Performance Contracting Helps Save on Energy Costs
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Unlock Energy Savings with Performance Contracting
Summary
As energy costs continue to rise, businesses in the U.S. are turning to energy performance contracts as a strategic solution. Offered by energy service companies (ESCOs), these contracts allow commercial building owners to enhance energy efficiency without upfront costs.
Article
Amid rising energy expenses, companies are exploring innovative ways to reduce their consumption beyond simply turning off lights. One effective approach is the energy performance contract, provided by an energy service company (ESCO), which offers a financial mechanism to boost building efficiency.
The essence of energy performance contracting is using future utility savings to fund current improvements. Typically spanning seven to 20 years, these contracts ensure that the savings generated will cover or exceed the annual costs of the project.
According to Jeff Stokes, Vice President at World Energy Solutions, a leading ESCO based in St. Petersburg, Florida, “Building owners can either pay high utility bills for inefficient systems or invest in energy-saving upgrades through our services.”
World Energy Solutions aims to cut kilowatt usage by up to 30 percent. Their offerings include utility billing analysis, energy audits, installation services, system maintenance, and ongoing monitoring to verify savings.
ESCOs like World Energy Solutions provide flexible financing options. One model involves the ESCO covering all initial installation and maintenance costs in exchange for 80 percent of the savings over a ten-year period.
Ben Croxton, CEO of World Energy Solutions, explains, “We sometimes fully fund installations at no cost to our clients, relying on the savings to generate our revenue.”
ESCOs not only pinpoint energy-saving opportunities but also handle engineering designs, project management, staff training, and ongoing maintenance.
Even the federal government is engaged, driven by mandates to reduce energy use in federal agencies by 35 percent from 1985 levels by 2010. This directive necessitates $5 billion in energy projects, largely funded through the Department of Energy’s "Super Energy Savings Performance Contracts."
In summary, energy performance contracting presents a viable and sustainable path for businesses to reduce energy costs, benefiting both their bottom line and the environment.
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