Energy Efficiency

Eight years ago, the Staudinger High School in Freiburg, a town in southern Germany, decided its buildings needed an energy makeover. Built in 1970, the school was fitted with a heating system that could not be regulated in individual rooms, the lighting was antiquated, and water pumped continually through the toilets.

Teachers, parents and friends clubbed together to raise the 270,000 euros ($360,000) necessary for the energy renovation and signed a contract with the Freiburg Council, which administers the school. The council guaranteed the investors a percentage of the energy savings over the next eight years.

"We already knew about global warming back then and it was obvious that the situation had to change," explained Almut Winzel, a teacher at the school who invested 7,500 euros ($9,981) in the energy contracting project.

The firm Eco-Watt installed a computer-monitored heating system, new lighting and a water pump. As a result the school now saves around 25-30 percent of its electricity bill and has reduced water use by 65 percent.

"That saves the environment, precious resources and money," Winzel said.

Good return on investment

Winzel has received an average of 6 percent interest on her investment, which is more than the group originally hoped for.

Dieter Seifried, the general manager of Eco-Watt, said the project has been running extremely well.

"One of the issues with energy contracting is that you can't exactly calculate the savings at the beginning," he said, adding that even if the project had performed worse than expected, "we would have made around 3 percent."

Winzel said that when the energy contract runs out in a few months time, she plans to reinvest her capital in a new one. "It's just such a logical, simple way of reducing energy use that I absolutely want to continue supporting it," she said.

Even though energy contracting is a simple idea, it can be difficult in practice because there are so many factors to consider -- such as how to deal with fluctuating oil prices or changing weather patterns. The coldest winter in a century could wipe out the investment completely, whereas a mild winter could award investors an extremely high return.

Then there are changing usage patterns to consider -- such as if the school decides to start holding evening classes and potential saving are eaten up by the increased heating and lighting. All of these aspects need to be written into the contract.

Growing market for energy contracting

Energy performance contracting is proving so successful that even big business has entered the game. Siemens Building Technologies (SBT), for example, has been tendering for such contracts for more than 10 years.

"We've seen a growth of about 10 percent in the German market for such energy-efficiency solutions in buildings and demand is especially increasing in the last two or three years." said Mario Lieder, the head of SBT's Energy and Environmental Solutions division in Germany.

The company has been involved in energy contracting projects from prisons to swimming pools and the average energy saving is around 20 percent. Although, after an energy refit, the Reinkenheide Clinic in Bremenhaven managed to save 40 percent.

Energy contractors are often called in because property owners, whether private firms or public authorities, lack the know-how or the investment capital for an energy refit.

Large expenditure not always necessary

But Mario Lieder from Siemens stressed that making buildings more energy efficient doesn't always require large sums.

"Sometimes it's not even necessary to invest in hard or software because you can optimize the building management system that already installed," he said.

According to Christoph Erdmenger from Germany's Federal Environment Agency, energy contracting is most suitable where there's significant energy use, such as in a building with several floors or a medium-sized company.

"It might not be viable to look into energy performance contracting on your holiday cottage," he said.

There are "millions of buildings throughout Germany" that would benefit from an energy refit, Erdmenger said.

Although Germany needs to use a variety of measures to reduce its carbon dioxide emissions, increasing energy efficiency in buildings "could make up several percent of this if implemented really consequently," he said.