Vitaliy Shapovalenko about risks of nontransparent Energy Service Contracts price determination

Vitaliy Shapovalenko, Energy Efficiency Institutional and Policy Expert of iC consulenten, continues to analyze and discuss ESCO service market. Following the article “ESCO service market without illusions”  published last year he developed another analytical paper “On certain risks of nontransparent Energy Service Contracts price determination” . It was released recently in the LIGABusinessInform.

 In the article, the author described the process of determination of Energy Service Contract price according to the Ukrainian laws, established market mechanisms in this sphere and, hence, risks related to nontransparent price determination and their impact on energy efficiency project performance. Both the customers and the contractors could be affected by those risks. For customers the main problem concerns high risk of inefficient use of funds. For contractors the most challenging could be risks of possible investment losses and lack of financial profitability.

The author also recommends how to minimize risks related to Energy Service Contract price determination. First of all, the customer and the contractor should coordinate their activities. For this purpose, authorities in cooperation with subject matter experts should develop Methodological Recommendations with clear and acceptable basic principles to determine those contracts price. Last but not least, it is recommended to customers and contractors to approve and adjust the price after contract signing if there are reasonable grounds.