Knoxville and the stimulus

A curious article in Wednesday’s New York Times about how US cities are going to use the flood of stimulus money earmarked for energy efficiency. The story’s focuses on Knoxville, TN and a group of energy auditors hired by the city to root out inefficiency in public buildings.

What the Times doesn’t say is that these audits are being done in advance of an Energy Savings Performance Contract (ESPC) that the city may enter into with Ameresco. You can read about that in this article from our local paper. Unless I’m mistaken, the potential ESPC has little to do with the stimulus funding, though perhaps some of the funds could be applied to the ESPC.

The great thing about an ESPC is that it’s revenue neutral. As an example, suppose the city of Knoxville is paying $1,000,000 per year in utility bills. An Energy Services company (ESCO) performs an audit and identifies $1,000,000 in energy efficiency upgrades that the city needs (new chillers, boilers, more efficient streetlights, etc.). These upgrades promise to reduce the city’s utility bills by $200,000 per year.

Under an ESPC, the ESCO secures financing and installs the new equipment at no charge to the city. The city agrees to pay the ESCO $200,000 a year until the loan is paid off.

So before the ESPC, the city was paying $1,000,000 in annual utility bills. After the ESPC, the city pays $800,000 per year to the utility and $200,000 to the ESCO. The ESCO makes a profit and keeps people employed. The banks make a profit on the loan. The taxpayers win because the city’s costs remain the same and they do not have to raise my property taxes.

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