Performance Contracts Can Save Big

Sept. 14, 2011

Could you benefit from financing that guarantees energy savings? A performance contract helps building owners to pursue efficiency improvements within their existing budgets and without upfront capital costs.

To provide a net savings to an owner’s budget, projects are designed so that the yearly energy and operational savings are greater than or equal to the payments over the term of the contract.

Texas A&M University has seen steady improvements in energy consumption by using performance contracts. In the past decade, the university has reduced campus energy usage by 35% while increasing gross square footage by 18%. Water consumption has also fallen by 33% since 2000.

Combined with low-interest loans from the state, Texas A&M has 24 facilities in the midst of HVAC, lighting, and mechanical system upgrades. Guaranteed by the university’s energy service company, energy and operational savings will amount to over $1 million annually during the first phase and $500,000 a year during the second.

Performance contracts can be used by virtually any type of company, but the U.S. government is one of the largest supporters. According to the Department of Energy, more than 570 federal projects worth $3.9 billion were implemented across the country using performance contracts. The improvements are estimated to save 32.8 trillion BTUs a year, enough to provide energy for 345,000 homes. This translates to $13.1 billion in energy costs, $3 billion of which will reduce government spending with the rest funding additional efficiency projects.

If you’re in a tight budget situation and having difficulty funding necessary improvements, a performance contract may be the ticket to jumpstart your efforts.

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