The Essential Energy Savings Performance Contracting Program Design South Carolina ESC November 29, 2012 Presented by: Jim Ploger

Topic Objectives Share with you, what we share with others –Fundamentals of ESPC Best Practices –Tools and Resources –Key Learning –Challenges Ahead

Definitions Energy Savings Performance Contracting (ESPC) “The use of GUARANTEED savings from the maintenance and operations budgets (Utilities) as capital to make needed upgrades and modernizations to your building environmental systems, financed over a specified period of time.” -- US Department of Energy

A Rose by any Other Name... Financial Mechanism Alternative Procurement Construction Delivery Method An Industry

Why Create an ESPC Program Demonstrate Leadership Risk Mitigation Goal Attainment – –Energy Efficiency –Environmental Stewardship –Economic Development (jobs with no money) –National Security –Reduce Deferred Maintenance (just fix my stuff)

Step 1 Identify the Champions –Governor Executive Orders Administrative leadership –Policymakers –Commissioners (i.e., PUC) –Agency Director(s) –Agency Head(s) –Stakeholders

Step 2 Construct a plan with the state champion –Meetings –Agendas –Understanding Goals

Step 3 Stakeholders Meeting –legal, finance, procurement, landlord agency, administering agency –an ESPC Primer

Why Use Energy Performance Contracting? Speed of the process from beginning to post construction Single Point Accountability before, during, and after the construction period. Quality Assurance – Performance and savings are guaranteed

Benefits Contractually guaranteed measured savings Integrated project analysis, design, and construction Long term monitoring of savings and performance Services and materials based upon quality and life cycle value, rather than on lowest first cost

More Benefits Infrastructure modernization – new more energy efficient systems and devices Environmental stewardship – reduced Green House Gas emissions Economic development – real jobs now Long term reduction in operating costs Improved working and learning environments National Security

More Benefits Elimination of Deferred Maintenance lists Distribution Grid relief Uptake of local utility incentive programs Avoidance of generation requirements Avoids emergency replacement of failing or near end of life equipment and systems Improves attitudes and productivity of working and learning environment

Step 4 Instruments

Some Key Concepts Multistage procurement –RFQ for prequalified providers Includes pricing transparency Financial Stability Proof of Expertise and Experience Opportunity for Differentiation –RFP for project selection Includes pricing metrics Opportunity for differentiation particular to the project –Oral Interviews

More Key Concepts Pricing is Transparent, but not open book Percentages are fixed in 2 nd stage selection and used to establish a fixed scope, fixed price, projected savings project with a guarantee of savings performance

More Key Concepts Investment Grade Audits –Complete scope of work –Complete savings projection –Complete project pricing –Measurement and Verification methodologies to prove savings –Complete list of assumptions –Standards of Comfort –Financial Proformas (so far)

Dispatching Review The adaptation of the template instruments is paramount Legal – meeting state statutes Procurement – meeting state statutes

Dispatching Review Finance – how to track the capitalization, the savings achieved, the new bills for consumption and shortfall remuneration (if required) Debt or Not Debt – that is the question!

Dispatching Review More Finance –How to Capitalize

Guide for Review

The Process Internal Guidance Meeting Financial RFP Issue RFP Realize Savings ESCO implements ECMs Select ESCO ESCO audit contract (IGA) ESCO Implementation Contract Sign financing contract ESPC ProcessFinance Process

Technical Assistance State program administrator 3 rd Party Engineering Review Owner’s Agent

Paper Flow Who does what, signs what, by when

Resource Sharing Investment Grade Audits Self-Funding ESPC Programs Standards of Comfort Fundamentals of ESPC Opportunity Estimators Energy Star’s Cash Flow Calculator Environmental Impact Calculator

More Resources Frequently Asked Questions Oral Interview Questions Concepts and Considerations Benefits

Data Tracking

Outreach and Education ESC Chapter Organization meeting Public and Private message from individual energy professionals

Outreach and Education Workshops, webinars, presentations Program Launch Media Case Studies

ESC’s Race to the Top shows success A massive opportunity remains Incorporating Performance Contracting into ENERGY STAR And the clock is ticking

Anticipated Benefits Infrastructure Modernized Environmental Stewardship National Security Economic Development This is the new way of doing business that builds jobs and drives the local economies at extraordinary pace and you get a guarantee of performance to boot.

Thank You! If you can’t figure out how to get started or how to move fast enough with ESPC, contact Energy Services Coalition