Energy Performance Contracting (EPC)

Vic Government EPCs since 2009 29 projects covering 745 buildings saving 37% (average GHG saving) and $418 million (net over life) savings are guaranteed

Federation Square EPC $6.85 million 55% greenhouse gas saving

Government office buildings EPC $11.8 million 30% greenhouse gas savings

Melbourne Sports and Aquatic Centre EPC $4.1 million 31% savings guaranteed

South West TAFE EPC $1.8m 32% greenhouse gas saving 9 higher-ed projects makes them the most subscribed segment: SW TAFE Kangan TAFE RMIT (dual sector) Box Hill TAFE Sunraysia TAFE Holmesglen TAFE Latrobe Uni Ballarat Uni (dual sector) NMIT Monash Chisholm Vic Uni (dual sector)

Parks Victoria EPC (46 parks) A good example of a distributed project involving a large number of small sites $2.8 million 28% energy saving

RMIT EPC $99 million 36% greenhouse gas saving * Except for Vietnam

Melbourne Cricket Ground EPC Scope being finalised

Museums Victoria EPC Scope being finalised

City of Yarra EPC $3.4 million 45% greenhouse gas saving 11.6 year payback 18 buildings covering 65% of total building energy use $3.4 million 45% greenhouse gas saving

Frequently asked questions Hard to see bills change over the years.

What is an EPC?

An integrated process with a savings guarantee Request for Proposal Detailed Facility Study Install solutions M&V EPC DFSA 1 contractor audits, specifies scope, contracts works, and measures and verifies Because there’s only 1 accountable party, a savings guarantee is possible. If there were different designers to contractors, it would be difficult to find any party willing to take this risk.

Why EPC? Why not just do it ourselves?

Guarantee reduces risk Low risk supports financing More savings Guarantee reduces risk Low risk supports financing Doesn’t require customer to be an expert Audits conducted under a competitive tender process have delivered more savings than paying someone to do an audit. Savings guarantee places risk on the provider, Due to the guarantee, the project lends itself more to financing, as there is a guaranteed return that can be used to service a loan. The customer doesn’t need to specify the solutions.

How can anyone guarantee the savings? Hard to see bills change over the years.

Careful application of the M&V protocol: Data logging systems/equipment New meters on relevant circuits Annual site bills Modelling Hard to see bills change over the years.

EPC measurement & verification Measurement and verification of savings. This text box not really necessary, but has been added to deliberately make the page look overly busy… for visual effect and nothing else really. Request for Proposal Detailed Facility Study Install solutions M&V As per blue box in upper right corner Initial M&V outline (for pricing) DFSA EPC Ongoing M&V reporting: Annual M&V reports One off M&V reports (e.g. option A solutions) Annual commissioning requirements Post-install measurements Reporting Making good Financial reimbursement Some pre-install measurements Quick overview of how M&V works. IPMVP Options: A: Partly measured retrofit isolation B: Fully measured retrofit isolation C: Whole of site D: Simulated Calibration Methodology agreed (option, sample, timing & duration) Baseline agreed Some measurements taken (e.g. option A ‘before’) Comprehensive MVP developed

Do we have to install everything they recommend?

No

Do we have to share the savings?

No

Does the ESCO take over our electricity bills?

No

What about maintenance contracts?

No

Do we lose flexibility in use of our buildings?

No

Are we big enough?

If you spend over $200K per year on utilities

How do we pay for it?

Cash Debt finance Finance Lease

Doesn’t it cost a lot to measure and verify? Hard to see bills change over the years.

It will cost more if you don’t. Hard to see bills change over the years.

Did you get what you paid for?

How much will an EPC cost? .. and save?

Hypothetical Local Government EPC Project scope Civic centres Aquatic centres Libraries Depots Other facilities Annual utility expenditure = $800,000 37% savings = $288,000 Capital investment (year 1 debt impact) = Annual operating statement impact = Avoided capital (asset replacement) = $2 million $153,600 $604,000

What will my chief finance officer think?

They should support this. Hard to see bills change over the years.

Accounting treatment of energy efficiency investments For projects funded with cash OR debt where the payback period is less than the investment life. zero, then +ve BALANCE SHEET Increased liabilities or less cash Improved asset value of buildings Operating statement Depreciation expense (~1/15th of investment) Annual cost savings (~1/7th of investment) Savings more than double the expense Net Debt (liabilities – cash) Increased net debt by value of investment in year 1 Impact reduces to zero over term of the payback period Positive impact thereafter +ve - ve for payback term, then +ve

How do I get started? Hard to see bills change over the years.

Call me Sam Burke 0408 554 413 Hard to see bills change over the years.

Further information www.procurement.vic.gov.au, Select ‘EPC’ under ‘State Purchase Contracts’