Energy Performance Contracting is a common solution for building managers looking for an easy yet affordable way of implementing energy efficiency measures. A single contract with an ESCO who not only offers a turnkey solution but also guarantees that energy savings will be made, has obvious benefits over multiple contracts with individual technology suppliers. What’s less clear is whether the market is ready for an enhancement to this business model which includes providing both energy efficiency and demand side response services under a single contract. To answer this question, the NOVICE project carried out a survey of building managers and facilities managers across Europe to learn more about the drivers and barriers that may influence their decisions.
Our survey found that the most common barriers to implementing energy efficiency projects were lack of available finance and poor returns on investment (ROI). 85% of participants stated that they could see potential for the buildings they manage to participate in demand response and flexibility services but cited lack of interest from their client/management team and regulatory restrictions as the most common barriers to participation. Only 35% of respondents actually participate in some form of demand response but in most cases this relates to load shifting to make use of cheaper energy tariffs (also known as implicit demand response) rather than making loads available to turn down or off at the request of the network operator (explicit demand response). To find out more about the results of this survey you can download and read the full report here.
So what does all this mean for EPC providers? Well, being able to offer combined contracts that cover both energy efficiency and demand response could help to persuade more clients to sign up to EPCs because the additional revenue generated through explicit demand response reduces payback period, cuts the contract length and improves the ROI. This in turn makes the opportunity more attractive to third party finance providers as the dual revenue streams from energy efficiency and demand response reduces the level of risk to which they are exposed. What’s clear is that there is potential to combine the two services. What’s unclear is how to make this happen in a market that is restricted by complex regulatory requirements. The NOVICE project will demonstrate what’s currently possible through testing dual service EPCs at a number of sites around Europe. We’ll be sharing our results via this blog and our project website.