What is an Energy Service Performance Contract?

For government agencies and large-scale commercial properties, the concern of whether a multi-million dollar energy redevelopment project will pay off is often the biggest hurdle to actually getting the project started. That’s where an Energy Service Performance Contract (ESPC) comes in; in essence, it provides your organization guaranteed performance of all energy systems installed. ESPCs are unique in that they allow energy projects to be funded by using future energy savings generated from the project to actually pay for it. Read on to learn more about this type of contract.

Who Offers Energy Service Performance Contracts?

ESPC’s can only be offered by certified Energy Service Companies (ESCOs). By definition, ESCOs “develop, design, build, and fund projects that save energy, reduce energy costs, and decrease operations and maintenance costs at their customers’ facilities.” Also, “ESCOs act as project developers for a comprehensive range of energy conservation measures and assume the technical and performance risks associated with a project.” ESCOs are certified by the National Association of Energy Service Companies. To find certified ESCOs in your area, check out NAESCO’s member list here.

How to Start An ESPC Agreement

To start an ESPC agreement, you must either place a request for proposal from ESCOs or contact an ESCO directly and begin their process. Typically, this process starts with an energy audit or a full building analysis. The intent is to get a full assessment of your organization’s current energy systems and historical energy use to serve as a basis for engineering and design work for the project. Recommendations for improvements to install will then be formally presented.

After this, a formal Energy Service Performance Contract will be drafted. These typically include the scope of the energy redevelopment project and the expected performance which should result from it. Performance could be measured in a variety of ways, from energy savings in dollars to energy savings in kilowatt-hours, or some other key performance indicator.

What happens after signing an ESPC?

Once the ESPC agreement is signed, everything shifts to the engineering, design, and construction phase. Your ESCO will work to design energy solutions that fit the sizing and specifications necessary to properly integrate with your organization’s current energy systems. Then, contractors will be hired to actually install the energy systems, unless the ESCO has workers on staff to do so.

After Construction

Once everything is installed, your ESCO will help to measure the energy savings generated on an annual basis. These figures will be used to facilitate repayment of the project until it is fully paid off. Most ESCOs will also perform routine maintenance of your energy systems as well, provided that this service was included in the ESPC agreement.

Looking for an Energy Service Performance Contractor?

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