With heating, ventilating and air conditioning (HVAC) systems responsible for between 30% to 50% percent of a building’s energy consumption, facility managers must decide whether to extend the life of existing equipment or upgrade aging infrastructure with energy-efficient HVAC systems.
Low-cost financing for energy upgrades is available through Energy Savings Performance Contracts (ESPCs), which fund capital improvement projects. As the ESPC pioneer, the US government has saved taxpayers over $5 billion in energy costs and the equivalent of 14.4 trillion Btu annually.
What Are ESPCs?
ESPCs are contracts that facility managers arrange with service providers to plan the financing, development, and implementation of projects that reduce energy consumption through equipment upgrades and installation of renewable energy
technologies.
These contracts allow facility managers and building operators to make building improvements with little or no front-end costs because the service provider, sometimes called an Energy Service Company (ESCO), guarantees energy cost reductions through capital improvements. Under the performance-based contract an energy services company assumes performance risk with its compensation directly tied to savings and results. Choosing the right ESCO partner is one key to a successful project.
Energy cost savings provide the funding to pay the ESCO, which receives payment over a specified period. In fact, federal government payment terms can be as long as 25 years.
Federal Buildings Lead The Way
Performance contracting programs were first introduced in the 1986 energy legislation, which hoped to stimulate federal and business partnerships on energy efficiency projects.
Since then, performance contracting has helped federal facility managers from over 20 federal agencies control energy consumption, infrastructure, and comfort issues by creating savings to fund building improvements. Performance contracting has evolved since its inception in 1986; the Energy Policy Act of 2005 again extended the program for federal facilities.
Facility managers at the Shades of Green Armed Forces Recreational Center in Orlando, FL, used an energy savings performance contract to save $400,000 annually in energy costs, while planning and preparing for facility growth. Brian Japak, contracting officer for Shades of Green, had two objectives in mind for the project: meeting energy efficiency mandates and keeping guests comfortable. “Chilled water is our most expensive utility,” said Japak. ”With the new chilled water plant, we feel more comfortable in our ability to control costs.”
The ESPC-funded construction of a new energy center, improved lighting, an indoor air quality evaluation, and a water conservation survey.
How ESPCs Work
Each ESPC is specifically designed to meet the energy savings goals and contractual needs of the facility. It may include one or many different energy- and cost-saving improvement options, among them: energy-efficient lighting, renewable energy, HVAC systems, and even water conservation projects.
The process starts with an energy audit, performed by the ESCO, which identifies the most efficient facility or campuswide projects. After an agreement is reached, the final contract describes the ESCO-guaranteed annual energy savings and assures that these savings will be acceptable to pay for the ESCO’s work. After the ESCO is fully reimbursed, the facility receives the ongoing cost savings benefits.
ESPCs apply to a wide range of projects on both the supply and demand sides and may include building renovation, new construction and system upgrades.
Among the supply-side options are:
- Distributed generation
- Heat recovery systems
- Steam system upgrades
- System performance modifications to take advantage of favorable utility rates
Demand-side options include:
- Energy and water conservation applications
- Facility control upgrades
- HVAC equipment
- Building envelope modifications
- Chiller plant improvements
- Lighting solutions
- Geothermal heat pump installations and expansions
- Photovoltaic energy installations
Getting the Most Out Of Your ESPC
There are several unique aspects to ESPC projects, beginning with the identification of the improvement project, the financing structure and then the long-term ESCO relationship. Along with a customized plan, each contract should include the following essentials:
- A clearly stated performance goal
- A system to evaluate performance during the design process
- A procedure for measuring and verifying performance after the project is complete
- Compensation that is defined and dependent upon meeting the performance goal(s)
- Measurement and verification (M&V) of building performance—a particularly vital element of ESPCs, especially for new buildings and large expansions
To ensure the long-term success of a project, it is essential to develop an effective and accepted M&V approach before a contract is implemented.
Super ESPCs
Federal facility managers who have experienced the complexity of government ESPC awards appreciate the Department of Energy’s (DOE) introduction of Super ESPCs, which were created to streamline the federal approval process.
Super ESPCs are ESCO contracts that have been made accessible to multiple agencies, all of which can use this single “umbrella” contract in order to bypass the normal ESCO contract procedures.
By using the expedited processes in Super ESPCs, federal agency energy managers implement energy savings projects faster, taking better advantage of environmental cost and comfort improvements.
Beaufort Marine Corps Air Station, located in Beaufort, SC, uses Super ESPCs to meet energy efficiency targets and make critical infrastructure improvements. With nearly 4,000 active duty service members and more than 700 civilian workers, improving the quality of life for employees and residents is a top priority.
Geothermal water source heat pumps and energy efficient EarthWise CenTraVac chillers will be installed at Beaufort Marine Corps Air Station to maintain comfortable building temperatures quietly and efficiently.
One-hundred-kW microturbines will generate both electricity and hot water to meet base heating requirements and offset peak electricity demand levels.
Meeting federal energy efficiency targets is a critical way for the government to reduce operating costs and improve environmental responsibility.
Environmental Impact
Energy use is the single largest source of CO2, a greenhouse gas linked to global warming. Studies have found that 95% of indirect global warming is caused by CO2 emissions from power plants. According to the Pew Center for Global Climate Change, the best opportunities to reduce greenhouse gas emissions are from improvements in end-use efficiencies, such as lighting and air conditioning.
Facility managers can reduce the environmental impact of their facilities by managing and lowering energy use. Many building managers have found that ESPCs are an effective way to reduce energy consumption, increase efficiencies and use renewable fuel sources.
Conclusion
Energy service companies, like Trane, help facility managers implement performance contracts to achieve high indoor environmental quality and maintain a comfortable working environment.
Given ESPC’s successes in the federal sector, the practice is now being adopted by the health care and education sectors as pressure to save energy increases.
ROBERT L. JOHNSON leads sales, marketing and engineering teams in public sector markets.
DE - July/August 2006
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