Some companies do more than just turn off the lights at the end of the day to reduce their energy use.
As rising energy costs hurt U.S. businesses' bottom lines more and more, the "energy performance contract" has become an appealing way for owners of commercial buildings to save money. This contract is a financing or operating lease offered by an ESCO, or energy service company, to help businesses make their buildings or facilities more energy efficient.
The key to energy performance contracts is to pay for improvements with money saved on utilities over time. The ESCO usually guarantees that the energy savings will be equal to or greater than the annual payments needed to cover all project costs, and this is usually done over a contract period of seven to twenty years.
"A building owner can either pay a utility for an inefficient building or pay an ESCO to improve it," says Jeff Stokes, a vice president at World Energy Solutions in St. Petersburg, Florida. World Energy Solutions is a publicly traded ESCO (symbol: WEGY).
World Energy Solutions tries to cut the amount of kilowatts used by up to 30%. The company offers a wide range of services, such as utility billing and rate analysis, energy audits, installation of building improvements, building system maintenance, and ongoing monitoring and verification of the energy savings.
ESCOs can offer different and creative ways to pay for their services. World Energy Solutions, for example, offers to pay the
total up-front cost of installation and maintenance of the equipment in exchange for an 80% share of the actual savings made over a minimum of 10 years.
Ben Croxton, the CEO of World Energy Solutions, says, "In some cases, our company will pay for the whole installation at no cost to the customer and live off the savings we make over a certain amount of time."
ESCOs not only find ways to save energy, but they also come up with engineering designs and specifications and oversee the whole process. They can also train employees and keep things running smoothly.
Even the federal government is getting involved, and for good reason. Executive orders that require federal agencies to use 35 percent less energy by 2010 compared to 1985 levels will require $5 billion in energy projects. A lot of that money will go to the Department of Energy's "Super Energy Savings Performance Contracts."
