Energy savings performance agreements (ESPA) are an innovative financing and contracting mechanism that allow public and private sector organizations to finance energy efficiency projects, using the guaranteed savings generated by these projects. As a result, ESPA has become an increasingly popular tool for businesses and institutions to reduce their energy bills and environmental footprints.

An ESPA is a contractual agreement between the organization and an energy services company (ESCO) that specializes in identifying and implementing energy savings measures. The agreement outlines the scope of work, performance targets, and the payment structure. Typically, the ESCO assumes the upfront costs of the project and is compensated for its services through a share of the savings generated.

The key benefits of ESPA include:

1. No up-front capital expenditure: As the ESCO assumes the costs of the project, businesses and institutions do not have to invest their own money upfront, making it an attractive option for those who don`t have the capital to invest in energy efficiency.

2. Guaranteed energy savings: An ESPA guarantees a certain level of energy savings, which provides a sense of certainty and predictability for businesses and institutions. This also ensures that the energy savings generated by the project will cover the costs of the project, making it a cost-neutral proposition.

3. Reduced environmental impact: By reducing energy consumption, ESPA projects can help organizations reduce their environmental footprint, which is becoming increasingly important for organizations seeking to demonstrate their commitment to sustainability.

4. Improved building performance: ESPA projects often include upgrades to the building envelope, HVAC systems, and lighting, which can improve comfort levels for building occupants, and increase the building`s overall performance.

ESPA is a highly flexible and customizable contracting mechanism and can be suitable for a wide range of organizations and industries. Some examples of ESPA projects include retrofitting existing buildings with energy-efficient lighting, HVAC upgrades, and building envelope improvements.

One notable example of an ESPA project is the Empire State Building Retrofit Project. Through the project, the iconic skyscraper underwent a deep energy retrofit that included upgrading all of its windows, installing modern HVAC systems, and implementing a building-wide energy management system. The project was financed through an ESPA, and as a result, the Empire State Building reduced its energy consumption by 40% and saved $4.4 million on its energy bills annually.

In conclusion, ESPA is an innovative financing and contracting mechanism that allows businesses and institutions to finance energy efficiency projects using the guaranteed savings generated by these projects. ESPA is highly flexible and customizable and can be an attractive option for organizations seeking to reduce their energy bills, improve their environmental footprint, and increase their building`s performance.