What Energy Savings Programs can be used by public entities?
Energy savings programs were created to promote awareness and implementation of sustainable construction in public facilities. They have become more important as energy costs rise and budgets decline.
Energy Savings Performance Contract
The most common type of energy savings program for public entities is an Energy Savings Performance Contract, or Guaranteed Energy Savings Contract. An Energy Savings Performance Contract is a contractual agreement between a qualified provider and public entity to reduce the energy and operating costs of a building through the implementation of energy conservation measures. They are unique in that they do not require a large up-front investment. Future energy savings from the improvements can be used to pay for the cost of the project.
Once the project is implemented, the qualified provider monitors utility bills and energy consumption every month to ensure that everything is running correctly and efficiency levels are reached. If the actual energy savings do not match the energy savings that were promised, the provider will pay the difference and make any changes needed. Any additional savings achieved from the project go directly to the building owner.
Below is a graph illustrating the cash flows of a Performance Contract.
The more detailed the Guaranteed Energy Savings Contract is, the better. These documents should indicate exact numbers and figures for energy savings and production, along with clear promises for how the provider will keep up their end of the bargain. The rules and regulations regarding Energy Savings Contracts will vary somewhat depending on local laws. Be sure to check to see what stipulations are required by law within your state.
What types of energy improvements can be made with an Energy Savings Performance Contract?
- Energy Conservation Measures: Energy conservation measures can include installing new energy equipment, adding renewable energy to a building, and reprogramming energy controls to perform optimally and efficiently. Energy savings are calculated based on a benchmark year of building energy consumption before the project has been implemented by a qualified provider.
- Renewable Energy: Renewable energy is an important consideration for guaranteed energy savings programs. Depending on local laws, solar power can often be installed as part of an energy savings performance contract or guaranteed energy savings contract. The process is slightly different, but the funding mechanism remains the same.
- Deferred Maintenance: Energy Savings Performance Contracts are a great way to address maintenance issues that have been deferred due to budget constraints. Often the maintenance is long overdue and results in significant energy and operational savings.
- Advanced Metering Infrastructure (AMI): Cities and towns can use an Energy Savings Performance Contract to fund renovations to aging water meters and wastewater treatment facilities. In many states, the operational savings captured from such improvements fund the project.
- Operational Savings: New equipment installed as part of an energy conservation project can reduce repair costs associated with maintaining old and inefficient equipment. In addition, the higher cost to make upgrades to building in the future can be avoided by including this work as part of an energy project. This may also be referred to as maintenance savings or capital cost avoidance.
Behavior-Based Energy Programs
People use energy, not buildings. Public entities can also implement behavior-based energy programs that directly influence the behavior of people using the buildings. These programs work similarly to Energy Savings Performance Contracts in that the savings that result from changed behavior pay for the cost of the program. Over time, public entities can reduce energy costs by up to 20% by implementing these types of programs.
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