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Public procurement frameworks help speed up the adoption of Energy Service Contracts

Public procurement frameworks (PPFs) provide the most effective route to encouraging the uptake of Energy Service Contracts in the public sector says a new report published today. Researchers at the Centre on Innovation and Energy Demand and the University of Bristol found that PPFs can significantly reduce the barriers that public sector organisations face when seeking to adopt energy service contracts. They go on to argue that public policy should prioritise establishing, supporting and promoting procurement frameworks in different parts of the public sector.

Energy service contracts (ESCs) involve the outsourcing of one or more energy-related services to a third party, or a contractor. They guarantee a specified level of energy savings over a period of several years and can reduce energy demand by increasing energy efficiency. Public sector organisations are in this way enabled to reduce their operating costs, transfer risk and focus on their core activities.  Many public sector organisations have dramatically reduced their energy bills as a result of adopting ESCs.

According to the policy brief, written by Professor Steven Sorrell and Dr Colin Nolden (a former CIED Research Fellow, currently Vice-Chancellor’s Fellow at the University of Bristol), PPFs perform three key roles that can speed up the adoption of Energy Service Contracts:

  1. Providing a recognised legal framework for procuring ESCs.
  2. Acting as intermediaries between clients and contractors, providing dedicated, expert assistance at each stage of the process.
  3. Promoting ESCs to potential clients (for example by disseminating case studies, organising visits to successful contracts or facilitating access to specific funding sources)

The report has also looked at the uptake of ESCs in the commercial sector and found that the growth in this sector has been much slower. PFFs may not work as well in this sector because commercial organisations face a different set of barriers to public sector organisations. Instead, lessons should be learnt from initiatives in other countries, including new approaches to financing projects and to measuring and reporting energy savings, say the researchers.

Further reading:

Nolden C., Sorrell, S. (2017) The role of Energy Service Contracts in delivering improved energy efficiency

Nolden, C., Sorrell, S. (2016) The UK market for energy service contracts in 2014-2015, Energy Efficiency, 2016, 9(6) pp 1405-1420

Nolden, C., Sorrell, S., Polzin, F. (2016) Catalysing the energy service market: The role of intermediaries, Energy Policy, 98 420-430

Find out more about our project on ‘The diffusion of energy service contracting’.