Internal contracting (intracting)
In this section, the city of Stuttgart (Germany) shares its knowledge and experiences with the implementation of a revolving fund and an internal contracting (intracting) scheme aiming at increasing energy efficiency and the use of renewable energy in public buildings, equipment and facilities. The fund was set up in 1995.
“Intracting" financing scheme was developed in Germany to overcome the typical obstacle of separated operational and investment budgets in local administrations, resulting in a well-known lock-in situation of public authorities. On the one hand, administrations have to pay enormous energy bills due to the poor condition of public buildings; on the other hand, the departments are not able to re-finance the urgently-needed saving measures by transferring the saved energy costs to the investment budget.
The “intracting” method is based on the idea of Energy Performance Contracting (EPC) but entirely operates within the city administration and with operational accounts. No external actor, such as an energy service company (ESCO), is involved. Cooperation is established between two separate organisational units of the same public administration. For example, the municipal department for the environment may serve as the contractor (ESCO) for the "customer department" without own investment funds.
The money saved through energy efficiency measures flow back to a dedicated budget line – a revolving fund (energy saving trust) – until the investments have been paid off. Creating an initial revolving fund is a political decision, and a financial department responsible for budget issues is strongly involved in its development. This financing scheme has been implemented in the city of Stuttgart (DE) since 1995.
Experience of Stuttgart
| KEY FIGURES || KEY BENEFITS |
|► Current value of the fund: € 8.8 M
► 273 contracts implemented
► Average pay-back time: 7,2 year
► Financial savings: € 12 M
► CO2 savings: 87 M tons
|► Small start-up budget|
► No interest on the investment capital
► No additional risk-related costs
► Reduced transaction & admin costs
► Minimised preparation period
► Small-scale projects financed, not interesting for external contractors
Useful support materials on intracting:
- Energy Cities’ study on intracting: this study contains a detailed description and principles of intracting finanicng scheme, Stuttgart experience with intracting and other cities’ and French universities’ experiences with intracting