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Energy Performance Contracts
by Director John Herbert
If you own or manage a building, we have good news you can save you money . . .
Energy Performance Contracts (EPC) also known as Performance Contracting is a smart, affordable and increasingly common method to achieve facility, industrial, and building energy improvements that save you both energy and money - an most importantly without upfront capital expense.
Any large building, industrial facility, or group of buildings could be ideal candidates for performance contracting, including
government buildings, schools, hospitals, hotels, commercial office
buildings, and industrial facilities.
What problems do you face at your facility?
Old, obsolete or inefficient energy systems and equipment? excessive maintenance costs escalating.
Facilities need to make improvements, but there are too many other demands on your time and budget.
You'll probably suffer from recurring equipment problems
that take up valuable staff time and effort.
Do you have rising energy bills that could be lowered only if you had
the right software?
If so, here's the good news...
You can enjoy energy upgrades you need today, with no up-front capital cost, it is like leasing but you only pay from the resultant energy savings. Best of all, those savings can be guaranteed lowering your risk How? through the use of an Energy Performance Contract (EPC).
Additionally all the energy saved means lower cost, less environmental damage, so energy performance contracts lower the future running costs and reduce your environmental impact.
Best kept secret
Probably the best kept secret, and often overlooked benefit, the facility owner keeps the equipment after the contract expires.
For example, the economic lifespan for a central chiller is approximately 20-25 years. Lets say that your facility uses a performance contract and a new energy efficient chiller in installed under a five year contract.
After the
contract expires your
facility has an energy efficient chiller with approximately 15 years
economic life to enjoy the lower operating cost without having paid
upfront capitial investment.
Here's how it works
Your energy bills are higher than they need to be due to
obsolete or aging equipment. By choosing an energy performance
contract you put those wasted energy dollars to use.
Working with Kelcroft, we help you manage and implement a
cost
effective energy
savings that will be guaranteed under the contract. The energy savings
in dollars terms will cover all project costs, from design to
completion, usually within a 3 to 6 year time frame.
Putting the all the pieces together:
- Identify and evaluate energy opportunities;
- Develop engineering designs and specifications;
- Manage the project from design to installation;
- Arrange for financing;
- Train your staff and provide ongoing maintenance services;
- Guarantee that energy cost savings will cover all project costs;
Energy Performance Contracts (EPC) are not exactly cutting edge science, but what is new is their application for energy procurement in Asia. Tried and tested overseas, EPC's has attracted growing interest from the private sector. What is important is that your team has construction contract adminstration experience.
Barriers & Risk
To good to be true? Of course, there are risks involved, Energy Performance Contracts (EPC) disadvantages include:
1. After contract is signed the facility owner is tied to one vendor for the term of the contract.
2. M&V - Whilst the contact is running, the results (energy saved) need to be continuously monitored. This is known as Measurement and Verification (M&V).
3. Any failure or shortfall from expected result requires reconciliation to recover shortfall, typically carried out annually or other agreed frequency.
4. Poorly formulated contract failing to ensure that energy performance doesn't override your core business.
5. Inadequate remediation - energy performance contracting is a partnership, where both parties must benefit.
6. Finding the experienced and highly skilled project managers are essential for both the planning and execution phases.
Even wondered how some businesses manage to offer impossibly low cost products? Energy management is a strategic tool, reducing your energy operating expenses by up to 40%. Pass those savings on to your customers and beat the competition hands down.
Like any contract the potential downside can be mitigated by strategic management and careful planning. And new products are being developed for example EPC insurance.
EPC is a tool, properly applied, it helps businesses create partnerships that deliver results that improve your bottomline, helping to give your business a competitive edge.
Click here to read more about Energy Performance Contracting (2 page PDF)
What equipment?
There is no limit on the type of EE equipment that can be used to lower energy consumption, energy efficiency improvement over and above the existing installation is the key criteria.Call today
For further information regarding Energy Performance Contracts and partnerships call Mr John Herbert at our Hong Kong office +(852) 2335 9830 or fax +(852) 2335 9862 or email us