Energy Services Company Models: Opportunities for Transit Vermont Energy Investment Corporation

Transportation Energy Service Company Models Energy Services Company Models ESCOs and Transit Opportunities and Challenges

Our mission: To reduce the economic and environmental costs of energy use

Energy Service Companies (ESCOs) Traditional Models

Energy Services Companies Use future energy savings to pay cost of investment required to achieve savings Positive cash flow Debt service Before During After Energy costs Energy costs Energy costs

Energy Services Companies Primarily used in building sector Lighting, HVACs, solar Provide technical assistance with technology Take on financing, ownership and operation risk in return for shared savings Provide energy user (buildings) predictability in energy use and savings guarantee

Impact of 3rd Party Ownership Models

Why Transit?

Fundamentals aligned with ESCO model High mileage vehicles 25,000 to 60,000 miles per year Low fuel economy 3.26 mpg Historically variable fuel costs High community impact

Fundamentals aligned with ESCO model Challenging financial environment Capital need far outstrips funding Limited options to raise money Traditional funding models favor status quo

Opportunities

Transit Energy Services Companies Positive cash flow Debt service Before During After 12 Year energy costs = $350,000 12 year energy costs = $31,000 12 year energy costs = $31,000 Are energy cost savings sufficient to cover higher costs of vehicle and cost of financing vehicle purchase?

Metrics to Guide Investments Total Cost of Ownership Risk associated with cost of ownership Reliance on Government Funding Total Society Cost of Ownership De-risking for Long-term Financial Planning

Assumptions: Total Cost of Ownership Diesel Electric Vehicle Cost $450,000 $750,000 Financing Costs - 2.7% Annual Miles 40,000 Fuel Economy 3.26 mpg 2.10 miles/kWh Price per Unit $2.13 $0.12 kWh Cost escalation 2.0% per year Annual Fuel Costs $26,135 $2,286

Total Cost of Ownership – 12 year vehicle

Total Society Cost of Ownership Value of avoided carbon emissions Presentation title to go here

Fuel Price Risk Considerations

De-risking Long Term Financial Planning

Financing Sources Vehicle Manufacturers State Transportation Infrastructure Banks Energy Efficiency Programs ESCOs, ESCO-like entities Renewable Portfolio Standards

Challenges

Challenges Mileage Estimates Demand Charges Split Incentive Operating costs vs. capital costs Agency Practices, State and Federal Regulations

Vermont Advantage Smaller vehicles, smaller gap 30’ electric bus ~ $450,000 35’ electric bus ~ $625,000 Additional Sources of Financing Rural Utility Service Vermont Renewable Energy Standard

Bethany Whitaker bwhitaker@veic.org Thank You www.veic.org Bethany Whitaker bwhitaker@veic.org

Total Society Cost of Ownership Value of Avoided Damages from Carbon SC-CO2 SC-CO2 - $56 Net Present Value Discounted by 2.5% / year Diesel transit bus 40,000 miles 12,000 gallons of diesel