Building Simulation and Performance Contracting

Abstract

While it has carried many names over the past few decades, such
as “energy services,” “demand side management,” and “performance
contracting,” implementing energy conservation and energy cost man-
agement programs on a turnkey basis generally including financing and
a guarantee, is what we today call performance contracting. It has gained
great popularity and seems to be particularly bolstered by the wave of
electric utility deregulation which is in the process of sweeping the coun-
try.
When done properly, as explained in our Association of Energy En-
gineers Seminar entitled “Management, Measurement, and Verification of
Performance Contracts”* (and in our upcoming Fairmont Press book on
the same subject), performance contracting has the ability to integrate fi-
nancial, engineering, construction, and operations and maintenance ser-
vices in a way that often produces spectacular results that could not be
achieved by any other means.
Performance contracting, however, does have its dark side. Because
the business proposition is so attractive and compelling, it is frequently
viewed literally as a “guaranteed free lunch” by numerous building
owners. However, in spite of the essential simplicity of the business
proposition, the implementation is anything but simple.