Energy Savings Performance Contracts

Quick Facts

Topics: Sustainability • Energy Services
Services: Energy Savings Performance Contracting

How Energy Savings Performance Contracts (ESPCs) Can Help Organizations Reach Infrastructure, Financial, and Sustainability Goals

Key Takeaways:

ESPCs are known to support infrastructure and efficiency projects but can also help enable sustainability and decarbonization outcomes.
ESPCs have obvious financial components and benefits, plus many non-financial benefits.
Choosing the right partner can be the most important factor for ESPC success.

Energy Savings Performance Contracts (ESPCs) — also known as “Performance Contracts,” — have been used successfully for over 40 years in the public sector (and sometimes by private companies) to enable critical infrastructure improvements and help to improve energy efficiency in a guaranteed performance model. As organizations begin to pursue sustainability and environmental goals as part of their strategic plans, ESPCs can also be a great option to help deliver the outcomes to support their goals.

How Does Energy Savings Performance Contracting Work?

An ESPC is a contracting process that centers on producing guaranteed future energy savings through a number of energy efficiency and infrastructure projects. In many cases, these savings are used to finance the project itself. Through the ESPC process, an organization will contract directly with an energy services company (ESCO) for project procurement and implementation. The ESCO helps the organization develop a plan to meet their infrastructure, sustainability, or cost savings goals using energy saving measures, and then guarantees the performance and savings over a specified period of time.

ESPC Process in Practice:

Evaluate, audit, and analyze facilities
Identify energy efficiency opportunities and quantify impact of each opportunity
Prioritize Opportunities: Balance payback with organizational goals to deliver both outcomes and savings
Project financing (if needed) and implementation
Track, measure, and verify each ECM to validate savings

Why Would I Consider an ESPC, and What Are the Benefits?

You have improvements that need to be made, but not a lot of funds to do it. Whether your infrastructure is aging and you have deferred maintenance or you are working to meet an ambitious carbon reduction goal, an ESPC can help achieve your outcomes without upfront cash and with guaranteed savings that can be used to support debt financing.
You have a multi-year capital improvement plan, but you could really benefit from having all the improvements sooner. With an ESPC, you can accelerate your timeline, allowing you to enjoy renewed building infrastructure sooner and start realizing energy savings faster. Additionally, by avoiding the time-consuming, piecemeal, low-cost bid process, you’ll be able to minimize countless hours spent on managing prioritization and procurement.
You want proof and peace of mind that energy-saving measures are performing as expected. If you’re using energy savings to finance the project or you want to report on a carbon reduction goal, the measurement and validation process that is built into an ESPC will help you verify the energy savings to support your goals and communicate the results to your stakeholders.

This Sounds Great, But How Do I Make Sure My ESPC Is Successful?

The ESPC process is regarded as a highly effective, risk-managed method for pursuing infrastructure improvements. The most critical element to consider with an energy savings performance contract is which energy services company you will work with to be your ESPC collaborator. You’ll want to choose a provider that is a NAESCO-approved energy services provider (ESP) or ESCO, which will indicate that the firm has the strength and track record to stand behind the performance guarantees. The National Association of Energy Services Companies (NAESCO) has a list of accredited member companies.

Trane energy savings performance contracts are already delivering more than $3.6 billion in guaranteed savings to customers.

Trane is accredited by the National Association of Energy Services Companies (NAESCO) as an Energy Services Provider (ESP), a U.S. Department of Energy (DOE)-qualified Energy Services Company (ESCO), and the Canadian Federal Buildings Initiative qualified bidder.