5 Steps to Successful Energy Performance Contracting
- Decide if energy performance contracting is a good solution for you.
- Select an energy service company (ESCO).
- Contract with your ESCO to identify energy saving opportunities.
- Negotiate a long-term contract with your ESCO.
- Verify savings and enjoy the benefits.
Step
1.
Decide if energy performance contracting is a good
solution for you.
Your first step is to consider how a performance
contract would work for you. You will want to look at your facility needs,
current staff capabilities and your potential to make improvements.
Find out if your facility is
a good candidate for a performance contract.
Your ability to use energy performance contracting depends on whether
there are significant energy-saving opportunities to interest an ESCO.
See the Mini-Audit below.
Assemble a team. Put together a team within your
organization. They should work together to explore the possibility of
a performance contract. Include maintenance staff as well as financial,
legal and procurement staff at the onset.
Assess ESCO services and benefits. ESCOs offer
a wide variety of services including, financing, construction management,
staff training and long-term maintenance services. Decide what is important
for you.
Mini-Audit
Does your facility have more than 40,000 square
feet of floor area?
Do you spend more than $40,000 a year on energy bills?
If so, an energy performance contract may work for you. It is likely
to benefit you even more if you have ...
- Aging buildings or equipment;
- Recurring maintenance problems or high maintenance
costs;
- Comfort complaints;
- Scarce budget resources;
- Too little energy management expertise;
- Too many demands on your maintenance staff;
- No recent upgrades of your lighting or controls
systems; and
- Energy-using equipment that is ready for replacement.
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Step 2.
Select an energy service company (ESCO).
The ESCO will be your partner for a long time, so
it is important to select one that shares your vision and is able to meet
your needs. A request for proposals (RFP) is an excellent way to identify
interested ESCOs and compare approaches. See the sample RFP.
Develop a facility profile.
Describe your facility's energy use, equipment, operating schedule, maintenance
problems, and planned equipment replacement or renovation plans. Also
include the utility bill history for the past three years, if available.
See the sample RFP for helpful guidelines.
Develop an RFP. Customize the sample RFP to set
the ground rules for your project, then invite ESCOs to respond. A list
of ESCOs serving each state is available.
Invite ESCOs to tour the facility. Interested
ESCOs will need to visit your facility and interview facility staff before
submitting their responses.
Evaluate the proposals. Evaluate the qualifications
of each ESCO for the skills, expertise and experience you need. Interview
the top contenders to better evaluate their approach to the project and
ability to work with you. Keep in mind that it is too early to request
cost estimates. Refer to the evaluation tips in the sample RFP.
What can an ESCO
do for me?
- Identify and evaluate energy saving
opportunities;
- Provide engineering services from design
to equipment specifications;
- Order and install equipment;
- Manage construction of a wide variety
of projects;
- Provide long-term energy management
and maintenance services;
- Guarantee performance and savings; and
- Arrange financing (if needed).
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Step 3.
Contract with your ESCO to identify energy-saving
opportunities.
Your ESCO will perform an
investment-grade energy audit that identifies energy-saving opportunities
and evaluates their potential. This provides you with critical information
to later negotiate your performance contract. The ESCO will then prepare
a project development agreement proposing a package of projects to include
in the performance contract. See the Sample Energy Audit and Project Development
Agreement with negotiating tips.
Negotiate an energy audit and
project development agreement with your ESCO. Establish criteria for
the audit. The cost of the energy audit can be rolled into your performance
contract. It must be paid in full if you do not sign a performance contract,
so you need to have funds set aside. If your criteria are not met, you
do not pay for the audit.
Review the energy audit. Review the technical
and cost details presented in the audit and discuss the suggested improvements
with your ESCO. Your ESCO will recommend a group of retrofits that optimizes
cost-effectiveness and benefits.
Projects that pay
for themselves in less than 10 years are ideal
- Heating: Replace aging boilers, steam traps
and pumps.
- Cooling: Replace aging chillers, cooling towers
or pumps.
- Ventilation and Distribution: Install variable
speed fans or replace fan or pump motors.
- Controls: Install a new energy management
control system or improve operational strategies.
- Lighting: Replace lamps and ballasts or entire
fixtures.
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Step 4.
Negotiate an energy performance contract with your
ESCO.
An energy performance contract is your road map for
implementing and tracking the project over the term of the agreement.
It should clearly define roles and responsibilities and explicitly state
how savings are determined and how the guarantee will function. The Sample
Energy Performance Contract offers negotiating tips.
Negotiate the scope and terms
of the contract. Get input from your engineering, financial and legal
staff. Negotiate costs and ask for open-book pricing to ensure that you
receive good value.
Negotiate a guarantee to meet your needs. The
guarantee is often the cornerstone of an energy performance contract.
It usually covers the annual debt service and requires the ESCO to pay
any remaining balance if expected annual savings are not reached.
Arrange financing. Your ESCO will help you secure
financing unless you have your own financing source. The most attractive
option for governments is usually tax-exempt financing with an annually
renewable lease-purchase agreement.
Review maintenance requirements and services. In
order to guarantee performance or savings, an ESCO often requires maintenance
on new equipment. Additional services can include reviewing operation
strategies, reporting on equipment operating problems, and repairing and
replacing equipment.
Resources and Sample
Documents Available
- Model Request for Proposals (RFP) for
Energy Performance Contracting Services (MS
Word)
- Supporting Letters (MS
Word)
- Evaluation Forms (MS
Word)
- Suggested Interview Questions to Ask
ESCOs (MS
Word)
- List
of ESCOs (HTML)
- Contract for Technical Energy Audit
& Project Development for Energy Performance Contracting Services
(MS
Word)
- Model Energy Performance Contract (MS
Word)
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Step 5.
Verify savings and enjoy the benefits.
Follow-up monitoring helps ensure that you are getting
full value from your energy performance contract. The success of the monitoring
effort depends on the level of detail provided in the energy performance
contract.
Approve the installation. Review
the requirements detailed in the contract and check that all equipment
was installed as specified. Also confirm that standards of comfort such
as temperature and light levels were achieved.
Operate the building as agreed in the contract. The
ESCO will maintain, monitor and verify the installation as specified.
Maximize benefits through trained staff. Your
ESCO will train your facility staff in optimal operation of equipment
and systems. This will help ensure savings and minimize future maintenance,
while maximizing the life of the equipment.
Review the quarterly reports. Meet with your
ESCO regularly to monitor your success.
Don't delay! Get started now and by next year
you can be enjoying new equipment, improved comfort and reduced maintenance.
Energy savings that could be paying for new equipment are wasted every
day of delay! |
