What is Energy Performance Contracting?
Are you looking to make your business more energy-efficient? If so, you’re probably familiar with the concept of energy performance contracting. Energy performance contracting is a type of contract that allows a company to save money on their energy bill by investing in energy efficient technologies like solar panels and LED lighting. By doing this, businesses are able to reduce their carbon footprint, increase efficiency, and save money all at once. In this blog post, we will dive into what energy performance contracting is and how it can help your business become more sustainable. We’ll also explore the different types of contracts available and how they work in practice.
What is an Energy Performance Contract?
An Energy Performance Contract (EPC) is a type of agreement between a customer and an energy services company (ESCO). The ESCO agrees to provide energy-efficiency improvements or other specified energy services to the customer, and the customer agrees to pay the ESCO based on the results achieved.
In an EPC, the ESCO typically designs, installs, and commissions the project, guarantees its performance, and provides ongoing operation and maintenance services. Customers usually pay for projects through a combination of upfront investment and shared savings from reduced energy consumption. In some cases, financing may also be available from third-party sources.
Energy performance contracting has been used extensively in Europe and is gaining popularity in the United States as a way to finance energy efficiency and renewable energy projects. EPCs can be used for new construction or retrofits of existing buildings, including residential, commercial, institutional, and industrial facilities.
How does it work?
Energy Performance Contracting (EPC) is a type of financing arrangement in which an energy services company (ESCO) provides upfront funding for energy efficiency and renewable energy projects in return for a portion of the future savings generated by the project. The ESCO guarantees that the project will generate enough energy savings to cover the cost of financing, plus a return on investment for the ESCO.
The EPC contract typically spans 5-10 years, during which time the ESCO manages and maintains the equipment used to generate the energy savings. At the end of the contract term, ownership of the equipment transfers to the customer at no additional cost.
During the contract term, customers make monthly payments to the ESCO based on their actual energy savings. If energy savings fall short of what was guaranteed in the contract, the ESCO makes up the difference.
Energy Performance Contracting can be used to finance a wide variety of projects including:
-Installing more efficient lighting
-Upgrading heating and cooling systems
-Improving building envelope (insulation, windows, etc.)
-Adding solar panels or other renewable energy systems
What are the benefits?
Energy performance contracting (EPC) is a financing mechanism used to fund energy efficiency and renewable energy projects. EPCs are often used by public entities, such as school districts and municipalities, to access the capital needed to invest in energy upgrades. In an EPC, a contractor agrees to provide financing for the project and guarantees that the project will result in energy savings that will offset the cost of the investment. The contractor is then paid from the resulting energy savings.
EPCs offer a number of benefits, including:
-Access to capital: EPCs can provide up-front funding for projects that would otherwise be difficult to finance. This can allow organizations to make much-needed improvements without having to divert funds from other priorities.
-Improved cash flow: EPCs can improve an organization’s cash flow by deferring payments until after the project is complete and the energy savings are realized.
– Reduced risk: EPCs transfer much of the project risk to the contractor, who is motivated to ensure that the project is successful in order to receive payment. This can reduce the risk for the organization compared to traditional financing arrangements.
– Guaranteed results: One of the key benefits of an EPC is that it provides a guarantee of results. The contractor agrees to provide financing for the project and guarantee that it will result in specified energy savings. This gives organizations confidence that they will see a return on their investment.
Are there any drawbacks?
Yes, there are some drawbacks associated with energy performance contracting. First, it can be difficult to find a qualified contractor who is willing to enter into such an agreement. Second, the upfront cost of implementing an EPC can be significant, although it is typically offset by the savings generated over the course of the contract. Finally, there is always the risk that the contractor will not meet their obligations under the contract, which could result in increased costs for the property owner.
How to find a contractor
If you’re looking to have energy performance contracting work done on your home or business, you’ll need to find a qualified contractor. Here are some tips:
1. Start by getting referrals from friends, family, or other businesses who have had similar work done.
2. Once you’ve compiled a list of potential contractors, do your research and check out their credentials and experience.
3. Make sure to get written estimates from each contractor before making your final decision.
4. Ask each contractor about their guarantee or warranty policy in case something goes wrong after the work is completed.
Conclusion
In conclusion, energy performance contracting offers a viable solution for businesses to reduce their emissions and improve their efficiency. By combining efficiency measures with financing options such as ESCOs or the creation of an Energy Services Company (ESCo), businesses can make significant improvements in energy use while avoiding large capital investments. The success of these contracts depends on careful research and planning, so it is important to work with experienced professionals when considering this option.
