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 anESPC 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

01 -Request For Proposals To Pre-Qualify ESCO For As-Needed

Energy Savings Performance Contracting Services

02 - ATTACHMENT A - ESCO Base Contract For As-Needed

Energy Savings Performance Contracting Services

03 - Attachment B - Response to this Request for Proposals

03a - Evaluation for ESCO Pre-Qualification

04 - ATTACHMENT C - Final ESCO Selection Process

04a - Secondary Evaluation Evaluator Sheet

04b - Secondary Evaluation Scoring Spreadsheet

05 - ATTACHMENT D - Enabling Legislation

06 - ATTACHMENT E - Enabling Legislation for Local

07 - ATTACHMENT F - Investment Grade Audit Contract

08 - ATTACHMENT G - Energy Performance Contract

08a - ESPC Appendix / Schedules

09- ATTACHMENT H - Financing Solicitation

10- ATTACHMENT I - Institution Memorandum of Understanding

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 2nd 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 ReviewReview Considerations for Energy Savings Performance Contracting Template Instruments and Process

Procurement 01-RFP to Pre-Qualify ESCOs – Procurement should review the concept and the instrument to insure

that this two-step process of provider selection for projects fulfills state requirements. Please mark any changes that must be made

03-AttachmentB-Response to this RFP – Procurement should review to insure that the guidance given to providers fulfills the procurement requirements of the state

03a- Evaluation for ESCO Pre-Qualification – Evaluations should be reviewed to conform with each state’s rigor in negotiated procurement to insure defensibility

04-Attachment C-Secondary ESCO Selection Process – Review for selecting the prequalified provider for a particular project. Please mark any changes that must be made

04a and 04b – review for final provider selection and conformance with state’s rigor on selection defensibility

Review of the balance of the instruments may be beneficial in the overall understanding of process and structure.

Legal 05-AttachmentD-Enabling_Legislation – Review of state specific enabling legislation for applicability

of instruments

07-AttachmentF-Investment_Grade_Audit_and_Project_Proposal – The IGA forms the technical portion of the entire agreement. Should the project not move forward, the agency is responsible for remuneration to the provider for the Audit itself and therefore this instrument should be reviewed for its standalone obligations as well as how it becomes a part of the whole of the ESPC agreement.

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 Process Finance Process

Technical Assistance

• State program administrator

• 3rd 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

ESPC Data Tracking Template

Project Name State Market SegmentsMBTUs Saved

Date of Contract Execution

Planned Term in Years

Square Ft if applicable

Utility Spend Before

Utility Spend After

(realized or projected)

Planned number

of M & V Reports

Planned kWh of

generation

Calculated # of Jobs ($92,000 /

job)

Calculated Carbon

Calculated SOX

Calculated NOX

Project Cost (not

including finance costs)

Guaranteed Savings Amount

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

M & V Ongoing Reporting

Report Long or Short Each Year of M & V

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

www.energyservicescoaltion.org

info@energyservicescoalition.org