How can you ensure favorable financing terms for energy performance contracts?

1 Understand your baseline

Before you sign an EPC, you need to have a clear and accurate picture of your current energy consumption, costs, and performance. This will help you establish a baseline for measuring the savings and benefits of the EPC, as well as identify the areas where you can improve your efficiency. You can use tools such as energy audits, benchmarking, and metering to collect and analyze your baseline data. You should also review your utility bills, contracts, and tariffs to understand your pricing structure and incentives.

2 Compare different financing options

EPCs can be financed in different ways, such as through third-party lenders, energy service companies (ESCOs), or self-funding. Each option has its own advantages and disadvantages, depending on your budget, goals, and risk appetite. For example, third-party financing may offer lower interest rates and longer repayment periods, but it may also require collateral, fees, and guarantees. ESCO financing may be more flexible and convenient, but it may also have higher interest rates and shorter terms. Self-funding may give you more control and ownership, but it may also limit your cash flow and project scope.

3 Negotiate the contract terms

Once you have chosen a financing option, you need to negotiate the contract terms with your provider. Pay attention to the scope and duration of the project, as well as the payment structure and schedule. Additionally, make sure the contract defines how the savings will be calculated, guaranteed, and verified, and that it identifies and allocates any risks involved. Finally, it should outline the responsibilities and costs of maintaining and monitoring the energy efficiency equipment and systems, as well as how performance data will be reported and evaluated. All of these aspects are important for ensuring that you get the most out of your financing option.

4 Seek expert advice

EPCs are complex and long-term contracts that require careful evaluation and due diligence. Before signing an EPC, it is important to consult experts who can assess the feasibility, viability, and suitability of the project. Energy consultants can help with energy audits, identify energy efficiency opportunities, and design and implement the project. Financial advisors can compare and select the best financing option, and review and negotiate the contract terms. Legal advisors can help understand and comply with legal and regulatory requirements, as well as protect rights and interests in the contract. Technical advisors can verify and validate the technical aspects of the project, such as equipment specifications, installation standards, and performance indicators. By taking these precautions, you can ensure favorable financing terms for your EPCs and reap the rewards of improved energy efficiency, reduced costs, and enhanced sustainability.