The project was implemented across three sets of activities (a) full definition of the energy efficiency projects, (b) investigation and comparative analysis of available funding mechanisms, and (c) dialogue between ESCOs, municipalities, and financing institutions to understand the risks perceived by each group, build trust and take into consideration their point of view in EPC implementation.
Based on the results of the above activities, the project proceeded with bundling and financial engineering, aiming at sizeable projects and attracting private financing. The last core activity was the preparation of the tender documents and tender launching.
Throughout the project, the Municipalities adopted a common approach envisaging common templates, adjustable to suit the needs of each investment case, for both the design and implementation tenders of the projects. This approach helped the cooperation among municipalities, the support for one another, and the exchange of knowledge among peers.
The key feature of the energy efficiency design was the replacement of the existing oil or gas-burning heating systems with heat pumps and the installation of rooftop PVs to cover a large part of building energy needs. Most of the treated buildings reached nZEB, A, or B+ energy performance class according to the national energy efficiency certification scheme.
The economic analysis of the investments showed, as expected with all investments including building envelope energy efficiency interventions a long payback period and negative NPV.
Such results indicate the need for a public grant that will improve the overall sustainability of the projects. The need for a public grant was further substantiated with a Cost-Benefit Analysis (CBA) which resulted in positive social NPVs and a benefit to cost ratio (B/C) above 1 for all the investments.
Based on benchmarking carried out in the frame of the comparative assessment of available financial sources and taking into account the identified restrictions applying to each financial source and the need for public grants, the financing mix used in PRODESA included:
- private funds through Energy Performance Contracting
- public grants
- equity or debt financing
Using a public grant, though, for leveraging private financing was not a straightforward exercise as it should be. Issues like incompatibility of the duration of grant programmes and long term EPCs or double financing may rise, but PRODESA adopted an approach to dealing with such issues.
In the approach followed in PRODESA for the EPC implementation, the open procedure was selected (one-step procedure). The contract type was characterised as a mixed contract (e.g. mixed contract of service and supply) depending on the mixture of interventions of each municipality. The Municipalities chose to follow the Guaranteed Savings model contract.
The main parameters that have been incorporated in the EPC projects tenders by the participating municipalities are the following:
- provision for a Measurement and Verification (M&V) scheme for the improvement of energy efficiency and electricity generation from RES throughout the contract duration
- an external mechanism for the verification of the results from an independent third party
- impairment Clause of the ESCO payment in case the guaranteed levels of energy efficiency improvement and RES electricity generation are not achieved
- the remote monitoring system of the energy consumption for all buildings and training of the municipal staff
