Energy Performance Contracting (EPC) consists in outsourcing the design, the implementation, the maintenance and sometimes the financing of energy-conservation project to a contractor called Energy Service Company (ESCO). In such long-term contracts, the contractor provides its client with a reduction in energy costs in exchange for a fixed fee or part of the savings achieved. EPC can be considered as an important market driver for efficiency investments. Yet the market in Switzerland is only emerging, lagging behind other countries such as Germany or the US.
Using data from existing markets, interviews and two surveys from the supply and demand sides, this study analyzes the development and potential roles of the Energy Performance Contracting market in Switzerland. The focus is on the impacts on the energy efficiency gap and related transaction costs. The results are used to identify relevant policy measures for promoting the market and possible interactions with other instruments used for energy efficiency.
In Switzerland, the transaction costs related to EPC are exacerbated by the municipal and cantonal divergences in terms of legal requirements. In this context, bottom-up approaches, such as the use of intermediaries (or ESCOs themselves) offering advices on a case by case basis, may be more valuable in Switzerland than top-down methods (e.g. standardized documents, general guidelines) in order to adapt to the divergences occurring in each political jurisdiction.
As compared to other countries, EPC’s potentials in terms of financing opportunities are probably less needed in Switzerland. Indeed, we provide empirical evidence that ESCO’s financing is valued positively only by a minority of potential clients, presumably creditconstrained by debt ceilings. On the other hand, the results show that the performance guarantee offered by EPC represents an attractive approach to unlocking cost-effective energy efficiency improvements. The importance of guaranteeing energy savings results in a crucial policy guidance. If EPC cannot reach all EPC segments such as smaller energy consumers due to the entailed transaction, the policy maker could use other instruments to ensure that the energy savings meet the expectations.
The delay of the EPC market in Switzerland conjugates with a lack of awareness on the demand side and on the supply side. We show that this lack of information results in misperceptions. While most of information dissemination can be led by suppliers themselves, the authorities benefit from neutrality, which is needed to convince public and private potential clients, other public authorities as well as potential suppliers. The final decision regarding the federal energy strategy is also likely to mitigate important uncertainties regarding the potentials of EPC. Still, successful ESCOs will likely be the firms who react and adapt their business model to better fit to the Swiss specificities.