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Energy Performance Contracting Approach

Energy Performance Contracting Approach. David Birr President Synchronous Energy Solutions. What is Energy Performance Contracting?. A contract for the acquisition of comprehensive energy efficiency improvements and services with minimal up-front costs

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Energy Performance Contracting Approach

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  1. Energy Performance Contracting Approach David Birr President Synchronous Energy Solutions

  2. What is Energy Performance Contracting? • A contract for the acquisition of comprehensive energy efficiency improvements and services with minimal up-front costs • Provided by qualified Energy Service Companies (ESCOs) • Uses the utility and resident allowance savings from the project to pay for the work

  3. What is Energy Performance Contracting? (continued) • Protects the customer by requiring a performance guarantee linked to measured savings over time • Guarantees can be structured to cover all project costs, including financing, over a specified contract term,usually 15-20 years

  4. Standard Services Offered by ESCOs • Investment grade energy audit • Comprehensive project design & engineering • Sources of project financing • Equipment acquisition • Complete project installation and management

  5. Standard Services Offered by ESCOs (continued) • Project performance guarantees for the duration of the contract • Savings measurement and verification data analysis • Ongoing equipment maintenance and inspection services • Extensive resident training services on improvements

  6. Standard Services Offered by ESCOs (continued) • Commissioning and testing of new equipment • Project monitoring and advice • Extensive ongoing training for building operators • Access to energy program financial incentives and grants

  7. Multifamily Market • Multifamily (5+ units): over 15 million households • Private conventional rental housing: 10 million • Private assisted rental housing: 3 million • Federal public rental housing: 1.3 million • City, state public rental housing: 2 million

  8. Federal Public Housing • 1.3 million households • Very low income • “Family” and “elderly” occupancy • Owned and managed by municipal nonprofits

  9. Federal Public Housing (continued) • PHAs generally have little or no credit history or financing expertise • HUD regulates performance contracting and other energy incentives

  10. Federal Public Housing Performance Contract Opportunities • HUD regulatory incentives in place since 1991 • RFP procedures in place • Average investment: $2,000-$4,000 per unit among experienced ESCOs • PHAs qualify for tax-exempt financing

  11. Residential Market Characteristics that Matter • Ownership/market segmentation (single, multi, public, private, etc.) • Building construction, size, age, and condition • Occupancy (family/elderly/handicapped) • Utility costs

  12. Is EPC right for your PHA ? • Metering configuration and applicable rate structures (master/individual/building-based) • Age,efficiency ,and condition of lighting,water,and HVAC equipment • Total Current Utility Costs • Current and Projected Utility Rates

  13. What is Different About PHA Performance Contracting? • Water efficiency measures are key measures that pay for other improvements • Construction will require access to resident units • Must sell the project to PHA management, tenants and HUD • Public housing success requires housing background because the HUD rules are complicated

  14. PHA Barriers • Hard to work on due to 24-hour occupancy • Management and regulatory bureaucracies in public housing • Metering configuration and rate analyses are sometimes complex • High transaction costs for smaller projects

  15. ESCO Challenges in PHA Market • Access to and quality of available utility consumption and cost data • Lack of PHA in-house technical and financial expertise • Shifting HUD regulatory guidance

  16. Why Use an ESCO? • Technical Expertise with PHA Properties • Project Financing Expertise • HUD Regulatory Knowledge

  17. Why Use an ESCO? (continued) • HUD allows you to keep utility savings to pay project costs depending upon the incentives you use • Long-term project performance monitoring • Reduced project performance risk

  18. Improves energy efficiency and occupant comfort levels Reduces environmental problems Creates local jobs Project Benefits

  19. Benefits of Performance Contracting • Replace aging equipment with new equipment • Access to 3rd party financing for needed capital energy improvements • Decreased equipment repairs and lower maintenance costs

  20. Benefits of Performance Contracting (continued) • Optimized equipment performance through project commissioning • Better overall management and control of facility

  21. Risk Reduction Benefits of Performance Contracting • Contractually guaranteed measured savings reduces the risk of savings erosion over time • Integrated project analysis, design, and construction reduces the risk of lost savings opportunities and schedule delays • Utility savings and performance monitoring reduces the risk of under-funding key maintenance requirements

  22. Risk Reduction Benefits of Performance Contracting (continued) • Up-to-date training and knowledge for facility operating personnel reduces the risk of project non-performance • Ability to select services and materials based upon quality and value, rather than on lowest first cost

  23. Savings Erosion Over Time is Typical of Conventional Energy Projects

  24. Stable Savings Guaranteed Over Time is Typical for EPC

  25. Comparison of Cumulative Long-Term Energy Savings Achieved Over Ten Years

  26. Conventional May take several years to secure sufficient funds to implement comprehensive energy projects High staff costs due to a piecemeal approach to bidding and managing each separate project Performance Contracts All funds needed for a comprehensive energy project are readily available Lower staff cost and quicker completion of a comprehensive project Conventional Bid and Spec EPC Negotiated Procurement

  27. Conventional Multiple contracts with multiple vendors can result in conflicting project requirements Energy savings are not guaranteed Performance Contracts One contract with single point accountability for project performance Long-term energy savings are guaranteed by the ESCO Conventional Bid and Spec EPC Negotiated Procurement (continued)

  28. Conventional Guarantees of comfort and operating standards are not usually offered by equipment vendors Incremental project implementation misses savings design opportunities Performance Contracts Performance contracts typically contain explicit comfort and operating standards Comprehensive project implementation maximizes savings design opportunities Conventional Bid and Spec EPC Negotiated Procurement (continued)

  29. Conventional Energy projects must compete for limited budget resources with other improvement projects No direct incentive for building staff to reduce energy costs Performance Contracts Energy projects are funded with utility bill savings ESCO compensation is tied to providing energy savings over the term of the contract Conventional Bid and Spec EPC Negotiated Procurement (continued)

  30. Conventional Limited staff or lack of expertise may put project performance at risk Operations and maintenance budgets are usually under-funded, resulting in wasted energy Performance Contracts ESCO provides ongoing technical expertise to insure project performance Utility bill savings finance operations and maintenance required to maintain project performance Conventional Bid and Spec EPC Negotiated Procurement (continued)

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