White Paper

How U.S. Federal agencies can leverage Energy Savings Performance Contracts to install clean energy systems, reduce carbon emissions, and address deferred maintenance through budget neutral financing

Energy Savings Performance Contracts ESPCs
Climate change, energy resiliency and mission readiness are key issues to many U.S. Government agencies, but solving these challenges often require large capital expense.

Energy Savings Performance Contracts (ESPCs), Utility Energy Savings Contracts (UESCs) and GSA ENABLE ESPCs are proven programs that allow Federal agencies to upgrade facilities infrastructure using budget neutral programs. Siemens has successfully implemented over 30 ESPCs and generated >$1B in guaranteed energy savings through these contract vehicles.

An Energy Service Company (ESCO) and/or utility company in consultation with the government agency develops, designs, and implements improvements at the project site and provides the money to pay for it. The agency pays the ESCO over the term of the contract, up to 25 years out of the energy and energy-related cost savings resulting from the project. The ESCO guarantees the performance of the project that is estimated to generate enough cost savings to pay for the project over the term of the contract. After the contract ends, all additional cost savings accrue to the agency.

Energy Service Company (ESCO)

The benefits of financed energy programs include:

  • High quality equipment, timely service and turn-key equipment commissioning
  • Mission critical infrastructure repairs, upgrades and resilience features that pay for themselves over time
  • Healthier, safer working and living environments
  • Increased reliability, cybersecurity capacity and functionality
  • Turnkey solutions approach versus patchwork maintenance programs
  • Savings guarantees that often exceed contract requirements. Our experience shows that customers typically receive 108% of the guarantee, verified through routine monitoring
  • The equipment’s useable lifecycle extends beyond the contract’s performance period
  • Delivers building efficiency improvements and new equipment without upfront capital costs
  • Funds energy improvements without relying on special congressional appropriations
  • Guarantees a level of performance estimated to generate enough savings to pay for the project within a 25-year term

What are the key elements to a successful ESPC project?

Have a champion.

Every successful ESPC needs a champion – someone who will maintain momentum and enthusiasm for the project within your organization. Ideally, this person has considerable influence within the organization and is an assertive advocate for the ESPC process. The strongest setback of an ESPC project is doing nothing – this can be overturned with the right people.

Be clear on objectives, requirements, goals, and criteria.

What exactly are you trying to achieve?  What are the technical, legal, and financial requirements? Document these requirements and re-emphasize to all stakeholders:

  • Baseline utility rates, what scope of work must be included in the project, etc.
  • Desired finance term, potential operational cost avoidance categories, any capital/grants/funds that can be applied towards the project, etc.
  • List of stakeholders, influencers, etc.

Obtain full support from all stakeholders

For an ESPC to be efficiently executed, all stakeholders must understand and support the objectives and requirements of this financing mechanism. Maintaining communication and full transparency through the entire ESPC acquisition planning, assessment, development, implementation, and audit phases is critical to the success of the program. Relevant stakeholders from your organization’s finance, capital planning, and facilities departments should be consulted at each phase of the project. In addition, having weekly calls and meetings with the ESCO is highly recommended to ensure the project stays on schedule.

Understand the Investment Grade Audit (IGA) report

IGA reports serve as the technical basis for the ESPC project development and justify the economic feasibility of the project to secure financing. Therefore, IGA reports can be complicated, brimming with technical details, financing strategies, and explanations of maintenance roles. Take the time to fully understand the contents of the report, asking questions and getting clarification on anything that isn’t clear. Make sure you understand exactly what is being requested from your organization in the way of assistance during construction, system maintenance, and other phases before the project begins. Establish an efficient process to respond to questions within the IGA document.

Consider supplementary support from a third party financed program

While installing clean energy solutions will help improve the resilience and efficiency of your facilities, you may need to source additional funding to meet your goals. Consider applying supplementary funds that are authorized and appropriated by Congress or available through other approved parties, such as MILCON, ERCIP, and O&M, to close the gap.

Establish a process to phase the infrastructure improvements so that your organization can see results earlier. For example, implement quick payback improvements first and then issue modifications to the agreement after the more complex solutions are designed and fully vetted to maintain momentum with the team.

third party financed program ESPC
ESPC Case Study:
How Naval Station Guantanamo Bay saves 49% in annual energy costs with energy upgrades through an Energy Savings Performance Contract (ESPC) from Siemens Government Technologies
Read the case study
ESPC Case Study:
How the U.S. Army Garrison Wiesbaden in Germany achieved a 51% reduction in energy costs in first Euro-financed Energy Savings Performance Contract (ESPC) by Siemens Government Technologies
Read the case study

Learn more about Energy Savings Performance Contracts (ESPCs) and how Siemens Government Technologies can tailor energy solutions and budget neutral programs for your mission.

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