Over the next two years, the University of Rhode Island will receive $18-million worth of energy-saving upgrades at no capital cost to taxpayers or the school, URI said Wednesday.

A Massachusetts-based energy-services company, NORESCO, will pay for the initial investment for new equipment and its installation after it completes audits of the university’s four campuses and determines cost-effective ways that URI will save money on its energy bill.

The university will use the savings to pay back the company over the next 12 years.

“The really nice thing about it is that it allows any entity to finance the replacement of the equipment without any cost to taxpayers,” said state energy commissioner Andrew Dzykewicz. “Usually what we do is bond it and pay it back over 20 years at about two and a half times what you borrowed.”

In the end, the university expects to save about $1.2 million a year after the proposed changes are put into place.

Even though it sounds too good to be true, this type of upfront financing is common, Dzykewicz said.

NORESCO alone has contracted with dozens of federal, state and municipal governments, with clients as diverse as the University of Massachusetts Medical Center and a small county prison in California.

Based in Westboro, Mass., NORESCO was acquired by Pittsburg-based Equitable Resources (EQT:NYSE) in 1997.

Under the deal with URI, the company makes its money by submitting all its costs and desired profits into a competitive bidding process for the contract.

After considering four bids, URI signed the contract with NORESCO in May, after about two years of preliminary negotiations and waiting for state approval.

Some of the changes have already been completed, such as more efficient lighting and air-conditioning systems at the Memorial Union on the Kingston campus and pool covers at the Tootell Aquatic Center.

Solar shingles have also been installed on two buildings; one each in Kingston and the W. Alton Jones campus, in West Greenwich.

“This is huge for us because the company does so many things,” said URI facilities director Jerry Sidio. “The most obvious is the replacement of equipment, some of which is very old and inefficient, but another major benefit is the reduction of carbon emissions.”

The company is also going to set up an anemometer, a device that measures wind speed, at URI’s Narragansett campus to research the possibility of using wind power for electricity.

The URI project is one of six state projects to increase Rhode Island’s energy efficiency, Dzykewics said.

The state has invested about $68 million in projects that have no upfront costs, Dzykewicz said, which will yield more than $128 million in savings.

Changes, such as new boilers and more sophisticated ventilation systems, have already been made at three Department of Administration buildings in Providence, Dzykewicz said, resulting in a 27-percent reduction in energy use and about $500,000 in annual savings.

Although the DOA contract was with a different energy service company, Siemens, the process is essentially the same, and just the beginning of future endeavors.

“We are going around all the state buildings and trying to do the biggest ones first,” Dzykewicz said.

He has already talked to city officials in Newport, Warwick, Warren, Westerly and Portsmouth about entering into similar agreements, Dzykewicz said, and after that he will go after more sectors.

“Then we will go out and talk to private institutions, private universities, hospitals…,” Dzykewicz said.