Original Date: 11/03/1996
Revision Date: 01/18/2007
Information : Energy Savings Performance Contracting
With an energy cost of $32 million per year, Oak Ridge established an energy management team to devise ways of reducing the facilities’ energy requirements. Despite budget cuts, the team needed to find a way to implement capital-intensive, energy cost-saving improvements without incurring the up-front costs. In response, Oak Ridge has begun to implement the Energy Savings Performance Contracting (ESPC) method.
ESPC involves working with a contractor (typically, an energy service company) who designs, installs, and maintains the energy cost-saving measures for a facility. As payment, the contractor receives a share of the facility’s energy cost savings. Most ESPCs incorporate a savings guarantee, wherein the contractor ensures that the facility will receive a certain level of energy cost savings regardless of the actual performance of the energy-saving measures. If the energy-saving measures do not meet the initial estimates, then the contractor receives a reduced payment for its services. In some situations, the difference between the actual and estimated savings must also be paid by the contractor to the facility.
Oak Ridge developed its first comprehensive ESPC with the Federal Energy Management Program. After receiving ESPC training from the program, the energy management team gathered information from meetings with five energy service companies. Next, the team briefed the energy manager at each Oak Ridge site (the Y-12 Plant, the East Tennessee Technology Park, and Oak Ridge National Laboratory) to obtain support and approval for the proposed ESPC. Oak Ridge is currently in the implementation stages of this ESPC.
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