Our Monthly Utilization Agreement vs. An Energy Savings Performance Contract
With any commercial building, electricity is among the largest of monthly expenses. Energy efficiency is an obvious way to combat high electricity costs, but these systems can be very expensive.
Traditionally, companies looking for efficiency upgrades have turned to Energy Savings Companies (ESCOs) to finance efficiency upgrades. While this option helps companies defer much of the up-front costs of an efficiency upgrade, it carries significant risks and long-term contracts. Here, we’ll discuss the ins and outs of signing an Energy Savings Performance Contract with an ESCO, and then explain a new solution for energy savings that does away with some of the inherent risks of the traditional ESCO model.
Energy Savings Performance Contracts: The Old, High-risk Solution
Instead of charging up-front for the entire cost of energy efficiency upgrades, ESCOs assume the initial costs of the project. Customers then pay for the upgrades over time, by giving the ESCO a portion of the money saved on their monthly electricity bill. The ESCO determines this monthly cost before the upgrades are installed, based on how much money they estimate customers will save on their energy bills. They lay out this agreement in an Energy Savings Performance Contract.
In theory, this model should allow commercial building managers to get the efficiency upgrades they want without adding to their monthly costs, but it isn’t always that simple. Here are some of the problems with using a traditional Energy Savings Performance Contract.
- ESCOs love to upsell—Because ESCOs make their money from energy savings, they are compelled to build out the biggest system they can with every customer. However, big efficiency upgrades may not make sense for every building. And, the bigger the system, the more likely it is that part of it won’t deliver the promised energy savings.
- Big systems carry hidden costs—While an ESCO may assume all the costs of your energy upgrades, they may not pay for the other costs associated with them. Installing and designing a big system with the ESCO will require the valuable time of the facility managers, who will then be tasked with maintaining the upgrades.
- Big systems are high-risk—Installing expensive and permanent building upgrades isn’t something that can just be undone. If the upgrades fail to deliver the promised energy savings laid out in the Energy Savings Performance Contract, the customer is still stuck with them.
- Long-term commitment—Energy Savings Performance Contracts usually have terms that extend for decades. Signing up with an ESCO means committing to a payment and system for as much as 20 or 30 years. A lot can change in energy efficiency technology in nearly half a century.
Monthly Utilization Agreements: The New, Low-risk Solution
Recognizing the barriers that traditional ESCOs and Energy Savings Performance Contracts present to customers, D.I. Pathways came up with a new monthly utilization agreement for its energy savings upgrades.
Instead of signing on for a bloated efficiency system and decades of expenses, D.I. Pathways’ customers just pay a flat fee every month for easily installable and removable energy upgrades.
Here’s what the monthly utilization agreement includes:
- A risk-free monthly contract—Customers who don’t like their new energy upgrades can opt-out at any time. It’s as easy as canceling a Netflix subscription.
- Insurance—All D.I. Pathways upgrades include an energy-savings guarantee. If the customer doesn’t see the energy savings they expected, D.I. Pathways will cover the difference.
- Maintenance—D.I. Pathways manages the performance and maintenance for all upgrades. Because the customer doesn’t own the upgrades, they stay off the company’s balance sheet and off a facility manager’s to-do list.
- No upsells—D.I. Pathways has no interest in selling our customers bulky energy efficiency systems. Our upgrades are easy to install and easy to remove.
- Access to the next big thing in sustainable energy—Just because it isn’t a giant system doesn’t mean that energy upgrades aren’t exciting. D.I. Pathways uses cutting-edge phase change material to help regulate a building’s temperature.
Interested in learning more about our monthly utilization agreement or want to schedule an assessment to find out how D.I. Pathways can help you improve your building? Contact us today!