Energy Savings Performance Contracting

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Energy Savings Performance Contracting The Utah
ExperienceEPA Air Innovations Conference

• Chicago - August 12, 2004

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• Others fell into good ground, and brought forth
  fruit, some an hundredfold, some sixty fold, some
  thirty fold
• Matthew 13

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We can use our time wisely and strategically with
performance contracting!

• 17 years of ICP grants 13.3 million in federal
  funds 11 million in match
• 4-6 hours a week x 5 months 44 million in
  retrofits from a performance contract

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Successful Energy Service Company Partnerships in
Utah

• lt1999 - 56 building (4,346,098 financed)
• University of Utah 81 bldgs. (44 million) with
  10,812,500 in savings achieved to date
• State Prison Phase I - 112 buildings
  (6,554,873) with 234,618/yr. in est. savings
• State Prison Phase II (5,026,112) with
  275,002/yr. in est. savings
• Utah Valley Community College - 12 buildings
  (9,493,424) with 556,888/yr. in est. savings
• Ogden Regional Center- one building (578,667)
  with 33,489/yr. in est. savings
• NOTE In addition to energy savings, the Prison
  projects provide 179,182 in water savings.

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Common Excuses for Not Undertaking Performance
Contracts

• Hey, they got burned doing that!
• We can fund it cheaper ourselves - the financing
  is too expensive
• We dont have the expertise to manage this kind
  of project. This whole process is very new to
  us.
• Our board doesnt want any debt!
• What if we dont get the energy savings that
  they promise?
• But, we already have contractors that we know
  and love
• Cant this wait? Im about ready to retire!

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Hey, they got burned doing that!

• You can minimize risk by procuring competitively
  using standard procurement documents by
  retaining independent technical expertise.
• Partner with an ESCO having a proven track record
  for success

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We can fund it cheaper ourselves - the financing
is too expensive

• Over the past 5 years, Utah institutions have
  secured financing at 4.6 to 4.8 with
  performance contracting
• According to the EPA, a one year wait for funding
  (on a 500k project) costs 100,000 in lost
  opportunity savings
• Check out the EPA Cash Flow Opportunity
  Calculator at www.energystar.gov

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We dont have the expertise to manage this kind
of project. This whole process is very new to
us.

1. Contact your state energy office for technical
   assistance
2. Select and contract with an independent 3rd party
   engineer/consultant
3. Obtain a sample RFP from the Energy Services
   Coalition website (escperform.org)
4. Openly solicit ESCO responses to the RFP
5. Review proposals and qualifications from ESCOs
6. Negotiate an investment grade energy audit
   agreement

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Continued

• 7. Negotiate and finalize the performance
  contract with the ESCO
• 8. Work with ESCO to secure best financial
  partner
• 9. Hold weekly project meetings
• 10. Conduct site inspections and commission work
  completed
• 11. Measurement and verification of energy
  savings achieved

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Our board doesnt want any debt!

• Financing can be structured as a lease
  arrangement - this will not affect an
  institutions debt since the title and ownership
  of the equipment resides with the provider until
  the end of the lease period
• Kent Michie - Financial Advisor to the Governor

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Measures ImplementedUniversity of Utah

• State-of-the-art lighting technologies
• Higher efficiency/CFC compliant chillers
• Variable frequency drives
• New energy management controls (for setback,
  mixed air, lighting demand)
• Variable speed chilled water pumping

• Properly sized and efficient motors and pumps
• Build a central plant for upper campus
• New cooling towers
• Convert air handlers to VAV

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University of Utah Performance Contract
Greenhouse Gas Reductions per year (preliminary)

• CO2 121,166,620 lbs.
• VOC 3,159 lbs.
• NOX 216,369 lbs.
• CO 17,523 lbs.
• SO2 54,771 lbs.
• PM10 6,831 lbs.
• Hg 123,749 mg.
• Source Cleaner Greener Emissions Calculator

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Measures Implemented for the Prison

• Electrical distribution upgrades
• Geothermal hot water heat 185 degree F
• Upgrade motors and pumps
• Lighting including T-5 highbay
• VFD installation
• Wind generation

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• Insulation steam lines and building envelops
• Recommissioning mechanical and control systems
• Stack economizers
• Night setback and demand limiting
• Low flow water using fixtures

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Some UVSC Project Issues
Issues
Resolution

• 1. ChevronTexaco has now purchased Viron
• 2. Technical reviews of baseline by the Utah
  Energy Office consultant
• 3. DFCM UEO staff help with project
  management and break project into project phases
• 4. Cap ECMs to those with
• paybacks gt useful life
• New President advised 4 month delay
• 6. Audit completion delayed for on-season data
  gathering

• 1. Viron ownership
• 2. Concerns about future changes to baseline
• 3. Limits on staff time for project management
• 4. Concern over long ECM paybacks
• Support of new UVSC President
• Audits being conducted in off-season

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For a successful performance contract, the ESCO
should

• Listen to the client agencys wants and needs
• Develop a project scope without product bias
• Clearly and regularly communicate with the
  client through all steps of the project
• Utilize best engineering management practices

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• Reduce client risk with guarantees on equipment
  reliability, change orders, energy performance,
  cash flows
• Provide continuity in project management
• Consider client preferences for contractors
  suppliers
• Remain flexible on issues of operational control
• Maintain a policy of open-book pricing

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For a successful performance contract, the owner
should

• Regularly and clearly communicate wants, needs,
  concerns to the ESCO (weekly project meetings)
• Involve representatives from various offices
  levels within the agency
• Get early buy-in from agency administration
• Inform ESCO early regarding special agency
  standards
• Approve all submittals and specs in advance

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1. Require Open book pricing throughout the
   project
2. Stage the overall project in phases
3. Utilize a collaborative group for procurement and
   procure competitively
4. Opt for advance approval of subcontractors
   suppliers
5. Retain 3rd party expertise for the owners side
   of the table
6. Carefully research each ESCOs references,
   technical qualifications, and financial background

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Energy conservation is a matter of leadershipBE
AN ENERGY CHAMPION!!

• Contact information
• Michael Glenn Utah Energy Office
• 801-538-5436
• mikeglenn_at_utah.gov
• Check out escperform.org