Performance contracting is a method of financing energy efficiency improvements that is gaining popularity among building owners. This approach allows building owners to make energy efficiency improvements without having to pay for them up front. Instead, the building owner pays for the improvements over time through the savings on their energy bills.
An energy service company (ESCO) is typically responsible for designing, installing, and maintaining energy-saving measures in a building. The ESCO guarantees that the energy savings will be sufficient to cover the cost of the improvements, and shares in any additional savings that result.
There are several benefits of performance contracting. One of the main benefits is that it allows building owners to make energy efficiency improvements without having to pay for them up front. This can be especially beneficial for building owners who do not have the capital on hand to pay for energy efficiency improvements.
Performance contracting also allows building owners to take advantage of the latest energy-saving technologies. ESCOs typically have access to the latest energy-saving technologies and are able to design and install systems that are tailored to the specific needs of a building.
Performance contracting also allows building owners to better control their energy costs. By making energy efficiency improvements, building owners can reduce their energy consumption and therefore their energy costs. Additionally, by sharing in the savings resulting from the energy efficiency improvements, the ESCO provides a financial incentive for the building owner to continue to operate the systems in an energy-efficient manner.
It’s important to note that performance contracting is a long-term commitment and building owners should carefully evaluate the ESCO’s credentials, experience, and the terms of the contract before entering into an agreement.
In summary, performance contracting is a method of financing energy efficiency improvements that allows building owners to make energy efficiency improvements without having to pay for them up front. An ESCO designs, installs, and maintains energy-saving measures in a building, and the building owner pays for the improvements over time through the savings on their energy bills. This approach offers many benefits including access to the latest energy-saving technologies, better control over energy costs, and a financial incentive for the building owner to continue to operate the systems in an energy-efficient manner.