Managing Energy Costs

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MMA Annual ConferenceJanuary 11 12, 2008

• Managing Energy Costs

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Introduction to session

• Eileen McHugh
• Division of Energy Resources
• eileen.mchugh_at_state.ma.us
• [phone]
• www.mass.gov/doer

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Energy Management Services

• Promote and deliver cost-effective energy
  efficiency outcomes

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Information

• www.mass.gov/doer
• Energy Management Services

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Speakers

• Phil Giudice
• Leo McNeil
• Doreen Hamilton
• Mike Ryan
• Bill Gran

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Phil GiudiceCommissioner, DOER
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Very high electric prices
MA
Source EIA
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Lots of GDP for the BTU and good trend
MA
CA
US
Source EIA/Census
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Lots of GDP for the BTU
MA
Source EIA/Census
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Efficiency is low cost option
Spot Wholesale
Efficiency
Source DOER
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Efficiency provided 4 TWh 2006
GWh
Source DOER
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Municipal Energy spending
Source US Census building floor space and elec
intensity suggests 1,490,000 MWh W/WW often
equals all other muni electotal muni
consumption inferred 2,980,000 MWh _at_ 0.14 per
kWh 75 million therms natural gas 34 million
gallons oil
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Municipal electric savings opportunity
Saving 23
Source efficiency savings range from 10 20
depending on vintage 3 million MWh _at_ 60 load
factor 200MW peak capacity providing 100 MW of
DR potential commodity savings range from 10 -20
from traditional practices
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Better Energy Decision Challenges

• Status quo too readily accepted
• Reconsider energy investment screens
• Payback required go deep and broad for long
  term payback
• Risk tolerance real time markets
• New technology/practices DR, Performance Ctc
• Insufficient data historic, end use and
  projections
• Insufficient expertise and staffing

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• Enable MA PV market to grow 40 per year to
  achieve 250 MW by 2017
• First installment 68 million over 4 years 16
  for public facilities, 8 for residences 27 MW by
  end of 2011
• Streamlined non-competitive rolling rebate
• Rebate level generally 40 of PV system (can be
  20 to 60) up to 500 kW
• Launch on 1/23

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Priorities

• Decouple remove hurdles to efficiency, CHP,
  distributed generation stand by rates, net
  metering
• Efficiency ramp remove spend cap and tap
  innovation
• Building codes
• Appliance performance standards
• Green communities
• Accelerate renewables long term contracts,
  siting, CommSolar
• Make RGGI work
• Consider rate alternatives real time price,
  public policy

Other suggestions?
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Leo McNeilRegional Director Comprehensive
Solutions Trane
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Enabling Legislation

• Two Options available for Cities, Towns,
  Schools
• 25A,11C Enacted 1994 Approximately 25
  projects in cities, towns, school districts
  implemented
• 25A,11I Enacted 2006 1 project completed, and
  at least 7 more in process at this time (several
  others actively evaluating the process currently)

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Streamline the Process

• Optimize Infrastructure and Budgets(Over 15B
  nationally since 1990)
• Eliminate Barriers
• Local Budgets Strained
• Aging Infrastructure
• Scarce Capital Dollars
• Increased Awareness

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Old vs. New

• Old
• RFP
• Design Development
• Ten Year Term
• Expensive Cumbersome

• New
• RFQ
• Qualifications Experience
• Twenty Year Term
• Saves Time Money

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Sample RFQ Scoring Sheet
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MMA letter of support

• This provision is particularly important now
  because performance contracting would allow
  communities to move forward immediately to
  implement these projects in a timely and
  efficient manner reducing energy consumption at a
  time when costs are skyrocketing.
• Massachusetts Municipal Association 11/7/05

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Its Easy Being Green

• Publish Bid
• Evaluate Responses and Select ESCO
• Negotiate Agreement
• Technical Energy Audit
• Project Scope Guarantee
• Execute Agreement Proceed
• Facility Upgrade

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Doreen HamiltonAccount Executive, Honeywell
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What is Performance Contracting?

• Performance contracts install energy efficient
  facility improvements, with no up front cost,
  paid for out of guaranteed energy savings from
  your existing operating budget.

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Energy Services Company
ESCo
Develop
Maintain
Design
Finance
Construct
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Performance Contracting

• A way to finance and implement facility
  improvements and services
• Energy and operating savings sufficient to cover
  all project costs
• A bundled set of retrofit, service, OM, and
  Energy Management Services
• Performance-based Guarantee

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Performance ContractingCore Components

• Technical
• Financial
• Contractual

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Technical

• Lighting
• Lighting controls
• Motors replacement
• Energy management system installation and
  optimization
• Variable frequency drives

• Hot water reset
• Control valves for boilers
• Water conservation
• Plug load controls (including PCs)
• Boiler replacement
• Green/renewable technologies

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Financial

• Where does the money come from?
• Existing budget neutral
• Energy
• Maintenance
• Capital improvement
• Rebates and incentives
• Municipal Lease or Other

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The Savings Buckets
Maintenance
Technology
Technology Infrastructure Upgrades
Facilities Infrastructure Upgrades
Communications
Utility
Operational Budget
Capital Budget
Project Funding
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How is it paid for?
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Contractual

• How can you buy this?
• How do we measure success?
• Guarantees
• When do you start to pay?
• What happens if.?
• Hotter/Colder
• Energy prices change
• Add buildings
• Eliminate buildings
• Schedule changes

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Mike RyanDirector of Buildings Construction
Quincy
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Quincy Project

• Getting Started-Assembled a Team
• Decided on the RFQ process
• Inserted the energy data, buildings, etc. into
  the RFQ
• Published the RFQ in the Central Register
• Simplified the Process did not use outside
  consultants

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What happened next?

• Received 5 proposals
• Interviewed 4 vendors on two occasions
• Rated the proposals based on references, ability
  to implement, service training, based on the
  criteria in the RFQ.
• Selected Honeywell
• In-depth engineering study of 42 buildings over 3
  months
• Resulted in 32M project with numerous
  infrastructure improvements.

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What did we get?

• 9 new Boiler Plants
• Over 18,000 lighting fixtures impacted
• Water Conservation through toilets, urinals,
  sinks, etc.
• 1,300 Steam trap repair/replacement
• Commercial Water meter replacement
• Window replacements at 6 City buildings
• Exterior doors at 5 City 2 School Buildings
• Overhead Doors in all Fire Department Buildings
• Building re pointing
• Pool Cover
• Solar Pool Heating
• Boiler Controls
• City Wide Energy Management System
• New Roofs for 6 buildings
• Transformer replacements
• Numerous other mechanical upgrades including unit
  ventilator HVAC replacements, etc.

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What else did we get?

• Program is self funding over the 20 year term
• Energy Savings are 1,007,000 per year
• Operational Savings of 240,000 per year
• Water revenue increase
• Electricity will be reduced by 25, fuel usage by
  27, and water usage by approximately 35.
• Utility Rebates from Keyspan, MTC and others
• Financed through a Tax Exempt Lease
• All buildings will be impacted
• Provide preventative maintenance
• Improve the environment

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Impacts for the Program Term

• Partnership with the EPA-The City of Quincy is
  also partnering with Honeywell and the EPA to
  provide Energy Benchmarking for all facilities
• City of Quincy has signed on for the Energy Star
  Challenge
• Buildings are being analyzed for Energy Star
  Status
• Emission reduction
• The electricity saved will reduce carbon dioxide
  emissions by 2,862,600 lbs/yr,
• The ozone depleting gas emissions will be reduced
  by 16,900 lbs/yr
• The reduced fuel consumption will reduce carbon
  dioxide emissions by 3,126,400 lbs/yr

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Impacts for the Program Term

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Equivalent Impact forProgram Term

• 440 Passenger Cars off road

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Equivalent Impact forProgram Term

• 825 planted acres of trees

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Bill Gran
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FranklinRegional Council of Governments

• Getting Started

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Municipalities Estimated Financing Potential
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Population of Participating Towns
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Chronology of FRCOGs Performance Contracting
Process

• April 26, 2007 DOER Seminar
• July 26, 2007 Presentation to FRCOG Governing
  Council.
• September 13, 2007 STAM Performance Contracting
  Presentation
• September 25, 2007 FRCOG Performance Contracting
  Presentation
• November 1, 2007 FRCOG Meeting
• RFQ Finalized.
• December 19, 2007 RFQ Advertized
• January 9, 2008 FRCOG ESCO Meeting.
• February 8, 2008 ESCO responses to RFQ due.

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Informational Flier

• What is Energy Saving Performance Contracting?
• Statutory Basis
• What kinds of improvements are allowed?
• Contract Scope and Duration
• Financing
• Guaranteed Savings

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Statement of Interest Form

• At the FRCOG Council meeting on July 26, Energy
  Saving Performance Contracting was presented as
  an opportunity for our member municipalities to
  make energy saving improvements to their
  facilities, including schools, without the need
  to take on any debt. The improvements can be
  paid for by the guaranteed savings resulting from
  the energy saving improvements, and the savings
  are guaranteed by the Energy Service Company
  (ESCO) selected to perform the work. See reverse
  side for a brief summary of the program.
• If your town is interested exploring this
  opportunity, please sign this form and return to
  the FRCOG at 425 Main Street, Suite 20,
  Greenfield, MA 01301 or email to wgran_at_frcog.org.
• Yes we are interested in Energy Saving
  Performance Contracting.
• ________________________________
• Name of Municipality
• ________________________________
• Signature of Municipal Official

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ANNUAL FACILITY ENERGY COST USE FORMS
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Participating Municipalities
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Participating RSDs
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Municipalities Total Energy Costs
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RSD Schools Total Energy Costs
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Municipalities Estimated Financing Potential
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Regional School Districts Estimated Financing
Potential
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Total of all Municipalities RSDs
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Questions