FEMP Assistance Meeting Forest Service Needs Energy Savings Performance Contracting ESPC

Definition of ESPC ESPC is a no-upfront-cost contracting method. The contractor incurs the cost of implementing energy conservation measures (ECM) and is paid from the energy, water, wastewater and operations savings resulting from these ECMs.

ESPC Achievements* $1.9 Billion Investment $5.2 Billion Savings Annual energy savings: 16 trillion Btu Equivalent to the energy consumed by 173,000 households or a city of a half million. *2005 data, reported June 2006.

ESPC Achievements Over 400 Federal ESPC projects through FY05 19 different Federal agencies and departments in 46 states DOD has done 60% of the projects and 70% of the investment dollars

Why do an ESPC? Meet energy reduction and environmental goals Affirm agency commitment to these goals Improve facilities: comfort and reliability Provide critical facility data Save taxpayer money Faster process Better quality Good for community relations Fixed price contracts - change orders aren’t needed Avoid cost of delay and inaction Fast construction Avoid deferred maintenance

More on: Why do an ESPC? ESCO has incentive to find all ECMs ESCO has incentive to provide high quality equipment that will perform long after installation ESCO has incentive to do all punch list items timely ESCO has incentive to commission well

Reallocate the Government’s Utility Bill Pay a lower utility bill Pay the contractor Achieve cost savings for the government Basics 2.4 Financing Provided and No Up-Front Capital Costs The features of Super ESPCs that are often most attractive to agencies are the financing and guarantee of cost savings. With no up-front capital outlay by the agency required, the ESCO provides all labor, materials, equipment, and engineering design for improvement projects to reduce energy costs. The contracts require the ESCOs to finance and implement energy-conservation measures (ECMs) for their agency customers and guarantee that these improvements will result in a specified level of annual cost savings. In return, the ESCO receives firm-fixed-price payments from the guaranteed cost savings. The ESCO and the customer agree on annual payments that are less than the cost savings guaranteed for the year, structuring a project with a long enough term to ensure that the savings are sufficient to pay the ESCO for its work.

DOE ESPC Final Rule (1995) Takes precedence over FAR Allows unsolicited proposals Specifies procurement procedures and bases for selection of ESCOs

The Two Types of Super ESPC General (by DOE Region) Technology Specific (National) Photovoltaics Geothermal Biomass and Alternative Methane Fuels Solar Thermal

Why Do You Need M&V? Verifies guaranteed savings: 1. ESPCs are financed using avoided cost as a revenue to service debt. 2. A critical part of this financing tool is the ESCO-provided savings guarantee. 3. M&V assures the government that savings have been fully achieved before full payment is made to ESCO. For a successful DO, both parties must understand and agree on the M&V strategy.

Interagency Agreement FEMP provides technical assistance to assure a successful ESPC. To get started, FEMP provides free services without the need for an IAA. After the IP phase, FEMP services are provided on a cost reimbursable basis. The IAA spells out level and cost of FEMP project facilitation.

Super ESPC Key Points Guaranteed Savings are Mandatory Measurement and Verification is Mandatory Contract term cannot exceed 25 years

ESPC Process Requires Require project facilitator Require financing competition Emphasis on M&V and Pricing Change in contractor selection process

Super ESPC steps ► Meet with DOE ► Pick Contractor (ESCO) ► Initial Proposal (IP) ► Notice of Intent (NOI) ► Detailed Energy Survey (DES) ► Delivery Order ► Final Design ► Installation ► Acceptance ► 1st Year Measurement & Verification (M&V) ► Annual M&V ► Complete contract

BAMF Super ESPC Process Phase 4 BAMF Super ESPC Process Implement DO Phase 3 Phase 2 Negotiate Final DO Exit ramp Phase 1 Detailed Energy Survey NOI & DO RFP Initial Proposal No obligation exit ramp Kickoff Meeting

Biomass and Alternative Methane Fuels Energy Services Companies (ESCOs) BAMF ESCOs Nation-wide Coverage Ameresco Federal Solutions Constellation Energy Services DTE Energy Systems Group Honeywell

ESCOs by DOE Regions (Regional ESPC) MIDWEST Constellation Energy Services Ameresco Solutions Johnson Controls NORESCO, LLC Honeywell Building Solutions (SES) NORTHEAST Honeywell International Johnson Controls NORESCO, LLC Select Energy Services Honeywell Building Solutions (SES) Consolidated Edison Solutions ESCOs by DOE Regions (Regional ESPC) MID-ATLANTIC Constellation Energy Services Honeywell International NORESCO, LLC Select Energy Services WESTERN Honeywell International Johnson Controls NORESCO, LLC Honeywell Building Solutions (SES) CENTRAL Ameresco Solutions Honeywell International Johnson Controls NORESCO, LLC Honeywell Building Solutions (SES) SOUTHEAST Ameresco Solutions Chevron USA Johnson Controls NORESCO, LLC Honeywell International Honeywell Building Solutions (SES) For contact info: www. eere.energy.gov/femp/financing/superespcs_espcescos.html

More ESPC Info Super ESPC Workshops for 2008 Energy 2008 August, 2008 Check with us about Intro and Advanced ESPC training workshops for 2008. Check with us about on-line or on-site training. Energy 2008 August, 2008 Phoenix, Arizona ESPC info on the Web: http://www1.eere.energy.gov/femp/financing/superespcs.html

Forest Service ESPC - History Edd Bills Biomass and Alternative Methane Fuels (BAMF) Super ESPC Project Facilitator

Forest Service ESPC - History 1998 Region 6 Corvallis Forestry Lab, Heating retrofit & Bldg Automation Systems $740,528 Cost - $769,001 Total Savings - 10 Year Term 2005 Region 2 Mystic Ranger District Office, Biomass Heat $211,449 Cost - $397,726 Total Savings - 20 Year Term Project aborted at Final Proposal due to size (economics) 2005 Region 4 Idaho City Ranger District Compound Biomass heat and power Project aborted before Initial Proposal due to size (economics)

Forest Service ESPC - Current Regions 2/4 Region-wide ESPC Biomass Heat, Lighting, Wind, Solar, Water Region 2, Part 1 - $1.9 Million cost - $2.9 Million total savings - 15 year term Region 4 Part 1 - $2.1 Million cost - $3 Million Savings (estimate) All indications point to at least 2 successful projects

Regions 2/4 Region-wide ESPC cont’d Region 2 - Detailed Energy Survey (DES) in-progress Region 4 - Initial proposal 1st wk of Dec 07 ESCO Proposed Model Part 1 – Large enough for project viability small enough for investigation efficiency. One volunteer Forest has comprehensive DES. All Forests in the region investigated for light and water. Measures of interest are considered (e.g. Forest has wind). Part 2 – Ideas coming out of Part 1 applied. All interested Forests have DES. Large scale biomass heat and/or power will be considered.

FS Currently Exploring ESPC Regions 2/4 Region 1 Region 3 Job Corps Research Stations Forest Products Lab

Forest Service ESPC Lessons Learned “Bundle” small projects for success Region(s)-wide effort is an excellent method of bundling (is a national ESPC possible?) Grass roots interest is essential Each Forest must stand alone – Energy savings are retained locally One Contracting Officer over several projects is very beneficial - cuts 6 months off a project. Grants and Agreements people add an approval layer

Forest Service ESPC Challenges Educating Contracting (and Grants/Agreements) Working around fire season Investigating spread-out, and remote locations Economical Measurement and Verification (M&V) on Energy Conservation Measures (ECMs) at small, spread-out, and remote locations

Recommendations to Streamline the ESPC Process at FS Execute a National Interagency Agreement out of FS HQ (avoids duplication from region to region) Assign a “specialist” Contracting Officer for ESPC

Forest Service Biomass Issues Size is everything – Small is challenging Small facilities must have help from lighting, water, etc to make ESPC economical. Currently the threshold seems to be around 30,000 ft2 Midsize biomass heat can pay back quickly Fuel procurement responsibility is an issue

FEMP Support for the Forest Service Biomass and Alternative Methane Fuels (BAMF) Super ESPC Technical and Team Lead

How can we help? Biomass expertise within FEMP DOE – FEMP Training Contract Officer Training Dean Graham – familiar with FS and ESPC

Wood-to-Energy Using wood: Reduces hazardous forest fuels – promotes healthy forests Reduces use of fossil fuel Lowers net carbon to the atmosphere Helps meet EPAct 2005 and Executive Orders Saves energy dollars

FS – DOE Synergy Large Scale Biomass Power Plant(s) for Federal Sector Power. Power Purchase Agreements Energy Parks – Ideal locations for heat and power applications

FS – DOE Opportunities Fuel Available Favorable State for Wheeling High Voltage Grid Nodes

Geothermal Heat Pump ESPC U.S. Department of Energy Contact DOE Southeast Region Geothermal Heat Pump ESPC Photovoltaic ESPC Biomass ESPC Doug Culbreth U.S. Department of Energy Carson.culbreth@ee.doe.gov 919-870-0051