Energy performance contracting is an innovative arrangement that provides energy management services to building owners and managers on a performance basis.
Energy performance contracting is an innovative arrangement that provides energy management services to building owners and managers on a performance basis. This approach was developed to overcome barriers that often prevent organizations from addressing opportunities to save energy, including a lack of technical expertise and limited budgets.
Simply put, an energy service company (ESCO):
- Assesses all your energy systems and equipment
- Identifies possible energy-saving opportunities
- Recommends energy efficiency improvements
- Implements changes to improve energy efficiency
- Monitors the results
The unique feature of energy performance contracting is that all of this is done at no upfront cost or risk to the business owner because the work is paid for with a percentage of the annual savings made on energy costs that are generated over a defined period of time.
Generally, energy performance contracting is done for organizations with an annual energy bill of at least $100,000, with potential energy savings of at least at $100,000. The defined payback period must be supported by a cost-benefit analysis and the lifespan for energy improvements must substantially exceed the payback period.
What have others done?
Memorial University of Newfoundland first opened in 1925 and is now the largest university in Atlantic Canada. In 2007, Memorial created a Sustainability Office and committed to growing the university in a way that would minimize its impact on the environment. In 2007, Memorial partnered with Honeywell Building Solutions to improve the university's energy efficiency.
Honeywell and Memorial agreed on a $13.2 million energy performance contract to complete several energy efficiency upgrades. The upgrades included lighting retrofits, upgrading the boiler and HVAC systems, replacing outdated equipment, and optimizing automated systems. Honeywell guaranteed the energy savings that Memorial would experience and the university reduced its energy costs by $1.5 million each year. The project also reduced Memorial's greenhouse gas emissions by 15% or 7,300 tonnes per year, which is the equivalent of taking over 1,400 cars off the road!