October 10, 2017

Energy Performance Contracting

Why is Energy Efficiency a Focus?

CHALLENGES OBJECTIVES

� Increasing utility and

maintenance costs

� Aging infrastructure and

Maintenance Intensive

� Tax Payers Expect to do

More with Less

� Save Money, Reduce Energy,

Operational, Maintenance Costs

� Improve schools without capital

funds

� Replace Old Equipment &

Increase Reliability and

Efficiency

� Operating budget is

lowered which pays

debt service for

improvements

� No need to pass a levy

� Savings are

guaranteed

� Useful life of

equipment is longer

than term of debt

service

How Does an ESPC Work?

The Energy Performance Contracting process mirrors and streamlines a traditional project delivery method, while meeting all public procurement requirements.

A common EPC includes:

� Comprehensive energy study

� Design of selected improvements

� Competitive subcontract pricing

� Financing assistance

� Construction

� Commissioning & Training

� Measurement & Verification (M&V)

Services are “Bundled” under an EPC

Benefits of a Stepped Approach

Comprehensive Energy Audit (CEA)• ECM Cost/Benefit realistically presented

• ECMs selected for design phase

Design Phase• ECMs designed

• ECM Cost/Benefit updated and reviewed

Execute Performance

Contract Documents

Finance Closing• BANS, Bonds, Municipal Lease

Construction• Install ECMs

Competitive Bidding• Contractors and venders compete based on design docs

• ECM Cost/Benefit finalized

Owner makes

2nd go/no go

decision

Owner makes 1st go/no go decision

Owner makes final go/no go

decision

EPC RFP• Qualification based

• Fully disclosed ESCO Fees and Mark ups

• Open book requirement

Benefits of an Energy Performance Contract

� “Repurpose” money that is already in operating (utility costs)

budgets into needed capital improvements

� Accelerated/Simplified project implementation (WV Code 18,5, 9A)

� A single point of contact/responsibility

� Do not public bid material & labor (no low bidder)

� Financing and grant assistance

� A positive cash flow makes projects “self funding”

� Energy savings are guaranteed

EPC Model vs. Traditional DBB

Traditional Design-Bid-Build Energy Performance Contract

Project funding required in budget Utilizes operational budget savings to

“self-fund” project

Design is a focus: life cycle cost is not Both design and life cycle cost are focus

Familiar delivery model Design-Build delivery model

Multiple points of contact Single point of contact

Design firm and construction company

in adversarial roles

Design firm and construction company act

as one team

No performance/savings guarantee Performance/savings guaranteed

Low bid could mean poorly qualified

contractor

Avoids low bid, low qualified contractor

headache

Transparent “open book” cost Transparent “open book” cost

Prevailing wage Prevailing wage

EPC Implementation Strategies

Combine longer payback upgrades with proven shorter payback energy conservation improvements to financially accomplish project goals. For example:

� Short Payback Items (i.e. LED Lighting)

� Short Payback Items (i.e. VFDs)

� Short Payback Items (i.e. RetroCx)

� Medium Payback Items (i.e. Equipment Controls)

� Long Payback Items (i.e. New Boiler)________________________________________________________________________________________________________________________

RESULT = Project that pays for itself (neutral cash flow)

EPC Pitfalls

� Guaranteed savings didn’t materialize

� Lack of transparency in procurement of labor and materials

� Hidden fees and mark-ups discovered after implementation

� Owner did not have control of the project

EPC Pitfalls and how to avoid them

� Public bidding laws

� Upfront disclosure of fees and mark-ups

� Define what unburdened construction costs are

� Transparent review of pricing from contractors

� Disclosure of escalation rates:

� Energy costs

� O&M Costs

� Measurement and verification

� Service/Maintenance agreements

� Transparent project contingency

Unburdened Construction Cost (1)

Less than

$1,000,000

$1,000,000

to $3,000,000

Greater than

3,000,000

Construction Mark-up (2)

(as a % of total unburdened construction cost) ____________ % ____________ % ____________ %

Program Management and Planning ____________ % ____________ % ____________ %

Design and Specifications (Engineer of Record) ____________ % ____________ % ____________ %

Administration ____________ % ____________ % ____________ %

Cost of Risk ____________ % ____________ % ____________ %

Construction Management and ESCO General Conditions ___________ % ____________ % ____________ %

Hazardous Waste Abatement ____________ % ____________ % ____________ %

Commissioning ____________ % ____________ % ____________ %

Training ____________ % ____________ % ____________ %

Profit ____________ % ____________ % ____________ %

Corporate Overhead ____________ % ____________ % ____________ %

Other: ____________ % ____________ % ____________ %

Total: ____________ % ____________ % ____________ %

ESCO Fee PricingProject Fee Sample

Competitive Subcontractor PricingBenefit of Competitive Construction Pricing

Total Savings Over Bidder B: $725,666

Pricing of ESCO Subcontractors

Construction

Cost(competitive pricing)

ESCO Cost of

Risk(Contingency kept by ESCO)

Construction

Cost

Transparent

Contingency(Goes back to Customer)

Fin

al C

ost

$

Open Book,

Fully Transparent ESCO

Closed Book ESCO

Establishing Contract ValueBottom Up Approach…More Project. Less Cost.

Contract

Cost

Difference

Energy Conservation Measures

� Lighting & Lighting Controls

� Energy Management and Control Systems

� HVAC Equipment Upgrades/Replacements

� Motors & Variable Speed Drives

� Computer Power Management System

� Demand Controlled Ventilation

� Heat Pumps

� Water Conservation

� Building Envelope

Energy Conservation Measures

� Photovoltaic

� Wind Turbines

� Solar Thermal

� Geothermal

� Hydro Turbine

� Fuel Cell

Case Study

Implemented improvements included:

� Lighting & Lighting Controls Upgrades

� HVAC Controls

� HVAC and DHW Equipment Replacements

� Dishwasher Booster Heater

� Computer Power Management Software

Doddridge County Schools- Energy Performance Contract • Project Cost: $1,737,201

Total Annual Savings: $68,043 • School Building Authority Funds $768,950

Case Study

Guaranteed Annual Energy Savings

1,115,590 kWh

2,592 kW

494 mmBtu

$122,272

Annual Equivalent Savings for Comparison

Cars Removed from Road 148

Barrels of Oil Saved 1,766

Homes Energy Use 66

Implemented improvements included:

� Indoor Lighting

� Gymnasium Lighting

� Variable Frequency Drives

� Energy Management System Upgrades

� HVAC Replacements

� Air Conditioner Replacements

� Water Conservation

� Computer Power Management

Roane County Schools- Energy Performance Contract

Project Cost: $1,563,035 • Guaranteed Annual Savings: $122,272

Mason County Schools- Energy Performance Contract

Estimated Capital Cost: $5,200,000 • SBA Funding: $614,880

K-12 Case Study

Annual Energy Use and Costs Prior

to Implementation

3,110 kW

9,000,000 kWh

15,000 mmbtu

$1,100,000

Estimated Annual Energy Savings

76,000 kWh

450 mmbtu

$250,000

Implemented improvements included:

� Lighting and Occupancy Sensor Upgrades

� Boiler Burner Replacement

� Boiler Plant Replacements

� Steam Trap Upgrades and Replacements

� Thermostatic Radiator Controls

� Window AC Control Optimization

� Digital Air Handler Controls Upgrade

� High Efficiency DHW Replacement

� Premium Efficient Motor Replacement

15

K-12 Case Study

Architectural &

Engineering Services

Est. 1940

Construction

Est. 1983

Energy Services

Since 1992

EPC

Success

WendelWendel’s Fully Integrated Professional Services

Reinforcing Cycle

� Implemented over $200 Million in ESPCs & Implementation

� $55 Million in the K-12 market

� $135 Million currently in development

� $28 Million in the K-12 market

� Professional Credentials

� Licensed Engineers

� Registered Architects

� Certified Energy Managers

� Certified Energy Auditors

� Certified Commissioning Professionals

QualificationsCredentials

� Renewable Energy Professionals

� LEED Accredited Professionals

� Certified Measurement &

Verification Professionals

Thank you.

Wendel Energy Services, LLCAndy Cocina

(304) 266-1534