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Energy Savings Performance Contracts Finish the Year Strong

handshakeThere was a lot of impressive news in the energy savings performance contracts (ESPC) sector toward the end of 2016.

ESPCs are gaining favor as a way to facilitate capital-intensive projects that otherwise would likely not be undertaken. In such arrangements, the work is done by an energy services company (ESCO), which is paid from the savings that accrue during a specified number of years.

The approach clearly is gaining favor. The Middletown (CT) Press reported yesterday that the Connecticut Valley Hospital in Middletown is embarking on a 30-month ESPC-financed project that will save $31.9 million over a 15-year period. The project, the story says, includes replacement of an underground steam pump, deployment of LEDs, creation of a cogeneration plant and installation of an electric-vehicle charging station. The work will be done and savings guaranteed by NORESCO, a United Technologies company.

ESPCs are commonly used by the government. Siemens said that during 2016 it has received federal contracts that it expects will save the government $300 million. The story at Mass Transit mentions four. One is a $40 million ESPC with the U.S. Army Garrison Hawaii that will create almost $3 million in annual savings at four bases on Oahu. A second ESPC was awarded to Siemens by the National Park Service for water and energy services at historical sites in Washington, DC.

The third Siemens’ ESPC is for the National Institution for Occupational Safety and Health campus in Bruceton, PA. Finally, Siemens will provide upgrades to the McAlester Army Ammunition Plant in McAlester, OK under an ESPC with the U.S. Army Corp of Engineers. The story says that modifications were made to an existing ESPC with the Corpus Christi Army Depot, which is the military’s largest helicopter repair facility, the story said.

Ameresco, another supplier of ESPC’s, said this month that the Multnomah (OR) County Board of Commissioners has enlisted it to do work that is expected to save $239,000 annually in water, gas and electric costs. The company will design, construct, commission and verify the $2.5 million contract. It includes lighting upgrades, new controls, water conservation and HVAC improvements at the Inverness Jail and the Juvenile Justice Complex. The county will receive $230,000 in grants and incentives.

Finally, the Defense Logistics Agency Energy awarded an ESPC to Honeywell International for work at the Oklahoma City Air Logistics Complex (OC-ALC) at Tinker Air Force Base in Oklahoma City. The $262 million contract will focus on modernization of 50 buildings totaling more than 10 million square feet. The project, which will take 42 months to complete, is expected to reduce energy usage by 35 percent and reduce water use by 9 percent.

ESPCs, of course, are not the only way in which ambitious projects are financed. But the basic idea – that ESCOs in essence put their saving forecasts on the line and only are rewarded if they are achieved – clearly resonates with government and private entities with small budgets and a desire to ensure that their initiatives, many of which are undertaken due to government mandates to become more energy efficient, will succeed.

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