Peter Hildebrandt 2015-07-22 17:36:52
Energy efficiency is an integral part of sustainable energy strategies. Implementing a comprehensive energy efficiency reference project that pays for itself through the resulting energy savings can be a complex undertaking. The idea of an energy savings business goes back to the energy crisis of the late ’70s. Combating energy costs suddenly was important to businesses and consumers. An early example was the Texas firm, Time Energy, which introduced a device to automate the switching of lights and other instrumentation to modulate energy use. The reason the product did not initially sell was because potential users doubted that the savings would really happen. To fight this uncertainty, the company came up with installing the device upfront and asking for a percentage of the savings accumulating. The result was the basis for the ESCO (energy service company) model. Through this process, the company achieved higher sales, and more return since the savings were large. Industry Catches On During ’70s, ’80s, and Beyond As more entrepreneurs watched this market grow, more companies popped up. Early ESCOs often consisted of small divisions of large energy companies or small, startup, independent companies. But as the energy crisis became an unpleasant memory and the cost of energy went down again, companies in turn had less leverage on potential clients to execute energy-saving projects. The industry grew slowly through the ’70s and ’80s, urged by specialist firms such as Hospital Efficiency Corporation (HEC Inc.), established in 1982 to focus on the energy intensive medical sector. HEC Inc., later renamed Select Energy Services, was acquired in 1990 by Northeast Utilities, and sold in 2006 to Ameresco. With the rise of the cost of energy in the ’90s and the accessibility of efficiency technologies in lighting, HVAC, and building energy management, ESCO projects experienced a rebirth. The term ESCO has also become more widely known among potential clients looking to upgrade their building systems that are either outdated and need to be replaced, or for campus and district energy plant renovations. Deregulation in the US energy markets in turn let energy services businesses experience a rapid rise. Utilities, which for decades enjoyed the shelter of monopolies with guaranteed returns on power plant investments, now had to compete to supply power to many of their largest customers. They began to look to energy services as a potential new business line to retain their existing large customers. Also, with the new opportunities on the supply side, many ESCOs started to expand into the generation market, building district power plants or including cogeneration facilities within efficiency projects. ESCOs in this country grew by 22% in 2006, reaching approximately $3.6 billion. How Are Most Buildings Functioning? Most buildings and facilities exhibit obstacles and limitations with respect to energy conservation and optimum maintenance. US Federal studies show that major and minor building systems routinely fail to meet performance expectations, and these faults often go unnoticed over time. The functions of a building, the number of tenants, and the configuration of the space change over time in unanticipated manners that adversely affect the systems that control building performance. Surprisingly, almost all buildings, building complexes, and systems within buildings still operate in a disconnected, standalone manner. Proprietary systems result in buildings that needlessly waste energy. Recent studies have found that roughly 30% of LEED-certified buildings perform substantially better than anticipated, while 25% perform substantially worse than anticipated. In general, LEED certified buildings perform 25–30% better than non-LEED certified buildings with regards to energy use. It is ultimately difficult or impossible for customers to construct a single integrated picture that correlates energy usage and maintenance costs to control system performance, space usage, conservation measures, and the behavior of those using the facility space. A more recent development is the concept of combining the benefits of performance contracting with the benefits of green buildings, affectionately described as green performance contracting. The reason the concept makes sense is because for green buildings, the costliest prerequisites to meet are usually the energy efficiency requirements. The LEED rating system requires buildings to be benchmarked using the EPA EnergyStar system. The minimum score to meet the LEED prerequisites is a score of 75 or greater (meaning the building is in the top 75 percentile of benchmarked buildings). Since performance contracting attempts to find all the sources of energy waste, then a building that has gone through the performance contracting process should meet the LEED prerequisite. Green performance contracting can be used to achieve sustainability goals in new building design and construction as well as in existing buildings. In new buildings higher-efficiency choices are compared to the modeled performance of the as-designed less-efficient building. Applying performance contracting to buildings being designed and built is the perfect cure for pressure to “value engineer” the efficiency and sustainability out of new buildings as they are designed. In new buildings, performance contracting bridges the gap between the first-cost and life-cycle cost perspectives by using long-term energy savings to pay for the incremental first-cost of high-efficiency measures. Green performance contracting in existing buildings provides a mechanism for implementing and financing the building’s efficiency and sustainability upgrades, including improved operations. Achieving sustainable building performance in existing buildings can be done at reasonable costs. If needed, system or building upgrades can be spread out over time and implemented when capital dollars become available. Green performance contracting provides comprehensive integrated solutions to a wide variety of building, site, and infrastructure improvements. Leading the Quest for Trusted Sustainability Ameresco is a leading energy efficiency and renewable energy company. Founded in 2000, Ameresco is at the forefront of the industry as an independent provider of comprehensive services, energy efficiency, infrastructure upgrades, asset sustainability, and renewable energy solutions for businesses and organizations throughout North America and Europe. Ameresco’s sustainability services include upgrades to a facility’s energy infrastructure and the development, construction and operation of renewable energy plants. The company develops tailored energy management solutions for customers across a wide variety of industries, including the commercial; industrial; local, state and Federal government; K–12 education; higher education; health care; and public housing sectors. Ameresco performs custom, property-wide audits to uncover areas for cost savings from energy efficiency, renewable energy, and energy management. The company helps customers identify how they use energy, and then provides a comprehensive approach to meet their energy saving goals, energy management challenges, and sustainability objectives. It also advises organizations on how to use energy cost savings to finance energy efficiency and renewable energy projects. Leveraging budget-neutral solutions like energy savings performance contracts (ESPCs), where the energy project upgrades are paid for by a portion of the cost savings resulting from these improvements over a set term, and power purchase agreements (PPAs), Ameresco helps eliminate the financial barriers that traditionally hamper energy efficiency and renewable energy projects for customers. By entering into an ESPC or PPA, customers can reduce their energy costs and modernize their energy infrastructure. At the end of the ESPC, the customer owns all of the improvements and receives all of the continuing savings that can be used for other capital expenditures. PPAs provide energy security and help to stabilize energy prices in both regulated and deregulated environments. With the up-front costs covered through the ESPC, energy efficiency solutions can include energy conservation measures such as lighting (such as upgrades to LEDs), window and HVAC replacements, installation of new boilers, chillers and onsite cogeneration equipment, and the latest energy management systems. Ameresco also is a leading developer of renewable energy projects, ranging from onsite biogas, solar, geothermal, to combined heat and power (CHP) and distributed generation through biomass and landfill-gas-to-energy plants. In addition, Ameresco works between demand side customers and utility companies to manage energy price risk, procure or sell back renewable energy, and automate invoice management. “Ameresco’s comprehensive energy efficiency and renewable energy solutions are addressing a wide-range of customer energy needs from conservation and efficiency to renewable energy generation and overall sustainability, adding tremendous value for customers. This is an exciting time, especially as technology continues to evolve and innovate,” adds George Sakellaris, president and CEO of Amersco. With its corporate headquarters in Framingham, MA, Ameresco has more than 1,000 employees providing local expertise to customers in the United States, Canada, and the United Kingdom. Organization Dedicated and Committed to ESCOs For NAESCO, (National Association of Energy Service Companies)—a national trade association—promoting the widespread use of energy efficiency is the main objective. The organization’s member companies use a delivery mechanism called performance contracting as their primary conveyance mechanism to assist customers in generating energy savings. Under performance contracting, ESCOs come in to a facility and analyze where there is wasted energy. ESCOs evaluate what can be done to make the building more efficient, assess how the comprehensive use of multiple technologies can optimize the maximum amount of energy savings, install energy efficient and renewable technologies, and, in many cases, operate and maintain the equipment over the life of the contract. ESCOs guarantee to their customers that there will be a certain level of savings, which covers the debt service to pay for the technologies installed. In nearly all cases, there is additional energy savings beyond the guaranteed savings amount. The LEED program uses energy as one of the components of its program; they also use other components such as flooring, roofing, and other measures that may not necessarily be in an energy performance contract. Since its inception in 1983, NAESCO has sought to educate customers and policy makers about the host of benefits that are associated with a comprehensive energy efficiency retrofit undertaken through a performance contract. There is legislation in all the states, which permits performance contracting by public facilities, and there is an active energy service performance contracting program at federal facilities. “Over time, the magnitude of the energy savings created by our member companies continues to grow,” explains Terry E. Singer, Executive Director of NAESCO. “To encourage best practices in the industry, NAESCO has an independent ombudsman as well as a rigorous accreditation program which reviews companies’ technical and managerial capabilities and examines the many elements involved in developing, installing, and operating projects. The accreditation program committee also seeks multiple customer references as part of the review. “The accreditation review is done by third parties who are unaffiliated with any of the companies under consideration.” In general, NAESCO members—because they have chosen to belong to a national association—tend to be companies that have a long operating track record in the industry. There is little chance that the goal of energy efficiency will become obsolete soon. “There remains so much available energy efficiency still to be harvested in the majority of buildings in the United States,” adds Singer. “Over three billion dollars have been invested in energy efficiency in federal buildings nationwide since 1992 and that covers roughly only 25% of federal buildings.” Most of the work done by ESCOs belonging to NAESCO is done in institutional and commercial buildings including schools, universities, hospitals, correctional facilities, state and federal office buildings, and military facilities, with a subset of companies specializing in public housing. Standalone homes are challenging to reach through a performance contract because of the transaction costs associated with a performance contract although some of NAESCO members do specialize in the hard to reach residential market, according to Singer. “Energy efficiency in many instances is related to water conservation and increasingly energy retrofits are including a water efficiency component.” NAESCO member companies have been in the vanguard of creating energy efficiency savings, some five billion dollars annually.” What Can Occur When a Company Changes Focus Trane is one of many companies that are ESCOs. Trane’s heritage has been in HVAC work for the most part. But their Trane Building Advantage is their new sub-brand for energy services. Engineers, project developers, and a variety of energy experts help develop and operate equipment for a customer’s building. Trane is now a major energy services company, delivering building advantages. Other companies very actively involved include such firms as Johnson Control, Siemens, Schneider Electric, and Ameresco. Among Trane’s main goals is to support energy efficiency in building. Buildings make up some 40% of the energy consumption in North America; the ability of ESCOs to reduce energy usage is substantial, according to Jason Bingham, vice president for Energy Services and Control. Such reductions can be between 10 and 30%. “Also, there are some concerns among utility companies about consumption rather than conservation. Consumption of energy is actually not going up, so some utilities cannot afford themselves,” adds Bingham. “Unfortunately, you can find some states where they are starting to do away with energy efficiency legislation, deciding that’s not important. But that is one of the main reasons NAESCO exists, continuing to promote energy efficiency in buildings. “NAESCO is basically both a governing body and a clearinghouse of organizations that hold accountability as a goal, in addition to promoting energy efficiency. Their main work is performance contracting. This institute supports the industry but in that support it also holds the businesses involved accountable to the industry itself through accreditation. This is to make the sure ESCOs involved really are able deliver on their promises and hold themselves responsible to those results.” The other side of the mirror is the industry itself in advancing how important energy efficiency really ought to be. Trane has been doing work as an ESCO since the 1990s. They have solid maturity in such work, work that has evolved into a lot of other work such as in renewable energy, biomass, combined heat/power, and energy storage, according to Bingham. As things stand currently, the industry is in a state of flux. Therefore their goal is to not only impact the demand side of energy but the supply and generation side of things. “Trane has done performance contracting since the ’90s and has a very mature organization around that work. Our goal is to connect our customer buildings to their desired business results and get them outcomes that are substantial in saving energy. Energy is a cost that needs to be managed, and it’s the right thing to do for our environment. “Although there is a focus on energy, you want kids to learn in a healthy environment with a lot of oxygen, make sure they’re not getting sick and passing around germs. At some point things are less about savings and more about creating a healthy environment. If you look exclusively at energy you may just hurt the mission. Our goal is to provide expertise in energy savings and positive outcomes for our customer’s customer.” Customers should be happy. But so should the customers of a business being served. If Trane does that, according to Bingham, they truly have success. Revenues in turn will increase too. The company added the green color for the new sub-brand because they want people to realize there is something else involved with this firm. “Work needs to be done to restructure how companies help people live in this new energy world. Microgrids are in the future as are more options on the supply side. GE has new technology coming out and we are partnering with them to create Smart Buildings. Our Building Energy Management systems (BEMS) are already best in class.” “With these new BEMS dynamics every piece of data for a new building now goes to the cloud so companies such as Trane can see where energy is being consumed and work on ways to decrease consumption or use energy better. The learning curve with all of this new technology is changing dramatically so the expectations for advancements in the next three to five years are exciting. The future is very bright for buildings owners.” Good Fit for Learning Environment Aiken County Schools is the sixth largest school district in South Carolina with 25,000 students and 3,100 employees in 39 schools. The district sought to improve the learning environment in its schools, meet EPA standards for chlorofluorocarbons (CFCs) with its cooling equipment, and maximize its operational budget through energy efficient systems. Johnson Controls proposed a 15-year, $3.5 million performance contract to fund upgrades to classrooms and lighting fixtures, plus replace the aging chillers and cooling towers at three high schools. In the end this work resulted in some amazing improvements. Aiken County Schools will achieve $320,000 annual savings for the district's bottom line. These advances will cut down on the county's schools’ energy consumption by 12%, saving the district $320,000 per year. The improved temperature and humidity control and light levels create a better learning environment for students and teachers, and the new cooling equipment meets EPA standards for CFCs—and all of this accomplished without relying on taxpayer funds, in a region and state in the country known for budgeting as little as possible for education. Guaranteed Energy Consumption Savings From a Big Player Siemens Guaranteed Performance-based Solutions allow facility and capital improvements to be made and funded through the energy savings of interested facilities. The firm formulates, designs and implements customized solutions that reduce operating expenses, while providing the additional value of new, energy-efficient, environmentally responsible equipment. This happens through these efforts and with some of these beneficial side effects: facility investments paid for through energy savings, professional energy management, improved occupant comfort, single source accountability, high-performance, sustainable buildings, and state-of-the-art equipment upgrades. Siemens includes a guarantee, which ensures energy consumption savings throughout the contract period. If the agreed upon energy goals are not met, Siemens pays the shortfall. If energy savings surpass the guarantee goals, customers receive 100% of the excess savings. Peter Hildebrandt writes extensively on engineering and scientific subjects.
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