Performance Contracting: Saving Energy, Saving Money

  November 10, 2011

Today's tip is about how an energy performance contract can be an effective method for funding energy efficiency upgrades with a limited budget.

As the economy tightens again, using third-party money to make energy efficiency upgrades with guaranteed results is a good tack to take. An energy performance contract is an agreement between a third-party energy services company and facility managers.

Follow these steps to ensure a successful contract and the resulting long-term energy savings. First, do an energy analysis to determine which systems are the best candidates for upgrades. Assemble your in-house performance contracting team, and carefully define the scope of the work. Agree on terms with your ESCO, including maintenance requirements, which party will be specifying the actual equipment, and ensuring that financing provisions meet the parameters for your organizations. You might also consider including language in the contract that covers initial commissioning and ongoing commissioning as well.

Some further tips: Be careful about the clauses in the contract that deal with measurement and verification, and after the work has been completed, be sure to review the results frequently - as often as monthly or quarterly - to ensure the project is on track.

Also, be sure to make the ESCO define precisely how each upgrade will be done. There are industry cautionary tales out there of an ESCO promising a 50 percent cut in lighting energy. And then simply going in and removing half of the lighting fixtures. So buyer beware! As with any contract, make sure you know what you're getting, and hold your contractor to exactly that.


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