Energy Savings Performance Contracts (ESPC) are an alternative financing mechanism authorized by the United States Congress designed to accelerate investment in cost effective energy conservation measures in existing Federal buildings.[1] ESPCs allow Federal agencies to accomplish energy savings projects without up-front capital costs and without special Congressional appropriations. The Energy Policy Act of 1992 (EPACT 1992) authorized Federal agencies to use private sector financing to implement energy conservation methods and energy efficiency technologies.
An ESPC is a partnership between a Federal agency and an energy service company (ESCO). The ESCO conducts a comprehensive energy audit for the Federal facility and identifies improvements to save energy. In consultation with the Federal agency, the ESCO designs and constructs a project that meets the agency's needs and arranges the necessary financing. The ESCO guarantees that the improvements will generate energy cost savings sufficient to pay for the project over the term of the contract. After the contract ends, all additional cost savings accrue to the agency.[2] The savings must be guaranteed and the Federal agencies may enter into a multiyear contract for a period not to exceed 25 years.
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Energy Savings Performance Contracts are regulations created by the Federal Energy Management Program (FEMP) of the United States Department of Energy (DOE) as required by the Energy Policy Act of 1992. The final DOE ruling came into effect on May 10, 1995. The use of ESPCs by Federal agencies was reauthorized in the Energy Policy Act of 2005 (EPACT 2005) through the end of Fiscal Year (FY) 2016 and permanently reauthorized in The Energy Independence and Security Act of 2007 (EISA).[3]
As of March 2010 more than 550 ESPC projects worth $3.6 billion were awarded to 25 Federal Agencies and organizations in 49 states and the District of Columbia (D.C.). These projects saved an estimated 30.2 trillion BTU annually, equivalent to the energy consumed by 318,300, and $11 billion in energy costs, $9.6 billion goes to fund energy efficiency projects and $1.4 billion is reduced Federal Government spending.[4]
United States Department of Energy (DOE) energy savings performance contracts are indefinite delivery/indefinite quantity (IDIQ) contracts designed to make ESPCs as practical and cost-effective as possible for Federal agencies. The Department of Energy awarded these "umbrella" contracts to ESCOs based on their ability to meet terms and conditions established in IDIQ contracts. DOE ESPCs can be used for any Federally-owned facility worldwide.[5]
DOE energy savings performance contracts help Federal agencies meet energy efficiency, renewable energy, water conservation, and emissions reduction goals by streamlining contract funding for energy management projects. The streamlined financing provides multiple benefits, including:
The United States Department of the Army (DOA) use of ESPCs is focused on the reduction of energy and water consumption, with ancillary benefits of achieving facility improvements, improving the quality of life in the Army, and ultimately reducing the overall energy costs of the Installations.