Energy Savings Performance Contracts (ESPCs)

Energy Savings Performance Contracts (ESPCs) were authorised by Congress to encourage federal agencies to become more energy-efficient and reduce energy use and costs through private investments. Under ESPCs, a private sector Energy Service Company (ESCO) is contracted to design, purchase, and install the necessary equipment and processes to increase energy efficiency at the facility. Federal agencies then pay the ESCO a share of the cost savings from the efficiency improvements over the life of the contract. Contractors receive a predetermined share of the cost savings and are only paid if actual savings result from the reduced energy use, while additional savings go to the Federal government. Facilities undergoing comprehensive energy upgrades through ESPCs generally target a 50% or more reduction in energy use levels.

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