Developers and owners of major commercial buildings are sitting up and paying attention to significant savings offered through the use of external energy performance contracting.

Property and construction consultants Davis Langdon say a number of its clients are carefully considering the performance contracting system which ensures the cost effective provision and ongoing maintenance of energy efficient systems.

Energy performance contracting is already a multi-billion dollar industry in the US, Europe and Asia, and is already in use in Australia, particularly by State Government Departments and local authorities.

Davis Langdon managing director Mark Beattie said that the system could be equally applied to commercial construction projects and refurbishments of existing buildings.

“Indications are that using an independent contractor to supply and maintain energy related plant and equipment in a building can produce significant cost savings, reduce greenhouse emissions and remove what is potentially a major headache for building owners,” said Mr Beattie.

“The system can be implemented in a new building from feasibility or concept stage, and can be applied to existing buildings which have old, obsolete or inefficient energy systems and equipment.

”There is also a clear link with the federal government’s $90 million Green Building Fund established to encourage energy-efficient refurbishment of existing commercial properties.”

Under the contracting arrangement, an Energy Service Companies (ESCO) designs, installs, finances, and if required, operates and maintains a building, facility or process.

The contractor is paid according to the savings achieved and any additional cost savings benefit the building owner.

Currently in Australia, the Energy Performance Contracting market is not as mature as in Europe, Asia or the US and most experience has been with Government procured contracts.

In both New South Wales and Queensland, state and local Governments have financed their own Energy Performance Contracting projects.

Mr Beattie said governments are typically risk averse, and yet they have embraced Energy Performance Contracting as a key mechanism to achieve substantial energy and cost reductions.

“In the current economic climate, with the reduced availability of credit and ever increasing energy costs, the opportunities for third party financing and guaranteed energy savings are critical and timely,” he said.

“Increases in the cost of energy to some government departments has been in excess of 100 percent from 2007/08 to 2008/09 fiscal years.

“Energy Performance Contracting guarantees savings in unit terms with an agreed cost per unit of energy applying over the length of the contract.

“Typically a three percent escalation factor has been established as an acceptable level by the industry in New South Wales and Queensland, and the final monetary level of savings becomes even higher when there are significant energy price increases.”

For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au