As the world continues to face the urgency of curbing global warming, energy efficiency has taken center stage in the quest to reduce carbon emissions. One way of achieving this is through shared savings agreements (SSAs) in energy efficiency.
In simple terms, an SSA is a contract between a building owner and an energy services company (ESCO) that aims to reduce energy consumption in a building. Unlike traditional contracts where the ESCO is paid upfront, with SSAs, the ESCO is only paid a portion of the savings realized from energy efficiency improvements.
The concept has been around for decades, but it gained prominence in the 1980s as a way of financing energy efficiency projects for public buildings. In recent years, however, the use of SSAs has expanded to private entities, including commercial and residential buildings.
One of the main benefits of SSAs is that they allow building owners to make energy efficiency improvements with minimal upfront costs. The ESCO covers the costs of the upgrades and is only paid from the savings realized over the contract period. This means that building owners can benefit from energy savings and improved building performance without having to make significant capital investments.
Furthermore, SSAs provide an incentive for the ESCO to ensure that the energy efficiency upgrades are effective. The ESCO is only paid when energy savings are realized, so they have a vested interest in ensuring that the upgrades are properly installed and maintained.
Another benefit of SSAs is that they are flexible and can be customized to meet the needs of individual buildings. For example, the contract can specify the scope of the upgrades, the duration of the contract, and the percentage of savings that will be paid to the ESCO.
In conclusion, shared savings agreements are an innovative way of financing energy efficiency improvements in buildings. With minimal upfront costs, building owners can benefit from energy savings and improved building performance, while ESCOs have an incentive to ensure that the upgrades are effective. As the world continues to grapple with the effects of climate change, SSAs can play a crucial role in achieving energy efficiency and reducing carbon emissions.