A guaranteed savings agreement is a type of contract entered into by a business or organization and an energy service company (ESCO) that guarantees a certain level of energy savings to the business over a specified period of time. The agreement gives businesses the confidence of guaranteed savings without the risk or uncertainty of equipment upgrades or operational changes.
As businesses seek to reduce their energy costs and become more environmentally friendly, guaranteed savings agreements have become increasingly popular. Under these agreements, an ESCO typically performs an energy audit, identifies areas where energy savings can be achieved and proposes a plan to implement energy conservation measures (ECMs). The ESCO then guarantees a certain level of energy savings to the business as a result of the implementation of the ECMs.
The agreement may be structured in a number of ways, but most commonly the ESCO will pay for the upfront costs of the ECMs and receive a portion of the savings achieved over the life of the agreement. This allows businesses to achieve immediate cost savings while spreading the cost of the upgrades over a longer period of time.
Guaranteed savings agreements can provide a number of benefits to businesses. Firstly, they allow for immediate cost savings without requiring large capital investments. Businesses can enjoy energy savings from day one without incurring any upfront costs. Secondly, guaranteed savings agreements provide certainty to businesses. By guaranteeing a certain level of energy savings, businesses can accurately predict their energy costs and budget accordingly. Finally, guaranteed savings agreements help businesses to become more energy-efficient and reduce their environmental footprint.
In order to ensure the success of a guaranteed savings agreement, it is important for businesses to choose a reputable and experienced ESCO. The ESCO should have a thorough understanding of the industry, be able to provide references and have a proven track record of delivering energy savings.
In summary, guaranteed savings agreements are a valuable tool for businesses seeking to reduce their energy costs and become more environmentally friendly. These agreements provide immediate cost savings, certainty and help businesses to become more energy-efficient. However, it is important for businesses to choose a reputable and experienced ESCO in order to ensure the success of the agreement.