An energy service agreement (ESA) is a mutually beneficial agreement between an investor or developer and a customer looking to install or upgrade renewable or energy efficiency systems like solar, CHP and battery energy storage. ESAs are proven financial structures that have been used to install many multi-million dollar retrofit projects for Fortune 500 companies and major institutional facilities. They are ideal financing structures for any organization looking to increase sustainability and lower energy costs with no upfront capital expenditure.
What is an ESA?
ESAs are financial agreements between a customer and an investor who will own the energy efficiency systems installed on the customers property. Customers in these agreements can be cities & municipalities, commercial businesses, healthcare institutions, manufacturing enterprises and primary & higher education institutions who will benefit from increased energy efficiency and savings. The investor is typically a bank or investment firm. They will cover all project development and construction costs and benefit from Renewable Energy Certificates (RECs) steady cash flow and tax incentives depending on the state the project is located in. The investor/ developer is also responsible for covering all costs associated with operations and maintenance.
After construction is finished and the energy efficiency project is operational, the customer begins making service charge payments for actual realized savings. Actual realized savings are the energy savings achieved by the system during an annual period. These are the sum of savings projected with measurement & verification calculations plus stipulated savings (agreed upon at the project’s beginning and included in the contract).The customer’s service charge payments are fixed, output-based charges that are set at or below the existing utility price, guaranteeing immediate utility savings.
ESAs are particularly useful for organizations that are low on cash, risk averse or looking for a short term contract with the option to buy out annually. With a national certified energy service company (ESCO) like EnergyLink facilitating your energy service agreement, your organization can lower energy usage & costs and carbon emissions in no time.
Interested in an energy service agreement?
If you are interested in entering into an ESA and starting a renewable or energy efficiency project with no upfront capital payment, click the button to get started. Our team of financial analysts will work to find the best project funding solution specifically tailored to your organization’s needs. EnergyLink is a national certified ESCO that designs, builds and funds projects for a range of commercial and industrial entities. Click the link below to learn more about other project financing avenues available to your organization.