Energy Performance Contracts Chip Barnes

What is an EPC? Popular way to obtain infrastructure energy efficiency & operational improvements with: Popular way to obtain infrastructure energy efficiency & operational improvements with: No up-front investment by customer No up-front investment by customer Guaranteed energy savings Guaranteed energy savings Permanently reduced energy costs Permanently reduced energy costs

How is this possible? Proposed energy savings are used to pay for the financing of the improvement costs with savings to spare Proposed energy savings are used to pay for the financing of the improvement costs with savings to spare Once improvement costs are paid off (usually 8-12 year term) 100% of savings stays with customer Once improvement costs are paid off (usually 8-12 year term) 100% of savings stays with customer

Areas of Potential Savings Energy Systems including: Energy Systems including: Lighting – indoor and outdoor Lighting – indoor and outdoor Heating Systems – Large Boilers Heating Systems – Large Boilers Air-Conditioning – Chillers, Cooling Towers Air-Conditioning – Chillers, Cooling Towers Building Improvements – Envelope Building Improvements – Envelope Controls – sensors, thermostats, etc. Controls – sensors, thermostats, etc. Less Maintenance Required (e.g. light bulbs) Less Maintenance Required (e.g. light bulbs)

Whos Involved? Customer: Municipalities, Universities, Schools, Hospitals, Military/Govt. Customer: Municipalities, Universities, Schools, Hospitals, Military/Govt. ESCO – Energy Saving Companies ESCO – Energy Saving Companies Big 5 Pepco Energy Services, Constellation Energy, Johnson Controls, Noresco, Energy Systems Group Big 5 Pepco Energy Services, Constellation Energy, Johnson Controls, Noresco, Energy Systems Group

Benefits & Drawbacks Benefits: Benefits: Accountability Accountability Risk-Reduction Risk-Reduction No Capital Outlay – project is financed No Capital Outlay – project is financed Cash flow at pre-determined level Cash flow at pre-determined level Risks borne by ESCO Risks borne by ESCO Guaranteed Savings Guaranteed Savings Expertise of ESCO Expertise of ESCO Reduced Environmental Impact (footprint) Reduced Environmental Impact (footprint)

Benefits & Drawbacks Drawbacks: Drawbacks: Establishing a baseline can be difficult Establishing a baseline can be difficult Difficulty in adjustments once project begins Difficulty in adjustments once project begins Operational Savings hard to define Operational Savings hard to define Costly finance charges Costly finance charges Required maintenance agreements expensive Required maintenance agreements expensive ESCO gimmicks ESCO gimmicks Control of Facilities Control of Facilities Substantial portion of savings paid to ESCO & finance Substantial portion of savings paid to ESCO & finance

The Process Potential areas of savings identified either by customer, ESCO or both Potential areas of savings identified either by customer, ESCO or both Comprehensive Energy Audit Performed by ESCO engineers Comprehensive Energy Audit Performed by ESCO engineers Contingent cost assigned to engineering study Contingent cost assigned to engineering study Proposal – results of study presented to client Proposal – results of study presented to client

The Proposal Detailed outline of energy and operational improvements (Scope of Work) & associated savings Detailed outline of energy and operational improvements (Scope of Work) & associated savings Baseline calculations & project timeline Baseline calculations & project timeline Measurement & Verification (M&V) Guidelines Measurement & Verification (M&V) Guidelines Guarantees – performance bond Guarantees – performance bond Maintenance agreement(s) Maintenance agreement(s)

Challenges Long time-table: EPCs usually take months to complete – WHY?? Long time-table: EPCs usually take months to complete – WHY?? Complex Projects Complex Projects Multiple decision-makers: boards, facilities managers, fiefdoms Multiple decision-makers: boards, facilities managers, fiefdoms Lengthy engineering studies Lengthy engineering studies Resistance to Change, Lack of Incentive Resistance to Change, Lack of Incentive Difficult to get buy-in from all parties Difficult to get buy-in from all parties

More Challenges Capital Project vs Performance Contracts Capital Project vs Performance Contracts Difficult to get buy-in from key players Difficult to get buy-in from key players No incentive for facilities manager(s) No incentive for facilities manager(s) Resistance to Change Resistance to Change Strong Leadership Required – champion needed to drive project Strong Leadership Required – champion needed to drive project

PG County Performance Contract ESCO – Johnson Controls ESCO – Johnson Controls Contract Covered: Contract Covered: County Courthouse County Courthouse Police Service Complex Police Service Complex Corrections Corrections

Improvements Project involved retrofit of 8,667 light fixtures Project involved retrofit of 8,667 light fixtures Installation of building occupancy sensors Installation of building occupancy sensors Upgrade of building control systems Upgrade of building control systems New roof-top A/C units Pump and Motor Replacement New roof-top A/C units Pump and Motor Replacement New Variable Frequency Motors/Drives New Variable Frequency Motors/Drives Cooling Tower Replacement Cooling Tower Replacement LEED evaluation of Courthouse LEED evaluation of Courthouse

Project Savings $12,201, over 14-yr period! $12,201, over 14-yr period! $871, per year! $871, per year! $72,629 per month! $72,629 per month!

Other MD Counties Baltimore City – LED upgrade of traffic signals saving $900,000 per year. Baltimore City – LED upgrade of traffic signals saving $900,000 per year. Howard County – building energy improvements saving $2.4M per year Howard County – building energy improvements saving $2.4M per year MEA – rotates contracts between BIG-5 MEA – rotates contracts between BIG-5

How YOU can Get Involved in Your County Call and/or your: Call and/or your: County executive and councilman/woman County executive and councilman/woman Write a letter to the editor Write a letter to the editor Call into talk radio and mention EPCs Call into talk radio and mention EPCs

Questions?