Risk Analysis of Energy Performance Contracting Projects in Russia: An Analytic Hierarchy Process Approach

Abstract

Systematic and effective risk management in energy performance contracting (EPC) projects requires a sound understanding of the main risks faced by energy service companies (ESCOs) and other energy service providing companies (ESPCs), which accomplish such projects under vulnerable market conditions in Russia. This study explores the EPC project risks (risk factors and their causes) and develops a risk analysis framework that is applied to three Russian sectors: (1) industrial; (2) housing and communal services; and (3) public. The identified general risks were validated by Russian EPC practitioners in expert interviews. An analytic hierarchy process (AHP) approach was then used to rank the identified risks in terms of their contribution to the riskiness of EPC projects. The data were obtained from a web-based questionnaire survey conducted among Russian ESCOs and ESPCs. For improving consistency of the obtained AHP results, the maximum deviation approach (MDA) for 8×8 matrices and the induced bias matrix model (IBBM) for 3×3 and 4×4 matrices were applied. This study indicates that there is a need for a widely usable formal approach for risk analysis and management in EPC projects in Russia. Causes of risk related to the financial and regulatory aspects were found to contribute most to the riskiness of EPC projects performed in all three focus sectors in that country.

Keywords: Risk analysis, energy performance contracting, EPC, energy service company, ESCO, Russia, analytic hierarchy process, AHP