Energy Performance Contract basics for industry
What is an Energy Performance Contract — and why it matters for industrial electrification, decarbonization, and cost-efficient energy upgrades.
Introduction
As industries face growing pressure to decarbonise, reduce emissions, and become more energy efficient, the challenge often lies in balancing these goals with budget constraints and operational complexity. A solution that is rapidly gaining traction across sectors is the Energy Performance Contract (EPC).
By shifting the financial and operational burden of energy transformation to a specialised partner, an EPC allows industrial players to modernise their energy systems — particularly through electrification — without upfront capital expenditure. This blog explains how Energy Performance Contracts work, why they matter, and how they’re changing the way industries approach energy management.
Understanding the Energy Performance Contract
At its core, an Energy Performance Contract is a long-term agreement between a customer (often an industrial energy user) and a service provider or third-party energy company. The service provider designs, finances, builds, and operates an energy solution — typically involving renewable power generation, battery storage, and intelligent energy management.
What sets the EPC apart is its financial structure. The customer pays a fixed monthly fee, but does not own the assets. Instead, they benefit from lower energy costs, improved efficiency, and reduced CO₂ emissions — all without making a capital investment. The risk, performance monitoring, and optimisation responsibilities are shouldered by the service provider.
Why It Matters for Electrification
Electrification is the process of replacing fossil-fueled systems — such as heating, cooling, transportation, and industrial processes — with electric alternatives. It’s a key strategy for reducing emissions and achieving energy efficiency. However, high initial costs and complex integration often delay progress.
This is where Energy Performance Contracts unlock significant value. Because the solution is financed and managed externally, industrial customers can immediately begin electrifying their operations. More importantly, they can do so without adding new debt to the balance sheet or diverting internal resources to develop energy infrastructure.
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The role of Microgrids and EMS in EPC
Modern EPCs increasingly include microgrid systems, which are localised power networks combining on-site generation (such as solar PV), battery energy storage, and advanced control technology. These microgrids operate independently or alongside the main grid, delivering electricity exactly where and when it’s needed.
Energy Management Systems (EMS) play a central role in optimising these microgrids. They continuously monitor electricity production, storage levels, and consumption patterns. This enables real-time decisions, such as whether to consume, store, or sell electricity to the grid — all managed remotely by the EPC provider. The result is reduced exposure to volatile energy prices and increased use of renewable electricity behind-the-meter.
Financial Flexibility: The of-balance sheet advantage
One key benefit of an Energy Performance Contract is that it stays off the customer’s balance sheet. Instead of taking on debt or spending capital, the customer pays a fixed monthly operating fee. The EPC provider owns and operates the energy assets, so they remain of the customer’s financial statements.
This setup works well for companies expanding energy upgrades across many locations. Without the CAPEX barrier, businesses can roll out advanced energy systems quickly and efficiently. It supports scale without disrupting financial plans or delaying sustainability goals.
Enabling resilient and predictable energy supply
As grid reliability grows more unpredictable due to increased electrification and variable renewable output, Energy Performance Contracts help strengthen energy security. Microgrids with integrated storage keep supplying power during outages, supporting uninterrupted operations in critical industrial settings.
The EPC model also includes active optimisation and performance monitoring, giving businesses a stable, predictable energy supply without handling technical complexities themselves.
Conclusion
An Energy Performance Contract is more than just a financing model — it’s a strategic tool for accelerating electrification and building energy resilience. With no upfront investment, expert-led implementation, and intelligent energy management, EPCs provide a practical path forward for industrial players looking to decarbonise and future-proof their operations.
In a world where energy transformation is no longer optional, but necessary, Energy Performance Contracts offer a smart, scalable, and low-risk way to get started.
FAQ
What is an Energy Performance Contract?
An Energy Performance Contract (EPC) is a long-term agreement where an external service provider implements energy-saving or renewable technologies at no upfront cost. The investment is repaid through energy cost savings or fixed monthly fees, enabling companies to improve efficiency and reduce emissions without capital expenditure.
How does an Energy Performance Contract support industrial electrification?
EPCs support industrial electrification by financing and deploying technologies such as solar panels, battery storage, and energy management systems. This allows companies to transition from fossil fuels to electricity-powered operations without using internal capital or resources.
Is an Energy Performance Contract considered off-balance sheet?
Yes, most Energy Performance Contracts are structured as off-balance sheet agreements. The energy assets are owned and operated by a third party, and the customer pays a fixed OPEX fee. This model avoids adding debt or capital assets to the company’s financial statements.
What technologies are included in an Energy Performance Contract?
Modern EPCs often include microgrids, solar PV systems, battery energy storage (BESS), and intelligent energy management systems (EMS). These technologies work together to provide resilient, cost-effective, and optimized power behind the meter.
Who can benefit from an Energy Performance Contract?
Industrial manufacturers, logistics operators, ports, data centers, and any organisation with high energy usage and decarbonisation goals can benefit from an EPC. It’s especially useful for businesses that need to electrify operations without incurring high upfront costs.
