Procuring and Contracting
Lessons from Tipperary’s Projects
Paul Kenny, B.E. C. Eng.
Tipperary Energy Agency
Smart Eco Hub 26/03/14
• Biomass installed as subcontract to large
construction project in 2008 in Tipp.
• Subcontractor and main contractor not aligned.
• Biomass design, integration and execution poor.
• Still “managing” and upgrading.
There has to be a better way!!
“biomass is crap” – Ireland
“biomass is the norm” – EU
TEA & LESC: initial
• TEA directly contracted 4 Biomass LESC since
2011. (550,360,400 and 80 KW)
• Aided a further 1.6MW (1.1MW built).
• All biomass boilers running well, on budget
delivering 60% saving.
• Lots of problems
that ESCO solved.
• ESCO’s rewarded for
high quality work.
• 80% RES-H for NTCC
TEA & LESC
Thurles Leisure Centre & Source Arts Centre
Heat load in kWh 1,500,000
Biomass cost €47,000
Equivalent LPG cost @55c/litre €115,000
Simple Payback in Months 30
10 Yr NPV €377,035
10 Yr IRR 59%
• Contract: Design, Supply & Install plant & supply all heat & operate & maintain
Coolbawn Water Treatment Plant (EE & RE)
Net Heat load in kWh 140,000
Biomass & EE ESCO cost for first 7 years €16,000
Equivalent Oil Cost €18,000
Saving over first 7 years of ESCO €20,300
Capital Cost to client €0
BEW Grant 35%
CO2 Saving in Tonnes 47
• 7 yr Contract: Design, Supply, Finance & Install plant & supply all heat & operate &
maintain (Energy efficiency and Renewable Energy)
• Short form for build + heat supply contract.
• 2 stage – shorten to 2-4 players with
• Life cycle procurement to get cheapest life cycle
• Let contractor size biomass / fossil share/ backup.
• Let contractor provide fossil backup within price.
• Let contractor maintain, fuel and worry.
• Be clear you will pay for offloading this risk and
get great value.
• Contractor finance is not cheap.
TEA advice on LESC
• Risk Map. “known unknowns”
• Assign risk to party best placed to deal with it.
• Fuel price risk is expensive to offload. Index
• Should supplier benefit/ suffer for changes
beyond their control/ influence?
• “unknown unknowns”
• Clauses to manage
• Renegotiate/ arbitrate
• Floors/ ceilings
Lessons - Risk
LIT Tipperary Thurles Leisure
Annual Heat Supply Cost (Oil vs Biomass)
Annual heating cost –
Annual Heating Cost Oil
3 year payback
• Non profit, public good enterprise
• Partnership approach
• Energy management
• Renewable energy and energy
• Procurement, project mgmt.
• Cost effective, value driven
• Paul Kenny
• Chief Executive
• T: 052 7443090
• F: 052 7443012
• E: firstname.lastname@example.org
• W: www.tea.ie
Tipperary Energy Agency