A simulation-based decision model for designing contract period in building energy performance contracting

Publication date: January 2014
Source:Building and Environment, Volume 71
Author(s): Qianli Deng , Limao Zhang , Qingbin Cui , Xianglin Jiang
This paper presents a simulation-based decision model for contract period determination in Energy Performance Contracting (EPC). The model attempts to assist the Energy Service Companies (ESCOs) on how long the contract period should be to balance the bidding competitiveness and the potential revenue loss. The uncertainties within the energy efficiency investment and the energy cost savings as return are addressed by stochastic processes, taking the maintenance and savings performance variations and the energy price fluctuations into account. Considering both the contract period and the energy cost savings guarantee, a framework is proposed to identify the profit sharing in EPC for both the owners and the ESCOs. An optimization model is derived accordingly, and the balanced length of the contract period is then reached. Finally, a campus case is presented to verify the applicability of the proposed model. The method can be used by industry practitioners as a decision support tool for contract period design, and is worth popularizing in other performance-based projects.