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Survey of the European EPC industry

To gain an understanding of the state of affairs of the EPC industry in Europe, a survey has been sent to ESCOs and banks/finance houses around Europe. Olivier Garnier, energy analyst at EEVS, summarizes the situation and provides insight into the regulatory, structural and financial barriers faced by the industry.

The results of the Transparense survey show that the EPC industry faces the same issues in most EU countries, mainly the complexity of the EPC concept, the lack of trust in the EPC industry, low customer demand and split incentives between landlord and tenants.

Regulatory barriers include ineffective regulation, lack of support from the government and uncertainty regarding subsides and policies; while structural barriers concern such issues as lack of trust in the ESCO industry, the complex nature of the EPC concept as well as lack of information. Obtaining finance to fund an EPC project is, rather unsur­prisingly, a major stumbling block for EPC providers and EPC customers across the EU. Furthermore, the financial crisis has made it more difficult to borrow money due to more stringent requirements from the finance houses. It is clear that finance houses and banks in the majority of the EU countries surveyed still struggle to provide adequate finance for EPC projects due to a lack of knowledge on the characteristics of such projects.

Interestingly enough, the financial crisis is also viewed as a driver by a third of the respondents, indicating that increasing energy prices and the necessity to reduce costs can also be powerful forces driving the EPC agenda. Changing government policy and a growing customer demand are also viewed as potential drivers for a positive development for the EPC industry. Energy policies from individual European governments are mostly seen as ineffective. The dissatisfaction with specific EPC policies is even greater, with over 80% of ESCO respondents answering "no policies in place", "very ineffective" or "ineffective". General energy efficiency policies seem to be viewed in a slightly more favourable way, with almost 35% of ESCO respondents choosing to brand them "effective" or "very effective".

The outlook for the EU EPC market taken as a whole is slightly more positive than it was a few years ago. Over half of the ESCO respondents have seen slight or major growth over the last 3 years. 31% believe that the market has stagnated, and only 12% are witnessing a slight or major decline.

The initial investment outlay from ESCOs for EPC projects is almost equally distributed from small projects (under  200 000€) to larger size projects (from 1 to 5 Million €). The provenance of the EPC providers' customers is very balanced: 42% public and governmental sector, 37% private business sector and 38% a mixture of both. The building types in which EPCs are being implemented the most are predominantly public buildings (hospitals, schools, universities), as well as hotels, offices, and, maybe more surprisingly, industrial premises. Typical technologies chosen to feature in an EPC include lighting, building energy management systems, boiler upgrades and heating ventilation and air conditioning improvement.

Olivier Garnier, Energy Analyst at UK Energy Efficiency Verification Specialists (EEVS) and leader of Transparense Work Package 2 on EU EPC markets