Energy Savings Performance Contracts: ESCOs Help Agencies Update Their Systems with No Upfront Costs

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PARK AND RECREATION AGENCIES ACROSS THE COUNTRY continue to be challenged with delivering the services and programming that their constituents expect. As budgets continue to shrink, these challenges become more pressing. Agencies with older recreation facilities are encountering operations and maintenance difficulties. The question for facility managers becomes how to obtain capital investments to keep facilities up and running in the current budget climate.

One tool that's been employed by park agencies from Tacoma, Washington, to Chicago, Illinois, is energy savings performance contracts or ESCOs. Many state legislatures have authorized local governments to use ESCOs and the federal government was authorized to use ESCOs under the Energy Policy Act of 1992. These authorizations provide an alternative funding mechanism for energy efficiency capital investments in the facilities of local governments.

Here's how it works. A park agency contracts with an ESCO company to conduct an investment grade audit of its facility. Within a recreation facility there are many opportunities for energy efficiency improvements including variable speed motors for pool pumps, energy efficient lighting, better heating and cooling systems, insulation, efficient windows and doors, and systems controls. The audit provides an agency with a list of energy efficient improvements, the expected energy reductions, and the return on investment. Some improvements, such as lighting, may have a short payback period of a few months to a year while other improvements, such as new heating systems, may have a longer payback period of several years. Once a list of improvements is identified, the ESCO company then designs and constructs those improvements while guaranteeing the energy savings as a result of those improvements.

What's unique about this model is the ESCO company can arrange for the financing of the facility improvements and receive payment for the improvements through the utility savings the agency realizes. Thus there are no upfront costs for an agency. Once the improvements have paid for themselves, the agency will realize the energy savings. …