Abstract
Energy Savings Performance Contracts (ESPCs) allow governments to tap private capital to finance energy efficiency improvements; the debt service on the financing is paid from the energy and energy-related cost savings generated by the efficiency projects themselves. Since 1998 about 43% of the funding for energy efficiency upgrades in US federal buildings has come from ESPC and other similar programs. This paper describes the “balance sheet” for an ESPC project as currently implemented by US federal agencies, and shows how parameters such as the cost of the project, the interest rate for financing, level of savings, energy escalation rates, and others combine to determine the project cash flow. The paper also examines the sensitivity of project economics to changes in each of these parameters.
