Saving Money While Advancing Energy and Water Conservation Through Performance Contracting
“Performance Contracting is a great option for schools, local governments and water utilities. It can provide hundreds of millions of dollars in both savings and revenue by implementing water and energy efficiency projects that pay for themselves and make communities more resilient to drought and climate change.”
– Jorge Figueroa, Senior Water Policy Analyst
Conserving Energy and Water is Particularly Important in the West
Conserving energy and water is important. The West is defined by the limited supply of water in our region, and the scarcity of this essential resource makes its intelligent use critical to our sustainable future. Climate change, which is inextricably linked to energy usage, will take a particularly hard toll on the mountain and desert West. The consequences of climate change are already visible: increased likelihood of more frequent and intense drought and wildfire, reduced snowpack, and extinction of vulnerable wildlife species. Therefore, taking advantage of significant money-saving opportunities that promote economic development through the implementation of common-sense energy and water savings is particularly important in our region.
Using the Power of the Market to Save Water, Energy and Money
Performance contracting is a great tool that allows public entities to partner with private industry to invest in comprehensive energy and water efficiency projects that pay for themselves and are conveniently implemented. At the end of the performance contract, all subsequent savings, year after year, accrue directly to the public entity.
Public entities in the Colorado River Basin states require significant amounts of energy and water to operate and maintain their buildings. They also often do not have the funds for large up-front investments in water and energy efficiency measures.
Performance contracts, also known as energy services performance contracts, allow public entities to implement comprehensive energy and water savings projects with no up-front capital costs. A performance contract creates a public-private partnership between a public entity and a service company to do far-reaching energy and water retrofit projects in public buildings.
The savings on monthly energy and/or water bills from the retrofit projects are guaranteed by the private service company to exceed the financing costs of the project. If the realized savings do not exceed the financing costs, the service company makes up the difference, not the public entity facility owner.
A substantial amount of money can be saved by reducing energy and water use in public buildings through efficiency improvements that pay for themselves via performance contracts. Achieving these big money savings would also improve air quality, reduce greenhouse gas emissions, and conserve our scarce and vital water resources. Public entities can thus demonstrate – through the guaranteed, low-risk approach of performance contracting – that fiscal responsibility and environmental stewardship can go hand in hand.
Western Resource Advocates’ Research and Education Will Encourage Widespread Adoption of Performance Contracting to More Quickly Advance Conservation
Western Resource Advocates is conducting research to determine the potential of performance contracting to reduce water and energy usage and save money for public entities in the Colorado River Basin states. Working with industry and various western states, we are also working to identify and resolve the major barriers to a healthy performance contracting market. We also plan to conduct outreach and education to increase awareness of this effective model for more quickly advancing water and energy efficiency.