Texas Energy Services Coalition


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  • Texas Energy Services Coalition

    1. 1. <ul><li>Overview of the Texas ESC Chapter </li></ul><ul><li>Theresa Sifuentes – Public Sector Co-chair </li></ul><ul><ul><li>Program Manager-LoanSTAR, SECO </li></ul></ul><ul><li>Kevin Vaughn – Private Sector Co-chair </li></ul><ul><ul><li>Market Manager- Government Energy Solutions, TAC Americas </li></ul></ul>Texas Energy Services Coalition
    2. 2. <ul><li>Introduction to </li></ul><ul><li>Performance Contracting </li></ul><ul><li>Presenters: </li></ul><ul><li>Carl Hurst, P.E. - State Government Solutions Director, Western U.S., Johnson Controls, Inc. </li></ul><ul><li>Scott Naab, Trane Comprehensive Solutions </li></ul>Texas Energy Services Coalition
    3. 3. <ul><li>Texas PC Projects </li></ul><ul><li>Energy Conservation Legislation </li></ul><ul><li>Performance Contracting 101 </li></ul>Topics of Discussion
    4. 4. <ul><li>High interest from the legislature </li></ul><ul><li>Plenty of available funding </li></ul><ul><li>Good for the state’s budget </li></ul><ul><li>Bond Review Board approves these projects </li></ul><ul><li>You aren’t the first </li></ul><ul><li>Long history of successful projects </li></ul>Before we begin…
    5. 5. Prior Projects - State
    6. 6. Prior Projects – Higher Ed
    7. 7. Prior Projects- Local Gov’t
    8. 8. Current State Agency PC Projects <ul><li>Texas Department of Criminal Justice </li></ul><ul><li>Texas Youth Commission </li></ul>
    9. 9. Existing Statute <ul><li>State Agencies 2166.406 Texas Government Code </li></ul><ul><li>City/County 302 Local Government Code </li></ul><ul><li>State Higher Ed. 51.927 Texas Education Code </li></ul><ul><li>School Districts 44.901 Texas Education Code </li></ul>
    10. 10. <ul><li>Senate Bill 1811 – 1997 </li></ul><ul><ul><li>Allows Higher Education to utilize TPFA </li></ul></ul><ul><li>House Bill 3530 - 1997 </li></ul><ul><ul><li>Allows State Agencies to utilize performance contracting </li></ul></ul><ul><li>House Bill 2492 - 1999 </li></ul><ul><ul><li>Extends term to 15 years </li></ul></ul><ul><li>House Bill 3286 – 2001 </li></ul><ul><ul><li>Allows water conservation </li></ul></ul>History of Enabling Legislation
    11. 11. <ul><li>House Bill 2277 - 2001 </li></ul><ul><ul><li>Clarifies RFQ procurement options </li></ul></ul><ul><ul><li>Clarifies bonding issues </li></ul></ul><ul><ul><li>Allows TPFA financing for State Agencies </li></ul></ul><ul><ul><li>Third Party Engineer review </li></ul></ul><ul><li>House Bill 2278 – 2001 </li></ul><ul><ul><li>Establishes SECO in Comptrollers Office </li></ul></ul><ul><ul><li>Requires State Agencies to implement energy conservation measures meeting the requirements of Section 2166.406 Texas Government Code </li></ul></ul>History of Enabling Legislation
    12. 12. <ul><li>2166.406 Texas Gov Code </li></ul><ul><ul><li>(f)- term of ESPC contract limited to 15 years </li></ul></ul><ul><ul><li>(g)- ESPC projects may be financed with TPFA’s Master Lease Purchase Program </li></ul></ul><ul><ul><li>(h)- contractor must guarantee savings </li></ul></ul><ul><ul><li>(I)- agency shall procure ESPC using professional services by 2254.004 (RFQ) and independent 3 rd party engineer shall review cost savings </li></ul></ul><ul><ul><li>(j)- legislature shall base agency’s appropriation for energy and water on the sum of: </li></ul></ul><ul><ul><ul><li>the agency’s estimated annual energy and water costs; plus </li></ul></ul></ul><ul><ul><ul><li>the annual energy and water cost savings resulting from the ESPC (thus finding the annual project payment) </li></ul></ul></ul>2166.406 Texas Gov. Code
    13. 13. <ul><li>2113.301 Texas Gov Code (appropriations) </li></ul><ul><ul><li>(b)- Before a state agency may use appropriated money to make a capital expenditure for a state facility purpose, the state agency must determine whether the expenditure could be financed with money generated by a utility cost savings contract </li></ul></ul><ul><ul><li>(c) If it is practicable to do so, a state agency that is using appropriated money must finance a capital expenditure for a state facility purpose with money generated by a utility cost savings contract. </li></ul></ul><ul><ul><li>(d) If it is not practicable for a state agency that is using appropriated money to finance a capital expenditure for a state facility purpose with money generated by a utility cost savings contract, the state agency must provide justification to the comptroller for the capital expenditure. </li></ul></ul>2113.301 Texas Gov. Code
    14. 14. <ul><li>RP 49 Executive Order </li></ul><ul><li>SB 5 Efficiency Mandates for buildings </li></ul><ul><li>Utility Standard Offer Programs </li></ul><ul><li>Other Utility Incentives </li></ul><ul><li>State Council on Competitive Gov’t (CCG) </li></ul>Other Initiatives
    15. 15. <ul><li>Scott Naab </li></ul><ul><li>Trane Comprehensive Solutions </li></ul>Performance Contracting Overview
    16. 16. <ul><li>Limited budgets </li></ul><ul><li>Maintenance problems </li></ul><ul><li>or comfort complaints </li></ul><ul><li>Limited expertise on technologies </li></ul><ul><li>Too many demands on staff time </li></ul><ul><li>to launch new projects </li></ul><ul><li>Yet…you want to replace equipment </li></ul><ul><li>and modernize your facilities </li></ul>What problems do you face at your facility?
    17. 17. <ul><li>An Innovative Solution: </li></ul><ul><li>Energy </li></ul><ul><li>Performance </li></ul><ul><li>Contracting </li></ul><ul><li>…a smart way to get better buildings </li></ul>If you face these problems… you are not alone
    18. 18. Energy Performance Contracting Projects pay for themselves! Savings stack up over time…
    19. 19. <ul><li>Money otherwise owed to the gas or electric utility pays for equipment! </li></ul>Here’s How It Works...… Annual Budget Annual Budget
    20. 20. <ul><li>Financed through TPFA master lease program </li></ul><ul><li>Annual cost savings exceed annual payments </li></ul><ul><li>15-year financing term (per legislation) </li></ul><ul><li>Does not impact debt ceiling </li></ul><ul><li>Endorsed by State Legislature & Governor </li></ul><ul><li>Results guaranteed by the ESCO </li></ul>How is the project funded? Multi-Year Lease-Purchase Agreement Annual Budget AFTER Improvements The money saved from the operating budget is used to make the payments!
    21. 21. <ul><li>Tax-Free Municipal Lease Purchase </li></ul><ul><li>SECO LoanSTAR funds </li></ul><ul><li>Proceeds of bonds </li></ul><ul><li>Contract with the provider of the Energy Conservation Measures </li></ul><ul><li>Utility Rebates </li></ul><ul><li>Grants </li></ul>Other Financing Options Annual Budget AFTER Improvements The money saved from the operating budget is used to make the payments!
    22. 22. <ul><li>Design build process gives agency control of outcome </li></ul><ul><li>Single point of responsibility eliminates finger pointing </li></ul><ul><li>Guaranteed Results </li></ul><ul><ul><li>The equipment will perform as intended </li></ul></ul><ul><ul><li>The project will perform financially as intended </li></ul></ul><ul><ul><li>The ESCO is obligated contractually by a guarantee </li></ul></ul>What about risk? Performance Contracting projects are significantly lower risk than traditional projects Annual Budget AFTER Improvements
    23. 23. Performance Contracting is a Better Method The “ESCO” is fully accountable for project performance, costs and savings! No Yes Change orders Operational and financial performance is Guaranteed No Performance Guarantee No Yes Upfront Fees Continuous throughout the life of the contract (15 years) Only during installation &warranty Relationship Current Budget Capital/Bond Financial Performance Contracting Bid/Spec
    24. 24. <ul><li>Established Protocols for Measurement and Verification (M&V) </li></ul><ul><li>IPMVP - International Protocol for Measurement and Verification Procedures </li></ul><ul><li>M&V Plan is required to be reviewed by third party engineer </li></ul><ul><li>It is possible to measure actual performance ! </li></ul>Measurement and Verification of Project Performance
    25. 25. Some Example Measures <ul><li>Lighting Improvements </li></ul><ul><ul><li>Projects: </li></ul></ul><ul><ul><ul><li>Replace fluorescent tubes & ballast </li></ul></ul></ul><ul><ul><ul><li>Replace fixtures </li></ul></ul></ul><ul><ul><li>Benefits: </li></ul></ul><ul><ul><ul><li>Easily pays for itself within its lifetime </li></ul></ul></ul><ul><ul><ul><li>Cuts energy cost of lighting system by 25% or more </li></ul></ul></ul><ul><ul><ul><li>Improved lighting quality </li></ul></ul></ul><ul><ul><ul><li>Better indoor environment </li></ul></ul></ul><ul><ul><ul><li>Cooler rooms on hot days (less heat from lighting system) </li></ul></ul></ul><ul><ul><ul><li>Leveraging opportunity – buy other equipment with savings from lighting </li></ul></ul></ul>
    26. 26. Some Example Measures (cont.) <ul><li>Heating System Improvements </li></ul><ul><ul><li>Projects: </li></ul></ul><ul><ul><ul><li>Replace old boilers </li></ul></ul></ul><ul><ul><ul><li>Upgrade with better controls </li></ul></ul></ul><ul><ul><li>Benefits: </li></ul></ul><ul><ul><ul><li>Improved comfort </li></ul></ul></ul><ul><ul><ul><li>Better internal environment </li></ul></ul></ul><ul><ul><ul><li>Solve maintenance problems </li></ul></ul></ul><ul><ul><ul><li>Eliminate the need to buy boiler replacement from capital funds </li></ul></ul></ul>
    27. 27. Some Example Measures (cont.) <ul><li>Water Utilization Improvements </li></ul><ul><ul><li>Projects: </li></ul></ul><ul><ul><ul><li>Replace faucets and fixtures </li></ul></ul></ul><ul><ul><ul><li>Improve irrigation systems and controls </li></ul></ul></ul><ul><ul><li>Benefits: </li></ul></ul><ul><ul><ul><li>Pays for itself through water savings </li></ul></ul></ul><ul><ul><ul><li>Improved application </li></ul></ul></ul><ul><ul><ul><li>Solve maintenance problems </li></ul></ul></ul><ul><ul><ul><li>Modernize & optimize systems </li></ul></ul></ul>
    28. 28. <ul><li>Biomass </li></ul><ul><li>Renewables </li></ul><ul><ul><li>Solar </li></ul></ul><ul><ul><li>Geo Exchange </li></ul></ul><ul><ul><li>Wind </li></ul></ul><ul><li>LEED certification </li></ul><ul><li>Utility rebates </li></ul><ul><li>Grant money </li></ul>Other applications/ opportunities
    29. 29. A Key Differentiator of the process….. <ul><li>Your Partnership with an </li></ul><ul><li>Energy Service </li></ul><ul><li>Company (ESCO) </li></ul>
    30. 30. <ul><li>Identify and evaluate opportunities (energy audit) </li></ul><ul><li>Design systems (engineering), specify & purchase </li></ul><ul><li>Manage construction </li></ul><ul><li>Arrange for financing </li></ul><ul><li>Provide long-term energy management services </li></ul><ul><li>Guarantee performance! </li></ul>Your ESCO will put the pieces together
    31. 31. 5 Steps to Success <ul><li>Decide if performance contracting is right for you </li></ul><ul><li>(Assess your needs & potential benefits) </li></ul><ul><li>Issue an RFQ </li></ul><ul><li>(Select Energy Services Company (ESCO) </li></ul><ul><li>ESCO identifies energy-saving opportunities </li></ul><ul><li>(Execute an audit contract) </li></ul><ul><li>Savings verified by an Engineer </li></ul><ul><li>(Approved by State Energy Conservation Office) </li></ul><ul><li>ESCO implements projects </li></ul><ul><li>(Develop and execute an Energy Performance Contract) </li></ul>
    32. 32. <ul><li>Better Buildings! Improved Comfort! Maintenance Problems Solved! </li></ul><ul><li>Pay for projects with no up-front funds (your utility budget pays for the projects) </li></ul><ul><li>One-stop shopping (single contract for multiple projects) </li></ul>Many Advantages of Performance Contracting
    33. 33. <ul><li>ESCO Expertise from onset to completion </li></ul><ul><ul><li>Energy efficiency </li></ul></ul><ul><ul><li>Operation and maintenance of buildings </li></ul></ul><ul><ul><li>Project cost assessment </li></ul></ul><ul><ul><li>Project financing </li></ul></ul><ul><ul><li>Construction management </li></ul></ul><ul><li>Comprehensive, whole-building approach </li></ul><ul><li>Training for your staff </li></ul><ul><li>Ongoing project monitoring and trouble-shooting to ensure sustained savings </li></ul>Many Advantages of Performance Contracting (cont.)
    34. 34. <ul><li>Contact SECO </li></ul><ul><li>http://www.seco.cpa.state.tx.us/sa_pc.htm </li></ul><ul><li>Theresa Sifuentes, </li></ul><ul><li>State Energy Conservation Office </li></ul><ul><li>Program Manager </li></ul><ul><li>(512) 463-1896 </li></ul>How to get Started
    35. 35. Questions