Energy Service Performance Contracts (Also Referred to as Energy Performance Contracts)
An ESPC or EPC is a financial mechanism used to pay for today’s facility upgrades with tomorrow's energy savings – without tapping your organization’s capital budget. An ESPC/EPC constitutes a partnership between a facility owner and an energy service company (ESCO), and is considered a time and cost‐effective method for completing comprehensive energy.
The Basic ESPC/EPC Process:
- The building/facility owner competitively selects an ESCO, which completes an energy audit of the facilities.
- Once an ESPC is negotiated, the ESCO designs, installs, and commissions energy conservation measures selected by the owner.
- Energy savings are measured and verified, and the ESCO guarantees the savings.
The Advantages of an ESPC/EPC:
- Pay for facility upgrades now with future energy and operational savings
- Low interest financing options often are available, including tax‐ free municipal leases, which are considered “non‐appropriated funds”
- The ESCO represents a single point of accountability, simplifying the upgrade process significantly
- Select an ESCO based on the best value, not necessarily the lowest bid
- The building owner participates in equipment and subcontractor selection
- Annual energy savings are measured and verified according to the International Performance Measurement & Verification Protocol (IPMVP)
- Guaranteed project cost, energy and financial savings, and equipment performance