ESCO, or so-called ‘guaranteed result contracts’, make implementing energy efficiency measures more accessible
The article is republished from citybuild.bg >>
In terms of energy efficiency and a sustainable future, Bulgaria has taken another step forward in providing opportunities for the comprehensive renovation of the building stock. Thanks to the four-year efforts of the FinEERGo-Dom project, the use of the ESCO mechanism has become an accessible tool to assist owners in renovating public and multi-family residential buildings.
In Bulgaria, the new mechanism for comprehensive building renovation through ESCO, or the so-called ‘guaranteed result contracts’, was developed and proposed by the FinEERGo-Dom project team, led by Econoler (Bulgaria) and supported by numerous partners from Poland, Latvia, Austria, Romania, and Slovakia. It is based on the LABEEF model, successfully applied in Latvia for building renovation through ESCO, and its implementation in Bulgaria was made possible thanks to strategic partnerships at national and local levels, including with the Ministry of Regional Development and Public Works, the Sustainable Energy Development Agency, and the teams of H2020 projects BeSmart, SHEERenov, SHAREs, and the Bulgarian ESCO association.
The centerpiece of the project is the creation of the FinEERGo-Dom one-stop-shop– an innovative and free solution addressing the need for a wide range of services to achieve deep renovation of buildings in the country. The center’s primary task is to assist municipalities and citizens in correctly using the newly developed ESCO mechanism for renovating their homes within Stage II of the Recovery and Resilience Plan, where 175 million euros in grant funding is provided. It is crucial to properly inform citizens about the specifics of the new model and for municipalities to competently conduct the procedures for selecting an ESCO company. In this context, a series of informational meetings with citizens on the topic of building renovation, the first of which will be in Burgas on December 5th, are planned in the coming months with the assistance of local municipalities. Information campaigns with Gabrovo municipality, Blagoevgrad municipality, and other interested municipalities are in the process of being finalized.
Why the ESCO Mechanism is Necessary
The practice in Bulgaria shows that the main problem in the energy renovation of the building stock is obtaining the initial resource for financing the investment. Essentially, with the ESCO mechanism, the company provides this financial resource, which is subsequently paid back 100% from the realized future energy savings, not by the owners. The contractor (ESCO) provides annual financial guarantees for the realization of the planned energy savings, which practically means that if the planned energy savings are not achieved, the owner will receive financial compensation, and the ESCO company has the responsibility to remedy the causes of the negative result.
In Bulgaria, there has been a legislative framework regarding guaranteed result contracts for years, but due to imperfections, its application was limited in scope – individual programs for renovation of residential buildings and operational programs targeting public buildings under the European Union. One of the main contributions of the FinEERGo-Dom project is the integration of the ESCO model into several strategic programs of the country and the introduction of legislative changes to improve the ESCO model and expand the possibilities for its application through hybrid forms – ESCO model and grant funding. Examples in this regard are the Long-term Strategy for Renovation of the National Building Stock (up to 2050), the provision of ESCO for financing 20% for renovating multi-family residential buildings in Stage II of the Bulgarian Recovery and Resilience Plan, changes in the Energy Efficiency Act and the accompanying ordinance for applying ESCO in the public building stock, and the new generation of financial instruments from the Fund of Funds, providing the possibility of combination with the ESCO mechanism. Opportunities for the use of technical assistance under international instruments EUCF (EUR 60 thousand) and ELENA (up to EUR 3 million) were foreseen.
The project showed that active efforts to popularize good practices are of crucial importance for the successful renovation of the building stock. The story of FinEERGo-Dom is more than just a project to develop a financial mechanism for comprehensive building renovation – it is a story of innovation, collaboration, and change. It demonstrates how joint efforts and strategic thinking can lead to significant improvements in a country’s sustainability and serve as a model for other countries striving for a green and sustainable future.