Building Energy Resilience

Today ratepayers in many states are making large investments in energy efficiency. I am a passionate advocate for the need to invest in cost effective improvements to our building infrastructure. However, I am concerned that many efficiency programs are taking short cuts to attain near-term goals that will undermine the market’s ability to generate deeper and more lasting efficiency improvements over time.

A Performance Contract with an Energy Services Company (ESCO) can be a powerful tool to enable a business to improve the performance of their facility without requiring money upfront. An ESCO assesses a facility’s energy efficiency opportunity, manages the improvement implementation and guarantees the energy savings will be greater than the cost of the project. In my recent blog post, ESCO: Energy Efficiency Investment with No Money Down, I describe the process of a Performance Contract and state “the ESCO assumes the risk of under-performance.” In recent months, however, the cost of natural gas has decreased substantially and many existing Performance Contracts are seeing negative savings for which the building owners are responsible.

An Energy Services Company (ESCO) is a commercial business that “will identify and evaluate energy saving opportunities and then recommend a package of improvements to be paid for through savings”.[1] Performance Contracting with an ESCO can be a very powerful tool for a company with energy saving opportunities but no upfront cash or financing options to implement the projects. An ESCO is a one-stop shop for energy opportunity identification, quantification, financing, implementation, staff training and a guarantee that the savings will cover the costs of the project. For a business, the bottom line is that one’s annual operating costs will not increase, because project financing and the cost of the ESCO are both covered in the energy and maintenance savings realized by the project. In addition, the ESCO assumes the risk of under-performance. If the savings are not achieved, the ESCO is responsible for covering the difference.