About Energy Savings Performance Contracts

In the face of ever-rising energy costs and the pressing need for environmental stewardship, municipalities are increasingly looking to energy- and water-saving improvements. To finance these necessary upgrades, municipalities have options at their disposal, one of the most impactful being an Energy Savings Performance Contract (ESPC).

Diving into the Details of Energy Performance Contracting

ESPCs are established contracting and financing mechanisms designed to facilitate energy efficiency upgrades in public and institutional buildings. These buildings include a wide variety of structures, such as those owned by state and local agencies, municipalities, universities, schools, hospitals, and wastewater treatment plants.

But what does this process actually entail? With an ESPC, these entities can finance the cost of energy and water conservation improvements using the guaranteed savings generated by the upgrades over time. These savings, both in energy consumption and operations and maintenance (O&M), essentially pay for the improvements, alleviating the need for significant upfront capital investment.

Understanding the Role of an Energy Services Company (ESCO)

To execute an ESPC, public entities engage the services of an Energy Services Company (ESCO). The ESCO’s role is multifaceted: they plan, design, install, and guarantee energy and O&M savings at their customers’ facilities. This role is unique in that ESCOs use a performance-based contracting methodology to guarantee outcomes, offering a level of assurance to their clients.

Taking a Closer Look at the ESCO Process

The process begins with the ESCO conducting a detailed facility assessment to identify potential energy and water conservation measures (ECMs). These measures may include a wide range of improvements, such as lighting upgrades, HVAC system replacements, or the installation of renewable energy systems.

Once the owner and ESCO agree on the proposed ECMs, the ESCO conducts an Investment Grade Audit (IGA). This audit includes detailed engineering calculations that serve as the basis for the guaranteed savings for each ECM.

Another crucial component of the ESPC process is the Measurement & Verification (M&V) plan proposed by the ESCO. This plan details how the savings from each ECM will be evaluated, as well as the format and frequency of reporting these results.

Following the design and installation of the agreed-upon ECMs, the ESCO measures, tracks, and guarantees the resultant energy and operational savings. These savings are used to pay for the upgrades.

The Power of Energy Savings Guarantees

At the heart of an ESPC is the energy savings guarantee. The savings are calculated as the difference between pre-project and post-project energy and water usage and related O&M. This guarantee provides a way for public entities to pay for energy improvements without dipping into their capital budgets. If the guaranteed savings are not achieved after installation, the ESCO is contractually obligated to cover the monetary shortfall.

Why Choose Millig Design Build?

Millig Design Build stands apart from other ESCOs in that we execute ESPCs under an Integrated Design-Build model. This model transforms the traditionally adversarial relationship between designers and builders into an alliance that fosters collaboration and teamwork.

Our approach ensures that as we make design decisions, we continuously seek feedback from our experienced construction management team and trade partners. This collaborative process allows us to refine our design decisions, progressively minimizing project cost and risk because the builders responsible for implementing the project are gaining project knowledge and providing design input throughout.

Moreover, the early involvement of our project performance team guarantees that systems are set up correctly and perform as designed. This level of integration and collaboration sets Millig Design Build apart from typical ESCOs, as do our internal engineering and construction management teams