A Simple Example to Introduce the Basic Financial Arrangements 85- Measurement and savings verification; and
- A guarantee of the energy savings to be achieved.
The popularity of performance contracting rests on the many ben-
efits it delivers. The highlights of the benefits it offers the customer or
the business which offers ESCO services are addressed below.
CUSTOMER ADVANTAGES
The recipient of ESCO services can achieve many benefits, includ-
ing:
- an immediate upgrade of facilities and reduced operating costs—
without any initial capital investment; - access to the ESCO’s energy efficiency expertise;
- positive cash flow (most projects generate savings that exceed the
guarantee); - the opportunity to use the money that would have been used for
required upgrades or replacements to meet other needs; - improved and more energy-efficient operations and maintenance;
- several normal business risks are assumed by the ESCO, including
the guaranteed performance of the new equipment for the life of
the contract (not just through a warranty period); - a more comfortable, productive environment;
- services paid for with the money that the customer would other-
wise have paid to the utilities for wasted energy.
Performance contracting is probably the best and quickest way to
be sure an organization is operating as efficiently as possible. It offers the
customer a risk shedding opportunity; however, risks do still exist.