Learn how local authorities can turn climate goals into action through financing instruments such as energy performance contracting (EPC).
Authors
Giulia Pizzini, Institute of Energy and Climate Policy | LinkedIn profile
Giulia Viero, Institute of Energy and Climate Policy | LinkedIn profile
Dr. Vlasta Krmelj, Energy and Climate Agency of Podravje | LinkedIn profile
(Note: Opinions in the articles are of the authors only and do not necessarily reflect the opinion of the European Union)
As the European Union intensifies its efforts towards climate neutrality, the revised Energy Performance of Buildings Directive (EPBD) places stronger emphasis on financial innovation, blended mechanisms and market activation to support building renovation. In this context, the Horizon 2020-funded PROSPECT+ played a pivotal role in empowering local and regional authorities (LRAs) to scale up sustainable energy investments. By engaging 290 LRAs across 30 European countries, the project offered a structured peer-to-peer learning programme that enabled participants to design and implement bankable renovation projects in line with the EPBD’s renewed goals.
The project training focused on 13 innovative financing schemes supporting the EPBD’s ambition to foster a structured and transparent investment environment. Among these, energy performance contracting (EPC) emerged as the most popular topic, reflecting its relevance and adaptability to municipal renovation strategies. PROSPECT+ combined its learning activities with practical tools, including the Financial Project Readiness Tool, the Financial Indicators Calculator, and SYNERGISE+, all open-source instruments developed to support the European Initiative for Building Renovation. These tools help ensure that local renovation plans are both environmentally sound and financially viable.
PROSPECT+ connected mentees—LRAs seeking to make best use of private capital for sustainable energy measures—with highly experienced mentors, such as other LRAs and their agencies that had already implemented advanced financing solutions.
Among them, ENERGAP, the Energy Agency of Podravje in Slovenia, stood out for its extensive experience with EPC. ENERGAP has successfully implemented EPC-based projects ranging from LED street lighting upgrades to comprehensive energy refurbishments of public buildings. Acting as a regional facilitator, ENERGAP supports municipalities with legal, financial, and technical expertise, ensuring guaranteed energy savings and efficient delivery.
The following article explores the sustainable energy projects implemented by ENERGAP, thanks to its expertise in using EPCs. It presents lessons learned on how to deploy EPCs in local contexts and highlights the importance of the PROSPECT+ project in capitalising and upscaling ENERGAP’s experience by passing it on to other LRAs all over Europe.
In short, EPC is an innovative financing scheme offered by a contractor, usually an Energy Service Company (ESCO). It allows clients interested in undertaking energy efficiency improvements, but with limited financial means or technical capacities, to implement the necessary measures. In EPC, an ESCO finances the project and implements energy efficiency investments. The project is based on the offered energy-efficient and/or renewable energy services that result in guaranteed energy and financial savings, which are stated in the EPC contract.
ENERGAP, the Energy Agency of Podravje based in Maribor, Slovenia, is a regional public energy and climate agency founded in 2006. With a dedicated team of nine experts headed by Dr Vlasta Krmelj, it supports over 20 municipalities in preparing and implementing their energy and climate action plans. ENERGAP provides technical and financial planning, advice, and capacity building to public and private stakeholders, helping them access diverse funding schemes, specifically focusing on EPCs.
ENERGAP has been using innovative financing schemes to implement sustainable energy measures since 2008, thanks to EU-funded projects through which it learned from peers, notably the Energy Agency of Upper Austria (ESV). Its first project focused on ‘intracting’ (short of internal contracting). Developed to finance energy-saving measures in the building sector, ‘intracting’ involves allocating savings from electricity or heating to a separate account for reinvestment in further measures. With an initial investment, this creates a self-reinforcing financial cycle. ENERGAP made small investments in a gas boiler, providing heat to the municipal kindergarten as a service. Since then, ENERGAP gained increasing expertise and developed strong competence in EPC, successfully facilitating one of the region's most significant energy renovation initiatives in 2019. Through a major partnership with the Municipality of Maribor, the agency implemented EPCs across 24 public buildings, including schools and kindergartens. This enabled coordinated energy refurbishments with guaranteed energy savings, highlighting ENERGAP’s practical expertise in deploying EPC as a financing tool to stimulate large-scale sustainable building upgrades.
Through this public–private partnership with Slovenia’s largest ESCO, Petrol Group, the project achieved remarkable results:
The €12 million initiative was funded through 50% private investment, 35% cohesion funds, and 15% municipal funding. The 15-year EPC guarantees savings and ongoing maintenance, with all savings accruing to the municipality once the contract ends.
Moreover, ENERGAP is working on new contracts to provide renewable heating systems to public and private buildings that have previously implemented energy-efficient measures. The story does not end here: Maribor is now preparing a large new EPC programme for building refurbishment, supported by the European Investment Bank’s ELENA facility.
Through its projects, ENERGAP has learned that the real challenge in delivering energy renovation through EPCs is not technology, it is people. As the director, Vlasta Krmelj, likes to say, ‘insulation doesn’t argue with you, but school principals sometimes do.’
Municipal staff are frequently short on time, expertise, or simply motivation to engage with complex contracts. EPCs require persistence and patience. Financial issues complicate matters further: municipal budgets are limited, contracts are intricate, and small projects rarely appeal to ESCOs unless they are bundled into larger, more bankable packages.
For ENERGAP, addressing these challenges has meant investing heavily in education and building relationships. A successful EPC requires close cooperation between multiple municipal departments—legal, financial, and technical—as well as the active involvement of building users. Sound energy management and robust monitoring of energy and financial flows are essential foundations. Without reliable data, projects cannot demonstrate results, and without results, neither city councils nor auditing authorities will support EPCs as a credible public-private partnership (PPP) instrument.
To build trust and legitimacy, ENERGAP has also reached beyond municipal boundaries. It has worked with other energy agencies, ESCOs, and legal experts, while actively involving national ministries, which are crucial for defining the legal and technical frameworks that make EPCs viable in Slovenia. By engaging them from the outset, ENERGAP has helped to anchor EPCs as a recognised and replicable model.
ENERGAP’s approach is partly technical and partly social. It builds strong political support and keeps mayors and councils engaged. It trains municipal staff, while also drawing on external expertise where needed. It communicates openly with school staff and citizens, emphasising comfort and lower bills as much as energy savings. On the financial side, ENERGAP bundles projects to increase attractiveness, combines different sources of funding, and always starts with a pilot to build confidence.
In short, maximising impact requires energy agencies and similar facilitators to develop a deep understanding of how EPCs affect all the stakeholders involved. Equally important is systematic knowledge exchange across EU Member States, since stakeholders from different contexts often face comparable challenges, risks, and opportunities when adopting EPC models.
In short, maximising impact requires energy agencies and similar facilitators to develop a deep understanding of how EPCs affect all the stakeholders involved. Equally important is systematic knowledge exchange across EU Member States, since stakeholders from different contexts often face comparable challenges, risks, and opportunities when adopting EPC models.
Thanks to PROSPECT+, ENERGAP did not let its EPC lessons remain unused in Maribor’s town hall. Having once been in the learner’s role—absorbing insights from peers back in 2008—the agency has now stepped into the role of mentor. It shares its expertise with cities and regions across Europe through the continent’s largest peer-to-peer capacity-building programme on innovative financing.
PROSPECT+, building on the foundations laid by its predecessor, set out to find the most forward-looking local and regional authorities ready to turn sustainable energy plans into reality. It did not take long to recruit ENERGAP. Within PROSPECT+ alone, 25 additional LRAs had the chance to learn the practical aspects of EPC directly from Dr Vlasta Krmelj. Through workshops, informal exchanges, and candid ‘lessons learned’ stories, ENERGAP guided participants to prepare, structure, and negotiate EPCs—helping them bypass the trial-and-error stage. In doing so, the agency multiplied the impact of its work. Each municipality trained under PROSPECT+ gained the confidence and practical know-how to launch its own projects, effectively transforming one city’s experience into a European toolbox for climate action.
In PROSPECT+, going beyond Slovenia, many mentee cities and regions had the chance to experiment with EPCs. They confirmed ENERGAP’s observation that the main challenge with EPCs is rarely technical, but rather the internal capacity to manage complex contracts. The learning cycles highlighted the importance of mobilising cross-departmental expertise—technical, financial, and legal—and ensuring robust energy and financial data monitoring. Without these, it is difficult to convince municipal councils or auditing authorities of the value of EPCs. For more information, see the ‘Report on experiences and successfully implemented learning groups’).
Another recurring lesson was the need for project aggregation. Small municipalities often lack the critical mass to attract ESCOs, but by bundling buildings or forming inter-municipal clusters, EPCs become viable and bankable. French ‘collectivités’ involving dozens of municipalities were cited as a good practice example, while in Spain, experiences showed that political trust is just as essential as financial viability. For more information, see the ‘SWOT analysis for energy efficiency projects’.
Beyond these structural aspects, mentees also learned that EPCs cannot be treated as one-size-fits-all solutions. Success depended on adapting the contracts to local contexts: in some cases, tailoring EPCs to cover street lighting or mobility services proved more feasible than starting with complex building retrofits. This flexibility, combined with the peer-to-peer exchanges of PROSPECT+, gave local authorities the confidence to experiment with financing models that matched their specific needs and capacities.
The key lesson is that EPCs as financing tools are not only about kilowatt-hours but also about people-hours. When trust and clear communication are patiently built, the payoff can be significant—lower costs, happier building users, and a city that saves energy without losing its sense of community.
In Maribor, this approach delivered millions in investment, nearly 6,000 MWh of annual savings, and over a thousand tonnes of CO₂ avoided each year. This is a considerable achievement for a contract that once had janitors wondering if the lights would be left on for them. Thanks to PROSPECT+, these lessons didn’t stay locked in Maribor; they travelled across Europe, helping dozens of other cities and regions adapt EPCs to their own realities—whether that meant bundling projects to make them bankable, tailoring contracts to street lighting or mobility, or learning that political trust is worth as much as technical design.
In the end, EPCs work best when they combine solid numbers with shared experience—and that is exactly what PROSPECT+ set out to demonstrate. From October 2025, a new edition of the programme—PROSPECT CUBE—will begin, offering LRAs fresh opportunities to learn, exchange, and innovate with new features. For more information, keep an eye on the project website.
