Scope and method of study. This subject matter is focused on the economic justification for energy management projects which involve both an energy client and an energy service company (ESCO) (and possibly other parties) in an Energy Savings Performance Contracting (ESPC) project. In this research, an analysis model is developed which includes multi-party involvement in justifying energy management projects that require expertise and capital beyond that found in the energy client. Examples include energy generation from waste heat, solar applications, and so on. The model is built on a system level and expands risk analysis beyond the simple party views. It is a multi-party model which seeks to find “win-win” solutions for all parties (or to expose shortcomings of projects where all parties cannot “win”). Such model application will help in justifying projects that might otherwise be discarded as too complex and too risky, or expose projects that will not produce demanded economic performance.

Findings and conclusions. The inputs of the model are referred to as being probabilistic and deterministic. The outputs of the model are the Net Present Values (NPV) of the client and the ESCO, respectively. The probabilistic inputs are either probability-distributed or simulated with the correlation coefficients from historical data. The deterministic inputs are referred to as either discrete arrays or single values. Multiple scenarios are generated in accordance with the number of the discrete arrays and the number of the values in each array. In each scenario, all probabilistic inputs are simulated, combined with the values randomly picked from the discrete arrays, and entered into the model. The output analysis is based on simulated NPVs for the primary parties (client and ESCO). The major contributions of the research include: (1) develop an analysis protocol for the parties involved in an ESPC project depending on the inputs and outputs of the proposed energy system, (2) develop a procedure to empower the parties involved in an ESPC project with information regarding the inherent risks, and (3) develop a procedure to present graphical outputs of multiple scenarios in an ESPC project to help the involved parties understand the influence of the significant inputs on the ESPC project.