A previous post on Energy Savings Performance Contracts (ESPCs) covered taking certain precautions to ensure that a project’s full energy savings are realized. When determining an ESPC’s specifics, it is best practice for the owner/agency to communicate desired objectives and cooperatively develop commissioning requirements to achieve maximum project benefit.

Question:  How can ESPC arrangements with an Energy Services Company (ESCO) be comprehensive by design, and not simply an afterthought, to maximize energy savings?

Answer:  The nature of the set of Energy Conservation Measures (ECM) will determine how comprehensive the energy savings are. The owner/agency is responsible for sharing the primary project goal with the ESCO, and for establishing the allowable payback period upfront. The owner/agency must explain the fact that the project needs to be as comprehensive as possible during the ESCO selection period. If the priority is that the measures have to pay for themselves within a minimum number of years, this objective should be made clear.

At the end of the day, the owner/agency should buy the service it wants, and it is up to the ESCO to make the numbers work. This is why it is important to have a knowledgeable in-house representative who understands the numbers and can negotiate appropriately with the ESCO.

Question:  It is typically more cost effective to allow an experienced ESCO commission projects because it possesses a greater familiarity with ECM technical details. How do you keep a conflict of interest from occurring if the ESCO performs and commissions the work?

Answer:  It is in an ESCO's best interest to create a project for which it can achieve the savings quoted in the guarantee.  When an ESCO performs the work, the commissioning step ensures that the building systems perform as designed. However, building owners need to participate in the commissioning process to ensure that the systems will operate according to the intended design and to the owner/agency needs. In the RFP, it is best to spell out that the ESCO should issue the commissioning protocol to the owner/agency for approval before commissioning occurs. Also, it is critical that an independent agency calibrates all instrumentation and tags it accordingly, before a project is commissioned.

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For further questions regarding ESPCs, please comment to this post or contact a Technical Assistance Provider by linking to the Solution Center.

Content for this Blog post courtesy of Sentech-SRA/ICF International