ESCO is an enterprise, which provides a deep renovation process of multi-family buildings and gives a long-term guarantee for its construction works. ESCO guarantees a certain level of energy savings in a building, certain indoor and water temperature, qualitative construction work and its regular maintenance throughout the duration of the contract. Therefore, in 15 or 20 years the renovated building will look like new.
All ESCO guarantees are discussed and stipulated in the Energy Performance Contract, that is signed between house residents and chosen ESCO. ESCO can be any competent enterprise, including property management or utility service company, that is ready for residents to provide the above-mentioned guarantees.
An energy service company (ESCO) have an important role in the comprehensive renovation of multifamily buildings. Under Energy Performance Contracting (EPC), ESCOs provide a wide range of energy efficiency related services. ESCO services cover all stages of the construction project: the energy audit of the house, preparation of technical documentation, analysis, and monitoring of construction project energy efficiency results. By engaging the ESCO throughout the renovation process, the company can provide all offered guarantees. Find out more about ESCOs here.
EPC means that a contractor (an ESCO) is engaged to improve the energy efficiency of the multifamily residential building and to achieve the defined energy savings covering all (or part of) the investment required for the renovation works.
Under EPC the ESCO guarantees to achieve the defined energy savings covering the investment required for the renovation works. In case if the defined energy savings is not achieved, the ESCO will take into account all operational and technical risks.
Under this form of contract, the ESCO examines the building, evaluates the level of energy savings, and then offers to implement the renovation project. After signing an EPC contract ESCO main task is to provide the agreed guaranteed in the long-term – comfort standards, energy savings, quality and maintenance standards. Find out more about EPC here.
Taking into account Latvian housing lifespan, multifamily buildings should be renovated comprehensively. It means that renovation should involve construction works that reduce energy consumption in a house (e.g. insulation of external walls, attic, basement, heating, hot water pipe replacement, window, and exterior door replacement). Also, some structural construction works need to be done, that would strengthen building exterior construction (e.g. exterior wall reinforcement and repair of the ventilation system). All construction work performed in the building must meet the requirements of the legislation (ensured minimum air exchange rate, not exceeding the maximum heat transfer coefficient, etc.).
Find out more information about the deep renovation of multifamily buildings here.
Residents. In the renovation process, multifamily building residents are the ones who decide on the deep renovation of buildings and finance it. Of course, the residents are able to find several alternatives to reduce the financial burden of payments, for example, to attract investments from municipality and finance institution ALTUM for creation of technical documentation, construction works, and other costs.
One of the options for apartment owners is to take a loan in the bank and to repay it on a monthly basis. If the loan agreement is for 10 years, the residents have to recover the amount to the bank within 10 years.
The second financing option for the residents is to sign an EPC, in which the guarantees and financing rules are set. In this case, the ESCO takes a loan in the bank and residents repay the construction costs to ESCO within accordance with the provisions set in EPC contract.
After the renovation, the payment for every renovated building will differ. The payment size differs not only from the size of the building but also from costs of construction work during the deep renovation, and also from the amount and conditions of available funding and co-funding. The payment for building renovation will be included in the monthly long-term bill, which differs depending on created contract length with the lender.
If apartment owners have decided to attract ESCO funding, usually ESCO takes a loan in the bank. During the period of EPC, three payments are listed in the monthly bills for the owners:
1. Payment for renovation (includes investment for construction works in building, such as engineering, construction, montage, project management, and financing costs);
2. Payment for heating to the heat supply company, that provides heat and hot water supply to a residential building;
3. Operation and maintenance costs (include all costs that will occur for ESCO during operation and maintenance activities, for example, costs for cleaning the heat exchangers of the heating system, replacing the ventilation system filters or restoring the facade paint).
With these payments, the ESCO receives remuneration for its services and can repay the loan from the bank.
For now SUNShINE and Accelerate SUNShINE consortium focus its work to support ESCOs that have successfully completed renovation projects, and in 2 years the projects will be refinanced and the enterprises can continue their work with other building projects. Find out more.
Within energy efficiency service framework service provider implement energy consumption reduction, energy efficiency and other energy utilization related activities. Under EPC the energy efficiency service provider guarantees to achieve the defined energy savings covering the investment required for the renovation works. In case if the defined energy savings is not achieved, the ESCO will take into account all operational and technical risks.
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.
- Reduced energy consumption of household – less energy will be required to heat your home;
- Ensured temperature control inside the house – every resident of the apartment will be able to control the temperature in each room separately;
- Improved living conditions – guaranteed indoor air quality, warm apartment and comfortable conditions in any season;
- Reduced capital investment –because energy-efficient, qualitatively insulated home does not need investment for emergency repairs and maintenance;
- Smart decision for your future – comprehensive multifamily building renovation will help to increase the value of an apartment by 20-30%!
The apartment owners can agree with the property manager on the reduction of the maintenance fee, as during the renovation the new facilities will be installed and all necessary construction works will be completed in the building, while Energy Efficiency Service Provider (ESCO) will maintain the construction work done under the EPC.
It means that instead of spending money once the problem has appeared, the ESCO doesn’t let problems appear in the first place by maintaining building and equipment in the building. For instance, they will not wait until the heat exchanger of the heating system is not working. Instead, the energy service company has periodically checked and maintained the heat exchanger based on manufacturer’s recommendations. This schedule is a part of EPC and owners can be sure that the ESCO will follow to it.
In order to facilitate the building renovation process for all involved parties (residents, ESCOs, banks, etc.), we have developed a single EPC model for the renovation of apartment buildings within the framework SUNShINE project.
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 EPCs. The difference is only in the renovation, operation and maintenance measures included in the EPC for each building.
For public building renovation, other contract samples are available 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 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.