Using ESPC to Maximize Energy Saving Goals Prepared for Environmental Business Council

1. Using ESPC to Maximize Energy Saving Goals Prepared forEnvironmental Business Council Paul Popinchalk, PE Celtic Energy

2. Environmental Scan • Economic Downturn creating Economic distress, staff & budget reductions • Energy Costs variable, global upward pressure • Environmental concerns increasing need to reduce energy use • US Energy use creating concerns with security & reliability • PA 11-80 promotes ESPC as mechanism for efficiency & renewable energy use Environmental Business Council

3. What is ESPC? Savings repay ESCO • Energy Savings Performance Contracting (ESPC) is an “innovative” method to purchase energy efficiency, water, and O&M improvements in buildings • A “single” procurement is used to purchase a complete package of services from an “Energy Services Company” (ESCO) on an open book basis (Design/Build done right) • Self-Financing of the entire project so there are no up front costs. Use Tax Exempt Municipal Lease, not ESCO $ • ESPC can help improve indoor air quality and work/learning environments, while reducing energy costs ESCO pays for project Improvements create savings Environmental Business Council

4. Potential Components of ESPC Project Environmental Business Council

5. ESPCs re-allocate current spendingNOT ADDED DEBT!!! Reduce spending on: • Wasted energy • Maintenance of old, inefficient equipment And reallocate the same spending to: • New energy-using infrastructure • Project financing costs (mostly interest) Will not degrade credit rating No need to ask taxpayers for new $ Environmental Business Council

6. How Does It Work? Owner Share Energy Cost Savings Owner Share Utility Bill Contractor Payment $ Utility Bill Utility Bill Before ESPC Contract During ESPC Contract After ESPC Contract • Pay a lower utility bill • Pay the contractor • Achieve cost savings for the Owner Environmental Business Council

7. The Basic Cash Flow Savings Net Positive Cash Flow $ [Debt Service, M&V, and O&M Costs] 15 T (Time) Environmental Business Council

8. What makes ESPC Attractive? • Guarantees for Performance, Savings, Costs, and O&M • Multiple Financing Options – Treat Projects as Investments • Comprehensive Energy Engineering • Everything is Negotiable – Custom Fit for each Owner’s Needs • Open Book Pricing • Cost of Construction Returned to Owner through Conservation Savings • Proven, Successful Practice since 1970s Environmental Business Council

9. Who are the Players? Energy Service Company (ESCo): • Identify and evaluate energy savings opportunities • Develop engineering design & specifications • Manage project from design to installation • Can arrange for financing • Train Owner’s staff on O&M • Guarantee project cost, performance & savings • Provides long term O&M if desired by Owner • Helpful Link: www.naesco.org Environmental Business Council

10. Who are the Players? 3rd Party Consultant • Assist in development of RFP • Evaluate ESCOs’ Proposals assist in selection • Facilitate accurate, comprehensive Detailed Audit by ESCO • Validate ESCO’s M&V, CX, O&M Plans • Verify ESCO’s M&V, CX activities • Review engineering design and specifications • Help Owner with contract negotiations • Review Annual M&V reports for term Environmental Business Council

11. ESPC Benefits Environmental Business Council

12. Windham Public SchoolsWillimantic, CT • Cash strapped district with 9 older facilities. • Major infrastructure upgrades; boilers, windows, etc. • Solved chronic comfort and maintenance problems (No need for parkas in class anymore!) • Many standard measures, lighting, sensors, EMS • Small Cogeneration at two schools allowed for emergency shelter status • CEI managing Performance Contract, $5.5 million at all schools, 13 year term Environmental Business Council

13. Who’s Doing ESPC? USDOE - Transformational Energy Action Management (TEAM) Initiative at dozens of its own facilities across the country featuring ESPC as the main vehicle of achieving savings (CEI is managing projects at HQ and Brookhaven Labs) City of Stamford implementing a $6.1 million energy performance contract in more than 20 schools (third party financing to pay to improve energy efficiency and repaid with utility energy savings) City of New Haven • $6.1 million of leased improvements. • $250,000 in utility rebates to offset capital cost. • $8.64 million in energy, maintenance, parts and labor cost saved to date. • $8.8 million savings guaranteed over the nine-year program. Town of East Hartford – several million $ in ESPC, and QECBS Town of Farmington just selected AMERESCO Town of Cheshire developing ESCO RFP with CEI Town of Colchester – just selected Honeywell with CEI Town of Newtown – just selected CEI as Third Party Consultants Environmental Business Council

14. Thank you for your time...QUESTIONS? Paul Popinchalk, PE LEED Accredited Professional Certified Monitoring & Verification Professional Director of Engineering Celtic Energy, Inc. (860) 882-1515 paul@celticenergy.com www.celticenergy.com

15. Federal Research Center – White Oak • Celtic hired to do Quality Control over ESPC with over $290 M in assets • 60 MW gas fired turbines • 20,000 tons of HE chillers • Solar power array • ECMs in buildings • CEI pushed New Phase 3 to be: • SmartGrid/PJM compliant • Robust M&V and CX plans Energy Savings Performance Contracting

16. State of Rhode Island Energy Office • State Administration Complex: • Cannon Building • Powers Building • Chapin Laboratory Building • Projects Include: • Replace old HVAC, chillers, boilers • Add campus wide HVAC controls • Lighting retrofits and controls • VFDs and premium efficiency motors • Economics: • Project Cost: $5.6 M • Annual Savings: $534,000 • Utility Rebate: $234,000 • Contract Term: 13 years Energy Savings Performance Contracting

17. Isn’t Design/Bid/Build Cheaper? • Yes, sometimes D/B/B is cheaper based on First Costs! • Get what you pay for. • Seldom are DBB designs optimized for efficiency, rarely capture expected savings. AE firms are not trained for these designs. • V.E.V. = Value Engineering Victim (Typical of D/B/B, not ESPC) • CATNAP = Cheapest Available Technology Necessary to Avoid Prosecution (Typical of D/B/B, not ESPC) • ESPC allows you to select ECMs based on value and life cycle, and not low bid! • No guarantees beyond one year warranty period in DBB • Rarely are systems commissioned

18. US Department of Energy - HQ • CEI Quality Assurance on ESPC Project at DOE Headquarters - Washington, DC • Over $26 M of infrastructure projects • Over $1.5M million in annual energy/O&M savings • ECMs include: • High performance lighting • Steam trap replacement/O&M • VAV system conversion • New HE central chiller plant • Water conservation • Annual Emissions Reductions (kg/yr): • 3,600,000 CO2, 1,500 Nox, 115 kg SOx Energy Savings Performance Contracting

19. UNC Wilmington • Hired Celtic Energy in January 2008 • Annual utilities cost $5M+, and growing • New chilled water plant is under loaded • Connected satellite cooling/heating plants • Daylight harvesting/skylights • Integrated multiple buildings into one web-enabled, open protocol front end • Replaced boilers, AHUs, chillers, windows • CEI worked with Energy Office and UNCW to modify and improve RFP • Currently in construction • $5M project, 20 year term Energy Savings Performance Contracting