# Improving the Efficiency of Energy Consumption in Buildings: Simulation of Alternative EnPC Models
## 4 Application to a Case Study
### Sensitivity Analysis  
With a view to confirming which contract is the most viable for the parties involved, analysis criteria based on financial discounting must be taken into consideration, including the Net Present Value (NPV) and the Internal Rate of Return (IRR). These values result  
Figure 5: Total electricity consumption vs. production estimated by the photovoltaic system. from calculations performed based on cash flows, represented by annual revenues and expenses updated over the project duration [44]. Once the sensitivity analyses and respective simulations have been performed for the various scenarios, namely in terms of contract duration and annual energy savings, a study is conducted to understand which energy efficiency contract is more beneficial for both parties involved. The Guaranteed Savings Contract transpires to be attractive for the ESCO, because it receives as payment in year 0 the amount that covers its investment, also guaranteeing the desired profit. The only risk associated with this part is having to guarantee the annual energy savings defined in the contract, under penalty of paying an indemnity to the client if it does not comply with this condition. From the client's perspective, it is observed that for different contract lengths (5, 10, and 15 years) and different energy savings (15%, 20%, and 25%), the results obtained for NPV and IRR are very favorable. The sensitivity analysis for this type of contract shows that increasing the length of the contract does not have much impact on the analysis parameters, with the NPV of the 5-year contracts in comparison to the NPV for the 15-year contracts suffering an increase of only EUR 4000 on average, and the IRR an increase of 1%. However, Guaranteed Savings Contracts carry a very high risk for the client, as they are fully responsible for the investment, and although the company must indemnify the client in case of breach of contract, this is a risk that ends up discouraging entities from opting for this type of contract; it would be a much more attractive contract if the investment risk is on the side of the company that presents the solution. First-Out Contracts on the client's side transpire to be quite attractive to the client, as the financial risk is totally assumed by the ESCO. Regarding the sensitivity analysis performed on this type of contract, it is worth highlighting the fact that during the contractual period the client does not receive any type of remuneration nor has any type of expense. The client only keeps the equipment, the total energy savings, and the responsibility of assuming the maintenance costs when the contract ends. The greater the energy savings defined in the contract, the shorter the duration of the contract, and the greater the NPVs obtained by the client. As far as the ESCO is concerned, First-Out Contracts are not as appealing as Guaranteed Savings Contracts, because they accumulate the financial and energy risk. If the ESCO does not guarantee the minimum energy savings specified in the contract, it will take the company much longer to recover the money invested. Furthermore, while the minimum NPV obtained for the client, which is associated with an energy savings of 15%, is EUR 19,317.44, the maximum NPV obtained by the company, which is associated with an energy savings of 25%, is only EUR 4900.40. Thus, this type of contract is not very advantageous for ESCOs, with the clients benefiting the most. The type of energy efficiency contract that emerges as the best alternative for both parties involved transpires to be the Shared Savings Contract, which has the two parties sharing energy savings for their own benefit, with the financial and energy risk being, as with First-Out Contracts, linked to the energy service company. In the sensitivity analysis performed, it was considered during the contract period that the energy savings received by the ESCO would be 80% of the total savings, so that the ESCO would recover its investment, leaving the remaining 20% for the client.