The term sounded fashionable and the approach made sense, but its second basic assumption – ‘the predicted yearly savings must be assessable in a reliable way’ – might often prove complex (see also  and ).
Instead of insisting on a fully reliable assessment of the return, such a ‘total concept’ would be truly visionary if it would provide an approach to deal with savings which are most probably there but very difficult to measure. A concept that, instead of insisting on ‘reliability’, finds a way to deal with the uncertainty in the measurement of the economic return without running irresponsible financial risks. Regulators and insurance companies have a role to play here.
New technologies need to be taken through a cost learning curve to iron out their teething problems. This means someone needs to finance the learning investment. For renewable energy technologies, many EU Member States provided financial support for these in the last decade, but such intervention leads to windfall profits when the learning effect is underestimated or regulation does not adapt quickly enough to cost reductions. Moreover, government budgets running out of cash lead to boom and bust cycles.
It is more challenging to let market forces play, but considering that the above risks are not unlikely, that’s what we need to do for energy policy in the future. Market design is key.
Even though the financial climate is not as tough today as it was six years ago, Energy Service Contracts remain a useful instrument. They can unlock energy efficiency measures in organizations or companies where it is complicated to free the necessary financial capital or make long-term investments.
The risk of the investment can be passed on to a contract provider. To manage such risk at a reasonable cost, a stable regulatory climate leading to somewhat predictable energy prices is a must. How to achieve this in the energy transition?