A Guide to Performance Contracting with ESCOs

An energy services company (ESCO) can identify energy improvements, provide the capital required and installs improvements, offers turn-key installation services, and guarantees energy savings. Companies pay the ESCO back over a period of years from the energy cost savings generated from the project. Hiring an ESCO is a proven strategy for identifying and implementing energy saving capital improvements, while managing risks inherent in such projects. ESCOs can provide a range of services, from an energy audit to a third-party financed turn-key project with a comprehensive set of measures and guaranteed energy savings. Their specialty is the performance contract that shifts some of the project's performance risk to the ESCO in exchange for allowing the ESCO to capture a share of the savings. Key benefits to working with ESCOs include improved building performance, options for project financing and risk management, and access to expertise, new equipment and training with little to no upfront cost. Performance contracts can apply to an individual building, campuses, or whole portfolios. This guide describes the benefits offered by ESCOs and the things to consider when selecting and contracting with your provider. ESCOs have long served government markets. Performance contracting can be an effective investment approach for the private sector as well