Energy Performance Energy Performance ContractsContracts

Chip BarnesChip Barnes

What is an EPC?What is an EPC?

Popular way to obtain infrastructure Popular way to obtain infrastructure energy efficiency & operational energy efficiency & operational improvements with:improvements with:

No up-front investment by customerNo up-front investment by customer Guaranteed energy savingsGuaranteed energy savings Permanently reduced energy costsPermanently reduced energy costs

How is this possible?How is this possible?

Proposed energy savings are used to Proposed energy savings are used to pay for the financing of the pay for the financing of the improvement costs with savings to improvement costs with savings to sparespare

Once improvement costs are paid off Once improvement costs are paid off (usually 8-12 year term) 100% of (usually 8-12 year term) 100% of savings stays with customersavings stays with customer

Areas of Potential SavingsAreas of Potential Savings

Energy Systems including:Energy Systems including: Lighting – indoor and outdoorLighting – indoor and outdoor Heating Systems – Large BoilersHeating Systems – Large Boilers Air-Conditioning – Chillers, Cooling TowersAir-Conditioning – Chillers, Cooling Towers Building Improvements – “Envelope”Building Improvements – “Envelope” Controls – sensors, thermostats, etc.Controls – sensors, thermostats, etc. Less Maintenance Required (e.g. light Less Maintenance Required (e.g. light

bulbs)bulbs)

Who’s Involved?Who’s Involved?

Customer:Customer: Municipalities, Municipalities, Universities, Schools, Hospitals, Universities, Schools, Hospitals, Military/Gov’t.Military/Gov’t.

ESCOESCO – Energy Saving Companies – Energy Saving Companies ““Big 5” Pepco Energy Services, Big 5” Pepco Energy Services,

Constellation Energy, Johnson Controls, Constellation Energy, Johnson Controls, Noresco, Energy Systems GroupNoresco, Energy Systems Group

Benefits & DrawbacksBenefits & Drawbacks

Benefits:Benefits: AccountabilityAccountability Risk-ReductionRisk-Reduction No Capital Outlay – project is financedNo Capital Outlay – project is financed Cash flow at pre-determined levelCash flow at pre-determined level Risks borne by ESCORisks borne by ESCO Guaranteed SavingsGuaranteed Savings Expertise of ESCOExpertise of ESCO Reduced Environmental Impact (footprint)Reduced Environmental Impact (footprint)

Benefits & DrawbacksBenefits & Drawbacks

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

financefinance

The ProcessThe Process

Potential areas of savings identified either by Potential areas of savings identified either by customer, ESCO or bothcustomer, ESCO or both

Comprehensive Energy Audit Performed by Comprehensive Energy Audit Performed by ESCO engineersESCO engineers

Contingent cost assigned to engineering studyContingent cost assigned to engineering study

Proposal – results of study presented to clientProposal – results of study presented to client

The ProposalThe Proposal

Detailed outline of energy and operational Detailed outline of energy and operational improvements (Scope of Work) & associated improvements (Scope of Work) & associated savingssavings

Baseline calculations & project timelineBaseline calculations & project timeline

Measurement & Verification (M&V) GuidelinesMeasurement & Verification (M&V) Guidelines

Guarantees – performance bondGuarantees – performance bond

Maintenance agreement(s)Maintenance agreement(s)

ChallengesChallenges

Long time-table: EPC’s usually take 18-36 Long time-table: EPC’s usually take 18-36 months to complete – WHY?? months to complete – WHY??

Complex ProjectsComplex Projects Multiple decision-makers: boards, facilities Multiple decision-makers: boards, facilities

managers, “fiefdoms”managers, “fiefdoms” Lengthy engineering studiesLengthy engineering studies Resistance to Change, Lack of IncentiveResistance to Change, Lack of Incentive Difficult to get “buy-in” from all partiesDifficult to get “buy-in” from all parties

More ChallengesMore Challenges

Capital Project vs Performance ContractsCapital Project vs Performance Contracts

Difficult to get “buy-in” from key playersDifficult to get “buy-in” from key players No incentive for facilities manager(s)No incentive for facilities manager(s) Resistance to ChangeResistance to Change Strong Leadership Required – champion Strong Leadership Required – champion

needed to drive projectneeded to drive project

PG County Performance PG County Performance ContractContract

ESCO – Johnson ControlsESCO – Johnson Controls

Contract Covered:Contract Covered: County CourthouseCounty Courthouse Police Service ComplexPolice Service Complex CorrectionsCorrections

ImprovementsImprovements

Project involved retrofit of 8,667 light Project involved retrofit of 8,667 light fixturesfixtures

Installation of building occupancy sensorsInstallation of building occupancy sensors Upgrade of building control systemsUpgrade of building control systems New roof-top A/C units Pump and Motor New roof-top A/C units Pump and Motor

ReplacementReplacement New Variable Frequency Motors/DrivesNew Variable Frequency Motors/Drives Cooling Tower ReplacementCooling Tower Replacement LEED evaluation of CourthouseLEED evaluation of Courthouse

Project SavingsProject Savings

$12,201,640.00 over 14-yr period!$12,201,640.00 over 14-yr period!

$871,546.00 per year!$871,546.00 per year!

$72,629 per month!$72,629 per month!

Other MD CountiesOther MD Counties

Baltimore City – LED upgrade of traffic Baltimore City – LED upgrade of traffic signals saving $900,000 per year.signals saving $900,000 per year.

Howard County – building energy Howard County – building energy improvements saving $2.4M per yearimprovements saving $2.4M per year

MEA – rotates contracts between “BIG-MEA – rotates contracts between “BIG-5”5”

How YOU can Get InvolvedHow YOU can Get Involvedin Your Countyin Your County

Call and/or email your:Call and/or email your: County executive and County executive and

councilman/womancouncilman/woman Write a letter to the editorWrite a letter to the editor Call into talk radio and mention EPC’sCall into talk radio and mention EPC’s

Questions?Questions?