CARTIF is one of the members of the frESCO project, which has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No893857 on 1 June 2020 to deliver the next generation of EPC on the basis of synergetic business models between aggregators and ESCOs, hybrid innovative energy services properly combining energy efficiency and demand response, clear and well-specified legal/contractual provisions and objective measurement and verification schemes to ensure objective verification of savings and fair & transparent remuneration of flexibility under the principles of Pay-for-Performance schemes.
Energy Performance Contracting (EPC) is a form of ‘creative financing’ for capital improvement which allows funding energy upgrades from cost reductions. Under an EPC arrangement an external organization (ESCO) implements a project to improve the energy efficiency or renewable energy production, and uses the stream of incomes from the cost savings or the returns from the renewable energy produced, to repay the overall costs of the project, including the costs of the initial investment. Essentially the ESCO will not receive its payment unless the project allows energy savings as expected. In EPC, ESCO’s remuneration is based on the demonstrated performance; a measure of performance is for example the level of energy savings or the returns from an energy service. EPC is a means to guarantee infrastructure improvements to facilities that lack energy engineering skills, manpower or management time, capital funding, understanding of risk, or technology information.
Despite the large economic energy saving potential in the EU, nowadays very few ESCOs apply Energy Performance Contracting to the residential market due to the following main barriers which make a large-scale application of the ESCO EPC model for residential buildings particularly difficult: the high transaction costs, the high fragmentation of market, the refusal of the owner to reduce electricity costs, the variation of individual needs and behaviors that require a personalized treatment, the lack of information and experience on the residential consumer side on EPC and Energy Management, the fear of becoming dependent on specific contractors for a long period, the inability of tenants and homeowners to cope with upfront investments (if needed) and the lack of public subsidies and financing capita, especially when considering the low attractiveness of typical EPC schemes and services.
Therefore, new EPCs need to disengage from current old-fashioned savings-based performance contracts and allow for adaptation to evolving energy market trends with the introduction of novel hybrid schemes that do not only reduce costs, but also create new revenue streams for the end-consumers/ prosumers, by empowering them to participate in energy transactions and become active players to the overlay energy market actors. Such an approach is expected to significantly reduce the payback period of relevant investments in smart equipment, distributed energy resources and assets (e.g. storage, EVs) thus, increasing the attractiveness of modern EPCs both for the investor (ESCO/ Aggregator) side, but also on the consumer side (enabling also the removal of the tenant/ landlord dilemma).
To this aim, frESCO Project Consortium, under the coordination of FUNDACION CIRCE, will introduce a variety of multiservices bundles to be provided by ESCOs/ Aggregators towards residential consumers in the frame of extended EPC offerings under the principle of Pay for Performance. These packages will combine: building retrofitting and investments for the installation of smart equipment (metering, sensing, actuating), extended offerings for the installation of distributed generation (PV) and storage (batteries) units, energy efficiency measures, flexibility services (with the introduction of storage and, if available, electric vehicles as means for enhancing flexibility) and non-energy services (Comfort preservation, Indoor Air-quality, Security, Well-being, Emergency notification services, etc.).
frESCO’s new business models will be demonstrated in 4 different pilots (Spain, France, Croatian and Greece) with complementary characteristics in terms of building typology (single-/multi-family), climate, regulation, energy consumption, energy assets, consumer groups, etc., thus facilitating the replicability of frESCO’s solutions across Europe. Overall, frESCO aims to directly achieve a primary savings of 464 MWh/yr and a reduction of 108 tCO2/yr and trigger 28.3M€ investment during the replication.