2014 Energy & Sustainability Conference

Energy Performance Contracting in State Government

State Energy Managers Meeting

Tuesday April 21, 2015

Presented by:Hayes Framme

Advisor for Infrastructure and DevelopmentChief Energy Efficiency Officer

Office of the Secretary of Commerce and Trade

o What is Energy Performance Contracting (EPC)?

o EO31 & statute

o EPC Roadmapo Streamline Processo Clear guidance

o Examples

What is EPC?

Energy Performance Contracting (EPC) is a financing technique that uses cost savings from reduced energy consumption & operational savings to repay the cost of installing energy conservation measures.

• Allows building users to upgrade their facilities without an increase in their budget

• Existing utility dollars are reallocated to pay for the improvements• The financial & operational risk of the energy improvements are borne by

the ESCO• Energy savings are bonded and guaranteed• Other advantages include the ability to:

• Use a single contractor to perform energy audits, design and build retrofits for a turnkey project

• equipment selection• subcontractor selection• firm, fixed cost contract with NO CHANGE ORDERS• Full transparency with “open book pricing”

Commonwealth and Administration Priorities

Executive Order 31 – October 15, 2014 

All state agencies should proactively pursue energy efficiency measures, especially Energy Performance Contracting(EPC), to reduce energy consumption. EPC is a budget neutral, cost-effective tool that permits state agencies and publicly-owned facilities to reduce their deferred maintenance backlogs without adding any financial burden to the taxpayer. For agencies that have already employed EPC, overall energy consumption should be re-evaluated to identify areas for further efficiency improvements.  Agencies should utilize the current process, at no cost to the agency, which provides a general audit to asses whether EPC is appropriate for the agency. This portion of the process is managed by DMME, and all agencies should work with DMME to have a general audit conducted with the goal of implementing an EPC by 2016. Coordinate with SCHEV to identify the deferred maintenance needs at each higher education institution and the opportunities to leverage energy savings to fund building infrastructure upgrades.

Commonwealth and Administration Priority

Code of Virginia – Chapter 6.1

Section §11.34.1

…It is the policy of the Commonwealth to encourage public bodies to invest in energy conservation measures and facility technology infrastructure upgrades that reduce energy consumption, produce a cost savings, and improve the quality of indoor air in facilities, and when economically feasible, operate, maintain, or renovate facilities in such a manner so as to minimize energy consumption and reduce operational costs associated with facility technology infrastructure….

…state aid and other amounts appropriated for distribution to public bodies shall not be reduced as a result of energy and operational savings realized from a guaranteed savings contract or a lease purchase agreement for the purchase and installation of energy conservation and facility technology infrastructure upgrades and modernization…

Section §11.34.3

…Such [EPC] contract may also provide capital contributions for the purchase and installation of energy conservation and facility and technology infrastructure upgrades and modernization measures that cannot be totally funded by the energy and operational savings.

EPC Roadmap

Goals of EPC Roadmap

• Streamline and Efficiency

• Clarity of process

• Ease of understanding

• Certainty throughout process

• Clear direction

EPC Roadmap

• Stakeholder engagement• External – Schneider Electric, Trane, Siemens • Internal – DGS, DPB, DMME, Treasury

• EPC timeline• Clear progression of process

• Contract modifications• Updates and clarifications

• Contract guidance• Provides clarity in process and stipulations

State Agencies & Higher Education

State Agencies

• Facilities upgrades and renovations with no upfront capital costs• Reduce Energy Consumption• Reduce Energy Costs• Reduce Deferred Maintenance• Stretch existing Capital/Maintenance Dollars• Meet EO 31

Higher Education

• Virginia Public Higher Education Institutions represent 59% of the Commonwealth’s electricity usage• 3 of the top 4 electricity users in state government are higher education institutions• Higher education has an estimated combined $1.437 billion in deferred maintenance

2014 Energy & Sustainability Conference

Commonwealth Examples

• Virginia DMV Headquarters in Richmond• 35% annual energy consumption reduction• $284,130 Annual Guaranteed Savings

“Trane just finished the Year 1 Reconciliation Report to check the accuracy of their calculations/design. While our contract guaranteed 36% ($284,000), we actually achieved just over 39% ($308,000), well above the level set by the Governor’s Executive Order.”

-- VDOT Commissioner Holcomb, April 2015

• James Monroe Building in Richmond• $447,974 Annual Guaranteed Savings

• Lord Fairfax CC• $23,798 Annual Guarantee• $42,005 Avg. Annual Savings

2014 Energy & Sustainability Conference

Commonwealth Examples

• Recognition – Virginia Department of Behavioral Health and Developmental Services

• VDOT – Completed the BOE and is evaluating next steps

• VA State Police – Completed the BOE process and is undergoing Investment Grade Audit (IGA)/Technical Energy Audit (TEA)

• In Discussions with other agencies

2014 Energy & Sustainability Conference

Final Thoughts

• EPC is not a silver bullet or one-size-fits-all solution

• It is a meaningful tool and should be at least explored• No cost Back of Envelope (BOE) audit• If a previous EPC has been implemented over 3 years ago:

• No cost to explore another BOE• Meets EO31 if there is no viable project• Option to move forward it there is a viable project

2014 Energy & Sustainability Conference

THANK YOU

Hayes FrammeHayes.framme@governor.virginia.gov(804) 225-4517

Tommy ThompsonEnergy Manager Department of Mines, Minerals, and EnergyThomas.Thompson@dmme.virginia.gov(804)692-3230

Charlie BarksdaleUtilities & Performance Contracting ManagerDepartment of Mines, Minerals & EnergyCell 804-840-1689