# Presentation: 680240

## Alternate Financing in the Federal Sector:Market Trends and Performance

- Charles Goldman
- E. O. Lawrence Berkeley National Laboratory
- CAGoldman@lbl.gov
***FUPWG Meeting ***
***Brooklyn NY***
- April 22, 2004

## Data sources & approach
Project trends:
UESC vs. ESPC 
Trends in project size and retrofit strategies
Typical costs and savings
Federal vs. other public/institutional (“MUSH”) markets
Project size, costs, savings & economics
Conclusions

- Data sources & approach
- Project trends:
- UESC vs. ESPC
- Trends in project size and retrofit strategies
- Typical costs and savings
- Federal vs. other public/institutional (“MUSH”) markets
- Project size, costs, savings & economics
- Conclusions

## Data Sources

- LBNL/NAESCO database of ESCO projects:
- ~2050 projects submitted by ESCOs for voluntary NAESCO accreditation process and by state energy offices:
- 7% federal – UESC and non-DOE ESPC projects
- 66% “MUSH” markets – K-12 schools, state/local governments, universities/colleges, hospitals/health care
- 27% private sector (not used in this analysis)
- ~125 DOE Super ESPC projects (from FEMP)
- Includes data received as of March 2004
- UESC project database (maintained by PNNL):
- ~800 projects submitted voluntarily by utilities and agencies
- Includes data received as of November 2003

## Approach:  Analysis of Project Data

- Compare UESC and ESPC project trends (LBNL & PNNL databases):
- Define typical strategies, focusing on different types of projects:
- SIZE: Small vs. large
- RETROFIT STRATEGY: Lighting Only, Multi-measure, Multi-measure with DG/Central Plant
- Trends in mix of project types over time
- Typical costs and savings for defined project types at military and civilian sites
- Comparisons between Federal and other institutional markets (local/state/K-12/university):
- Typical project size, costs, savings, and payback times

## Large Projects Dominate Alternative Financing Market in Federal Sector

- Projects greater than $2M account for 80-90% of UESC and ESPC market investment
- However, UESC projects are much more likely to be small
- Large UESC projects appear to be very large (19% of projects account for 79% of investment)

|  | Large Projects
(>$2M) |  | Small Projects
(<$2M) |  |
| --- | --- | --- | --- | --- |
|  | N | % of costs | N | % of costs |
| ESPC | 90 | 92% | 69 | 8% |
| UESC | 154 | 79% | 636 | 21% |

## Trends in Project Costs - ESPC

- Large projects (>$2M) account for an increasing share of ESPC market activity

**N=155**

## Trends in Project Costs - UESC

- Most (~80%) UESC projects cost less than $2M
- No clear change in share of large projects over time
- Source: PNNL UESC database

**N=790**

## Trends in ESPC Project Types

**Large DG/Central Plant projects are an increasingly common ESPC strategy (~40%)**
**Small and large multi-measure projects account for ~40-45% of market activity**
**Lighting Only projects account for small and declining share of ESPC market**

**N=153**

## Trends in UESC Project Types

- UESC DG/CP projects represent lower market share than for ESPC (~15%)
- UESC Lighting Only projects are more prevalent (~20-30%)
- Mix in retrofit strategy and project size fairly stable over time
- Source: PNNL UESC database

**N=740**

## Typical Costs and Annual Savings for Small (<$2M) Projects

**Typical Costs and Annual Savings for Small (<$2M) Projects**

- In aggregate, Lighting Only projects show strong correlation between costs and savings, with short paybacks
- Military ESPC Central plant/DG projects have greater savings than civilian agency projects

- Lighting Only

- DG/Central Plant

**N=8 (ESPC)**
**N=24 (UESC)**

**N=31 (ESPC)**
**N=51 (UESC)**

## Typical Costs and Annual Savings for Large (>$2M) Projects

**Typical Costs and Annual Savings for Large (>$2M) Projects**

- Very few large Lighting Only projects
- Average ESPC and UESC DG/Central Plant project for military agencies costs $14M and $7M respectively
- Average ESPC and UESC DG/Central Plan project for civilian agencies costs 6.8 and 10M respectively

- Lighting Only

- DG/Central Plant

**N=49 (ESPC)**
**N=34 (UESC)**

**N=3 (ESPC)**
**N=11 (UESC)**

## Federal vs. Other Institutional Customers: Project Costs

- On a square-foot basis, federal projects cost less ($2.08/ft2 vs. $2.93/ft2) than is spent by institutional sector customers
- No significant differences in retrofit strategies – observed trend may be due to economies of scale

## Federal vs. Other Institutional Customers: Energy Savings

**Median ****federal market energy savings are higher than other institutional sector customers**** (18 vs. 14 kBtu/ft****2****)**
**Higher savings in hospitals due to unique strategies and private-sector style decision making**
**Lowest savings in K-12 schools – due to focus on indirect benefits, non-energy improvements and fewer operating hours**

## Federal vs. Other Institutional Customers: Project Economics

- Median payback time is 7.7 years in Federal market vs. 8.8 years for other institutional sector markets
- $550M in net economic benefits for 214 federal projects compared to $1.2B for 965 projects in other institutional sectors

## Conclusions

- Large projects drive investment in both UESC and ESPC markets
- Project data supports anecdotal trend toward large DG/Central plant projects in ESPC market
- Greater share of Lighting Only projects in UESC market – but substantial investment in more comprehensive projects as well
- Federal market projects tend to be larger and less costly than other public/institutional projects done by ESCOs
- Energy savings and net benefits are higher per project in Federal market than other public/institutional markets

## Background Slides

## Typical ESPC Project Costs and Annual Savings

| Military (N=57) | Lighting Only |  | Multi-measure |  | Multi-measure with DG/CP |  |
| --- | --- | --- | --- | --- | --- | --- |
| Average Project... | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) |
| Small (<$2M) | 1.08 | 0.24 | 1.12 | 0.20 | 1.08 | 0.33 |
| Large (>$2M) | 2.12 | 0.32 | 9.87 | 1.31 | 14.5 | 1.93 |

| Civilian (N=99) | Lighting Only |  | Multi-measure |  | Multi-measure with DG/CP |  |
| --- | --- | --- | --- | --- | --- | --- |
| Average Project... | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) |
| Small (<$2M) | 0.50 | 0.08 | 0.90 | 0.14 | 1.17 | 0.23 |
| Large (>$2M) | 2.39 | 1.12 | 4.72 | 0.64 | 6.79 | 0.83 |

## Typical UESC Project Costs and Annual Savings

| Military (N=386) | Lighting Only |  | Multi-measure |  | Multi-measure with DG/CP |  |
| --- | --- | --- | --- | --- | --- | --- |
| Average Project... | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) |
| Small (<$2M) | 0.44 | 0.09 | 0.58 | 0.08 | 0.67 | 0.10 |
| Large (>$2M) | 8.56 | 1.96 | 5.14 | 0.77 | 7.06 | 0.81 |

| Civilian (N=339) | Lighting Only |  | Multi-measure |  | Multi-measure with DG/CP |  |
| --- | --- | --- | --- | --- | --- | --- |
| Average Project... | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) | Cost ($M) | Savings ($M) |
| Small (<$2M) | 0.19 | 0.05 | 0.30 | 0.05 | 0.66 | 0.09 |
| Large (>$2M) | 5.95 | 1.01 | 6.20 | 0.70 | 10.57 | 2.08 |

## Federal vs. Other Institutional Customers: Project Size

- Federal projects are significantly larger than other markets – median costs are $1.85M vs. $0.98M
- Large representation by ESPC projects in our sample affects this result

**Notes:**
CHUCK: 

Note the breakdown of our database:
50% Super ESPC
15% other ESPC (army, site-specific)
24% UESC
11% unknown