1. 1 | ESPC Technical Assistance Team eere.energy.gov Welcome to today’s “Ask the Expert” Session for state and local grantees on Energy Savings Performance Contracting (ESPC) Some tips before we get started… Session will be recorded All attendee phone lines are muted Please submit your questions via the Questions window As many questions as possible will be answered during the session Presentation slides along with the summary of ALL questions and answers will be sent to attendees a few days after the training

2. 2 | ESPC Technical Assistance Team eere.energy.gov The Parker Ranch installation in Hawaii DOE Technical Assistance Program Ask the Experts About Energy Savings Performance Contracting Date: March 24, 2011 ARRA EECBG Recipient Webinar Series

3. 3 | ESPC Technical Assistance Team eere.energy.gov What is TAP? DOE’s Technical Assistance Program (TAP) supports the Energy Efficiency and Conservation Block Grant Program (EECBG) and the State Energy Program (SEP) by providing state, local, and tribal officials the tools and resources needed to implement successful and sustainable clean energy programs.

4. 4 | ESPC Technical Assistance Team eere.energy.gov How Can TAP Help You? TAP offers – One-on-one assistance Extensive online library, including – –Webinars –Events Calendar –TAP Blog –Best practices and project resources –Facilitation of peer exchange Topics include – Energy efficiency and renewable energy technologies Program design and implementation Financing Performance contracting State and local capacity building

5. 5 | ESPC Technical Assistance Team eere.energy.gov Provides a platform for state, local, and tribal government officials and DOE’s network of technical and programmatic experts to connect and share best practices on a variety of topics. The TAP Blog Access the TAP Blog! http://www.eereblogs.energy.gov/tap/

6. 6 | ESPC Technical Assistance Team eere.energy.gov Accessing TAP Resources 3) Ask questions via our call center at 1-877-337-3827 or email us at http://www1.eere.energy.gov/wip/s olutioncenter/default.html http://www1.eere.energy.gov/wip/s olutioncenter/default.html We encourage you to – 1) Explore our online resources via the Solution CenterSolution Center 2) Submit a request via the Technical Assistance Center Technical Assistance Center

7. 7 | ESPC Technical Assistance Team eere.energy.gov The Parker Ranch installation in Hawaii Ask the Experts About Energy Savings Performance Contracting Today’s Experts: Karl Berntson, Doug Dahle, David McGeown, Linda Smith ARRA EECBG Recipient Webinar Series

8. 8 | ESPC Technical Assistance Team eere.energy.gov Long Term Partnerships (10-15 years) Persistent Performance is Success Factor Customer Champions & Commitment “Reallocating Excess Energy Expense into Infrastructure” No Capital Cost – Contractor Revenues from $ Savings Determine Energy and $ Savings Risks & Responsibility – Key focus for both parties Measurement & Verification – Verify Savings ESPC Principles

9. 9 | ESPC Technical Assistance Team eere.energy.gov Karl Berntson SRA International Doug Dahle National Renewable Energy Laboratory David McGeown SRA International Linda Smith 9K ft Strategies in Energy Today’s Experts

10. 10 | ESPC Technical Assistance Team eere.energy.gov Polling Question

11. 11 | ESPC Technical Assistance Team eere.energy.gov ESCO Selection

12. 12 | ESPC Technical Assistance Team eere.energy.gov A qualified ESCO puts many different pieces together in a turnkey approach: Identify and evaluate project opportunities Design, install, commission and manage projects Help arrange for financing Measure and verify savings Train staff, provide ongoing maintenance services, and more. And, guarantee the savings will cover all project costs ESCO Selection – What defines an ESCO?

13. 13 | ESPC Technical Assistance Team eere.energy.gov Key ESCO organizations –National Association of Energy Service Companies (NAESCO) www.naesco.org –Energy Services Coalition (ESC) www.energyservicescoalition.org State energy office or state administrative agency that oversees state buildings may have a prequalified ESCO list ESCO Selection – How do I find an ESCO?

14. 14 | ESPC Technical Assistance Team eere.energy.gov ESCO Selection Process Provide background information on your facilities Solicit proposals through a formal competitive process Set-up an evaluation team Review proposals and select the top proposers Interview the top proposers Select the finalist ESCO Selection – How do I select an ESCO?

15. 15 | ESPC Technical Assistance Team eere.energy.gov Ensure firm qualifies as an ESCO –Scope of Services (guarantee, auditing, M&V, financing assistance, project management, construction/installation, commissioning) –Scope of Measures (HVAC, lighting, renewables, water efficiency, plant upgrades & specialty systems that relate to your facility Project History –Quantity, scope and scale of ESPC projects (with guaranteed savings) –Relevant projects in your market sector, your locale, and similar in scale Technical Approach –Review a sample audit –Expertise/experience in similar building types and with measures you anticipate. Management Approach –Organizational structure –Local staffing and support vs non-local –Resumes and roles of staff to be assigned –Subcontractors vs in-house staff –Scheduling plans ESCO Selection – Is this ESCO a good fit?

16. 16 | ESPC Technical Assistance Team eere.energy.gov Compare apples to apples Audit cost Request markups on each element Request other fees and how/when fee is to be applied Ensure commitment to open book pricing throughout the process ESCO Selection – How do I evaluate ESCO costs?

17. 17 | ESPC Technical Assistance Team eere.energy.gov Look to your ESCO to provide best value Capture the maximum level of savings –A comprehensive approach –No cherry picking of projects Ensure measured, sustained savings –Rigorous measurement and verification process (with an up- front plan) to ensure ongoing savings Leverage funds – capture utility incentives, grants, etc. Economy of scale – address all buildings Disclose ALL cost elements up-front (markups, margins, fees up-front – show how they will be applied – and then negotiate) ESCO Selection – How can I select an ESCO to get the best value?

18. 18 | ESPC Technical Assistance Team eere.energy.gov Investment Grade Audit

19. 19 | ESPC Technical Assistance Team eere.energy.gov Negotiate the terms of IGA and project development agreement (owner and ESCO) Provide utility bills (owner) Perform facility audit (ESCO) Review the audit results (owner and ESCO) Select final ECMs to implement (ESCO and owner) Develop implementation proposal (ESCO) Investment Grade Audit (IGA) – Division of Responsibilities

20. 20 | ESPC Technical Assistance Team eere.energy.gov Investment Grade Audit (IGA) components –Baseline measurements –IGA schedule –IGA cost –Overhead and Profit mark-ups for overall ESPC Investment Grade Audit (IGA) Components

21. 21 | ESPC Technical Assistance Team eere.energy.gov Scope of work –Baseline establishment –Facility(s) walk-through –Modeling –Develop list of ECMs –Provide audit report –Develop ESPC proposal –Prepare preliminary installation layouts Time of completion IGA Components – cont’d

22. 22 | ESPC Technical Assistance Team eere.energy.gov Polling Question

23. 23 | ESPC Technical Assistance Team eere.energy.gov ESPC Financing

24. 24 | ESPC Technical Assistance Team eere.energy.gov “Reallocating Excess Energy Expense into Infrastructure”  Pay a lower utility bill and energy system O&M cost  Dollar Savings: Payments to ESCO & Financier  Achieve cost savings for the customer ESPC Financing

25. 25 | ESPC Technical Assistance Team eere.energy.gov Agency Energy and O&M Bills Cost Savings Where the Money Comes From and Where It Goes Customer Funds for Energy and Related O&M

26. 26 | ESPC Technical Assistance Team eere.energy.gov State/Local Bonds Tax-exempt Bank Financing Master Lease for Financing (tax-exempt credit line) – Bid Financier – Block of Projected Financing $ – Project Specific Interest Rate Lease/Purchase ESPC Financing Types

27. 27 | ESPC Technical Assistance Team eere.energy.gov ESCO Project Investment Thresholds –Transaction Costs vs. Rate of Return – Common target ≥ $1 M investment – Economy of scale – Consider: Bundling energy efficiency & renewable projects – Public sector facilities attractive to ESCOs Low risk long term partner ESPC Financing

28. 28 | ESPC Technical Assistance Team eere.energy.gov ECM Selection

29. 29 | ESPC Technical Assistance Team eere.energy.gov Boiler and chiller plants Energy management control systems Building envelope HVAC Chilled/hot water and steam distribution Lighting Electric motors and drives Refrigeration Distributed generation Energy Conservation Measures (ECMs) All Technology Categories Renewable energy Energy/utility distribution Water and sewer Electrical peak shaving/load shifting Rate adjustments Energy-related process improvements Commissioning Advanced metering Appliance/plug load reductions

30. 30 | ESPC Technical Assistance Team eere.energy.gov $4.5M ESPC project 8.4 year payback –Replacing boilers with a steam production system, 5% steam efficiency increase, no 24-hour staff –Evaluating the energy management control system, upgrading controls, and installing a life safety supervision system –Replacing 25-horsepower air compressors with 40-horsepower rotary air compressors –Replacing corroded cooling coils –Replacing 25,000 lamps, ballasts, and fixtures with high- efficiency models and installing lighting controls –Replacing electric motors.. 8 buildings and 1 million square feet $1.8 million energy bill Hospital Campus

31. 31 | ESPC Technical Assistance Team eere.energy.gov Action Electricity (kWh) Gas (therms)$ savings Payback (years) Boiler replacement303,90271,073$311,7028.4 Controls upgrade156,25381,88043,5527.7 Air compressor replacement 61,093—12,56518.1 Cooling coils replacement 210,273—14,7193.0 Lighting improvements 1,733,751—128,0987.2 Motor efficiency upgrade 258,400—18,0883.6 Total2,723,672152,953$528,7248.4* Hospital Campus

32. 32 | ESPC Technical Assistance Team eere.energy.gov Look at the FEMP models http://apps1.eere.energy.gov/femp/training/course_detail_ondemand.cfm/CourseId=42http://apps1.eere.energy.gov/femp/training/course_detail_ondemand.cfm/CourseId=42 Use local contacting expertise –Just like regular ‘sticks and bricks’ –Use you own government estimators ESCO cost plus models –Verify how costs are determined –Are ‘costs’ burdened? If so how? Don’t wait until a final proposal –Work together as much as possible from project inception Understand financing costs Negotiating a Fair Price

33. 33 | ESPC Technical Assistance Team eere.energy.gov ESPC Measurement & Verification (M&V)

34. 34 | ESPC Technical Assistance Team eere.energy.gov An ESCO guarantees performance it can control – that rarely covers all risks in a project An effective M&V plan shares risks between the owner and the ESCO: –Risk of operating a facility is usually borne by the owner –Equipment performance is usually covered by the ESCO –Maintenance to ensure savings may be taken on by ESCO and/or owner –Market price for energy can rarely be underwritten by the ESCO Risk and M&V

35. 35 | ESPC Technical Assistance Team eere.energy.gov The M&V Plan: IF YOU DON’T UNDERSTAND IT, DON’T SIGN IT.

36. 36 | ESPC Technical Assistance Team eere.energy.gov In accordance with IPMVP 2010, the M&V plan should cover 13 specific topics: ECM Intent Selected IPMVP Option and Measurement Boundary Baseline: Period, Energy and Conditions Reporting Period Basis for Adjustment Analysis Procedure Energy Prices The M&V Plan

37. 37 | ESPC Technical Assistance Team eere.energy.gov Meter Specifications Monitoring Responsibilities Expected Accuracy Budget Report Format Quality Assurance M&V Plan (cont’d.)

38. 38 | ESPC Technical Assistance Team eere.energy.gov The M&V Reconciliation Report should include: Energy data for the reporting period Values of independent variables – weather, occupancy and variables that affect energy usage Justification for corrections made to any data Handling of bad or missing data Agreed estimated values for Option A Energy rates used Details on non-routine adjustments Computed savings in both energy units and dollars Emissions reduction The M&V Reconciliation Report

39. 39 | ESPC Technical Assistance Team eere.energy.gov Cost Elements of ESPCs

40. 40 | ESPC Technical Assistance Team eere.energy.gov Project Development –Surveys, audits, proposal Conservation Measures –Direct costs for design and implementation ESCO overhead and profit Financing –Interest –Procurement Performance Period Services Cost Elements of ESPC

41. 41 | ESPC Technical Assistance Team eere.energy.gov Contract Administration

42. 42 | ESPC Technical Assistance Team eere.energy.gov Contract Administration Activity after Award – Insurance and bonds before design – Review of Design and Installation Plans – Accept Design & Installation – Notice to Proceed – Coordinate access to facilities and lay down area – Witness Commissioning tests & M&V measurements – Accept Installation – Proceed with Performance – Review Annual M&V Reports & Invoices (Annual) – Contract Modifications as needed – Close out Contract ESPC Contract Administration

43. 43 | ESPC Technical Assistance Team eere.energy.gov OPEN COMMUNICATION with ESCO partner Key Customer Personnel/Roles – Contracting Officer (CO) Administration Official Primary POC for ESCO Contract meetings/issues – Contracting Officer’s Technical Representative Primary POC for project review of ESCO work & deliverables General – Document any and all agreements – File all project documents for future reference – Count on turnover of project personnel Access to past project documentation critical Successful Contract Administration

44. 44 | ESPC Technical Assistance Team eere.energy.gov Parking Lot – McGeown

45. 45 | ESPC Technical Assistance Team eere.energy.gov $71M savings performance contract for power from a combined heat and power plant Central Utility Plant Saves $5.8 M energy and $6.5 M in O&M Almost 20 MW of cogeneration –5.6 MW dual fuel engine –3 x 4.5 MW natural gas combustion turbines –2 x 1130-ton absorption chillers –2 x1130-ton –3 x1980-ton electric chillers –3 x10 MMBtu/hr hot water boilers –Integrated plant controls, building automation systems, 1,800 sf fixed solar array and a 300 sf single-axis tracking solar array. FDA Campus Cogen

46. 46 | ESPC Technical Assistance Team eere.energy.gov $3.6M for small BLM facilities in Colorado, Idaho, Montana, Nevada, Oregon, and Wyoming –Lighting and associated controls –HVAC controls –Digital HVAC control upgrades –New boilers –Ground source heat pumps –Advanced meter installation s Bureau of Land Management

47. 47 | ESPC Technical Assistance Team eere.energy.gov Energy savings performance contract –Savings $300,000 a year –Reduces annual potable water consumption by 160 million gallons (2 percent of City’s water supply) –Two 11-million-gallon holding reservoirs –Two pump stations –3 miles of distribution pping Air Force Water

48. 48 | ESPC Technical Assistance Team eere.energy.gov $12M wind turbine Guantanamo Bay Four wind turbines will generate 3,800kW –25% peak power for base operations –$1.2M/yr energy savings, 650,000 gallons diesel Navy Renewable Energy

49. 49 | ESPC Technical Assistance Team eere.energy.gov Federal on-line ESPC training http://apps1.eere.energy.gov/femp/training/course_detail_ondeman d.cfm/CourseId=43 FEMP first Thursday seminars http://apps1.eere.energy.gov/femp/training/first_thursday_seminars. cfm The FEMP Online Oracle

50. 50 | ESPC Technical Assistance Team eere.energy.gov DOE Team Lead Chani Vines: chani.vines@ee.doe.govchani.vines@ee.doe.gov ICF Team Contract Leads Deborah Miller, demiller@icfi.comdemiller@icfi.com Brian Zaleski, bzaleski@icfi.combzaleski@icfi.com ICF ESPC Technical Assistance Team Contacts Karl Berntson: Karl_Berntson@sra.comKarl_Berntson@sra.com Dale Hahs: dhahs@energyservicescoalition.orgdhahs@energyservicescoalition.org Irina Bulkley-Hopkins: Irina_Bulkley-Hopkins@sra.comIrina_Bulkley-Hopkins@sra.com Doug Dahle: douglas.dahle@nrel.govdouglas.dahle@nrel.gov David McGeown: David_McGeown@sra.comDavid_McGeown@sra.com Linda Smith: Linda.Smith@9Kft.comLinda.Smith@9Kft.com More Questions?

51. 51 | ESPC Technical Assistance Team eere.energy.gov Please join us again for additional webinars: For the most up-to-date information and registration links, please visit the Solution Center webcasts page at www.wip.energy.gov/solutioncenter/webcasts www.wip.energy.gov/solutioncenter/webcasts Upcoming Webinars