Current Policies and Practices Related to the Incorporation of Non-energy Benefits in Energy Saving Performance Contract Projects

This paper analyzes current policies and practices related to the incorporation of non-energy measures (NEMs) and their benefits to energy saving performance contract (ESPC) projects implemented by the U.S. energy service company (ESCO) industry. Previous research by our team has found that projects in the public and institutional sector are increasingly using ESPCs to address various non-energy-related needs (e.g., roof replacement). Unfortunately, there is no consistent guidance on methodologies for incorporating non-energy benefits (NEBs) into the cost/benefit analyses of projects. This paper presents the results of an in-depth review of state-by-state and federal legislation of the incorporation of non-energy benefits, including measures and benefits allowed and restrictions that apply.

Case studies indicate that the value of NEBs can be as much as 40% or more of the total economic savings generated by an ESPC project. However, there is significant variation across regions and levels of government, with regard to how many and which types of non-energy measures are allowed in ESPC project contracts. There appears to be little or no correlation between the level of government infrastructure needs, which can be extensive, and the number of non-energy measures allowed by the jurisdiction. The authors recommend standardized, simplified, and transparent methodologies for estimating and verifying the savings generated by the various non-energy measures—in a manner that is analogous to the original development of the International Performance Monitoring and Verification Protocol (IPMVP).