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Virginia Tech Guaranteed Energy

Savings Project Using Internal Funds

January 31, 2013

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Introductions

D. Daryl Bishop, CEM

General Manager Pepco Energy Services

James (Fred) Selby, CEM

Energy Manager Virginia Tech

Robert (Bob) LaRose, PE, CEM

M&V Engineer Pepco Energy Services

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Virginia Tech

State University located in Blacksburg, VA

2,600-acre main campus with more than 125 campus buildings

The Commonwealth’s most comprehensive university and its

leading research institution

VT offers 215 undergraduate and graduate degree programs to more than

30,000 students

VT manages a research portfolio of more than $450 million

VT a large energy consumer

1.85 trillion Btu’s of energy (electricity, coal, natural gas, fuel oil) consumed

in FY2012

More than $20 Million spent on energy in FY2012

Energy Use Intensity of 214.8 kBtu’s/GSF (down from 235.0 kBtu’s/GSF in

FY2008)

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Pepco Energy Services

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Agenda

Introductions Daryl

How Virginia Tech began this Journey

Pick 4 Procurement

Selection Process, MOU

Roadblocks and Solutions Fred

Challenges

Benefits

Preliminary Results – Implementation

Preliminary results – M&V Bob

Closing Comments Daryl

Q&A Panel

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How Virginia Tech Began This Journey

Adopted a Climate Action Commitment That Requires Being

Near Carbon-Neutral by 2050

Recognized a Need to Replace Assets That Were Beyond

Useful Life

Provide Additional Capacity / Reliability

Leverage Capital Improvement Budgets and Resources

Reduce Maintenance Costs

Generate Positive Cash Flow

Increase Performance and Efficiency

Incorporate Renewable Energy

Positive PR and Environmental Benefits

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Pick 4 - Procurement Process

Phase I - RFP Process for Energy Services Companies (ESCO)

The RFP was written for all public bodies in the Commonwealth.

The goal behind the pre-qualified pool is to provide for healthy competition

Phase II - Selection Phase of the ESCO for the project

The public body will select 4 or more ESCOs from the pool to provide an

approach to the Energy project.

This phase does not cost the public body anything; we call this “the back of the

envelope proposal”.

The public body will interview and select one or more ESCOs and negotiate a

contract with them for performing the formal energy audit- MOU

Phase III - Technical Energy Audit

This is the phase where the ESCO performs the energy audit-

If the public body goes forward with the project, then the financing needs to be

defined.

Phase IV – Financing The Project

Traditional Financing

Other Options

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Financial Considerations

0

20

40

60

80

100

120

1 2 3

O&M and Accrued CapitalReplacement

Lease Payment

Utilities (Gas, Water, Electric)

Utilities

Utilities

Utilities

O&M

O&M

O&M

Lease

Before

Project

After Project During

Project

Internal Financing does not change the guaranteed savings or the procurement

Financial Considerations

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BOE Audit - Energy Conservation Measures

ECM Description Savings Costs

Simple

Payback

(Years)

1 Lighting 85,632$ 538,639$ 6.29

2 HVAC Controls 98,626$ 267,043$ 2.71

3 Demand Control Ventilation 6,978$ 3,576$ 0.51

4 Steam Control 1,875$ 34,328$ 18.31

5 Economizer 25,288$ 75,808$ 3.00

6 Water Conservation 19,998$ 71,166$ 3.56

7 Domestic Hot Water Decentralization 36,991$ 706,341$ 19.09

8 Variable Frequency Drives Upgrades 18,337$ 480,978$ 26.23

9 Steam System Repair 49,651$ 119,504$ 2.41

10 Electric Motor Replacement 4,297$ 166,584$ 38.77

11 Fume Hood Efficiency Upgrades 188,932$ 2,328,815$ 12.33

12 Ventilation Energy Recovery 39,955$ 346,362$ 8.67

13 Variable Pumping Applications 18,997$ 107,718$ 5.67

14 Main Kitchen Hood Ventilation Upgrades 85,486$ 157,558$ 1.84

15 Food Court Hood Ventilation Upgrades 50,792$ 580,872$ 11.44

16 Cooling Tower Upgrades 21,178$ 13,409$ 0.63

17 Cooling Tower Water Treatment 6,609$ 109,492$ 16.57

18 Solar PV System 6,988$ 771,549$ 110.41

19 Energy Recovery -$ -$ -

20 Wind Turbine 52,450$ 1,524,733$ 29.07

21 Compressed Air Decentralization -$ -$ -

22 Windows 24,464$ 105,056$ 4.29

23 Destratification Fans 2,051$ 7,595$ 3.70

24 Vending Miser 2,443$ 10,070$ 4.12

25 Transformers 15,340$ 279,794$ 18.24

26 Kitchen Appliance Replacement 63,655$ 286,066$ 4.49

27 Boiler Blowdown Recovery 51,954$ 82,866$ 1.59

28 Sensible Attemperators 94,348$ 482,737$ 5.12

29 Absorption Chiller 177,267$ 2,882,432$ 16.26

30 Powerhouse VFD Upgrades 108,688$ 750,781$ 6.91

31 Automatic Compressors Staging 7,578$ 71,517$ 9.44

32 Recover Heat from compressors 18,157$ 50,062$ 2.76

33 Compressor Water Shutoff 150$ 1,716$ 11.42

34 Install Anaerobic Digester 23,055$ 3,575,828$ 155.10

35 Energy Awareness 23,734$ 35,758$ 1.51

36 Metering -$ 64,365$ -

37 -$ -$ -

1,431,943$ 17,091,119$ 11.94 TOTAL PROJECT

Cost Savings Summary By ECM

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Roadblocks / Solutions

Roadblock #1: Getting a VT Budget Office “Go / No Go” Decision

Issue: VT Budget Office apprehensive of PC process, reality and

measurability of savings, guaranteed savings provision

Solution: Several meetings held with and presentations made to VT

Budget Office addressing PC benefits, ECM scope and financial details,

M&V protocols, Pepco successes at other facilities, etc.

Results: “Go” decision to proceed reached August, 2011

Roadblock #2: Project Financing

Issue: Outside financing would count towards University debt capacity

Solution: Decision made to finance internally

Result: Three separate internal funding methods implemented:

1. E&G Buildings – VT Budget Office Loan ($3.9 Million, 9-Year, 0.6% interest)

to VT Facilities Services

2. Dining Services – Borrow from their Reserve Accounts

3. Athletics – Fund from within their O&M Budgets

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Roadblocks / Solutions

Roadblock #3: ECM “Package” vs. Individual ECM Justification

Issue: With the decision to fund internally, VT Budget Office concerned

with bundling of: (1) reliability-centered ECM’s, (2) “green” projects

excessively long payback (i.e., solar PV array, wind turbine, etc.); and (3)

long-term financing of ECM’s with shorter life cycle than debt service

period

Solution: VT Financial folks developed a spreadsheet tool to assess

individual ECM credit-worthiness based on:

1. Is the Life Cycle > Payback Years?

2. Is the NPV of Life Cycle Savings > Cost?

3. Is the Life Cycle > Finance Years

Result: Several ECM’s not meeting all three requirements were either cut

(by individual building or altogether) or required to have special/extra

justification

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Challenges

Continually Evolving (and Increasingly Smaller) Project Scope

Back of the Envelope: $17.3 Million project, 36 ECM’s in 6 buildings

Technical Audit: $11.7 Million project, 47 ECM’s in 6 buildings

Post-T/A VT Facilities Services Scrub: $9.0 Million project, 24 ECM’s in

6 buildings

Final Package: $5.3 Million project, 18 ECM’s in 5 buildings

Required multiple Pro-Forma and Cash Flow Analyses from Pepco

Key Auxiliaries Stakeholder Education and Buy-In

Several meetings and presentations to Dining Services and Athletics

leadership to educate on process and specific ECM

Coordinating Around Athletics O&M Budget Requirements

Due to tight fiscal-year budgets, Athletics ECM implementation had to

be coordinated more around fiscal year cash flow than around

construction/contractor efficiency

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Challenges

Three Individual Projects in One (E&G, Dining Services, Athletics)

Required significant contract language and attachment/schedules

modifications

Each unit project required to have net positive cash flow each year

Multiple points of contact, coordination/scheduling requirements

More complicated M&V reporting

Elapsed Time (~2 Years) Between Technical Audit Release and

Implementation Contract Execution

Some ECM components already upgraded through renovation or

maintenance projects

Some ECMs impacted by previous or planned future changes in

building space layout and/or functionality

Equipment cost increases (i.e., lighting, transformers / wire due to

increases in copper price)

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Benefits

Real Energy and Emissions Reductions

Although starting relatively small, when completed, the final $5.3 Million

package will:

Install lighting retrofits, HVAC controls upgrades, water conservation

measures, variable frequency drives, kitchen ventilation upgrades, cooling

tower retrofits, building envelope sealing, and steam system repairs

Save $711k+ in annual energy costs (in current dollars)

Reduce energy consumption by more than 10 percent in the respective

buildings (including 4.0 Million kWh of electricity and 28,000+ MMBtu’s of

steam per year)

Reduce annual CO2-e emissions by approximately 4,200 metric tons

Reliability Upgrades

Although not to the original extent, two key reliability issues will be

addressed:

Dietrick 750 kVA Transformer Replacement

Replace obsolete Cassell Coliseum air handler unit

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Benefits

Improved Personnel Comfort

Brighter lighting in building hallways (with less energy consumption)

Improved temperature conditions in McBryde Hall stairwells (window

film)

Improved temperature consistency throughout Cassell Coliseum main

arena area (destratification fans)

Win-Win VT-Pepco Partnership

VT suggested an ECM to Pepco (removable insulation blankets)

Pepco investigated VT’s recommended vendor and found the savings to be

real and the product robust

Pepco included this in VT’s Phase 1 PC project and is using in other

applications as well now

Our hope is that demonstrated success in Phase 1 will lead to future

phases across VT campus buildings

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Delivered – Phase 1 Project

ECM Description Savings Costs

Simple

Payback

(Years)

1 Lighting 107,942$ 761,451$ 7.05

2 HVAC Controls 66,728$ 466,464$ 6.99

6 Water Conservation 1,772$ 13,278$ 7.50

8 Variable Frequency Drives - AHUs 5,003$ 51,960$ 10.39

14 Main Kitchen Hood Ventilation Upgrades (Melink) 40,511$ 286,236$ 7.07

16 Cooling Tower Upgrades 11,747$ 76,711$ 6.53

22 Window Film 14,264$ 52,825$ 3.70

23 Destratification Fans 6,110$ 64,822$ 10.61

24 Vending Miser 821$ 4,589$ 5.59

25 Transformers (GE Copper) 12,400$ 308,532$ 24.88

27 Boiler Blowdown Recovery 41,910$ 277,870$ 6.63

31 Automatic Compressors Staging 9,148$ 122,371$ 13.38

36 Metering -$ 183,396$ -

39 Building Envelope Sealing-New 14,798$ 145,436$ 9.83

53 ECM-30 Powerhouse VFD Upgrades (Toshiba 18pls) 188,616$ 2,139,311$ 11.34

54 ECM-9 Steam System Repair (Option 1) 53,221$ 150,085$ 2.82

55 ECM-9 Steam System Repair (Option 2) 21,740$ 90,532$ 4.16

64 Install Insulation Blankets 45,531$ 138,399$ 3.04

642,261$ 5,334,266$ 8.31 TOTAL PROJECT

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Preliminary Results – Implementation

Cassell Coliseum Weather Stripping

McBryde Hall Window Film

Powerhouse Steam Traps

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Preliminary Results – Implementation

Former Dietrick Hall 750 kVA Transformer New High-Efficiency Transformer

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Preliminary Results – Implementation

Cassell Coliseum Destratification Fans Powerhouse Insulation Blanket and

Inverter-Duty Motor

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Preliminary Results – M&V

M&V plan minimizes risk to both parties

IPMVP Options A & B

Provides reasonable security of ECM

performance relative to cost of the M&V activities

Many post-measurements conducted during the

construction period

Preliminary assessment of project savings

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Verified Savings to Date

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Reference Projects

PES developed projects have consistent track record of over performance

Roanoke County Public Schools ,

VA

North Carolina Department of

Administration

Salisbury University , MD

Penn State University –

Altoona

Penn State University –

Chemistry

Building

National Institutes of Health

Projected

Savings $400,361 $2,074,000 $331,378 $363,124 $ 588,389 $2,289,235

Verified

Savings $537,738 $2 ,389,500 $690,219 $386,275 $ 647,249 $2, 3 8 8 , 763

Percent of Guarantee

134% 115 % 208% 106% 1 1 0 % 10 4 %

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Summary

Projects can be successfully completed where belief

in Performance Contracting is questioned

Internal financing reduces scope but can provide the

needed funds to a phased approach

Bringing more stakeholders into the project selection

process has it’s challenges and rewards

Given that the concern about debt is universal -

internal financing can prime the pump that measured

and verified results can drive to the next phase of

savings

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Questions

Ask Fred, Daryl or Bob any question you may have.

Thank you!

Follow up questions:

D. Daryl Bishop, CEM

General Manager

Pepco Energy Services

804-347-9037