Energy Performance Contracting (EPC) for public institutions – Your entry point

Briefly explained: In Energy Performance Contracting (EPC), a beneficiary — for example a municipality — and a specialised energy service provider (the contractor) conclude a contract under which the contractor plans, implements and monitors energy-efficiency measures and guarantees their effect for the entire contract duration. The investments required to implement the energy saving measures are made in full or in part by the contractor. If the contractor only finances a portion of the investment, the beneficiary covers the remaining amount through a one time capital cost subsidy (in German ‘Baukostenzuschuss’). The contractor is remunerated based on the energy or cost savings achieved, which are contractually defined (energy savings guarantee) and measured and verified using recognised procedures. This shifts technical and, in part, financial risks to the contractor. This form of cooperation is defined in the EU energy efficiency directive 2023/1791 (Directive - 2023/1791 - EN - EUR-Lex).

Below, you can download a model contract including annexes for an EPC. Information regarding tender documents for such EPC projects is also provided.

Why undertake an EPC project now?

The EU energy efficiency directive 2023/1791 significantly tightens requirements for the public sector in every member state, including Luxembourg: Firstly, the entire public sector must reduce its final energy consumption by 1.9% annually, and secondly, an annual renovation rate of 3% of the heated/cooled usable floor area of public buildings must be achieved. Reference is made to the explanations on the website Collecte de données dans le cadre de la transposition de la directive (UE) 2023/1791 relative à l’efficacité énergétique | Klima-Agence.

EPC is already well established in many Member States—particularly for public buildings and street lighting. This is demonstrated by the most recent overview report of the EU Joint Research Centre (JRC) for the years 2020–2021 (JRC Publications Repository - Energy Performance Contracting in the EU – 2020-2021).

The use of EPC contributes nationally to fulfilling measures 109, 303, 319, 320 and 321 of the integrated national energy and climate plan (Plan national intégré en matière d'énergie et de climat du Luxembourg pour la période 2021-2030 (PNEC) - Le gouvernement luxembourgeois).

Furthermore, an EPC project supports a municipality in meeting various measures within the climate pact for municipalities, such as: 2.1.3 Renovation concept, 2.2.1 Renewable energy heat, 2.2.3 Heat efficiency, 2.2.4 Electricity energy efficiency, 2.2.5 CO₂ and greenhouse gas emissions and 2.3.1 Public lighting.

How EPC works in practice

  • Holistic approach: The contractor considers the building or site as a system, assembles a package of measures (e.g. optimisation of heating and ventilation, control technology, lighting, and possibly building envelope measures), and coordinates them to maximise impact and cost-effectiveness.
  • Financing & remuneration: The contractor finances the investments in full or in part and refinances them through the contractually agreed contracting rate, which is funded by the actual savings achieved.
  • Savings guarantee & compensation: The guaranteed savings are demonstrated annually. If the guarantee is not met, the contractor provides financial compensation as if the guaranteed savings had been achieved. Thus, the economic risk of meeting the guaranteed savings rests with the contractor.
  • Long payback times? For measures with longer payback periods (e.g. improvements to thermal insulation standards), the beneficiary may provide an additional one‑time capital cost subsidy (in German ‘Baukostenzuschuss’). This maintains overall economic viability without weakening the savings guarantee.
     

Your advantages as a public institution at a glance

  • Closing resource gaps: Many administrations lack time or specialised staff for complex efficiency and renovation projects. EPC enables clear bundling of services and awarding them to experienced contractors who take over planning, implementation, operation and monitoring—including guaranteed savings outcomes.
  • Risk transfer & results guarantee: In EPC, a substantial share of the technical and economic risk—including achievement of the targets—is transferred to the contractor. If guaranteed savings are not achieved, a financial compensation mechanism applies. This increases budget certainty.
  • Access to financing & cost-effectiveness: EPC combines short-term operational or system optimisations with longer‑term investments (e.g. building envelope). Where investments cannot be fully amortised solely through savings, a capital cost subsidy can ensure economic viability.

Support from Klima Agence and state funding

To help public institutions plan, tender and use EPC more easily, Klima Agence provides not only the model contract (including PDF annexes and Excel files), prepared by the Berliner Energieagentur under the supervision of the Luxembourg Ministry of the Economy and Klima Agence, but also accompanying information and services. If interested, please contact: pacteclimat@klima-agence.lu .

The following national funding instrument is available:

Downloads available here:

Please note that the following documents are available in German only.

Legal notice (disclaimer) regarding the EPC model contract

The model contract and its annexes serve solely as non binding guidance. These documents do not replace legal, tax or technical advice, nor do they provide any guarantee of completeness, accuracy, currency or applicability to individual cases.

Every EPC project is different (building stock, package of measures, procurement procedure, financing including possible capital cost subsidies, measurement and verification plan, allocation of risks, duration, reporting). The contract must therefore always be adapted to the specific project, negotiated by both contracting parties and carefully reviewed by their legal and technical advisors.

Legal framework conditions may change. Users are responsible for checking the contract for legal conformity and currency prior to use and adapting it as necessary.

Klima-Agence accepts no liability for decisions made based on the model contract or its annexes. Only the signed contract version between the parties is legally binding.