Energy Performance Contract (EPC)

The Different Types of Energy Performance Contracts

Works-Type Energy Performance Contracts

The works-type EPC is the most common form of energy performance contract. It includes the completion of energy renovation work on the building or technical equipment (heating, ventilation, lighting, insulation, etc.). These interventions aim to significantly reduce energy consumption and improve comfort.

In this type of contract, the service provider undertakes not only to design and execute the work, but also to guarantee a minimum level of energy savings over a defined period. If the results are not achieved, the service provider compensates for the difference according to the terms and conditions stipulated in the contract.

This EPC is particularly suited to older or energy-intensive buildings requiring technical upgrading. It can be combined with financing mechanisms (CEE, public subsidies, third-party financing) to reduce the initial investment. It offers a comprehensive and secure solution for project owners wishing to undertake energy-efficient renovations, while relying on a commitment to measurable and verifiable results.

Service-type EPCs

The service-type EPC is primarily based on optimizing existing buildings, without necessarily undertaking major renovations. The objective is to improve energy performance through facility management, optimized maintenance, precise consumption regulation, and user involvement.

This type of EPC leverages so-called “organizational” or “behavioral” levers, such as HVAC system configuration, real-time consumption monitoring, and occupant training. It relies on remote monitoring, technical management tools (TMS), and energy dashboards.

The service provider commits to a performance objective, with an obligation to deliver results, as with other types of EPCs. This format is particularly suited to recent or already renovated buildings, where the potential gains lie in the use and operation of equipment.

The service-type EPC thus allows for rapid gains at a lower cost, while laying the foundations for a culture of sustainable energy performance. It is also an excellent starting point before future work.

Global EPCs

The global EPC combines several services in a single integrated contract: construction, operation, maintenance, and energy management. It offers a comprehensive and coherent view of performance, with a single point of contact responsible for all actions.

This type of contract is designed to maximize long-term energy savings by ensuring both the efficiency of technical installations and their optimal operation. It generally includes performance commitments over several years (up to ten years), with regular monitoring and penalties for failure to meet targets.

The global EPC is well-suited to complex or multi-site sites (communities, campuses, large real estate portfolios) that require unified management. It also allows for better coordination of investments, optimization of operating costs, and securing results through a comprehensive approach.

EPC with or without third-party financing

An EPC can be implemented with or without third-party financing, depending on the project owner’s investment capacity and the project’s financial strategy.

In an EPC with third-party financing, an external entity (bank, semi-public company, third-party operator) covers the initial investment. Reimbursement is then made from the energy savings generated. This allows public stakeholders or companies with limited budgets to undertake ambitious projects without immediately mobilizing their own funds.

Conversely, an EPC without third-party financing relies on direct financing by the beneficiary. The latter retains full control over financial flows and can fully benefit from the savings once the investment has been amortized.

The choice between these two models depends on numerous factors: borrowing capacity, desired commitment period, access to public aid, and acceptable level of risk. In all cases, the performance guarantee mechanism remains central, securing the return on investment.

Who is the energy performance contract for?

The energy performance contract is aimed at all stakeholders with energy-intensive buildings who wish to sustainably reduce their consumption. It is particularly suited to organizations facing regulatory or economic objectives related to energy efficiency.

Local authorities (town halls, departments, regions) are among the main beneficiaries, particularly for their schools, gymnasiums, administrative buildings, and cultural facilities. Social housing providers and condominium managers also benefit from a regulated solution for financing and managing energy renovations.

In the private sector, industrial companies, large service groups, clinics, and shopping centers can use the EPC to improve the performance of their facilities while securing results.

What are the advantages of an EPC?

The energy performance contract offers numerous benefits for both public and private project owners, combining energy efficiency, contractual security, and long-term profitability.

The main advantage of the EPC lies in its commitment to results: the service provider guarantees a measurable level of energy savings. This approach reduces investment uncertainties, secures return on investment, and limits financial risks.

The EPC also enables a sustainable reduction in energy consumption, resulting in a significant reduction in energy bills and greenhouse gas emissions. It thus actively contributes to organizations’ climate strategies.

The EPC also contributes to the valuation of real estate assets. Improving the energy performance of buildings increases their comfort, attractiveness, and regulatory compliance (particularly with regard to the tertiary decree or mandatory energy audits).

Finally, the EPC facilitates access to public or private financing (CEE, grants, third-party financing), making ambitious projects possible without mobilizing all of the company’s own funds. The EPC is therefore a strategic tool for combining economic performance and environmental commitment.

What are the limitations of an EPC? 

The first limitation is related to its technical and legal complexity. Implementing an EPC requires specialized expertise to define objectives, manage commitments, structure guarantee clauses, and monitor results. Without adequate support, the project may lack rigor or consistency.

Another challenge: the reliability of the initial assessment. If the initial energy audit is poorly conducted, projected savings may be overestimated, compromising profitability and trust between the parties.

Furthermore, the choice of service provider is also strategic. A company with little experience or poor references may not achieve the set objectives, despite the existence of a contract. Finally, the implementation time can be lengthy: between the study, contracting, construction, and monitoring phases, an EPC can span several months, or even years.

How to set up an energy performance contract?

Step 1: Initial Energy Audit

This first phase establishes a detailed inventory of the site’s energy consumption. The audit identifies the most energy-intensive equipment, potential malfunctions, and areas for improvement. It also serves to define the baseline situation that will allow future savings to be measured.

Step 2: Drafting the Specifications

Based on the audit, specifications are drafted. They set out the performance objectives, the types of actions planned (works, management, maintenance), the monitoring procedures, and the commitments expected from the service provider. This document is essential to ensure a clear and transparent consultation.

Step 3: Launching a Call for Tenders (Public or Private Contract)

The project owner then selects a service provider via a call for tenders. Candidates submit technical and financial proposals, including a commitment to guaranteed savings. 

Step 4: Implementation of Actions

Once the contract is signed, the service provider initiates the planned actions: energy improvement work, installation of monitoring equipment, user awareness raising, optimization of settings, etc. This phase can last several months depending on the scope of the project.

Step 5: Performance Monitoring and Annual Verification

Throughout the contract, results are tracked using measurement tools (sensors, software, BMS) and compared to the baseline situation. An annual review validates the achievement of objectives. In the event of deviations, adjustments or compensation are implemented according to the terms of the contract.

What is the link between an energy performance contract and a carbon strategy?

The energy performance contract (EPC) is a concrete lever for implementing an effective and measurable carbon strategy. By directly affecting the energy consumption of buildings, it helps reduce greenhouse gas emissions, particularly in scopes 1 and 2 defined in a carbon audit.

The work and actions carried out within the framework of an EPC help reduce dependence on fossil fuels, improve equipment efficiency, and promote more efficient and intelligent management of energy resources. It is therefore fully integrated into a gradual decarbonization trajectory.

Furthermore, the results obtained through the EPC are quantifiable, verifiable, and traceable, facilitating carbon reporting, regulatory compliance (e.g., tertiary decrees), and the achievement of objectives set by a climate roadmap. For businesses and communities, the EPC thus becomes a tool to optimize energy efficiency and reduce carbon footprints, while securing long-term investments.