There is much hype around the concept of Energy Performance Contracting (EPC), especially to enable the public sector to achieve the mandated 33% energy saving by 2020. However, I would recommend caution. Organisations need to be aware that EPCs are not the only show in town.
The concept of EPC is simple; a contractor takes charge of your energy, they install more efficient equipment and share the energy cost savings with you. The contractor typically takes up to 80% of the savings to finance the equipment installed and their costs to management the project.
For the public sector which is risk adverse and for which cost savings are not in practice a motivation, then the EPC model perhaps is the only way to achieve the mandated savings. However, for commercial organisations, a contractor taking 80% of the savings for typically a 7 period would require some serious justification. If the contractor achieves a 33% saving, your share would be 20% of 33%, which is 6.6%.
The reason why serious justification is necessary is that typically 10% savings can be made by no cost procedural changes such as having policies to switch off lights when not needed, implementing power save options on IT equipment, adjusting thermostats and time clocks, fixing compressed air leaks, plus the use of statistical process control charts.
A further 10% are often realised by installing or improving controls. The costs of these are modest. Such recommendations will include installing better controls for existing equipment such as thermostats, time clocks, occupancy detectors, weather compensation of heating circuits, and sub metering of significant processes. As there is a cost saving involved, the payback is generally less than 12 months.
Thus 20% savings are achievable at low cost within a 12 month payback without using an EPC compared to 6.6% savings using an EPC. Such projects can be easily managed by in house Six Sigma black belts or by using an engineering consultancy.
The author of this blog, Bob Sutcliffe, is a Chartered Engineer and member of EMPI and has significant experience of energy reduction and carbon footprint reduction. Bob can be contacted at email@example.com