Application and risk assessment of the energy performance contracting model in energy conservation of public buildings

With the development of China’s economy, the total area of public buildings is continuously increasing, and higher energy consumption in this field is gradually becoming prominent. In order to improve this situation, China has been working on energy savings in public buildings since 2007. Energy-saving models and energy policies have become the lifeline of sustainable energy development. Furthermore, the energy-saving renovation of public buildings, as a key project, has attracted the attention of governments and scholars. In the report of the 18th National Congress of the Communist Party of China, energy conservation and emission reduction were given a prominent place. The 13th Five-Year Plan (2016–2020) aims to further promote China’s energy conservation work. On the one hand, administrative and legal measures should be taken to strengthen energy conservation. On the other hand, it is necessary to speed up the establishment of a long-term market-based energy-saving mechanism and to rely on market forces to remove various obstacles to energy conservation. Energy performance contracting (EPC) is a practical and effective method applied in energy conservation. Therefore, this research aims to put forward a relatively perfect energy-saving risk management system for EPC public building projects based on analysis of the factors influencing investment risks of energy-saving projects and the use of quantifiable risk management models, thus providing some theoretical support for the risk decision-making of energy service companies.

Energy Performance Contracting Initiative in Malaysian Public Hospitals

Ministry of Health Malaysia (MOH) has integrated sustainability program in the management of its assets particularly hospital buildings in line with the national sustainability goals and the United Nation Sustainable Development Goals. The fundamental sustainability change is significant since 2015 in the public healthcare sector where green business practice is more appreciable through formation of policy and sustainability related programme. Public hospital in Malaysia are very high energy consumers, therefore various energy projects have been implemented through Energy Performance Contracting (EPC). EPC projects in MOH is intended to deliver energy expenditure savings as well as to offset hospital building carbon footprint. EPC practice in government hospitals have managed to offset about 15.7 ktonne carbon emission in 2019 or about 16% of Government building national emission reduction target. Energy project such as energy efficient chiller retrofit, LED lighting retrofit and solar thermal hot water are some of the EPC initiatives by MOH in public hospitals. The energy projects not only serve to meet the overall Hospital Facility Management Contract sustainability goals but also to complement the green building target for Malaysian Healthcare building by 2025. The aim of this paper is to review the development of the EPC projects in public healthcare sector and its impact on government energy spending as well as to the climate.

Energy Performance Contracting and Public-Private Partnership: How to Share Risks and Balance Benefits

Public private partnerships (PPPs) are a well-known instrument used worldwide by public administration (PA) to build public infrastructure using private knowhow and financial resources, and sharing risks. In recent years, PPPs have been widely adopted to develop energy efficiency projects between public and private sectors. In this context, a successful project requires a contractual arrangement based on energy performance contracting (EPC) that balances the interests of the two parties. This paper aims to answer two questions: how to share the benefits between the contractual parties and reach an optimal long-term contractual agreement; and which type of contract ensures a consistent risk transfer to the private partner, allowing the PA an “off balance” accounting treatment. The research questions are answered through the development of a mathematical equation able to calculate the optimal percentage of benefits sharing between partners in a long-term contractual agreement. The results are tested with a simulation based on a case study about the energy efficiency project of an Italian hospital. The paper is innovative because it provides suggestions to improve the EPC-PPP contractual structure and realize a balanced agreement between the public and private partners. Moreover, it analyzes the different allocation of risks in EPC contracts to identify the implication for the PA in terms of on-off balance accounting treatment in energy efficiency investment. We show how a successful long-term EPC-PPP can benefit from a mixed contractual structure in which profit-sharing percentage changes during the contract’s life to ensure the same net present value (NPV) to both public and private partners. This paper supports public decision making in order to choose contracts that are able to transfer energy and management risks. Moreover, it helps to understand the balance between public and private interests in a long-term EPC-PPP contract.