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Energy Savings Performance Contracts


Overview

The Guaranteed Energy Savings Program (GESP) utilizes an Energy Performance Contract (ESPC), which is a performance-based procurement and financing mechanism that leverages energy and operational savings achieved through the installation of energy efficient and renewable energy equipment and implementation of operational best practices, to finance the cost of the building retrofit and renewal project, with no net cost increase to the public entity.

An ESPC, referred to in statute §16C.144 as a Guaranteed Energy Savings Agreement, is a performance-based contract between a public entity and a qualified “Energy Services Company” (ESCO).  Principle to the agreement is a written “guarantee” from the ESCO providing that annual utility, operational, and maintenance cost-savings generated during the term of the guaranteed energy savings agreement, will meet or exceed the annual payments due under the finance agreement.  In the event the “guaranteed” savings are not achieved during any year of the agreement, the ESCO is required to reimburse the public entity for the guarantee shortfall. To achieve the “guaranteed” savings, the ESCO assumes the construction and on-going performance risk of the project.

Over the term of an ESPC, the accumulated savings resulting from decreased energy, operational and maintenance costs are used to pay for all project and financing costs including; design, bidding, equipment procurement and installation, commissioning, measurement and verification monitoring, and related project finance costs. Projects are generally structured so that the savings equal or exceed all project costs. Savings in excess of the “guarantee” are immediately accrued by the public entity in the form of reduced utility and operational costs.

The ESCO serves as the single point of accountability for the public entity throughout the agreements: auditing, design, construction, commissioning, and performance periods.

Energy Services Companies

An Energy Services Company (ESCO) is a commercial business that develops, installs, and provides financial assistance for projects designed to improve energy efficiency and maintenance costs for facilities using an ESPC. ESCOs act as the project developers for a wide range of tasks and assume the technical and performance risk associated with the project.  ESCOs are able to provide services to both public and private sector clients. 

Typical tasks performed by an ESCO: 
  • Develop, design, and arrange financing for energy efficiency projects;
  • install and maintain the energy efficient equipment involved;
  • measure, monitor, and verify the project's energy savings; and
  • assume the risk that the project will save the amount of energy guaranteed.
Typical energy conservation opportunities included in an ESPC:
  • Architectural /Structural – roofing, doors, insulation, weather-stripping, window treatment
  • Electrical – lighting retrofits, emergency power, power and distribution, IT/communications networks, life safety systems
  • Mechanical – HVAC systems, plumbing and drainage, energy management and building controls  
  • Property/Site – underground utilities, lighting improvements, swimming pools, ice arenas
  • Renewable Energy – photovoltaic (PV) solar, thermal solar, wind, biomass, hydroelectric
  • Water and Waste – water purification systems, water sewage facilities, landfill gas capturing, waste utilization
  • Operational Best Practices – staff training and development programs associated with energy conservation
“Guarantees” associated with an Energy Services Performance Contract:
  • Guaranteed Project Installation Costs
  • Guaranteed Energy and Financial Savings 
  • Guaranteed Equipment Performance 
Advantages of an Energy Services Performance Contract:
  • Single point of accountability – the Energy Services Company (ESCO)
  • Transfers the “risk” of both construction and long-term savings to the ESCO through a performance “guarantee”
  • Provides budget neutral financings, no direct impact on taxpayers
  • Utilizes best value procurement practices
  • Annual energy savings are monitored and verified by the ESCO 

GESP Master Contract and Procurement Documents


To review the GESP Master Contract, Work Order Contract and Site-Specific RFP, refer to the Program Resources section.