1 | espc technical assistance team eere.energy.gov welcome to today’s “ask the expert” session...

1 | ESPC Technical Assistance Team eere.energy.gov

Welcome to today’s “Ask the Expert” Sessionfor 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

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

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.

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

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/

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/solutioncenter/default.html

We encourage you to –

1) Explore our online resources via the Solution Center

2) Submit a request via the Technical Assistance Center

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

• 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

Karl Berntson

SRA International

Doug Dahle

National Renewable Energy Laboratory

David McGeown

SRA International

Linda Smith

9Kft Strategies in Energy

Today’s Experts

Polling Question

ESCO Selection

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?

• 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?

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?

• 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?

• 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?

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?

Investment Grade Audit

• 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

• Investment Grade Audit (IGA) components

– Baseline measurements

– IGA schedule

– IGA cost

– Overhead and Profit mark-ups for

overall ESPC

Investment Grade Audit (IGA) Components

• 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

Polling Question

ESPC Financing

“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

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

• 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

• 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

ECM Selection

• 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

• $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

ActionElectricity (kWh)

Gas (therms) $ savingsPayback (years)

Boiler replacement 303,902 71,073 $311,702 8.4

Controls upgrade 156,253 81,880 43,552 7.7

Air compressor replacement

61,093 — 12,565 18.1

Cooling coils replacement

210,273 — 14,719 3.0

Lighting improvements

1,733,751 — 128,098 7.2

Motor efficiency upgrade

258,400 — 18,088 3.6

Total 2,723,672 152,953 $528,724 8.4*

Hospital Campus

• Look at the FEMP models• http://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

ESPC Measurement & Verification (M&V)

• 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

The M&V Plan:

IF YOU DON’T UNDERSTAND IT, DON’T SIGN IT.

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

• Meter Specifications

• Monitoring Responsibilities

• Expected Accuracy

• Budget

• Report Format

• Quality Assurance

M&V Plan (cont’d.)

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

Cost Elements of ESPCs

• 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

Contract Administration

• 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

• 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

Parking Lot – McGeown

• $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

• $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 installations

Bureau of Land Management

• 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

• $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

• Federal on-line ESPC training http://apps1.eere.energy.gov/femp/training/

course_detail_ondemand.cfm/CourseId=43

• FEMP first Thursday seminarshttp://apps1.eere.energy.gov/femp/training/

first_thursday_seminars.cfm

The FEMP Online Oracle

DOE Team Lead

Chani Vines: chani.vines@ee.doe.gov

ICF Team Contract Leads

Deborah Miller, demiller@icfi.com

Brian Zaleski, bzaleski@icfi.com

ICF ESPC Technical Assistance Team Contacts

Karl Berntson: Karl_Berntson@sra.com

Dale Hahs: dhahs@energyservicescoalition.org

Irina Bulkley-Hopkins: Irina_Bulkley-Hopkins@sra.com

Doug Dahle: douglas.dahle@nrel.gov

David McGeown: David_McGeown@sra.com

Linda Smith: Linda.Smith@9Kft.com

1 | espc technical assistance team eere.energy.gov welcome to today’s “ask the expert” session...

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