Energy Performance Contract Definition: Understanding the Basics
As businesses and organizations strive to become more sustainable, energy performance contracting has emerged as a popular solution. But what exactly is an energy performance contract? In this article, we will explore the definition of energy performance contracting and its benefits.
Energy performance contracting, or EPC, is a contractual agreement between a client and an energy service company (ESCO). The agreement outlines specific energy conservation measures (ECMs) that the ESCO will implement to improve the energy efficiency of a building or facility. The ECMs can include equipment upgrades, building envelope improvements, and behavior modification programs.
The goal of energy performance contracting is to reduce energy consumption and costs while maintaining or improving the environmental quality of the building or facility. The ESCO assumes the financial risk of the project and guarantees energy savings. If the energy savings are not achieved, the ESCO is responsible for covering the difference.
Energy performance contracts are typically long-term agreements, lasting from five to 20 years. During this time, the ESCO provides ongoing maintenance and monitoring of the ECMs to ensure they continue to operate effectively.
One of the biggest benefits of energy performance contracting is the ability to finance energy efficiency improvements without upfront capital investments. The ESCO covers the cost of implementation and is paid a portion of the energy savings achieved. This allows clients to make energy efficiency upgrades that may have otherwise been financially impossible.
Energy performance contracting also provides clients with a way to achieve their sustainability goals. By reducing energy consumption and carbon emissions, organizations can improve their environmental impact and achieve recognition as a sustainable business.
In conclusion, energy performance contracting is a contractual agreement between a client and an energy service company aimed at reducing energy consumption and costs while improving the environmental quality of a building or facility. The ESCO assumes the financial risk and guarantees energy savings, making it a financially attractive option for clients. Ultimately, energy performance contracting allows organizations to achieve their sustainability goals while reducing energy costs and consumption.
