Saving, Not Speculation

July 20, 2013

It’s not simply the technologies that keep us awake at night, it’s so often that problem of “How are we going to pay for this necessary improvement?” that causes so much anxiety. There are hundreds, thousands, of solutions offered to public and private organizations, solutions for making their operations more energy-efficient, and many of those proposed solutions have merit. Few of them, however, offer a practical solution to the greatest challenge of all. How can we afford that?

ESCOs-Energy Service Companies-may be the most practical helpers for building owners and municipalities we have seen so far. Their popularity has grown especially in the weakly funded public sector because they often answer questions about the sources of financing along with the technological solutions.

“An ESCO is a business that develops, installs, and arranges financing for projects designed to improve the energy efficiency and maintenance costs for facilities over a seven- to 20-year time period,” is how this type of company is described by NAESCO, the National Association of Energy Service Companies .

“Typically, they offer the following services:

  • develop, design, and arrange financing for energy efficiency projects
  • install and maintain the energy-efficient equipment involved
  • measure, monitor, and verify the project’s energy savings
  • assume the risk that the project will save the amount of energy guaranteed

“These services are bundled into the project’s cost and repaid through the dollar savings generated.”

The aspect of ESCOs that sets them apart from other companies that offer good solutions for energy efficiency is the fact that their work and contracts are based on performance. Equipment contractors and consulting businesses can have excellent results, but their cost is seldom based on, or covered by, proven performance.

The energy savings in projects done by ESCOs is verified, not estimated. Perhaps the best-known and most reliable means of measuring energy efficiency is metering; it’s a direct tracking of energy savings, according to sanctioned engineering protocols. One cost that is placed inside most performance-based energy efficiency projects is that of maintenance; an ESCO’s work can include part or all of the maintenance for installed new equipment over the length of the contract. That is perceived as a significant advantage for many customers, such as public facility owners, for whom maintenance can be not only a technical, but also a huge financial challenge.

Photo: John Francis
Many municipalities are looking at ways to optimize their energy use, not just for City Hall, but for all city buildings.

Better Equipment Must Play Its Role
There’s a good chance that older facilities will need to change some of their equipment because what they are using (and may have been using for a whole generation of employees) may be inefficient, or even dangerous. But all the improvements are not solved by equipment. Learning how they should use their equipment, learning how to end bad practices in energy use, and learning how all the occupants of a facility should be made aware of the needed changes are vital parts of a change for the better.

One owner of a public building said he was amazed when told that his heating system was fine for its purpose. “They didn’t try to include an expensive, new one in their plans,” he said of the ESCO studying his facilities. Instead, they recommended a more practical, and saving, approach to its use, he explained.

A benefit less reported, or even noticed, in the moves of recent years to get our energy usage under sensible control, is the number of employment hours that have been saved through companies committed to energy efficiency. It’s not only for ESCOs that jobs have been created and supported, but also for all those who (directly and indirectly) support energy efficiency projects. It is estimated that about one third of the money used in ESCO projects is spent on labor. That means that about $7 billion has benefited employment in the last $20 billion of such projects. When the savings in energy costs are for public facilities like schools and universities, peripheral beneficiaries are those whose programs are being started now, academic or technical programs that could not be started before because there was no funding with which to begin.

Some ESCO companies have “ESCO” in their names, but there are some that have been leaders in energy control for years without that rubric and their performance contracts are relatively new. Schneider Electric, Siemens, Eaton, and Johnson Controls are names that have been familiar to energy users for a long time, each one a good example of the progress that has been made for both onsite and more traditional systems. The best way for me to show how an energy services company can help you and your community is probably by citing some examples from different areas of expertise.

A simple reason why public authorities (like cities, schools, and universities) have been the leaders in taking advantage of these energy performance contracts is that so few of them have any investment available for improvements. Traditionally, many projects have been quick fixes, good enough until somebody comes along with good financing; meanwhile we can blame politicians we don’t like for preventing progress. For a municipality, a performance contract allows them to pay for the capital cost of improvements with no tax increases, so it’s no wonder that public customers have seemed to dominate the scene.

The city of Brea, CA, is a good example of success in saving energy, and its cost. In this case, the savings come from lighting, heating, and cooling. Included in the project was the installation of a high-efficiency lighting system in more than a dozen city buildings, improving the quality and efficiency of some 4,000 street lamps, updating the cooling and heating in six buildings, and the installation of solar panels at three sites.

“There was no other way we could have undertaken this scope of project in this efficient a manner or time,” explains Charlie View, Brea’s director of public works.

The ESCO involved was Chevron Energy Solutions. If the project should fail to perform to the guarantee (achieving an agreed level of savings in energy costs) the ESCO must make up the difference. If savings exceed the guarantee, the city keeps the excess.

There are several municipalities in California that have benefited from the work of Chevron Energy Solutions. In Solana, the city has a project to trim its annual energy consumption by more than 350,000 kWh by upgrading more than 500 streetlights to high-efficiency LED models. There are other improvements, too, on City Hall and at the Fire Station and Marine Safety Buildings. To finance the much-needed replacement of the City Hall roof, the city used savings from the upgrades elsewhere. In the City of Hanford, the chief beneficiary of new energy efficiency is the wastewater treatment plant, thanks to a Chevron solar program. Concord, CA, is saving taxpayers about $18,000,000, thanks particularly to a 200-kW photovoltaic solar installation. In all, Concord has 14 projects designed to reduce energy and maintenance costs.

Who Benefits?
Thanks to the huge (some may say horrendous) emphasis placed on sports in colleges and universities by our televised media, most people think of the University of Kentucky as the place with the great basketball tradition. That’s true, but ease your mind away from sports and think of energy. The University of Kentucky has initiated an energy policy and contract that totals almost $25 million and will save the university more than two million dollars annually. The prime partner with the University of Kentucky in this stellar program is Ameresco, a leading energy efficiency and renewable energy services provider. Ameresco and its predecessors have constructed billions of dollars worth in projects throughout North America. The annual environmental benefits for the University of Kentucky (and its thousands of students and neighbors) will equal:

  • the removal of 23,490 tons of carbon dioxide (CO2), equal to
  • the removal of 46,234 cars from the road, or
  • the powering of 5,305 average-size homes, or
  • the planting of 62,908 acres of trees

That is some achievement. “Creating a more energy-efficient campus community is something I have championed for the past nine years,” comments Lee T. Todd Jr., president of the University of Kentucky. “Conservation of our natural resources is not only good for our bottom line, it is good for the future strength and vitality of our Commonwealth.” The President also praises the partnership with Ameresco that is helping the university use its resources in a more sustainable manner.

Photo: Honeywell
Inside today’s newer buildings are systems designed to reduce energy consumption while improving indoor environments.

There are several types of contracts involved in the university’s program. There is one for energy efficiency, an energy savings performance contract, guaranteed energy savings contract, solar thermal, and a campus-wide energy awareness program. There are 61 facilities involved in this prestigious effort, including 5.2 million square feet. The campus covers more than 716 acres and has more than 27,000 students. The ambitious project continues despite the current state budget limitations and will implement significant saving measures, on a budget-neutral basis, for electrical, mechanical, and water services. By leveraging energy efficiency such as lighting and water retrofits, the project includes major improvements to on-campus generation and to HVAC monitoring and control systems.

There are 4,263 housing units in 35 large complexes and 600 scattered site units under the auspices of the Akron Metropolitan Housing Authority (AMHA), and everybody there will benefit from the improved living environment. The contract between AMHA and Ameresco includes an energy performance contract, energy supply management, physical needs assessment, and asset planning. Among the types of technology involved in this $14.5 million project are geothermal, renewable energy, and a photovoltaic system. The project was phased initially by utility type, to optimize the financing and ramp up implementation. As a result of the conservation measures installed by Ameresco, AMHA anticipates annual savings of more than $1.5 million.

For some projects of this magnitude, owners can expect the work to take several years, with everything covered in the contracts. When you think of it, what is a decade in the history of a city? Compare that to, possibly, many years of wasted energy, harmful processes, and neglect of the public’s best interests. The more one reads of the projects undertaken and completed by companies like Ameresco, the more one understands how slow we have been to correct errors of past years. If “We’ve always done it this way” is the current excuse for changing nothing, think of the community for your children and grandchildren. ESCOs, with their performance contracts and other techniques, are going a long way to make tomorrow not only more enjoyable, but healthier and safer, too.

Net-Zero Energy Communities
One myth to toss out of the council or committee’s meeting room at once is that all these advances towards an energy-saving, cost-saving future must be achieved with new buildings. Existing buildings can show dramatic improvements. Retrocommissioning is a process to improve the efficiency of an existing building’s systems and equipment. It may correct problems that occurred at the early design or construction stage of the building, or it may correct problems that have occurred as the building has aged, or because the usage of the building has changed.

A superb source of information and experience in this area is the Institute for Building Efficiency, an initiative of Johnson Controls, known worldwide for their equipment, design, and planning successes. (Check the website

www.institutebe.com, and you’ll find a wealth of useful, practical information about improving your buildings’ performance.) Retrocommissioning involves a systematic evaluation of opportunities to improve your energy-using systems. If we were talking about a vehicle, as opposed to a building, the mechanics would make saving changes to all aspects of the vehicle’s operation based on how the owner actually drives. Among the problems that retrocommissioning will identify and fix could be:

  • thermostats and sensors that are out of calibration
  • valves and belts that are not working properly
  • lighting and equipment that is on when it may not need to be
  • poor air-balancing systems
  • systems that heat and cool simultaneously
  • “economizers” that are not operating as designed
  • controls sequences that do not function correctly
  • variable-frequency drives that operate at unnecessarily high speeds or that operate at a constant speed even though the load being served is variable
Photo: Siemens
Modern controls can help older buildings reap energy efficiency rewards.

They can be small operations, inexpensive to correct, but they can have been eating energy and money at painful rates. Retrocommissioning benefits everybody in a building. The owners see reduced operating costs from the better performance of equipment and the energy savings. Occupants are more comfortable, thanks to better temperature control and better indoor air quality. The managers of buildings benefit because they’ll hear fewer complaints from occupants.

Aha, you think. But what does it cost and what does it save? Savings will vary according to the age, size, and location of the building, as well as on the scope of the retrocommissioning process. Studies have shown that the costs of retrocommissioning activities range from $0.13 to $2 per square foot, while payback ranges from 0.2 to 2.1 years. Overall energy savings can approach 15%. The shortest paybacks seem to come from control measures and a correction of operations; maintenance measures have longer paybacks. The design, installation, retrofit, and replacement of equipment typically have the longest paybacks.

From buildings to communities, that’s the path of progress. Reaching net-zero energy at the community level entails maximizing the energy efficiency of each building in the community. That will include many existing buildings. It will also mean meeting the energy demand with renewable energy. (It is probably easier to supply renewable energy at the community level because sites where larger, high-efficiency solar installations can be installed are more readily available.) The strategy for net-zero energy may not be completed in a few weeks or months. It is a strategy, the way to reach a goal. It may take several years, but everything along the way will be leading to that happy conclusion. It becomes a matter of balance within the community, with everybody aiming at the same result and committed to saving changes. Today’s financing plans (like those popular Energy Savings Performance Contracts, or ESPCs) will give private or public customers a good base on which to build the future, with knowledge of where we’re going all the time.

Not All Customers Are Huge
What prompts a customer to ask for an ESCO solution? I cannot do better than quote John White, Director, Energy Solutions at Eaton, a company that needs no introduction in the world of proven, practical equipment in several industrial sectors.

“It’s incumbent on government, public sector, and business organizations alike to streamline operations, maintenance, and energy expenditures to serve their customers and the public with services that use less energy while improving reliability and safety,” explains White. “Essentially, meeting customers’ needs more effectively, efficiently, and profitably is the driving force. Budget considerations, deferred maintenance, and increasing energy expenses are propelling organizations to use ESCOs. The public sector is facing budgets that are not growing, and in some cases have been reduced. At the same time, many organizations have deferred maintenance expenditures, but maintenance programs cannot be deferred indefinitely, and inefficient operations result in increased energy expenses.”

The Pikes Peak Library District in Colorado Springs, CO, has realized significant energy savings from the ESPC into which it entered with Eaton. Today, the library district is achieving electricity savings that exceed the guaranteed levels defined through the ESPC by 42% and natural gas savings that exceed the guaranteed levels by 113%. The project involved auditing the facilities, identifying and compiling savings figures for the potential Energy Conservation Measures (ECM) for each facility, determining the ECM costs, and working with the organization to identify funding mechanisms. Early on in the audit process, Pikes Peak Library District outlined several concerns within their facilities, including a poorly functioning Direct Digital Controls (DDC) system that could not be easily used by staff at the facilities, comfort issues, and failing equipment (such as variable air volume boxes and failed control valves). To address these concerns, Eaton included DDC system upgrades and training, equipment replacement, and air-and-water system testing and balancing for the facilities. The two-phase project included guaranteed savings that have been well exceeded. In Phase 1, there has been $59,618 in utility savings, 25,314 therms of natural gas savings, and 70,207 CCF of water savings. In Phase 2, they have seen $15,602 in utility savings, corresponding to 161,031 kWh and 38.4 kW of electrical savings, plus 1,510 therms of natural gas savings.

“ESCOs are able to use funds that organizations are already paying towards utility bills and use the savings to pay for projects,” further explains White. “Essentially, the ESPC program permits facilities owners or managers to make progress towards important energy efficiency and water conservation requirements through projects funded by means of guaranteed energy and water savings. Energy conservation measures are put in place quickly, and organizations will often realize savings in approximately four months. ESPCs are budget neutral and have no upfront costs.”

Photo: Capstone
Accurate and consistent control of onsite power systems ensures efficiency and reliability.

Profits for the Public
Let’s not underestimate the demands of the public in North America for their elected officials and publicly financed institutions to be more proactive in saving energy and the environment, and getting value for that proverbial taxpayer dollar. It’s not surprising, then that many of the best-known projects have been in the public sector. Some of the towns in the Northeast, like Reading, MA, can trace their beginnings back to the 17th century. Now, it is the future is the main concern. Last year, with energy, fuel, and water costs soaring for the community, Reading needed a way to control a potential runaway inflation. The Town of Reading and Reading Public Schools looked for an ESCO with whom to partner to develop a sustainable project, identify funding, manage construction, and guarantee results.

Reading worked with NORESCO to develop new equipment installation, some system upgrades, and many energy efficiency initiatives at all of its municipal buildings, the fire and police station, center for seniors, public library, and the schools. The improvements have already resulted in significant reductions in energy and water consumption for 15 municipal buildings, including eight schools. One of the changes was the installation of a Web-based control system that allows the town to manage building systems centrally; trends are identified quickly, and adjusted by the touch of a button.

Perhaps the biggest change (and improvement) was the education of the public! “We’ve made it our mission to educate students and faculty about the importance of their environment and energy use,” comments Mary C. DeLai, director of finance and operations for Reading Public Schools. “We wanted to take what we had in place already, and modify behaviors and equipment without sacrificing health or comfort.”

The majority of the project is funded from reductions in energy and water consumption, guaranteed by NORESCO. In a year, the energy efficiency improvements have saved Reading more than $340,000 in verified annual energy consumption costs (and reduced emissions by some 1,300 tons of carbon dioxide, 3.5 toms of sulfur oxides, and 2.0 tons of nitrogen oxides).

The analysis by NORESCO of financial options for Bedford County and Bedford County Public Schools in Virginia showed that the two community entities could achieve better results if they worked in tandem, resulting in improved buying power and jointly procured services. Three schools, beneficiaries in this action, have already been financially able to install new windows; without the proposed cooperation it would have required new school capital for the windows. The overall contract between Bedford County, Bedford County Public Schools, and NORESCO is funded by reductions in energy and water usage over a 15-year term, and it includes improvements to lighting, energy management, HVAC systems, weatherization, and water conservation. It is a guaranteed energy savings agreement of almost $8 million.

A significant part of the guaranteed energy savings agreement between NORESCO and the Commonwealth of Massachusetts Division of Capital Asset Management and Maintenance (DCAM) for work at the University of Massachusetts Dartmouth (UMD) has been a new gas turbine heat and power (CHP) system to replace the university’s old, inefficient heating plant boilers. The CHP system will produce much of the electricity needed by the campus and will achieve that more cost-effectively than traditional power plants that distribute power long distances over transmission lines. The CHP system is located in the central plant on campus (winter heating and summer cooling), and recovers energy from waste heat, a byproduct that is typically discarded by power plants.

“Our guaranteed energy savings agreement allows savings from basic improvements in our buildings, such as lighting, HVAC, and water upgrades, to help fund more systemic and engineering-intensive improvements,” notes Salvatore Filardi, associate vice chancellor for administrative services, UMD. “Students, faculty, and staff will benefit from ore efficient buildings and systems, with no outlays required from taxpayers.”

Onsite power and distributed energy are having a strong impact on the projects welcomed nationwide by the customers of ESCOs. All the weaknesses of past installations and power sources are studied, and remedies are being proposed, remedies that end up costing the customer (who is often the unnamed taxpayer) nothing. This is surely the time to investigate what an energy services company can do for you and your community. The number of forward-thinking customers is growing. The failures from yesterday-most of them well intentioned but now surpassed by superior technology and engineering-are being righted. Many thousands of people have already benefited; it would not be too speculative to say that the whole country can see better energy usage and savings. For added incentive, see how our water use is improved, too, beyond its current, dangerous levels, in most of the ESCO projects.
About the Author

Paul Hull

Paul Hull writes on topics related to technology and construction.

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