Energy efficiency is a crucial aspect of reducing energy consumption and lowering energy costs. One of the most effective ways to improve energy efficiency is through performance contracting with Energy Service Companies (ESCOs). Performance contracting is a business model in which the ESCO guarantees a certain level of energy savings for the customer, and makes up the difference if the savings are not achieved. In this blog post, we will take an in-depth look at performance contracting with ESCOs, including the benefits and considerations for customers.
Performance contracting is an attractive option for customers because it eliminates the need for a large up-front investment. Instead, the ESCO finances, designs, and implements the energy-efficient upgrades, and the customer pays for the upgrades through the energy savings over a specified period of time. This makes it a low-risk option for customers as they can see the savings before committing to the upgrade. Additionally, the ESCO is responsible for maintaining and monitoring the equipment, so the customer does not need to worry about that.
One of the main benefits of performance contracting is that it allows for a comprehensive approach to energy efficiency. The ESCO conducts an energy audit of the facility, identifies areas of inefficiency, and recommends specific upgrades that will lead to energy savings. This can include installing energy-efficient lighting, HVAC systems, and building management systems, as well as making changes to the building envelope to improve insulation and reduce air leakage. By taking a comprehensive approach, customers can achieve significant energy savings over time.
Another benefit of performance contracting is that it can help customers take advantage of government incentives and funding opportunities for energy efficiency. ESCOs are often familiar with the various incentives and funding opportunities available, and can help customers access them. This can significantly reduce the cost of the energy-efficient upgrades.
However, customers should be aware that performance contracting can be complex and time-consuming. The process usually starts with an energy audit, and then the ESCO will design and implement the upgrades. This can take several months or even longer. Additionally, performance contracts can be long-term, with a period of time of up to 20 years. It’s important for customers to carefully review and understand the terms of the contract before signing it.
In conclusion, performance contracting with ESCOs is an effective way to improve energy efficiency and reduce energy costs. The ESCO guarantees a certain level of energy savings, and finances, designs, and implements the energy-efficient upgrades. Additionally, the ESCO is responsible for maintaining and monitoring the equipment. By taking a comprehensive approach, customers can achieve significant energy savings over time. However, customers should be aware that performance contracting can be complex and time-consuming and that it is important to review the terms of the contract before signing it.