Energy and water saving upgrade projects can pay for themselves over time if designed and implemented properly. By financing and efficiency improvement, you can even show savings in the initial year. Design / build projects can be managed in house or outsourced, and sources of financing are available for credit-worthy clients. If you have already employed a commissioning agent or auditor, they may be able to offer advice on how to proceed. However, managing a comprehensive retrofit program for commercial or industrial facilities involves risk, and most commercial building owners do not have the technical capacity in-house for undertaking such projects. Performance contractors will provide the initial energy evaluations, as well as manage and finance comprehensive efficiency retrofit projects, and guarantee they pay for themselves out of the savings created. This approach has been used most widely by public entities, but can be adopted by private sector owners and managers as well.
Performance contractors act as a partner for the commercial or industrial facility owner / manager. They work alongside the owner to provide engineering design, procurement, construction, and commissioning services. Generally these firms arrange the financing of the entire project so that the building owner / manager doesn’t make a payment until savings actually start to accrue, and offer a guarantee that the savings exceed the cost of the project, including finance costs, over the term of the financing. Performance contractors also know how to obtain any available tax or utility rebate subsidies available in the local area. Projects can usually be designed so that the owner experiences savings from the commissioning of the first elements of the upgrade project. This allows a building owner to create savings from within an existing budget allocation, without having to allocate internal capital. this has made performance contracting particularly attractive to governmental entities, which might have to request legislative appropriations for upgrades otherwise. Still, capital improvements have shrunken in the private sector as well, making performance contracting of greater interest as well.
For more information about performance contracting generally, see A Guide to Performance Contracting with ESCOs, and A Guide to Performance Contracting with ESCOs, Volume 2, Appendices, or about performance contracting for public entities in Texas visit SECO’s page on Energy Savings Performance Contracting. SPEER has recently released a staff paper, Performance Contracting Legal and Regulatory Update, that provides a history and status update on performance contracting for state agencies and universities. The National Association of Energy Service Companies, or NAESCO, provides three levels of certification:
As mentioned, Performance Contractors can help you arrange financing for a project, and guarantee your project generates the budget savings you need to make payments. In Texas, public entities (e.g., state agencies, universities, colleges, cities, counties and all other local political subdivisions) have access to low-interest financing through the Loan STAR fund, which is administered by the State Energy Conservation Office. In addition, the Texas Public Finance Authority can finance energy and water savings projects for state entities (e.g., state agencies and universities) at very low interest rates. Because performance contractors normally facilitate financing with third parties, they are generally very willing to help public entities access those low-cost sources of capital, which simply improves the economics of a project.
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