Strategic design of cost savings guarantee in energy performance contracting under uncertainty

Qianli Deng, Xianglin Jiang, Qingbin Cui and Limao Zhang

Applied Energy, 2015, vol. 139, issue C, 68-80

Abstract: Among the key barriers to profit in Energy Performance Contracting (EPC) are uncertainties about attaining the realized energy cost savings and potential disputes over the guaranteed cost savings. In this paper, a methodology has been proposed to assist the Energy Service Company (ESCO): (1) to evaluate the risk threshold if the guarantee has already been made, and (2) to determine the guarantee design, if the guarantee has not been made yet, that not only promises the ESCO’s profitability from EPC but also maintains its competitiveness to win the bid. Uncertainties within the energy cost savings are modeled stochastically using Monte-Carlo simulation, taking both the energy price fluctuation and the facility performance variability into account. Based on that, a strategic energy savings guarantee design curve is derived, that all the points on it would return as appropriate guarantees. Finally, a campus case is presented to demonstrate the applicability for finding the appropriate guaranteed savings value. This method is also worth popularizing in similar performance-based projects.

Keywords: Energy performance contracting; Cost savings guarantee; Energy Service Companies; Uncertainty modeling (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0306261914011891
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:139:y:2015:i:c:p:68-80

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/bibliographic
http://www.elsevier. ... 405891/bibliographic

DOI: 10.1016/j.apenergy.2014.11.027

Access Statistics for this article

Applied Energy is currently edited by J. Yan

More articles in Applied Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().