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: