Energy Service Companies, ESCOs, contract with institutional energy users in the public and private sectors to provide cost-effective energy efficiency retrofits across a wide spectrum of client facilities, from college campuses to water treatment plants. Effectively utilizing a performance-based contract business model, ESCO's have implemented significant comprehensive energy efficiency retrofit projects over the last three decades. A recent Lawrence Berkeley National Laboratory report estimates that ESCO investment in energy efficiency retro-fit projects currently runs about $7 billion a year. Since 1990, ESCOs have delivered:
Energy Service Performance Contracts (Also Referred to as Energy Performance Contracts)
An ESPC or EPC is a financial mechanism used to pay for today's facility upgrades with tomorrow's energy savings – without tapping your organization’s capital budget. An ESPC/EPC constitutes a partnership between a facility owner and an energy service company (ESCO), and is considered a time and cost‐effective method for completing comprehensive energy.
THE BASIC ESPC/EPC PROCESS
- The building/facility owner competitively selects an ESCO, which completes an energy audit of the facilities.
- Once an ESPC is negotiated, the ESCO designs, installs, and commissions energy conservation measures selected by the owner.
- Energy savings are measured and verified, and the ESCO guarantees the savings.
THE ADVANTAGES OF AN ESPC/EPC
- Pay for facility upgrades now with future energy and operational savings
- Low interest financing options often are available, including tax‐ free municipal leases, which are considered “non‐appropriated funds”
- The ESCO represents a single point of accountability, simplifying the upgrade process significantly
- Select an ESCO based on the best value, not necessarily the lowest bid
- The building owner participates in equipment and subcontractor selection
- Annual energy savings are measured and verified according to the International Performance Measurement & Verification Protocol (IPMVP)
- Guaranteed project cost, energy and financial savings, and equipment performance
Using ESCOs to Deliver Maximum Dollar and Energy Savings
Organizations often turn to Energy Service Companies (ESCOs) when considering retrofit projects since ESCOs have extensive design and implementation experience in integrating multiple efficiency measures, mitigating technical and performance risks, and providing a financial guarantee to project lenders that the energy savings generated will cover the debt service.
ESCOs, in essence, act as project developers as they integrate the project’s design, financing, installation and operational elements. Project contract terms typically range between seven and twenty years depending on the types of measures installed. The main differentiator between ESCOs and other energy efficiency contractors is the guarantee of energy savings which is specified as part of the terms of an energy savings performance contract (ESPC).
ESCO Service Offerings
ESCOs provide (either directly or through experienced subcontractors) all of the services identified by the organization as needed to implement the energy efficiency retrofit. ESCOs present a comprehensive plan to maximize energy savings while meeting the customer’s specific facility requirements. ESCOs engineer and design the project to include multiple conservation measures and to account for interactions among the installed measures.
Typical service offerings include the following:
- Provide an Investment Grade Audit
- Engineer projects of appropriate size and scope
- Arrange project financing and assist the organization in understanding the available financing options.
- Procure and install the equipment
- Monitor and verify energy savings for as long as the customer wishes often the entire contract term
- Provide, if requested, ongoing operations and maintenance savings
- Prepare reports for the customer detailing energy savings and a reconciliation plan if energy savings were to fall below projections
Since 1990, ESCOs have delivered:
- $50B in projects paid from savings
- $55B savings – guaranteed and verified
- 450,000 person-years of direct employment
- $33 billion of infrastructure improvements in public facilities
- 450 million tons of CO2 savings at no additional cost
Undertaking a comprehensive energy efficiency facility retrofit is a complex project with an array of suppliers and technologies all impacting your future energy savings. An energy service company, or ESCO, can offer the expertise and resources to guarantee long term success for your facility, by fully integrating all areas and aspects of your project. HVAC, lighting, windows, doors, insulation, boilers, controls, metering, all come together seamlessly when your project is managed in partnership with an ESCO.
Your partner ESCO will also handle energy audits and the complicated projections for determining your multi-year savings, as well as advising you as to your potential future savings beyond the term of your contract. And, working with an ESCO offers the fiscal advantage of financing your energy efficiency retrofit entirely from the realized future energy savings, via an Energy Performance Contract (EPC) or Energy Service Performance Contract(ESPC) thereby sparing your facility the need to pursue upfront allocated financing. If you have facilities spread across multiple locations, an ESCO can project manage all your locations under the same contract. Your ESCO is committed to a productive multi-year partnership, and to delivering an energy efficiency retrofit resulting in savings over the full life span of the energy efficiency measures installed and operating in your facility.