A Study Of Incentive Mechanism Of Energy Performance Contracting

Energy performance contracting (EPC) was developed in the market economy countries in 1970s and is a win-win mechanism for Energy Management Companies (EMC) and their clients. The implementation of EPC is of great significance for china to improve building energy efficiency, resource conservation and environmental protection. A study of incentive mechanism of EPC is conducted and an incentive model of EPC is developed by setting relevant variables and parameters. The model is expected to expand the range of research and application of the principal-agent theory and to provide some advice for implementing EPC in practice.First, EPC is considered as a kind of outsourcing for energy efficiency service. The building owners consign their building energy efficiency to professional EMC and a principal-agent relationship is formed between building owners and EMC. Secondly, the principal-agent theory is systematically reviewed and the principal-agent relationships between building owners and EMC are analyzed and the links between the theory and practical problems is identified. Finally, a principal-agent model between building owners and EMC is developed by using classical incentive model for reference and setting relevant variables and parameters. The model is explained by using mathematical logic and the expected utility of building owners under different information structures are compared. Meanwhile, a comparative statics analysis about relevant variables and parameters of the model is conducted. The results of the analysis of the model show the agency cost is a decreasing function of holding the amount of energy services information for building owners and building owners' expectations of income is positive correlation with EMC's capability and negative correlation with EMC's risk attitude,strive cost coefficient and outside stochastic variables' variance. In addition,creating energy service repository and the specific measures and proposals of fostering and managing to EMC are proposed in this paper based on the analysis of the model in order to promote the development of EPC in china building energy saving.