Energy Efficiency
The Not-So-Risky Business Of
Energy Savings Performance Contracts
Energy savings performance contracts enable public utilities to improve facilities and reduce costs in a way that minimizes financial risk.
By Fred Ellermeier and Peter Thomson
W
ater and wastewater treatment operations are
estimated to use 3% of the total United States
electrical consumption ��� more than 100 billion
kilowatt-hours per year. Many utilities report
that electrical power is not only their largest budget item, but
also one of their fastest-rising costs. At the same time, utilities
face significant strains on infrastructure and competition for
their capital improvements budgets. Capital programs, regulatory burdens, rising costs, and rate issues compete for attention and create additional funding battles. Communities and
utilities must make difficult choices about spending priorities.
Utilities that take a holistic look at actual long-term costs
and evaluate projects as business cases, often can justify
investments that address long-term issues. Investing now can
provide paybacks either in reduced future costs (efficiency)
or in renewal and replacement ahead of failure at a lower
cost (avoided costs).
Concerns about financing infrastructure improvements and
payback have led a small, but growing, number of utilities
into energy savings performance contracts (ESPCs). Such
contracts can help utilities reduce operating costs and make
much-needed facility improvements in a way that eliminates
potential concern about actual payback. The ESPC process
identifies facility improvements that meet utility goals and
make good business sense.
An ESPC offers multiple benefits. In this streamlined
design-build approach to project delivery, an energy service
company (ESCO) serves as the project developer. ESCO representatives work with utility staff to identify potential plant
improvements that make financial sense. Examples of such
improvements include installation of energy-efficient motors
and lighting, upgrades in solids processing, and increased
biogas and energy production. The ESCO then evaluates
identified improvements to determine the most attractive
Figure 1 Turning
O&M; savings into
capital funds.
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