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Frequently Asked Questions
Frequently asked questions (14)
An energy service company (ESCO) is a legal entity which delivers building renovation using Energy Performance Contracting in a multifamily residential building. Generally speaking, every company, including house maintenance companies and utility companies, using Energy Performance Contracting (EPC) is considered an ESCO.
During the design and implementation stages of the project ESCO undertakes all technical, economic and legal risks. Main goal of the ESCO is to ensure guarantees (energy savings, quality standard, comfort standards and maintenance standards) during the whole EPC term.
Energy Performance Contracting (EPC) is a contract between a legal entity - ESCO who will be renovating Your home and You - the residents of the multifamily building. EPC means that a contractor (an ESCO) is engaged to improve the energy efficiency of Your multifamily residential building and to achieve the defined energy savings covering all (or part of) the investment required for the renovation works. Under this form of contract the ESCO examines Your building, evaluates the level of energy savings, and then offers to implement the renovation project. With EPC the investment for the renovation of the building are repaid from the energy savings and related financial savings, so there is no need for the up-front capital from the residents of the building.
EPC includes information about the guarantees (guaranteed energy savings, guaranteed quality standard, guaranteed comfort standards and guaranteed maintenance standards) that ESCO have to ensure You during the whole EPC term. At the same time the EPC will clearly show the contracting rates that the ESCO will charge You. These rates, also called fees, are charged because the ESCO needs to cover the investment costs of the renovation works, the financial costs of the project, and also needs remuneration for operating and maintaining the measures implemented in Your building.
To summarize: ESCO undertakes all technical, economic and legal risks. The main goal of the EPC is to ensure that energy savings, quality standard, comfort standards and maintenance standards are met during the whole EPC term and to protect You when it doesn't.
For more detailed informaton about EPC, please look here.
The renovation project includes the deep renovation of Your multifamily building. Deep renovation consists of both the energy saving measures (for example wall insulation, insulation of the heating system) and measures that repairs the building fabric (for example fixation and repairing of the external walls) and engineering systems (for example replacement of the damaged heating pipes). All measures have to apply to the regulations (for example ensure the minimal air exchange rate, not exceed the maximal heat transfer coeficient of the building envelope).
It should be noted that carrying out all repairs in Your building at the same time is financially more beneficial and also easier from the technical point of view, so it is possible to get the best results and the highest energy savings at the lowest price than implementing each measure individually.
For more detailed information about the deep building renovation please look here.
With EPC You do not need to undertake loan obligations. Project is carried out and financed by the ESCO. The ESCO will arrange for the needed capital investment using available subsidies, financing from commercial banks and other specialized facilities or investors (Funds). The investment for the renovation of the building are repaid from the energy savings and related financial savings.
After the renovation with EPC, the way and amount that is paid for heating and circulation losses (if Your house has centralized hot water supply) will change. These fees will be replaced by Energy Fee, Renovation Fee and Operation and Maintenance Fee.
Energy Fee includes the costs for the heating and circulation losses. This payment is calculated from the actual heat consumption after the renovation and heating tariff.
Renovation Fee includes the investments for the renovation of Your building, for example engineering, construction, installation, project management and financing costs, and the rate offered to prime banks on interbank term deposits (EURIBOR) minus the subsidies (for example grant from the current multifamily building renovation program). This fee is distributed throughout the EPC term.
Operation and Maintenance Fee consists of the inflation rate and costs for the operation and maintenance of the renovation works during the EPC contract period for example costs for cleaning the heat exchanger of the heating system, replacement of filters for a new ventilation system, or a provision for repainting the façade. This fee is distributed throughout the EPC term.
During the energy audit heat consumption, hot water consumption (if Your house has centralized hot water supply), average outdoor and indoor temperature as well as the dates when space heating are started and stopped in the last 3 to 5 years are determined. Taking into account the average outdoor and indoor temperature as well as the dates when space heating are started and stopped in Your building, average heat consumption in these years also called the baseline is calculated. The baseline (average heat consumption in the last 3 to 5 years) shows how much heat Your building would consume if no renovation was done. Multiplying the baseline with heating tariff equals the sum that residents would pay if no renovation was done. Energy Fee, Renovation Fee and Operation and Maintenance Fee after the renovation (taking into account the outdoor and indoor temperature as well as the dates when space heating are started and stopped in the baseline year) cannot dramatically exceed this sum.
Energy service company (ESCO) invests their own money in Your building renovation so You won't have to take a loan. During the EPC term the bill will include Renovation Fee (includes the investments for the building renovation, for example engineering, construction, installation, project management and financing costs) and Operation and Maintenance Fee (this fee covers the costs which the ESCO will have for the operation and maintenance of the renovation works, for example costs for cleaning the heat exchanger of the heating system, replacement of filters for a new ventilation system, or a provision for repainting the façade). With these payments ESCO will receive the remuneration for its services and can pay back the loan to the bank. But these fees together with the fee for consumed heat cannot dramatically exceed the fee which You would pay for the consumed heat if no renovation was done (taking into account the outdoor and indoor temperature as well as the dates when space heating are started and stopped). In this way the payments can be kept at a reasonable level during the EPC term. Only way the ESCO can earn more is to design and implement better renovation project for Your house. This means that You receive high-quality service.
The EPC is signed between the ESCO and the Community of Apartment Owners. According to the Latvian "Law On Residential Properties" general meeting of apartment owners of the building is convened. At the meeting apartment owners vote on the implementation of the EPC project, as well as nominate the mandate person who will be authorized to sign the EPC on behalf of all the apartment owners. The decision is taken if the number of the apartment owners who have voted "for" the decision represent more than a half of the residential properties of the residential house. In the general meeting voting can be done by a person listed in the Land Register.
If Your house is not connected to the district heating but it has a local heat source (for example, gas or pellet boiler) and data about fuel consumption are available (minimum is the data about the last 3 years) then the house can apply to the "Multifamily Building Renovation Program" of the Latvian Baltic Energy Efficiency Facility (LABEEF). In this case during the energy audit additional calculations to understand boiler efficiency are needed.
But if Your house has a local heat source and there is no data about fuel consumption building cannot apply to the LABBEF program. It is because it will not be possible to calculate energy consumption before the renovation and to determine energy savings after the renovation. In this case the first step should be to start recording the fuel consumption data.
If there is a separate heat source (for example, gas boiler or stove) in every apartment of Your building then the house cannot apply to the LABEEF program. It is because in this case it will be difficult or impossible to calculate the energy consumption before the renovation and to determine the energy savings after the renovation.
At the moment Latvian Baltic Energy Efficiency Facility (LABEEF) do not have program for the renovation of private houses.
Benefits of the EPC:
- ESCO assumes all the tasks and risks of the renovation project;
- ESCO will arrange the needed capital investment for the renovation project;
- Apartment owners do not need up‐front capital or take loan from the bank;
- Contractual guarantees for the apartment owners during the whole EPC term;
- Predictable and clear fees during the whole EPC term;
- House is conserved for the next 30 or more years;
- Maintenance cost reduction;
- Cleaner environment and improved quality of life;
- Apartment value increases by 10-20%;
- After the EPC expires residents pay only for the actual heat consumption.
For more detailed information about EPC, please look here.
Maintenance cost is reduced because during the renovation all crucial and necessary works in Your building are done and new equipment is installed but after the renovation a proper maintenance schedule is implemented. Of course, maintenance is cheaper because new equipment has been installed, but more importantly it is reduced because instead of spending money once the problem has appeared, the ESCO doesn't let problems appear in the first place by maintaining Your building and equipment in the building. For instance, they will not wait until heat exchanger of the heating system is not working. Instead, Your energy service company has periodically checked and maintained the heat exchanger based on manufacturer's recommendations. This schedule is part of Your EPC and You can be sure that the ESCO follows it.
The sections in all EPC's are the same. Basic principles - ensure guarantees (guaranteed energy savings, guaranteed quality standard, guaranteed comfort standards and guaranteed maintenance standards), provide turnkey service (the ESCO provides all the services required to design and implement the deep renovation of the building) and minimize the risks for multifamily building residents - are also the same in all the EPC's. The difference is only in the renovation, operation and maintenance measures included in the EPC for each building.
For more detailed information about EPC, please look here.
The finance for multifamily building renovation is also available for the renovation of culturally and historically valuable multifamily residential building. But it should be taken into account that if the law "On Protection of Cultural Monuments" applies to Your building then no measures that could change the building appearance (for example external wall insulation) can be implemented. Exception is only in cases with the permission of the State Inspection for Heritage Protection of the Ministry of Culture.
LABEEF ir fonds, kura galvenais mērķis ir nodrošināt energoefektivitātes pakalpojuma sniedzējiem (ESKO) nepieciešamo finansējumu. Pārliecinājies, ka ESKO ir pienācīgi veicis darbus un sasniedzis Energoefektivitātes pakalpojuma līgumā (EPC) noteiktos mērķus, fonds nopērk tā nākotnes ieņēmumus, lai ESKO varētu īstenot citus projektus. Fonds darbojas saskaņā ar vadlīnijām, kuras kalpo par pamatu, lai LABEEF izvērtētu finansējuma piešķiršanu konkrētiem ESKO.
Sīkāka informācijas par LABEEF ir pieejama šeit.