The Energy Efficiency Opportunity

Conservation IS… “More Important Than Ever” zSince 1980 electric consumption has increased 45%. If nothing is done to slow this trend, consumption could grow by 57% in the next 25 years. “ New York Tribune columnist Tom Friedman (2006) zSince 1980 electric consumption has increased 45%. If nothing is done to slow this trend, consumption could grow by 57% in the next 25 years. “Green is the new “Red-White & Blue” and is the most patriotic thing a person can do”. New York Tribune columnist Tom Friedman (2006)

Common problems for public facilities… Limited budgets Maintenance problems or comfort complaints Limited expertise on technologies Too many demands on staff time to launch new projects Yet…you want to replace equipment, modernize your facilities and meet SUSTAINABILITY GOALS….

An Innovative Solution: Energy Performance Contracting …a smart way to get better buildings

Here’s How It Works...… Money otherwise owed to the gas, electric or water utility pays for equipment!

How is the project funded? Annual Budget AFTER Improvements Financed through a tax exempt lease purchase financing Annual cost savings exceed annual payments year financing terms (per legislation) Does not impact debt ceiling Endorsed by most state legislatures & Governors Results guaranteed by the ESCO The money saved from the operating budget is used to make the payments!

zDesign build process gives agency control of outcome zSingle point of responsibility eliminates finger pointing zGuaranteed Results yThe equipment will perform as intended yThe project will perform financially as intended yThe ESCO is obligated contractually by a performance guarantee Performance Contracting projects are significantly lower risk than traditional construction/retrofit projects

Measurement and Verification of Project Performance zEstablished Protocols for Measurement and Verification (M&V) zIPMVP - International Protocol for Measurement and Verification Procedures zM&V Plan may be reviewed by third party engineer zIt is possible to measure actual performance !

Risk and Risk Management Cost Savings Development An educated consumer is the best customer Agree early on project intent Measurement & Verification Procedures Some savings are budget reductions – Some aren’t Third party reviews are available Contracts Be clear on Standards of Service and Comfort Knowledge and understanding is critical

Risk and Risk Management Financial Projections Involve your budgeting people early Know where the repayment funds are coming from Guarantees What are the client’s responsibilities What are the ESCOs responsibilities Statutory Requirements / Solicitation Procedures Don’t reinvent the wheel, talk to others who have been there before

Guaranteed Savings zESCO provides guarantee that savings will meet or exceed a specific amount zGuarantees meet federal and state standards, according to the jurisdiction zIf you don’t realize the guaranteed savings the ESCO must pay you the difference zMotivates BEST life-cycle cost rather than lowest cost bid

The “ ESCO ” is fully accountable for project performance, costs and savings! Bid/SpecPerformance Contracting FinancialCapital/BondCurrent Budget RelationshipOnly during installation & warranty Continuous throughout the life of the contract (15 years) Upfront FeesYesNo Performance Guarantee NoOperational and financial performance is Guaranteed Change ordersYesNo

ESCO Responsibilities zIdentify and evaluate opportunities (energy audit) zDesign systems (engineering), specify & purchase zManage construction zArrange for financing zProvide long-term energy management services zGuarantee performance!

The Kansas Facility Conservation Improvement Program (FCIP) zThe FCIP is a program which enables public agencies easy access to a method of construction known as energy savings performance contracting zKSA 75-37,125 Authorizes the FCIP to provide support and resources zEssentially the FCIP streamlines the process of developing a partnership between a public agency and an Energy Service Company (ESCO)

Steps To Success xPreliminary Audit xInvestment Grade Audit xEnergy Performance Contract

Facilities Conservation Improvement Program Russ Rudy Buildings Team Manager Kansas Energy Office office cell