upscae f the EPC is w aiy based  the reaisati f the fwig cditis that wud reduce the aret riss ad reduce trasacti csts which are sti quite high fr either pubic authrities ad fr ESCs 1 There is a eed t expit the added vaue f stadardisati Stadard EPC ctracts wud avid uch bureaucracy ad prvide cfidece abut such ctracts ag the pubic staff Athugh certai parts f the EPC ctract ca be stadardised there is sti a eed t eave a certai degree f fexibiity i rder t best custise each prect 34 2 There is sti the eed fr re trasparecy i the Itaia Cde f pubic ctracts Startig fr existig successfu practice carificatis eed t be itrduced by aw (ie the prvisis  the eve f desig fr EPC) 34 3 It is usefu t have guaratee fuds r ther fiacia ts at the atia eve i rder t icrease the cfidece f the fiacia sectr i such ctracts 4 Fiay the estpapprach is t be repicated as it is prve t be effective It is iprtat that such a apprach wud be part f the issi f regia pubic authrities ad t y reated t stad ae prects which eed t be fuded by the EU r ther bdies This apprach is ceary prted by the Sart Fiacig fr Sart Buidigs Iitiative ad advcated by Directive 2018844EU