258 NEWSLETTER 2021 This model offers an advantageous structure, especially for local governments, since the project owner does not have to pay in advance, and reimbursement is made on the project profit. In this way, it is possible to allocate annual approved budgets on other projects. Also, the administration would still solely enjoy the amount corresponding to the saved energy, once the repayment is completed. Guaranteed Savings Method In the guaranteed savings model, the ESCO bears the technical risk and the performance risk of the project, but the financing burden remains on the project owner. Under this structure, the project owner transfers the investment amount from the beginning of the project and collects the returns of the investment as the saved energy that is due to the project. For example, if the energy saving projection is thirty units in a guaranteed savings contract and, for a specific month, the saving is realized as twenty units, the ESCO would transfer the cost for ten unrealized units to the project owner. In this way, the project owner may still profit from the excess savings, without undertaking the risk for any unrealized amount. Usually, the guaranteed savings method is preferred for the ESCOs with relatively limited financial capacity. Although an ESCO with a limited financial capacity would not be able to transfer the initial investment amount to the project, it may still be able to guarantee the performance of the project. Conclusion Energy performance contracts constitute an important financing method for the realization of the goals, such as green, renewable energy consumption, in a more efficient way, which are also reflected in the legislation. Depending on the financial capacities of the project owner and the ESCO, the parties may choose the shared saving model or the guaranteed savings model, which underlines the flexible structure of this financing method. The measurement, evaluation, and conformity determinations, which are carried out by third parties, are of critical importance for the accurate and efficient functioning of the contract. Therefore, the principle of transparency and accuracy should be adopted by each part of an energy performance contract.
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