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colorado.gov/energyFinancing Energy Efficiency Retrofits with Performance Contracting• Presented by: Conor Merrigan, LEED AP BD+C
Presentation Overview • Governor’s Energy Office Overview • Energy Performance Contracting Introduction • National and State Perspectives • How GEO Program Works • Opportunities and Challenges • New Markets • Q&A
The Governor’s Energy Office (GEO) MissionThe Governor’s Energy Office promotes sustainableeconomic development in Colorado through advancingthe state’s energy markets and industry to create jobs,increase energy security, lower long term consumercosts, and protect our environment.
Energy Markets Represent a Significant Opportunity forColorado MISSION Tens of thousands of new jobs in the industry across Jobs The Governor’s fuel types (emerging & legacy) & supply chain (R&D, Energy Office promotes sustainable economic development in manufacturing, O&M) Colorado through advancing the state’s energy market and industry to create jobs, increase energy security, lower long term consumer costs, and protectfuel types & geographic location & reducing Security Diversifying our environment. demand through resource efficiency reduces volatility & increases reliability Cost Increased efficiency and maturation of renewable energy and alternative fuels have resulted in new low cost sources of energyEnvironment Fuel consumption represents a major source of emissions of local pollutants and greenhouse gases
Market Opportunities and Barriers in the Colorado EnergySector Est. Colorado Market Opportunities Market Market Size Barriers ($ MM/yr) MISSION The Governor’s nergy Office •promotes(driven byin new Power Generation $17,000 sustainable economic infrastructure Accelerate investment technologies • Full accounting of externalities • Transmission development in Colorado through advancing the state’s energy markets (In State) environmental and security • Technology maturity (eg clean coal, factors) solar) and industry to create jobs, increase energy security, lower long term -$1,700 • Displace imports (~10% of • Transmission infrastructure Power Generation costs, is a net protect our environment. consumer (CO and consumption • Protectionist policies (CA) (Export) importer) • Export $1,000s CA, AZ, NV energy markets) TBD* • Additional annual economic • Valuation by market makers / consumer savings TBD FY12* regulatorsConsumer Efficiency • Consumer information • Access to financing $8,000 • 10% displacement of oil with • Fueling infrastructureTransportation Fuels alternative fuels will keep • Economies of scale $8,077 mm / yr in Colorado • Price volatility concerns • Accounting for externalities $11,000 • Increased investment potential • Limited market demand and Natural Gas in CO (amount TBD) export capacity Production • Public perception driving regulatory uncertainty
GEO Promotes Policies that Support Private Sector Solutions Profit Societal Opportunity Interest
Why Buildings?76% of all power plant generated Buildings Account For Half Of Allelectricity is used just to operate Greenhouse Gas Emissions. buildings.
Energy Performance Contracting …Process through which energy efficiency and capital improvements are funded (fully or partially) by the energy and maintenance cost savings generated by the improvements themselves when the cost savings are financed over a period of time.
When to pursue Energy Performance ContractingInvestigating an EPC generally makes sense if:• Your facilities have an average annual utility spend of over about$400,000• Your have a single-owner scenario with a relativelyuncomplicated lease arrangement• The Owner has an appetite for energy improvements and/orcapital improvements AND• A willingness to accept a longer term finance period (7-10 yearsminimum)
Energy Performance Contracting • A way to upgrade your facilities without dipping into your capital budget • Use future energy and maintenance savings to pay for projects
Energy Performance Contracting • Energy Savings Measures funded through guaranteed savings. • Reallocate money already being spent in utility budget to purchase efficiency and capital improvements
Energy Performance Contracting (Public) • Financed through lease-purchase agreement (typical) • Funds from multiple sources may be combined. • Guaranteed cost savings pay lease-purchase • Annual cost savings meet or exceed annual payments
Energy Performance Contracting (Public) • Up to 25-year term depending on equipment lifetime • Typical finance term between 12 and 15 years. • Not impacted by TABOR (annually renewable & subject to non-appropriations) • Endorsed (strongly encouraged) by state legislature & Governor
Potential Annual Energy $ Savings Typical Facility Energy Savings Opportunity: 15% to 30% (or more)
Potential Energy Performance Contract • Example: • $500,000 annual utility expense • 20% annual savings = $100,000 • 10 year tax-exempt lease purchase • $100,000 X 10 years = $1,000,000 Fund nearly $1M in improvements today and pay it back over 10 years with funds previously budgeted to your utility company.
Energy Performance ContractingRelative Activity of Other StatesESCO project investments tend to be concentrated in heavily populated states with supportiveenabling policies; Colorado is a growing market.
Energy Performance ContractingNational outlook 17
Total Savings from the GEO EPC Program Total Projects Costs $191,342,779 Total Cost Savings $44,471,181 Total Energy Savings 655,934 MMBtu or 192,189mWh Total O&M cost savings $963,087 Total Energy Cost Savings $7,960,766 Average Term 11.4 months Average Payback 15.5 years (from 3-52) -Construction Completed Data from 1994 to Sept. 2011
Recent EPC Activity in Colorado Total project Total Energy Total Cost Cost Savings Savings 23,058 MMBtu or 2008 $17,188,529 $495,339 6,756 mWh 33,988 MMBtu or 2009 $10,853,789 $794,417 9,958 mWh 118,967 MMBtu 2010 $52,801,631 $2,948,685 or 34,857 mWh 9,813 MMBtu or 2011- So far.. $5,466,315 $220,919 2,875 mWh -Based on date Average (2008- 58,671 MMBtu or construction $26,947,983 $1,114,191 2010) 17,191 mWh completed
Energy Performance Contracting• To simplify the process, and ensure the highest level of quality the GEO has pre-approved 14 ESCOs to implement performance contracts in Colorado• The GEO will work with State, Higher Ed, Counties, Cities, K-12 Schools, and Special Districts to navigate the energy performance contracting process• You and an energy service company (ESCO) enter an agreement that allows efficiency upgrades to be paid for with savings achieved through decreased energy consumption and maintenance costs
GEO’s EPC Process • GEO Pre-qualifies ESCOs • Simplifies the selection process • Ensures highest level of quality • Annual review and re-approval process • Standardized process/procedures • Standardized contract documents • ESCOs under contract with GEO to use GEO contracts and processes • On-going guidance/support from GEO • Technical reviews of deliverables
GEO EPC Process PARTNER WITH GEO GEO will provide support throughout EPC process STEP1 INTRODUCTORY STAGE STEP 2 ESCO SELECTION STAGE STEP 3 TECHNICAL ENERGY AUDIT STAGE STEP 4 PERFORMANCE CONTRACTING STAGE STEP 5 MONITORING & VERIFICATION STAGE
FAQ: What about the audit cost? How much does an audit cost? • ~$0.20 - $0.30 per square foot • Process plants will be estimated separately • Audit cost is disclosed as part of ESCo selection When you sign an audit contract, you agree: • If you go forward with EPC, audit cost is rolled into package and is paid for through savings • If you stop after the audit, you pay for the audit then. What does this mean for planning? • Decide if you need to encumber funds for this possibility.
Case Studies in EPCK-12 EPC Case Study State EPC Case StudyMesa County Valley 51, Phase I Department of Human Services, DYC Phase III Total energy retrofit on facilities with stringent operationalLighting and HVAC upgrades requirementsStatistics Statistics• Bottom Line: $4.1M Project, $383K annual savings, • Bottom Line: $9.9M project, $893K annual savings, 13 15 year term year term• 2,702,842 SF, 51 Buildings • 708,668 SF, 12 Buildings• 17 Energy Conservation Measures • 24 Energy Conservation Measures• ESCO: Trane • ESCO: Siemens• Status: M&V on Phase I, Construction complete • Status: 1st year M&V to be complete within a month, November 2010, $4.5M Phase II also complete, construction complete in March 2010 Phase III just completed, Phase IV(Solar) current • Estimated Cost Savings: $629K Energy/Water, $263 O&M• Estimated Cost Savings: $358K Energy, $25K O&M • Actual Cost Savings: About $25K better (preliminary) • Not on balance sheet: $4.5M in avoided controlled• Actual Cost Savings: exceeding estimated maintenance costs• Annual Electric Savings: 3,528,488kWh – Costs the state would not have recovered due to• Annual Electric Demand Savings: 15,576kWh replacing aging equipment• Annual Gas Savings: 163 Therms • Annual Water Savings: 64,063,000 Gallons• Total Annual CO2 Savings: 6,644,425 lbs/ 3322 tons • Annual Electric Savings: 4,231,087kWh • Annual Gas Savings: 19,395 MMBtu• $100K Capital Contribution, $3.5M Financed • Total Annual CO2 Savings: 8,332,704 lbs/ 4166 tons• $510K in Utility Rebates (part of $804K in total • $300K Capital Contribution, $9.5M financed rebates, the largest check to date written by Xcel) • $90K Utility Rebates
Colorado School Districts using EPC• Adams 14 •Eaton • Lone Star •Platte Canyon • South Routt• Arriba-Flagler • Elizabeth • Las Animas •Platte Valley • Springfield• Boulder Valley • Gilpin County • Mancos • Pritchett • Stratton• Calhan •Haxtun • Manitou Springs • Pueblo 60 • Thompson• Campo • Hayden •Manzanola • Pueblo 70 • Walsh• Cheraw • Holly • Mapleton •Roaring Fork • Weld Re-1• Clear Creek • Julesburg • Mesa County • S. Conejos • West End• Colorado Springs •Karval • Moffat County • S. Routt • Widefield• DeBeque •Kiowa • Monte Vista • Stratton • Wiggins• Dolores RE-4A •Kit Carson • Montezuma-Cortez • Summit • Windsor• Eads •Lake County • CSDB • Salida R-32 • Woodlin • Lewis Palmer • Plainview • Sierra Grande • Yuma
Colorado Cities and Towns using EPC• Arvada • Durango • Grand Junction • Pueblo• Aspen • Englewood • La Jara • Rifle• Boulder • Florence • Lafayette • Salida• Breckenridge • Fort Collins • Littleton • Silverthorne•Colorado Springs • Fowler • Longmont • Steamboat Springs• Commerce City • Frisco • Manitou Springs • Westminster• Cortez •Glenwood Springs • Meeker • Windsor• Crested Butte • Golden • Montrose
Colorado Counties using EPC• Arapahoe County • Freemont County • Montezuma County• Bent County • Garfield County • Montrose County• Chaffee County • Gilpin County • Otero County• Cheyenne County • Gunnison County • Ouray County• Clear Creek County • Jefferson County • Prowers County• Custer County • Kit Carson County • Pueblo County• Delta County • La Plata County • Rio Blanco County• Eagle County • Lincoln County • Routt County• El Paso County • Mesa County • Sedgwick County• Elbert County •Moffat County •Washington County
Colorado State Departments using EPC• Human Services • Revenue• Corrections • Wildlife• Transportation • Agriculture• Natural Resources, State Parks • Public Health and Environment• Education• Personnel and Administration, Capital Complex
Colorado Higher Education using EPC • UC Boulder – Housing • Mesa State College • Red Rocks CC • UC Colorado Springs • Western State College • Northeastern JC • UC Denver • Arapahoe CC • Northern Colorado • CSU – Ft. Collins • Colorado Northwest CC • Trinidad State JC • CSU – Pueblo • Fort Lewis CC • Colorado Community • School of Mines • Lamar CC College Systems • Adams State College • Pikes Peak CC
Opportunities and Challenges for EPCOpportunities Challenges• Cyclical; aging projects • Program Funding become new projects • Payback Term• Innovative technologies • Primary market saturation• Growth industry in 5-10 years• Underserved markets in • Finance Colorado- Industrial, Commercial, • Public: TABOR (or son Wastewater/Water of TABOR) Treatment, Housing • Private: IRR, ROI, etc. Authorities, Private Sector, Special Districts, fleets, more. …
Private Sector EPC• DOE funding opportunity awarded in October – $600,000 over 2 years, est. 10 private sector public projects – Buy down cost of TEA and guide clients through process in exchange for identifying market barriers – 5 pilots identified for first year, next 5 to be competitively selected
Find out more… Governor’s Energy Office website www.colorado.gov/energy Energy Efficiency - Commercial Buildings Program - Performance Contracting •Sample documents & contracts •Case studies •List of pre-approved ESCos
Support from the GEO EPC information and support: • Conor Merrigan, GEO’s Commercial Energy Efficiency Manager-303.866.3965 firstname.lastname@example.orgThe GEO’s Community Energy Coordinators (17) www.colorado.gov/energy > Local Community > CECs