1. Energy Savings Performance Contracts & Energy Service Companies
Federal Energy Management Program
Energy Savings Performance Contracts & Energy Service Companies
Doug Dahle, PE
office:
cell:

2. Overview Energy Savings Performance Contracting Principles
Energy Savings Performance Contracts & Energy Service Companies
Overview
Energy Savings Performance Contracting Principles
Understanding the Money Trail
Energy Service Companies
Customer Services
Risk Management
Tools for ESPC Customers
ESPCs for Federal Sector – They work!!!
Consider Master ESPC Contracts

3. ESPC Principles Long Term Partnerships (15-25 years)
Persistent Performance is Success Factor
Customer Champions & Commitment
“Reallocating Excess Energy Expense into Infrastructure”*
No Capital Cost – Contractor Revenues from $ Savings*
Determine Energy and $ Savings*
Risks & Responsibility – Key focus for both parties
Measurement & Verification – Verify Savings
* Figures in following slides
* Figures in followin slides

4. ESPC Principles
“Reallocating Excess Energy Expense into Infrastructure”
Pay a lower utility bill
Pay the contractor
Achieve cost savings for the government

5. Agency Energy and O&M Bills Customer Funds for Energy and Related O&M
Where the Money Comes From and Where It Goes
Agency Energy and O&M Bills
Savings repay ESCO
Cost Savings
ESCO pays for project
Improvements create savings
Customer Funds for Energy and Related O&M

6. Percent of Agency Payments Over Contract Term
The Project Cost Stack
110%
100%
28% Performance Period Services
90%
80%
70%
28% Interest
31% Finance-related costs
Percent of Agency Payments Over Contract Term
60%
4% Financing Procurement Price (FPP)
50%
69% Debt Service
40%
30%
42% Amount Financed
(Principal)
41% Project investment
20%
10%
3% Up-front payments 0%
*Data from Super ESPC projects awarded from 2005 to May Figures may not add to exactly 100% due to rounding.

7. Energy Service Companies
A long term energy management partner
Customer focused Service & Communications
Listen to understand customer needs
Offer solutions to best address customer needs
Propose and Document potential ESPC project
Good faith negotiations to meet mutual needs
Motivated – Financial return from long term revenues

8. Energy Service Companies
Expertise in Energy Efficiency & Supply Solutions
ESCO delivers in ESPC
Audits and Baseline Energy Status & Data
Design & Installation of Energy Measures
Arrange Financing
Commissioning & Post-Installation measurement
Customer training on installed measures
Operations & Maintenance
Responsibility for O&M negotiable
Continuous verification of savings

9. Customer Services Companies
1) Facility Requirements
Commissioning of Installed Projects
2) Energy/water use reduction & Related Cost Savings
Measurement & Verification (M&V) of Savings

10. Facility Requirements
Customer sets standards for building operations
Lighting Levels, Indoor Comfort (HVAC)
Energy System Controls
Shut down HVAC during unoccupied hours
Commissioning (Cx)
Customer/ESCO develop design intent
ESCO prepares Cx Plan after project design
Tests to ensure Facility Requirements are met
Cx equipment tests & Report

11. Energy/Water Savings M&V Goal – Verify Annual Energy & $ Savings
M&V Plan (set at contract award)
Develop Pre Installation Energy Baseline
Measure Post Installation Performance
How Energy Savings calculated:
Pre-Post Installation Energy Use
$ Savings = Energy Savings x Energy Rates
Post Installation M&V Report
Demonstrates potential guaranteed saving/year
Periodic M&V Report (typically annual)
Verifies annual guaranteed saving achieved

12. Determine Energy & $ Savings Energy Efficiency
Post-retrofit Energy Use Baseline Energy Use
Rate, kW
Increased Performance
Reduced Operating Hours
Hours per year 12

13. Determine Energy & $ Savings Renewables
Reduced Utility Purchase Baseline Energy Requirements
Renewable Energy Supply
Cost
$/kWh
Hours per year 13

14. Risk Management Goal - Persistent Savings over long term
Example: Building Owner assumes O & M
Risk
Resources for building owner O & M to deliver savings
If performance degrades, ESCO expects full payment
Benefit
Building owner job opportunity to manage project
Increased infrastructure investment
Risk & Responsibility Matrix - assess other risks
See 2.3 (MS Word doc)
Financial, Operational, Performance issues

15. Tools for ESPCs M&V Document Templates M&V Plan
Post Installation M&V Report
Periodic M&V Report
Renewable Energy RE Screening
Pre Project analysis of cost effective RE opportunities
Solar
Wind
Biomass
Combined Heat & Power
Geothermal Heat Pumps

16. Master ESPC Contract Includes common ESPC terms and conditions
Modify Scope of Work for specific sites
16 ESCOs awarded Master Contract
Designed for public facilities
Ameresco; Chevron Energy Solutions; Clark Energy Group
Consolidated Energy Solutions; Constellation Energy Projects &;
Services Group; FPL Energy Services; Honeywell Intl.;
Johnson Controls Government Systems; Lockheed Martin Services;
McKinstry Essention; NORESCO; Pepco Energy Services;
Schneider Electric Systems; Siemens Government Systems;
The Benham Companies; Trane

17. Argentina ESPCs ESCO Project Investment Thresholds
Transaction Costs vs. Rate of Return
Common target ≥ $1 M investment
Economy of scale
Consider:
Bundling energy efficiency & renewable projects

18. Private Sector ESPCs ESCO marketing of ESPC services
Conducts at risk, Facility Survey to identify energy projects
IF not economically viable, no cost to customer
IF economically viable , proposes Energy Savings Project
IF customer rejects, customer reimburses ESCO costs
IF customer accepts, ESCO effort part of project cost
ESPC project developed and negotiated
Customer acquires infrastructure improvements and
facility energy efficiency at no capital cost

19. DOE ESPC Contacts & Information
Bill Raup DOE Federal Energy Management Program ESPC Program Manager (202) Doug Dahle National Renewable Energy Laboratory Expertise: Program policy and project facilitation, Solar/Wind DOE ESPC Web Site: