The legal framework applicable to the Energy Performance Contract (EPC) is derived from both European Union (EU) and national legislations. At the EU level, the core definition of the EPC is to be found in the Directive 2006/32/EC, but it has not yet been fully transposed into the legislation of all European countries.

Furthermore, most existing definitions are not “operational”, that is to say sufficiently explicit to establish the elements, conditions and modalities of implementation. No standardized and comprehensive typology of EPC models has yet been widely accepted. Consequently, actors of the energy efficiency markets have different understandings of performance-based contractual models; in most cases the functionalities and the characterizing clauses that should explicitly define an EPC are still unclear.

In order to improve understanding of EPC’s characteristics and risks by the potential clients and thus facilitate the ESCOs’ (Energy Service Companies) marketing of their services, it is essential to clarify underlying characterizing concepts behind these particular contractual models.

The 2012/27/EU Directive – Energy Efficiency Directive (EED) establishes a framework to promote energy efficiency (EE) in European Union to ensure the fulfilment of the objective of 20% increased energy efficiency by 2020.

Member States should promote the energy services market and access of SMEs to this market by:
– Disseminating clear and easily accessible information regarding financial instruments, incentives, grants and loans to support Energy Efficiency projects
– Publicly available and regularly updated list of available energy services companies
– Support the public sector in terms of request for proposals for energy services (especially for rehabilitation of buildings).

Within this Directive, the definition of Energy Performance Contracting is the following: “energy performance contracting’ means a contractual arrangement between the beneficiary and the provider of an energy efficiency improvement measure, verified and monitored during the whole term of the contract, where investments (work, supply or service) in that measure are paid for in relation to a contractually agreed level of energy efficiency improvement or other agreed energy performance criterion, such as financial savings.”

Guarantee of savings is one of the key elements of the EPC. This is in line with the EED, as in its Annex XIII, guaranteed savings are listed among the minimum items to be included in energy performance contracts with the public sector or in the associated tender specifications. Moreover, in the article 18 of EED, Member States are required to promote the energy services market and access for SMEs to this market by, inter alia, disseminating clear and easily accessible information on available energy service contracts and clauses that should be included in such contracts to GUARANTEE ENERGY SAVINGS and final customers’ rights.