Energy Services Agreements (ESAs), “Energy as a Service Contracts,” or “Efficiency Services Agreements” are a relatively simple form of energy efficiency financing. An ESA is a pay-for-performance contract where the client can implement their energy project with zero upfront capital expenditure.
How does an ESA work?
An ESA provider develops, finances, maintains and owns the equipment / technology for the duration of the contract (typically 5 to 10 years) additional and longer terms available upon request, if certain criteria i.e. cost & size qualifies. In exchanges for implementing the project, the ESA provider will charge the customer a minimum monthly fee for the equipment portion of the project, along with a reduced rate based on overall consumption, which is less than the current utility.
While the customer will enjoy immediate energy savings and greater reliability, they won’t actually own the equipment, unless they buy out the contract at a certain point in time or purchase the equipment at the end of either the initial term or any extension of the contract. This is an off-balance sheet solution where the energy savings is the value of the agreement to the customer because of customization.
A typical ESA will take a shorter time to close, with greater savings achieved through the implementation process and is typically better for larger projects or (more than $1 Million)….
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