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The Truth about Guaranteed Energy Savings

As buildings age, the building envelope and systems start to degrade, leading to a lack of comfort, poor indoor air quality (IAQ), and wasted energy. But a building doesn’t have to be new to be energy efficient; retrofits can convert facilities into sustainable environments and have a positive impact on the bottom line.

According to the U.S. Energy Information Administration, HVAC systems make up 51% of the total energy use while lighting represents 25%. That makes up three-quarters of an office building’s energy use! So, it’s best to focus on energy efficiency before looking into cosmetic updates.

That’s where a Guaranteed Energy Savings Contract (GESC) (or Energy Savings Performance Contracts -ESPC) can play a crucial part. A GESC allows businesses to do efficiency upgrades, minimizing or eliminating the need for capital expenditures, and essentially pays for the project.

Here’s a definition from the Department of Energy: Energy Savings Performance Contracting (ESPC) is a budget-neutral approach to make building improvements that reduce energy and water use and increase operational efficiency. By partnering with an energy service company (ESCO), a facility owner can use an ESPC to pay for today’s facility upgrades with tomorrow’s energy savings—without tapping into capital budgets.

So how does an GESC work? It’s important for a facility owner to partner with an energy services company (ESCO) that will serve as a trusted advisor, with a proven track record in these types of projects. Trusted is the key word – there are some ESCOs that will exaggerate savings and guarantee unachievable results. They may base the estimates on the false assumption that a building’s systems run more than they actually do or include projects (and savings) that won’t be achieved because they aren’t necessary.

The ESCO analyzes the facility and determines energy conservation measures (ECMs) that benefit the owner. During the development phase of the project, it’s important to find the ideal balance between conservative savings projections (to minimize risk) and sufficient scope that will maximize the benefits from the improvements – taking into account that property degrades each year. Now let the project begin!

Once those ECMs are in place, they should be monitored and measured regularly to watch for any negative trends that may need to be corrected. This ensures that the actual savings match the guaranteed savings for a given year – or are higher than the guaranteed amount.

As mentioned, you want to make sure that the ESCO is trusted and knows their stuff… here’s why. The ESCO is obligated to prove that the guaranteed energy savings have been achieved each year or they should reimburse the client if actual energy savings in any year fall short of the guaranteed amount.

This is where Measurement & Verification (M&V) programs come in handy. In a typical GESC, the measurement of savings is performed on an ongoing basis. This ensures that the energy guarantee is met through monitoring, utility bill analysis and preventive repair and maintenance services. In each case, the goal is to make sure that systems and equipment are operating in the most efficient manner and to take corrective action as needed. Sustaining the performance of the energy conservation measures installed is critical to long-term success of a facility improvement program.

Harshaw Trane has a long history of being extremely accurate when it comes to performance contracting projects meeting or exceeding the guaranteed amount each and every year of the contract. Over the past 20 years, we have averaged a success rate of over 99% in exceeding the savings that we promised. Our customers enjoy all excess savings that our facility improvements deliver.