Performance Contracting

What is energy performance contracting?

Building owners enter into an agreement with a professional energy service company (ESCO) to identify and evaluate energy saving opportunities. A recommendation is then made for a list of improvements to be paid for through savings on energy consumption.  The ESCO guarantees that savings will meet or exceed annual payments to cover all project costs-usually over a contract term of seven to ten years.  If energy savings do not materialize, the ESCO pays the difference to the owner.  To ensure savings, the ESCO offers training and long-term maintenance services.


How does a building owner find energy savings?

            By working in partnership with an ESCO, a building owner determines what building improvements make the most sense to improve comfort, increase safety, reduce utility consumption and cost, and make maintenance easier and less costly.  Recommendations for energy related improvements might include replacing lighting, skylights, modifying or replacing HVAC systems, plumbing, installing building and energy management controls systems, technology, building envelope, replacing motors, installing pool covers and modernizing and renovating building spaces.


Can't building owners do this themselves?

            Yes, if owners have time, money and expertise. An ESCO will work with owners to provide complete packages of services that meet owners’ needs and save owners’ money.  An ESCO can identify and evaluate energy savings opportunities, provide engineering services, order and install equipment, deploy and manage all phases of construction, commission and audit the program, arrange financing, and guarantee the savings.


How risky is this for building owners?

            ESCOs work under a contract performance guarantee that shifts the risk to the ESCO. Owners’ guaranteed energy savings pay for the capital improvements and debt service, so owners have no up-front or ongoing costs.  If the energy savings do not materialize, the ESCO pays the shortfall to the owner.


What is the typical annual energy savings?

           Annual energy savings can typically range from 20 to 30 % of building owners’ annual                total utility expenditure.



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