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Update from the ESCO Industry

This presentation provides an overview of the ESCO industry, including its track record, challenges, proposed solutions, and potential job creation opportunities in the public housing sector. It also addresses the need for coordination between ESCO initiatives and other programs, as well as the calculation of the cost of delays.

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Update from the ESCO Industry

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  1. Update from the ESCO Industry HUD Public Housing Convening November 28, 2012

  2. Presentation Overview • Thanks to HUD • NAESCO Introduction • ESCO Track Record • Challenges and Proposed Solutions • Industry Questions

  3. Thanks to HUD • Thing have improved significantly since 2010 • NAESCO believes that it is helpful for all parties to discuss the current initiatives • HUD is making this a “win-win-win” • ESCOS can help HUD achieve its energy efficiency mandates

  4. Introduction to NAESCO • 85 member companies • ESCOs, engineers, finance, equipment mfrs. • Divisions of major companies • Utilities and energy companies • International controls companies • National and regional independents

  5. Introduction to NAESCO • $45B in projects since 1990 • About $1 billion of PHA projects • $50B savings – guaranteed and verified • 350,000 person-years of direct employment • $25 billion of infrastructure improvements • 450 million tons of CO2 savings at no additional cost

  6. ESCO Industry Growth

  7. ESCO Market Segments

  8. ESPC Job Creation • $10M project ≈ 95 direct jobs • 20 jobs at the ESCO company • 40 jobs at local subcontractors • 35 jobs at equipment manufacturers • $10M project ≈ 120 indirect jobs • $10M project ≈ 21.5 jobs

  9. Potential Jobs in PHA Projects • Potential market ≈ $3.5 billion • Potential jobs ≈ 73,000

  10. Challenges and Proposed solutions

  11. Lengthy Project Reviews • Typical review is 5-24 months • PHA savings during delay are lost forever • Some PHA’s financial condition deteriorates • Delays can make a good project uneconomic • Proposed Solutions • Set and project project schedules/milestones • Monitor and publish milestones to all parties • Increase OFO Energy Center staffing • Revisit Section 30 requirement

  12. Rolling Rules Updates • Create new hurdles for projects • Proposed Solutions • Grandfather all projects in process • Provide 6 months notice of changes • Increase communications among all parties • “No surprise” approval process • Consistent application of rules across HUD offices

  13. Coordinating EPC with Other Initiatives • Proposed Solutions • Correct the issue with the DSCR in the FASS by applying savings to the debt at the program level • Produce guidance to concurrently apply rate reduction incentive with an EPC • Tie EPC to Green PNA initiatives • Integrate EPC incentives into Rental Assistance Demonstration (RAD) Program • Recognize Section 3 of 1968 Housing Act resident training as allowable cost

  14. HUD Goals Shrinking? • HUD Strategic Plan for 2010-2015 was to retrofit 150,000 units • Targets appear to be shrinking • What is the plan for increasing retrofits in 2013 and beyond?

  15. Follow up communications • Establish working group of all program stakeholders? • Measure-specific program issues

  16. Calculating the Cost of Delay

  17. Cash Flow Opportunity Calculator • Simple to use • Illustrates cost of delay • Customers can confirm results • Answers… • How much equipment can be purchased from savings • Whether it is better to wait and use future cash • If money is being lost waiting for better interest rate

  18. Cash Flow Opportunity Calculator http://www.energystar.gov/ia/business/bus_financing_cfo_calculator.xls

  19. Uses existing data CFOC: Overview

  20. CFOC: Investment Value

  21. CFOC: Investment Value $1,512,000

  22. CFOC: Simple Payback

  23. CFOC: Net Present Value $1,042,136 $883,170

  24. 2.2 Break-Even Point CFOC: Break-Even Point

  25. 15.4% Opportunity Cost if delayed 12 months* CFOC: Opportunity Cost

  26. Questions or More Information Donald Gilligan NAESCO dgilligan@naesco.org 978-740-8820

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