# Presentation: 147169

## Energy Savings Performance Contracting – The Utah ExperienceEPA Air Innovations Conference

*Energy Savings Performance Contracting – The Utah Experience**EPA Air Innovations Conference*

*Chicago - August 12, 2004*

- “Others fell into good ground, and brought forth fruit, some an hundredfold, some sixty fold, some thirty fold”
- 				Matthew 13

## We can use our time wisely and strategically with performance contracting!

**17 years of ICP grants = $13.3 million in federal funds + $11 million in match**
**4-6 hours a week x 5 months = $44 million in retrofits from a performance contract**

## Successful Energy Service Company Partnerships in Utah

**<1999  - 56 building ($4,346,098 financed)**
_**University of Utah**_** – 81 bldgs. ($44 million) with $10,812,500 in savings achieved to date**
_**State Prison – Phase I**_** - 112 buildings ($6,554,873) with $234,618/yr.  in est. savings**
_**State Prison – Phase II**_** ($5,026,112) with $275,002/yr. in est. savings**
_**Utah Valley Community College**_** - 12 buildings ($9,493,424) with $556,888/yr. in est. savings**
_**Ogden Regional Center-**_** one building ($578,667) with $33,489/yr. in est. savings**
- NOTE: In addition to energy savings, the Prison projects provide $179,182 in water savings.

## Common Excuses for Not Undertaking Performance Contracts

**“****Hey, they got burned doing that!”**
**“****We can fund it cheaper ourselves - the financing is too expensive”**
**“****We don’t have the expertise to manage this kind of project.  This whole process is very new to us.”**
**“****Our board doesn’t want any debt!”**
**“****What if we don’t get the energy savings that they promise?”**
**“****But, we already have contractors that we know and love”**
**“****Can’t this wait?  I’m about ready to retire!”**

## “Hey, they got burned doing that!”

- You can minimize risk by procuring competitively using standard procurement documents & by retaining independent technical expertise.
- Partner with an ESCO having a proven track record for success

## “We can fund it cheaper ourselves - the financing is too expensive”

- Over the past 5 years, Utah institutions have secured financing at  4.6 to 4.8% with performance contracting
- According to the EPA, a one year wait for funding (on a $500k project) costs $100,000 in lost opportunity savings
- Check out the EPA “Cash Flow Opportunity Calculator” at _[www.energystar.gov](http://www.energystar.gov/)_

## “We don’t have the expertise to manage this kind of project.  This whole process is very new to us.”

**Contact your state energy office for technical assistance**
**Select and contract with an independent 3****rd**** party engineer/consultant**
**Obtain a sample RFP from the Energy Services Coalition website (escperform.org)**
**Openly solicit ESCO responses to the RFP**
**Review proposals and qualifications from ESCOs**
**Negotiate an investment grade energy audit agreement**

##    Continued:

**7.   Negotiate and finalize the performance contract with the ESCO**
**8.   Work with ESCO to secure best financial partner**
**9.   Hold weekly project meetings**
**10. Conduct site inspections and commission work completed**
**11.  Measurement and verification of energy savings achieved**

## “Our board doesn’t want any debt!”

- “Financing can be structured as a lease arrangement - this will not affect an institutions debt since the title and ownership of the equipment resides with the provider until the end of the lease period”
- 	Kent Michie - Financial Advisor to the Governor

## Measures ImplementedUniversity of Utah

- State-of-the-art lighting technologies
- Higher efficiency/CFC compliant chillers
- Variable frequency drives
- New energy management controls (for setback, mixed air, lighting & demand)
- Variable speed chilled water pumping

- Properly sized and efficient motors and pumps
- Build a central plant for upper campus
- New cooling towers
- Convert air handlers to VAV

## University of Utah Performance Contract – Greenhouse Gas Reductions per year (preliminary):

**CO2: ****	****121,166,620 lbs.**
**VOC: ****	****	****  3,159 lbs.**
**NOX: ****	****       216,369 lbs.**
**CO: ****	****	****	****17,523 lbs.**
**SO2: ****	****	****54,771 lbs.**
**PM10:****	****	****  6,831 lbs.**
**Hg: ****	****	****       123,749 mg.**
- Source: Cleaner Greener Emissions Calculator

## Measures Implemented for  the Prison:

*** ******Electrical distribution upgrades***
*** ******Geothermal hot water heat – 185 degree F***
*** ******Upgrade motors and pumps***
*** ******Lighting including T-5 highbay***
*** ******VFD installation***
*** ******Wind generation***

##  Insulation – steam lines and building 	envelops
 Recommissioning mechanical and control 	systems
 Stack economizers 
 Night setback and demand limiting
 Low flow water using fixtures

-  ***Insulation – steam lines and building ******	******envelops***
*** ******Recommissioning mechanical and control ******	******systems***
*** ******Stack economizers ***
*** ******Night setback and demand limiting***
*** ******Low flow water using fixtures***

## Some UVSC Project Issues

***Some UVSC Project Issues***

**Issues**

**Resolution**

***1.  ******	******Viron ownership***
***2.   ******	******Concerns about future changes to baseline***
***3.  ******	******Limits on staff time for project management***
***4.  ******	******Concern over long ECM paybacks***
***Support of new UVSC President***
***Audits being conducted in off-season***

***1.  ******	******ChevronTexaco has now purchased Viron***
***2.  ******	******Technical reviews of baseline by the Utah Energy Office & consultant***
***3.  ******	******DFCM & UEO  staff help with project management and break  project into project phases***
***4.  ******	******Cap ECMs to those with***
***      ******	******paybacks > useful life***
***New President advised – 4 month delay***
***6.  ******	******Audit completion delayed for on-season data gathering***

- `

## For a successful performance contract, the ESCO should: 

***Listen to the client agency’s wants and needs***
***Develop a project scope without product bias***
***Clearly and regularly communicate with the    client through all steps of the project***
***Utilize best engineering & management practices ***

***For a successful performance contract, the ***_***ESCO***_*** should:****** ***

*** ******Reduce client risk with guarantees on equipment reliability, change orders, energy performance, & cash flows***
***Provide continuity in project management***
***Consider client preferences for contractors & suppliers***
***Remain flexible on issues of operational control***
***Maintain a policy of open-book pricing***

## For a successful performance contract, the owner should:

*** ******Regularly and clearly communicate wants, needs, & concerns to the ESCO (weekly project meetings)***
*** ******Involve representatives from various offices & levels within the agency***
***Get early buy-in from agency administration***
***Inform ESCO early regarding special agency standards***
***Approve all submittals and specs in advance***** **

***For a successful performance contract, the ***_***owner***_*** should:***

## Require “Open book” pricing throughout the project

***Stage the overall project in phases ***
***Utilize a collaborative group for procurement and procure competitively***
***Opt for advance approval of subcontractors & suppliers***
***Retain 3******rd****** party expertise for the owner’s “side of the table” ***
***Carefully research each ESCO’s references, technical qualifications, and financial background***

## Energy conservation is a matter of leadership“BE AN ENERGY CHAMPION”!!

- Contact information:
- Michael Glenn – Utah Energy Office
- 801-538-5436
- _[mikeglenn@utah.gov](mailto:mikeglenn@utah.gov)_
- Check out escperform.org