Contracting – Heat energy as a private service
Additionally, the maintenance and continuous optimisation (monitoring) of the systems as well as the purchase or provision of the energy itself are among the usual tasks of the contractor, who takes on the technical implementation as well as the financing and financial risks.
The contractor guarantees its client/customer that the contractual objectives will be met over the entire term of the contract - usually for 10-15 years. Clients or customers are building owners, condominiums and property management companies, local authorities or energy suppliers.
Local heating networks and heat contracting
With the spread of decentralised neighbourhood supply systems, complex local heating supply systems fed from various environmental sources have emerged.
However, as neighbourhood heating and cooling supply was initially a marginal phenomenon, most municipal utilities initially showed little interest in it - such projects were considered too small and not sustainable. Regulating, maintaining and servicing local heating networks is relatively complex, requiring more time and a deeper understanding of the processes involved than district heating, for example. Contractors have therefore filled this supply gap and developed their own comprehensive business model.
In this blog post, we will focus on the supply of heating and cooling.
1. Energy performance contracting
Energy performance contracting (EPC) is a special form in legal, substantive and procedural terms: In this contracting model, the content of the contract is the guaranteed saving of energy costs for the contractors within the term of the contract. The contractor makes the necessary investments to optimise the (existing) system and increase energy efficiency and can take appropriate measures - at its own risk. The contractor receives part of the energy cost savings as remuneration.
2. Energy supply contracting
In this type of contracting, the contractor plans, finances and builds an energy supply system - in our case usually a local heating network. The contractor then provides the contractual partners - building owners or local authorities - with heating and cooling energy for a fixed period at agreed conditions. The object of the contract is therefore the supply of energy.
In operations management contracting, the contractor takes over an existing system and carries out optimisation measures at its own risk.
Financing contracting involves the planning, financing and construction of a plant that belongs to another operator, e.g. a municipal utility. With the support of the contractor, this operator is able to operate the plant in an environmentally friendly manner. The operator must repay the contractor's investment costs during the term of the contract.
Contracting - what are the benefits?
Energy contracting is an effective instrument for increasing the energy efficiency of buildings and supplying neighbourhoods in a climate-friendly and energy-efficient manner.
The contractor sells end customer heat and therefore has a strong interest in the efficiency of its system. If he operates and maintains the system well, the system's efficiency and SJAZ[1] increase and so does his profit. The contractor is therefore inherently interested in operating an efficient system and must maintain and monitor it well in the long term in order to counteract deviations and avoid losses.
Investors who realise large building complexes but are overwhelmed with the energy supply and billing also benefit from the outsourced technical and business management services.
Contracting - especially energy-saving contracting - improves the energy balance of buildings and neighbourhoods, as it reduces energy costs and greenhouse gas emissions. According to dena, contracting therefore contributes to the success of the energy transition.
[1] System annual performance factor

Contracting with cold local heating: It all depends on the balancing limit!
The contractor plans, builds and operates systems for heat/energy supply - he takes care of the necessary energy procurement and finances the whole thing - so far, so good. With a warm heating network, everything is clear: the heat meter is located at the end customer's heat transfer station and the contractor bills up to this point. The balance area therefore goes right up to the meter.
But what about a low-ex network or a cold network?
These grid types require decentralised heat pumps at the consumer. The low-ex network only uses booster HPs, which heat the 40 °C water from the network to keep the hot drinking water free of legionella. In the cold grid, the heat pumps are in (continuous) use for heating and hot water.
But who owns these heat pumps in the house? The homeowner or the contractor? So far there are no guidelines for this. However, if the contract with the contractor is to supply heat, the heat pumps should belong to the contractor, who is then also solely authorised to control the heat pump. And in this case, the meter is located BEHIND the booster heat pump.
In this way, the highly energy-efficient ‘cold local heating’ system also becomes an economically attractive business model for the contractor, in which - despite the ‘free’ source heat (e.g. from geothermal energy) - he can pass on his high initial investment in drilling and probes to the operating costs.
So are cold local heating networks penalised?
Yes, says Markus Pröll, goodmen energy site manager Munich.
The problem is that decentralised heat pumps are not subsidised by the Bafa in module 4 (operating cost subsidy = electricity requirement of the heat pump) - regardless of whether they belong to the individual or are part of a contracting system. And so the contractor misses out on a subsidy here, which makes the system less attractive, at least in theory. The financial bonuses of an operating cost subsidy are often not even relevant in individual cases. But the mere knowledge of a supposed disadvantage leads to contractors building more inefficient systems with centralised heat pumps just to receive the operating cost subsidy.
‘If decentralised heat pumps are paid for, installed and operated by the contractor in a cold network, thermal energy is sold to the end customer - in the same way as with warm networks. The decentralised heat pumps are then part of the supply system. In this case, I see no reason why decentralised heat pumps could not also be subsidised,’ concludes Markus Pröll. ‘I clearly recognise a loophole in the law here.’
Perhaps it would make more sense to provide additional support for systems above a certain size and to subsidise local heating networks on a technology-neutral basis, Markus Pröll continues. ‘Because at the moment, heat losses and poorer COP are often accepted in exchange for a small subsidy. I wonder whether the Bafa is aware that it is pushing more inefficient systems as a result?’
Contracting and the heating transition = a match with political challenges
Nevertheless, contracting helps to realise the heat transition. With the sale of end customer heat, the contractor is interested in ensuring that his system works efficiently and therefore profitably for him. The better the SPF, the higher his profits with a well-designed and correctly dimensioned system. Long contract terms of up to 20 years mean that investments in particularly efficient systems can be reliably passed on to the customer.
However, it is important to ensure that this motivation is not squandered through incorrect or missing incentives - because at the moment, politicians are focussing more on speed than efficiency when it comes to the heating transition. The price for lower efficiency, however, would be high heating costs during operation and increased electricity demand.