Transcript Energy Performance Contracting Approach

Energy Performance
Contracting Approach
David Birr
President
Synchronous Energy Solutions
What is Energy Performance
Contracting?

A contract for the acquisition of
comprehensive energy efficiency
improvements and services with
minimal up-front costs

Provided by qualified Energy Service
Companies (ESCOs)

Uses the utility and resident
allowance savings from the project
to pay for the work
What is Energy Performance
Contracting? (continued)

Protects the customer by requiring a
performance guarantee linked to
measured savings over time

Guarantees can be structured to cover all
project costs, including financing, over a
specified contract term,usually 15-20
years
Standard Services Offered by
ESCOs





Investment grade energy audit
Comprehensive project design &
engineering
Sources of project financing
Equipment acquisition
Complete project installation and
management
Standard Services Offered by
ESCOs (continued)




Project performance guarantees
for the duration of the contract
Savings measurement and
verification data analysis
Ongoing equipment maintenance
and inspection services
Extensive resident training
services on improvements
Standard Services Offered by
ESCOs (continued)




Commissioning and testing of
new equipment
Project monitoring and advice
Extensive ongoing training for
building operators
Access to energy program
financial incentives and grants
Multifamily Market

Multifamily (5+ units): over 15
million households
• Private conventional rental
housing: 10 million
• Private assisted rental housing: 3
million
• Federal public rental housing: 1.3
million
• City, state public rental housing: 2
million
Federal Public Housing

1.3 million households

Very low income

“Family” and “elderly”
occupancy

Owned and managed by
municipal nonprofits
Federal Public Housing
(continued)

PHAs generally have little or no
credit history or financing
expertise

HUD regulates performance
contracting and other energy
incentives
Federal Public Housing
Performance Contract
Opportunities
HUD regulatory incentives in
place since 1991
 RFP procedures in place
 Average investment: $2,000$4,000 per unit among
experienced ESCOs
 PHAs qualify for tax-exempt
financing

Residential Market
Characteristics that Matter

Ownership/market segmentation
(single, multi, public, private, etc.)

Building construction, size, age, and
condition

Occupancy
(family/elderly/handicapped)

Utility costs
Is EPC right for your PHA ?

Metering configuration and
applicable rate structures
(master/individual/building-based)

Age,efficiency ,and condition of
lighting,water,and HVAC equipment


Total Current Utility Costs
Current and Projected Utility Rates
What is Different About PHA
Performance Contracting?


Water efficiency measures are key
measures that pay for other
improvements
Construction will require access to
resident units

Must sell the project to PHA
management, tenants and HUD

Public housing success requires
housing background because the HUD
rules are complicated
PHA Barriers

Hard to work on due to 24-hour
occupancy

Management and regulatory
bureaucracies in public housing

Metering configuration and rate
analyses are sometimes complex

High transaction costs for smaller
projects
ESCO Challenges in PHA
Market

Access to and quality of available
utility consumption and cost data

Lack of PHA in-house technical and
financial expertise

Shifting HUD regulatory guidance
Why Use an ESCO?

Technical Expertise with PHA
Properties

Project Financing Expertise

HUD Regulatory Knowledge
Why Use an ESCO?
(continued)

HUD allows you to keep utility
savings to pay project costs
depending upon the incentives you
use

Long-term project performance
monitoring

Reduced project performance risk
Project Benefits
 Improves
energy efficiency and
occupant comfort levels

Reduces environmental problems

Creates local jobs
Benefits of Performance
Contracting
 Replace
aging equipment with
new equipment
 Access to 3rd party financing for
needed capital energy
improvements
 Decreased equipment repairs
and lower maintenance costs
Benefits of Performance
Contracting (continued)

Optimized equipment performance
through project commissioning

Better overall management and
control of facility
Risk Reduction Benefits of
Performance Contracting

Contractually guaranteed measured savings
reduces the risk of savings erosion over time

Integrated project analysis, design, and
construction reduces the risk of lost savings
opportunities and schedule delays

Utility savings and performance monitoring
reduces the risk of under-funding key
maintenance requirements
Risk Reduction Benefits of
Performance Contracting
(continued)

Up-to-date training and
knowledge for facility
operating personnel reduces
the risk of project nonperformance

Ability to select services and
materials based upon quality
and value, rather than on
lowest first cost
Savings Erosion Over Time is
Typical of Conventional
Energy Projects
90
80
70
60
Percent of
Predicted 50
Savings
40
Achieved
30
20
10
0
Year 1 Year 2 Year 3 Year 4 Year 5
Stable Savings Guaranteed Over
Time is Typical for EPC
120
100
Percent of 80
Predicted
Savings 60
Achieved
40
20
0
Year 1
Year 2
Guaranteed
Savings
Year 3
Year 4
% Predicted
Savings Achieved
Year 5
Conventional
Contract
100
90
80
Percent of 70
60
Predicted
50
Savings
40
Achieved
30
20
10
0
Performance
Contract
Comparison of Cumulative LongTerm Energy Savings Achieved
Over Ten Years
Conventional Bid and Spec EPC
Negotiated Procurement
Conventional
Performance Contracts
 May

All funds needed for a
comprehensive
energy project are
readily available
 High

Lower staff cost and
quicker completion of
a comprehensive
project
take several
years to secure
sufficient funds to
implement
comprehensive
energy projects
staff costs due to
a piecemeal approach
to bidding and
managing each
separate project
Conventional Bid and Spec
EPC Negotiated Procurement
(continued)
Conventional
Performance Contracts
 Multiple

One contract with
single point
accountability for
project performance
 Energy

Long-term energy
savings are
guaranteed by the
ESCO
contracts
with multiple
vendors can result in
conflicting project
requirements
savings are
not guaranteed
Conventional Bid and Spec
EPC Negotiated Procurement
(continued)
Conventional
Performance Contracts
 Guarantees

Performance contracts
typically contain
explicit comfort and
operating standards
 Incremental

Comprehensive
project
implementation
maximizes savings
design opportunities
of
comfort and
operating standards
are not usually
offered by equipment
vendors
project
implementation
misses savings
design opportunities
Conventional Bid and Spec
EPC Negotiated Procurement
(continued)
Conventional
Performance Contracts
 Energy

Energy projects are
funded with utility
bill savings
 No

ESCO compensation
is tied to providing
energy savings over
the term of the
contract
projects
must compete for
limited budget
resources with
other improvement
projects
direct incentive
for building staff to
reduce energy costs
Conventional Bid and Spec
EPC Negotiated Procurement
(continued)
Conventional
Performance Contracts
 Limited

ESCO provides
ongoing technical
expertise to insure
project performance
 Operations

Utility bill savings
finance operations
and maintenance
required to maintain
project performance
staff or lack
of expertise may
put project
performance at risk
and
maintenance
budgets are usually
under-funded,
resulting in wasted
energy