Energy Savings Performance Contracting (ESPC)

1. Energy Savings Performance Contracting (ESPC)

2. What is an ESCO? • Energy Services Company (ESCO) • Some similarities to a Design/Build firm • Turnkey service for energy efficiency projects • Expertise in energy engineering • Commissions project work • Measures and Verifies Energy Savings

3. ESCOBenefits Collaboration between Owner, DES, and ESCO Ability to fast-track Owner involved with contractor selection Owner involved with equipment selection One responsible entity (ESCO) GUARANTEED: Maximum project cost Energy savings Equipment/System performance

4. What is DES’s Role 1986 RCW 39.35 Legislative Authority to GA (Now DES) Project Oversight Financial Transparency Contractual Framework & Coordination Prequalified Providers

5. Qualifying Projects Energy and/or Water conservation projects such as: • Building lighting • Street lighting • HVAC modifications • Steam & condensate • Boiler & chiller systems • Energy management control systems • Building and grounds water conservation

6. Financing Current Operational Costs Savings Savings Annual Debt Service New Operational Costs Utility & Maintenance Costs Utility & Maintenance Costs Utility & Maintenance Costs After Before During

7. Financing Options • Energy Service Company (ESCO) Financing • State Financing • State Treasurer’s LOCAL Program • 3 - 5% interest rate • 10, 12 or 15 year loan • Private Financing • Agency intra-budget financing

8. Department of Enterprise Services Experience Energy conservation in public facilities since 1986 Over 500 projects totaling $300 million Over $100 million in energy cost saved $30 million in utility rebates brought to the projects Clients include state agencies, colleges and universities, cities and towns, counties, school districts, port districts, libraries, hospitals, health districts: Highline College Olympic College Yakima School District Valley Medical Center City of Tukwila King County Tumwater School District Department of Corrections University of Washington Veterans Administration City of Olympia Port of Bellingham …and dozens more Customers:

9. Sequence of an ESCO Project Design & Construction Project initiated by Interagency Agreement Preliminary Audit #1 #3 #5 #2 #6 #4 Investment Grade Audit Measurement & Verification ESCO Selection

10. Interagency Agreement • DES initiates an Interagency Agreement (IAA) between the State and the client agency • DES management fee schedule is included in the IAA • The Client signs and DES executes the IAA

11. ESCO Selection • DES pre-qualifies Energy Service Companies (ESCOs) biannually and creates a registry through an RFQ • The client reviews qualifications and chooses the ESCO that is right for them • ESCO Interviews are optional

12. Preliminary Audit • Walkthrough to identify facilities and systems to study • Client establishes cost-effectiveness criteria • ESCO conducts a preliminary audit • Client and DES review the list of energy conservation measures proposed • The client decides whether to proceed with an investment grade audit

13. 4.Investment Grade Audit • Up to this point, there is no obligation to pay for ESCO services • If you proceed with construction, the cost of the investment grade audit is included in the guaranteed project cost • If you do not proceed with construction of energy saving measures which meet your payback criteria, you are billed for the audit • If no measures are found that meet payback criteria, there is no cost for the audit

14. 4.Investment Grade Audit (continued) • ESCO and DES sign investment grade audit agreement, Client signs funding authorization • ESCO develops investment grade audit with cost and savings guarantee • Client may list favorable subs and equipment • Client and DES review and comment on draft audit • ESCO incorporates comments, presents audit results, and submits an energy services proposal (ESP) • The ESP includes all project costs

15. 5. Design and Construction • Client and DES review energy services proposal • ESCO and DES sign construction contract • Client signs funding authorization • DES issues notice to proceed • Client and DES review design documents • Bid documents prepared by ESCO • Sub-contractors and equipment selected • DES manages ESCO project construction • DES and Client verify ESCO’s costs and savings

16. Measurement and Verification • First year measurement and verification (M&V) is part of every project • M&V is covered under a separate agreement, authorized by the client • 2 – 3 years of M&V are recommended for systems which require frequent adjustments, such as controls systems • If using loan to fund Energy project may want to extend M&V

17. Highline College • Performing Site survey for crane pick • What's coming out of that vault? • Uh oh…. • Central Heating Plant • Direct Buried Piping - VE • Engage DES approval for Engineering investigation • Develop cost analysis for repair options • Expedited Contracting, Tight construction window

18. What was presented: Options Studied: • Cured-In-Place Pipe Lining (Trenchless) • Open Cut Excavation and Pipeline Replacement • Direct Boring (Trenchless) • Satellite Boiler • Temporary Boilers (If piping failed prior to a permanent fix) Each Option Included: • Overview of the option • Advantages • Disadvantages • Impact of students and staff • Timeframe for completion • ROM Total Project Cost

19. B29 ConstructionB4 Installation Completed Discovery DES onBoard ReportDelivered NTP forIGA NTP forConstruction 11/18/17 9/16/17 10/18/17 9/17/17 11/19/17 1/05/18

20. Attractive ESCO Projects • Projects with significant Energy/Utility Savings • Interior and exterior Lighting (LED) • HVAC projects – chillers, boilers, pumps, AHUs, distribution systems, commissioning • Water conversation projects • Building Envelope Upgrades

21. Attractive ESCO Projects • Projects with some energy savings and significant project complexities • Projects that require scheduling work around client requirements on critical deadlines • Projects with numerous unknowns like retro commissioning projects or major HVAC renovations • Projects that need contractor flexibility • Projects that need guaranteed cost & energy savings to apply for grants

22. Low Bid Vs ESCO Process • ESCO Process – Design and Construction are by the same Company. • ESCO Process – Project’s cost and energy savings are guaranteed and construction invoicing is “open book”. • ESCO Process – You select ESCO from our prequalified list. The ESCO process is your choice. The DES energy program and ESCO have a lot of incentive to ensure successful projects.

23. Washington Colleges • Seattle Central College • Eight ESCO projects – continuous from 2008 to current • Has used three ESCOs • Started with Commerce grant • Highline College • Six ESCO projects – continuous from 2011 to current • Has used one ESCO • Started with Commerce grant • Edmonds College • Nine ESCO projects – from 2000 to current • Has used three ESCOs • Received two Commerce grants

24. DES Commissioning Program • Existing Building Commissioning • Energy Hogs • Control/Comfort Issues • Buildings that have not been Commissioned for over 10 Years • Prequalified On-Call Commissioning Firms • Sequence similar to ESCO projects • Commissioning firms are not allowed to do construction activities (agreement – not a construction contract)

25. DES RCM Program • New Program – will start accepting clients/marketing early 2019 • Program is intended to provide our clients a pathway to reduce utility costs/carbon emissions and sustain those improvements • Program will be flexible in scope and cost. We will tailor to meet your specific needs. Could be whole campus, specific building(s) and/or specific systems • Program will partner with the WSU Energy Office to provide training and energy efficiency information. • Goal is to train your staff

26. ELCCAs • Strive for “Net Zero Ready” • Building Orientation (Future Solar PV) • Building Exterior (Insulation/Windows) • Roof/Conduits/Electrical system designed for future Solar PV • Pay close attention to Mechanical system • New Washington State Energy Code limits choices • If recommended Mechanical system is new to you and your staff, ask questions and request examples.

27. Thank You Joe Sullivan DES Energy Program 360-407-9377 Joe.Sullivan@des.wa.gov