February’s Michigan Energy Forum event, Financing Your Commercial Energy Project, will focus on highlighting an array of financial mechanisms that exist to help commercial building owners make their energy efficiency and/or renewable energy project a reality.
February 2012 - Michigan Energy Forum - Diane Mills
FinancingYour Commercial Energy Project CEC Forum February 2, 2012Energy Performance Contracting Diane Mills, Certified Energy Manager email@example.com
What is Energy Performance Contracting?“The use of guaranteed savings from the maintenance and operations budget (utilities) as capital to make needed upgrades and modernizations to your building environmental systems, financed over a specified period of time.” ~The U.S. Department of Energy“Energy savings performance contracting enables building owners to use future energysavings to pay for upfront costs of energy-saving projects, eliminating the need to tap intocapital budgets.” ~Valerie Brader, Chief Energy Policy Officer, State of Michigan 2
Spec/Bid vs. Energy Services Performance Contracting Floor Abatement Environmental Environmental Contractor Contractor Insulation Architectural Services Engineering Architectural Services Engineering Carpentry Services Flooring General Contractor Sheet Metal Contractor Masonry Flooring ENERGY SERVICES Construction Client PERFORMANCE Contractor Manager CONTRACTOR Systems Electrical Contractor Controls Electrical Insulation Contractor Contractor Lighting Roofing Contractor Roofing Contractor Equipment Equipment Ameresco at Risk NO Change Orders District at Risk Mechanical Plumbing Mechanical Guaranteed Results Contractor Change Orders (10-20%) Contractor One Contract No Guaranteed Results Pre-Qualified Trades Multiple District Contracts Vs. Savings Measured & Leveraged Controls Sheet Metal Low Bidders Only Contractor No Layers of Mark-up (horizontal) No Savings Measured/Leveraged Can use Bond Issuance $’s Multi Layers of Mark-up (vertical) Can use Private Financing Plumbing 33% Faster Implementation, with Contractor significant construction cost savings* * 1997 Construction Industry Institute study, in conjunction with Penn State University, 351 projects studied in 37 states
Spec Bid Approach Energy Services Performance Contract Approach• Money Spent before cost, scope and funding are • No Dollars spent until all details of the project are finalized known• Overall project cost is not known until project is • Guaranteed project investment is known before completed proceeding with agreement• Who is Accountable for the success of the project • Accountable for all aspects of the project• What if there is a change order? • No Change Orders• Concerns about Speed and flexibility of the • Complete flexibility to change course midstream and project on time completion guaranteed• It is difficult to ensure competent and /or local • Responsible for securing competent contractors and contractors in a low bid situation local worker participation• What professionals do you hire and when? • Turn Key process (engineers, construction manager and Architect)• Many bids and many contracts • Compressed time frame with one contract• Specification based • Solution based
Performance Contracting Before During After $$$ Savings Savings ESCO & Debt Service $$ Energy Energy Energy + O&M + O&M + O&M $
The Process Analysis Phase Utility Data Analysis Needs Analysis And Preliminary Audits Preliminary ECM (Energy Conservation Measures) Collaborative Review Verification Phase Detailed Audit Evaluate Possible Operational And Maintenance Savings Develop Energy Conservation Measures (Ecms) Calculate Energy Savings Research Utility Rebates And Incentives Collaborate To Finalize Scope Evaluate Financing Alternatives And Financial Impacts Implementation Phase Construction Management Project Administration Commission, Measurement & Verification (M&V) Maintenance Plan Training Ongoing reporting and M&V Acceptance Letter