Energy performance contracting lets a site pay for efficiency work out of the savings it creates. The contractor funds and installs the job, then earns from the measured drop in use. The client carries little upfront risk.
Quick Answer
The model ties payment to measured savings.
Three common forms: shared savings, guaranteed savings and paid-from-savings.
A baseline of current use is agreed before any work starts.
Savings are checked with meters, not guessed from theory.
Typical terms run 3 to 7 years.
What is energy performance contracting?
This model refers to a deal where an efficiency provider is paid from the savings its work produces.
It means the provider funds and installs the upgrade, and payment rests on checked cuts in use.
energy performance contracting in practice
How the main models compare:
| Model | Who funds | Client risk |
|---|---|---|
| Shared savings | Contractor | Low |
| Guaranteed savings | Contractor or lender | Very low |
| Paid from savings | Contractor | Low |
| Client-financed | Client | Medium |
| Energy-as-a-service | Provider | Lowest |
| Hybrid | Both | Shared |
What does an EPC project cost in Nigeria?
A small lighting retrofit under an EPC typically runs ₦2,000,000 to ₦8,000,000.
Larger building jobs run into tens of millions, funded by the contractor.
The contractor's share of savings usually runs 40 to 70 percent.
Measuring and checking the savings adds 3 to 8 percent of job value.
How is energy performance contracting carried out?
- Audit the site and set a written energy baseline.
- Find measures with a clear and measurable saving.
- Choose the model and agree the savings split.
- Install the measures with agreed metering points.
- Check the savings against the baseline on a fixed plan.
- Review, adjust and hand over once the term ends.
Sources
https://www.nerc.gov.ng, https://nemsa.gov.ng, https://www.iea.org, https://www.iso.org
Why the baseline matters
Everything rests on the starting figure.
A weak baseline makes savings hard to prove.
Agree it in writing before work begins.
Adjust it only for agreed changes.
Then both sides trust the number.
Checking the savings
Meter the real use, not the estimate.
Compare like periods against the baseline.
Allow for weather and output changes.
Publish the results each period.
A clear figure ends most disputes.
Where it fits best
Sites with a steady, high energy bill.
Sites that lack cash for upgrades.
Firms that want fixed, known costs.
Owners who want risk held elsewhere.
Landlords and tenants can both use it.
What to watch
Vague measurement ruins a good job.
Name who owns the new equipment.
Set a clear handover at the end.
Keep upkeep duties in writing.
Then the savings stay real.
Typical measures
Lighting swaps cut use at once.
Motor and pump controls cut waste.
Power factor work lowers bills.
Insulation and cooling fixes add up.
Each one is metered on its own.
Getting started
Start with a free walk-through audit.
Pick two or three clear measures.
Agree the baseline and the split.
Then sign a short first term.
Prove the model before you scale it.
Related guides from this series
- Energy audit cost in Nigeria
- Energy benchmarking for facilities in Nigeria
- ISO 50001 energy management
About the author
Written by the Illuminate Engineering technical team. We audit facilities and structure efficiency projects across Nigeria.
Frequently Asked Questions
How does performance contracting work?
A provider is paid from the savings its efficiency work creates.
Who pays for the upgrade?
Usually the contractor funds it and recovers payment from checked savings.
How long do terms run?
Typically 3 to 7 years, depending on the measure and saving.
How are savings proven?
By metering against an agreed baseline, not by estimation.
Conclusion
An EPC moves the risk of an efficiency job onto the contractor. With a firm baseline and real metering, both sides win from proven savings.