Infinite Solutions Guidebook

Financing the energy renovation of public buildings through internal contracting



Peter Schilken
Nino Schäfer

Publication year


Meeting the European energy and climate policy objectives will require the mobilisation of substantial energy efficiency and renewable energy investments at the local level. Given both the substantial effort necessary to finance the energy transition and restricted municipal budgets, it is clear that these objectives cannot be met through traditional public financing such as grants or direct investment, but by finding a new approach to financing solutions.

Energy and water-saving measures in municipal buildings can be financed in many Different ways. There are a great number of possibilities and each has its positive and negative aspects that have to be considered in view of the specificities of each local authority.
The challenge is therefore to adopt a project financing model that is both economically viable in the short term and capable of generating energy savings.

Internal Contracting : Enabling municipalities to design sustainable and modern infrastructure

In brief, contracting is a financing method that enables investments to be made in energy saving measures, by placing the burden of the investment cost on a contractor or contracting fund until it is repaid through the energy costs saved.

The idea of Internal Contracting, often called Intracting (municipal internal performance contracting scheme), is to enable the municipality to finance multiple investments for energy savings without being tied to an external contractor. This requires that a revolving fund be setup.

Águeda’s Internal Contracting scheme at a glance

Special features of Internal Contracting in Águeda: The FEWE has no legal status and is formed by the transfer to a specific heading in the municipal budget, established for this purpose, of an initial amount of funding created by the Municipality, as well as extra financing necessary to attain the objectives. After the formal decision by the Mayor, the proposal is forwarded for implementation to the Division of Environment and Sustainability.The Fund is 100% financed by the municipal budget, with €300,000 as a seed, and by the water and energy savings.