That Can Make You
Boat Loads O’Cash!
improve energy efficiency, some companies are doing more than just
turning out the lights at the end of the day.
As soaring energy costs increasingly affect the bottom line of U.S.
businesses, the "energy performance contract" has become an
attractive solution for commercial building owners. This contract is
a financing or operating lease offered by an energy service company,
also known as an ESCO, to help businesses improve the energy
efficiency of their buildings or facilities.
The key to energy performance contracting is to use long-term
utility savings to fund the improvements. The ESCO often guarantees
energy savings that will meet or exceed annual payments to cover all
project costs, usually over a contract term of seven to 20 years.
"A building owner either pays a utility for an inefficient building,
or they can pay an ESCO to improve their building," says Jeff
Stokes, a vice president at World Energy Solutions, a publicly
traded ESCO (symbol: WEGY) based in St. Petersburg, Fla.
World Energy Solutions strives to reduce kilowatt usage by up to 30
percent. The company offers a variety of services, including utility
billing and rate analysis, energy auditing, installation of building
improvements, building systems maintenance and ongoing monitoring
and verification of the energy savings.
ESCOs can provide flexible and unique ways to finance their
services. For example, World Energy Solutions offers to pay the
total up-front cost of installation as well as equipment maintenance
in return for an 80 percent share of the actual savings realized
over a minimum 10-year period.
"In some cases, our company will fund the entire installation, at no
charge to our customer, and live off the savings we generate over a
certain amount of time," says Ben Croxton, chief executive officer
of World Energy Solutions.
ESCOs not only identify energy-saving opportunities, but also
develop engineering designs and specifications and manage the entire
process. They also can provide staff training and ongoing
Even the federal government has gotten into the act, and for good
reason: Executive orders that require federal agencies to use 35
percent less energy by 2010 in comparison to 1985 levels will
require $5 billion in energy projects. Much of that will go to
"Super Energy Savings Performance Contracts," offered by the
Department of Energy.