Handbook of air conditioning and refrigeration / Shan K

Performance Contracting
ENERGY MANAGEMENT AND GLOBAL WARMING 25.7
7. After energy retrofit is complete, operate and control the HVAC&R system according to the requirements
of the proposed energy efficiency opportunities. Check the energy costs against
those from prior to the energy retrofit.
According to Mahoney and Weiss (1997), a performance contract legally guarantees energy and
operating savings based on the performance of the contractor over a specified period of 5 to 25
years. Performance contracting also allows a facility to complete a major upgrade in energy efficiency
funded by the saving of energy costs. The contractor must pay for savings that fail to
materialize.
Energy Service Companies. During performance contracting, most often an energy service company
(ESCO) initiates an HVAC&R system energy efficiency upgrade proposal to a facility owner tailored
to the facility’s needs. A performance contract includes design, installation, financing, project
management, maintenance, and monitoring. Most of the components of a performance contract are
the responsibility of the ESCO, and therefore, an experienced, technically competent person who has
a good relationship with a financial party is the key factor for sucessful performance contracting.
There are three kinds of ESCOs:
● Engineering ESCOs are companies that always specialized to provide engineering services, including
energy audits and system design. More often, engineering ESCOs also include project
management, financing, and performance guarantees.
● Equipment ESCOs are manufacturers of energy users or controlling equipment. They establish
their own energy efficiency service divisions to expand their marketing.
● Many utility ESCOs are owned by utilities which provide not only energy efficiency services, but
also electric and natural gas power. There are also ESCOs aligned between utilities and consolidated
HVAC&R contractors.
General Steps. Mahoney and Weiss (1997) noted that a performance contract works best when
ESCOs and local contractor are well coordinated. The ESCO is reponsible for engineering, project
management, guaranteed savings, and long-term project funding. The local contractor takes care
of the installation, maintenance, and other services. All involved parties, such as facility owner,
ESCO, local contractor, and equipment manufacturers, work well when the following general
steps are taken:
● Conduct an energy use estimate. This involves assessing current conditions, collecting data to estimate
potential savings, and determining factors affecting energy costs. Field surveys; interviews;
review of building and HVAC&R system drawings, energy use of electric, gas, or oil for a number
of years; occupancy schedules; and required indoor environmental parameters are important for
an energy estimate.
● Perform a detailed engineering analysis. Computer modeling and simulation can be used to evaluate
the current energy use as the baseline. Compare various alternatives, calculate and determine
each possible energy-saving measure.
● Design the energy-saving measures for retrofit with reasonable payback time. Facility owner
should approve an implementation plan prepared by the ESCO.
● Arrange project financing. After the approval of the implementation plan, the ESCO finds suitable
third-party financing for the payment of installation and other costs. As the transaction costs are
roughly the same for small, medium, and large loans and are expensive, a large or combination
project often helps.