As indicated in a recent post on a specific Funding Opportunities Announcement, DOE's Federal Energy Management Program ("FEMP") continues to promote government agencies' use of "alternative project financing mechanisms." These alternative project financing mechanisms should be particularly attractive to agencies (and therefore contractors) that are charged with making capital improvements to the energy infrastructure in the face of ongoing sequestration. That's because in many cases, energy system upgrades can be made without any upfront cost to the agency.
Energy Savings Performance Contracts ("ESPC") are one of the mechanisms that have been revitalized lately to achieve this goal. Contractors bear the capital cost of the improvement, which is then paid back to the contractor over time using the financial savings realized through the reduced energy consumption. As explained on FEMP's website:
ESPCs allow federal agencies to make payments over time for energy efficiency and renewable energy projects on federal facilities installed by an Energy Services Company ("ESCO"). The federal government pays for the improvements from the resulting energy cost savings. When the contract term is complete, the recurring energy and cost savings from these improvements accrue to the agency.
The key to success lies in proper project planning that accurately predicts life-cycle cost savings of the capital upgrades. Luckily, there is a lengthy list of contractors qualified to take on this task. However, there is no reason more companies shouldn't apply for inclusion and take advantage of these worthwhile and potentially lucrative opportunities. FEMP provides a convenient summary of what's required to become a Qualified ESCO.
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