Energy-savings performance contracts (ESPCs) have provided a tool for states, municipalities, and school districts to achieve sustainability goals, budget reductions, and efficiency of the built environment through an alternative financing mechanism since the mid 1990s.
An energy services company (ESCO) is contracted to perform a financial-grade operational audit for the project, which identifies the specific measures and ultimate savings from those measures. The ESCO guarantees these savings and the contract is “paid back” based on the actual savings incurred, essentially eliminating the need to pay for the measures from the approved capital budget.
This policy option considers utilizing ESPCs to identify opportunities for energy conservation measures, and then implementing the measures that will have the largest effect on reducing greenhouse gas (GHG) emissions. Performance contracting is well suited for State-owned buildings and what is often referred to as the “MUSH” market, an acronym for municipalities, universities, schools, and hospitals.
The U.S. Department of Energy (DOE) developed an ESPC toolkit with input from states, municipalities, and school districts as part of its ESPC Accelerator, which began in 2013 and ended in 2016. Over the three-year period, DOE partnered with 25 different state and local agencies to identify barriers around ESPCs and developed solutions for success.
Nevada participated in the DOE ESPC Accelerator and as a result designed and implemented the Performance Contracting Audit Assistance Program (PCAAP) in the Governor’s Office of Energy (GOE). Through this program, the GOE provides incentives to public facilities that wish to enter into an ESPC by covering the costs of the investment-grade audit (also known as the financial grade operational audit) up to $0.10 per square foot. Since PCAAP’s inception in 2014, GOE has awarded $1.7 million to accelerate performance contracting resulting in projects totaling $100 million, while creating an estimated 730 jobs and saving over 51 million kWh and 463,000 therms annually.