Energy Performance Contracts for Public Schools
As we embark on a significant and transformative capital project for North Shore Schools, while in parallel an equally transformative energy performance contract project, it reminds me of an article I authored on this topic last year and posted on my LinkedIn page.
With a singular focus on the goals and objectives of the District, MEMASI and our energy performance contract (EPC) partner Ecosystem did a lot of digging through buildings, number crunching, analysis and technical collaboration to develop an energy performance project that has rarely been accomplished in the public school market – add air conditioning to classrooms, offset that energy increase with energy savings, reduce district-wide energy consumption, optimize the health, well-being and comfort of students and faculty, and do it all without the taxpayers or District paying for it.
Now that we are finalizing the project scope and entering the design phase of the EPC, we look forward to realizing the fruits of our labor while creating an energy project model that can be implemented by other progressive school districts.
I hope you find this brief article informative. If you would like more information on how an EPC can benefit your district, or if you’d like us to assess your district to develop a potential project plan, please reach out to us.
- Daryl
The common problem with EPCs:
While EPCs allow school districts to complete energy savings projects with little or no up-front expenditures, knowing the common pitfalls and how to best avoid them is critical to a successful project. All too often, EPCs are developed by contractors or equipment suppliers with little knowledge of the facilities, resulting in energy savings that are estimated or speculative. EPCs often proceed as though one building system has no influence over another. For example, a lighting company advocates for LED lighting, an HVAC company pushes for more efficient equipment and controls, and a solar company only knows photovoltaics. So, who makes it clear that the level of investment in one will directly affect the level of investment needed in the other, and who ensures all of these new systems work together?
The results of these EPCs are typically independently designed and implemented conservation measures without real measured savings to the benefit of the district. And if executed during the same time as a capital project, conflicts and coordination issues typically arise.
The correct approach to EPCs:
Our approach is one where the scope is developed, designed, financed, implemented, measured and verified in close collaboration with a single energy services company (ESCO), a process sometimes called Integrated Energy Performance Contracting (IEPC).
A proper EPC avoids compartmentalization by taking a whole-building and/or district-wide approach. Our collaborative process with the district focuses on integrated, well-planned solutions rather than one-for-one replacements. We ensure that all concurrent projects are in sync, optimize debt, and generate cash flows when necessary.
How to maximize the value of an EPC:
1. Focus on deep engineering-driven retrofits
We implement engineering-driven EPCs by partnering with companies that specialize in value optimization and offer in-house design capabilities that complement ours. This synergy maximizes energy savings for our clients.
2. Vendor neutrality is key to finding the best fit solution
Our cost optimization approach stems from vendor neutrality; we work only with leading suppliers who best fit each client’s unique needs. Suppliers are introduced to the process only post-project concept and audit, and not when developing scope. This allows us complete flexibility in selecting the most appropriate equipment for each client’s unique needs, without constraints or vested interests.
3. Eliminate silos through integration
One of the key principles to a successful EPC is the elimination of silos between design and construction. All stakeholders, including the construction team, are involved from the onset of the project to maintain aligned interests. Comprehensive designs and cost estimates are developed sooner and can be modified throughout the project for greater optimization, generating increased savings and overall financial performance.
4. Maximize cash flow and debt optimization
We suggest only energy conservation measures that yield significant value. We develop projects focused on maximum financial efficiency; solutions that will address the client’s needs with the lowest construction dollars and highest energy savings.
5. Risk-free contracting benefits you, not the ESCO
EPC contracts should be agile and customer-centric to take the risk away from our clients. If we don’t attain agreed upon financial or performance objectives on savings, costs or timeline, the ESCO pays the difference. We ensure that the performance metrics benefit the client and not the ESCO, generating maximum scope or cash flow depending on the client’s criteria.
6. Performance-based compensation equals higher savings
Payment is tied to performance and actual energy savings. The possibility of achieving higher savings with lower construction costs inspires the project team to invest more time and effort and to be creative in designing the most efficient project possible. The resulting excess savings can be shared amongst the stakeholders.
7. Real energy savings measured through utility bills
Post-implementation energy savings are measured and verified through savings in actual utility bills. The measured savings are used to develop our contractual guarantees. The result is a project that is contractually binding to an annual dollar amount, and not stipulated calculations. Ultimately, the utility meter is the judge.