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Energy costs are an important expense item, especially for the industrial sector. For this reason, industrial enterprises and public institutions are looking for solutions to save energy within the scope of various legal and technical regulations in order to minimize energy costs. In this context, Energy Performance Contracts (EPC) are one of the types of contracts applied to increase energy efficiency and reduce costs.
What is an Energy Performance Contract?
An Energy Performance Contract is a type of contract that aims to achieve targets such as reducing energy costs or repaying the investment over a specified period of time. The EPS model is geared towards achieving energy efficiency in buildings and industrial facilities, especially through energy service companies.
In this contract model, energy service companies are obliged to optimize the energy systems in the facilities, to carry out the necessary maintenance and repairs, and to implement projects that will increase efficiency.
One of the prominent energy service companies in EPS applications is ESCOs. ESCO (Energy Service Companies) are organizations that develop energy saving projects by taking financial risks to increase energy efficiency in facilities and buildings. ESCOs generate income when the savings targets stipulated in the contract are met, thus ensuring the success of energy savings.
Energy Performance Contract Models
Energy Performance Contracts are arranged in different types according to risk sharing and financial obligations between the parties:
- Guaranteed Performance Contract: The service provider guarantees the specified level of energy savings and covers the difference if this saving is not achieved. In this model, all financial gain from savings is concluded in favor of the customer.
- Shared Performance Contract: The energy savings obtained are shared between the service provider and the customer at the determined rates. The energy saved generates income for the utility company over a period of time. In this model, it is aimed to distribute the economic benefit on energy costs between the parties in a balanced way.
- Energy Performance Contract Without Investment: In this model, the savings obtained during the contract period belong to the company providing the service, but all savings rights obtained are transferred to the investor upon the expiration of the contract period. If the projected savings are not realized, the company providing the service bears a loss.
EPS and Legal Legislation
Energy Performance Contracts are supported and regulated within the scope of the Energy Efficiency Law No. 5627, which entered into force in 2007. This law includes issues such as efficient use of energy resources, increasing energy efficiency and preventing waste.
The legal regulations regarding EPC applications are detailed with the "Regulation on Increasing Efficiency in the Use of Energy Resources and Energy" dated October 27, 2011 and determine the legal framework of energy efficiency services and audit processes.
With the "Communiqué on the Implementation of Energy Performance Contracts in the Public Sector" published in the Official Gazette in 2021, certain standards were introduced for public institutions and organizations within the scope of EPC. In this context, a minimum 20% energy saving guarantee is sought in public tenders and contractors are obliged to meet this target.
Result
Energy Performance Contracts constitute an important legal and economic mechanism for reducing costs, increasing energy efficiency and implementing sustainable energy policies for the industry and public sector. Strengthening the legal framework and increasing incentives for the spread of EPC applications in Turkey is seen as a strategic necessity in terms of energy savings. Accordingly, expanding the applicability of Energy Performance Contracts will contribute to the sustainable realization of energy management.
Originally published 09.02.2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
