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Energy efficiency is one of the most cost-effective opportunities in the energy transition, yet many viable projects still struggle to attract investment. High upfront costs, limited access to financing, unclear risk allocation, and difficulties in measuring savings often prevent technically sound projects from reaching implementation. This training module provides a practical introduction to Energy Savings Performance Contracts (ESPCs) as a way to translate energy savings into predictable, financeable cash flows.
The module explains how ESPCs can bridge the gap between technical potential and investment realization by linking payments to measurable performance, allocating risks between project owners and Energy Service Companies, and reducing the upfront capital burden under certain contractual models. It covers six business models recognized in Indonesia: Guaranteed Savings, Shared Savings, Hybrid Savings, Build–Operate–Transfer, Build–Operate–Own, and Energy as a Service.
Created by NIRAS and Lestari Advisors, with support from UK PACT (Partnering for Accelerated Climate Transitions), the module was developed for the Energy Efficiency Investment Incubator Secretariat under the Directorate of Energy Conservation, Ministry of Energy and Mineral Resources.
Designed for project owners, ESCOs, financial institutions, government agencies, and other energy-efficiency practitioners, the module goes beyond conceptual explanations. Each business model is accompanied by its financing structure, payment mechanism, allocation of responsibilities, contract checklist, project timeline, key risks, mitigation measures, and frequently asked questions. It also explains how gender equality, disability, and social inclusion considerations can be integrated throughout the ESPC project lifecycle.
What You Will Learn
1. Why viable energy-efficiency projects still struggle to secure investment
Energy-efficiency projects often face high upfront costs, split incentives, limited standardization, uncertain savings measurement, and unfamiliarity among financial institutions. The module explains how these barriers contribute to Indonesia’s limited pipeline of investment-ready projects.
2. How ESPCs convert energy savings into financeable cash flows
Performance-based contracts can reduce uncertainty, improve project bankability, align incentives, and allocate technical and financial risks to the parties best positioned to manage them.
3. How to choose between six ESPC business models
The module compares Guaranteed Savings, Shared Savings, Hybrid Savings, BOT, BOO, and Energy as a Service, including who finances the project, who owns the assets, how the ESCO is paid, and how risks are shared.
4. What a bankable ESPC contract should include
Practical checklists cover critical contractual elements such as energy-consumption baselines, performance guarantees, measurement and verification, adjustment clauses, financial security, asset ownership, and operation and maintenance responsibilities.
5. How to manage technical, financial, and operational risks
Each model includes a risk and mitigation matrix to help project owners and ESCOs anticipate issues such as performance shortfalls, inaccurate baselines, equipment failure, client-payment risk, operational changes, and ESCO default.
6. How to integrate inclusion throughout the project lifecycle
A dedicated chapter provides guidance for integrating gender equality, disability, and social inclusion considerations into project design, procurement, implementation, monitoring, and stakeholder engagement.