Set it up well and an Energy Performance Contract can achieve amazing things for businesses with must-be-met targets to save or generate their own energy.
Like finally getting postponed maintenance and asset replacement projects underway.
Or overcoming scepticism that promised benefits will materialise. Or doing away with the need for upfront capital, when a project would pay for itself quickly if it could just get done.
That’s why I’m a huge fan of Energy Performance Contracts (EnPCs). They’re a great vehicle to getting things done and making big dents in a business’ energy consumption and carbon emissions.
So what makes a successful EnPC?
Simple. The good ones are planned and socialised well.
Yes, like many things in life and business, preparation is the secret to reaping the rewards an energy performance contract can deliver. So here are my five top things to get right when preparing an EnPC:
1. Know your organisation
How does your organisation procure capital projects? What is the governance process for investing in this kind of commercial contract? What governance changes are needed if any? How does it differ from your conventional capital projects?
2. Engage your decision makers early
It’s vital to get your key decision makers to understand how an EnPC approach can deliver the results they want. I’ve seen EnPCs that are well supported by engineering, maintenance and procurement teams stall when escalated to senior management for approval. And only because the approach was unfamiliar. You can lose a lot of momentum and credibility that way.
Start meeting key decision makers at least six months before your organisation sets its budget for the next year. This gives you time to get them to ‘buy into’ the process and set a realistic budget which may need initial site energy assessments. Introducing your preferred energy partner at this stage can also help build confidence in the approach.
3. Define a clear strategy and set clear objectives
What is the most important thing you want your EnPC to achieve? Is it a reduction in carbon, energy or cost? Is it an increase in operational performance or productivity? Are there associated benefits or drivers such as security of supply, business continuity or asset replacement?
It’s rare that you can achieve every possible benefit within the usual commercial constraints. So decide what you can compromise on.
4. How to pay for it
There are so many options and variations of a theme available, that you must be clear about what is and is not acceptable to your organisation; on/off balance sheet, third party financing, shared savings, paid through an energy supply contract and so on. It’s hard to give generic advice beyond saying you can model different options and that you should at least set specific criteria which you know are acceptable to your business. (see point 1).
5. Choose the right EnPC contractor for your organisation
EnPCs work brilliantly when there is a great deal of co-operation, communication and trust between client and contractor. Not so effective when those ingredients are missing. So look for a partner who shares your values and is able and willing to commit to an enduring relationship.
A good indicator is how open they'll be about challenging projects and times when things didn't go to plan as well as describing successes. Because there will be times when things don’t go as planned either during delivery of the project or during the measurement & verification of the savings phase. This is when you need an EnPC partner who will put your interests first.
It's fair to say that EnPCs can't solve every problem and aren't right for every organisation. But approached in the right way, they can be right for a lot of situations. I’m a fan because engineering is about solving problems and EnPCs can help businesses break through many technical, financial and even cultural barriers holding them back from energy efficiency greatness.
To find out more about EnPCs from EDF Energy and how we can help guide you through these steps please contact one of our team at email@example.com or visit edfenergy.com/large-business/buy-energy/performance-contracts