Originally posted December 11, 2019
The average age of school building in the United States is more than 50 years old. This means they were built before 1972. Older facilities require more effort to properly maintain them so that they can continue to serve the next generation of students.
Older buildings are also notoriously harder to heat and cool because of leaky windows, poor insulation, and aging and inefficient building systems. As such it is very common for K-12 facilities to waste millions of dollars in excess energy consumption without knowing it.
But the good news is that by actively working to cut utility costs, school districts can easily reap savings. These savings can then be used to help fund needed facility improvements.
One of the ways a school district can take advantage of this is through an Energy Savings Performance Contracting (ESPC). An ESPC is a budget-neutral approach to make building improvements that reduce energy and water use and increase operational efficiency.
By partnering with an energy service company (ESCO), school districts can use a guaranteed energy savings performance contract to pay for today’s facility upgrades with tomorrow’s energy savings; without tapping into capital budgets. Through the guaranteed savings program, the dollars that are paid out to utility companies can be reduced and the corresponding savings can help fund needed facility improvements.
The basic process for schools to move forward with an ESPC are:
- The school district decides to utilize the ESPC process and competitively selects an ESCO.
- The school district enters into a contract to the ESCO, who will conduct an energy audit of their facilities and develop an implementation proposal, which identifies potential energy conservation measures (ECMs). A wide variety of measures can be included in an ESPC project. Typical ECMs include upgrades to lighting, water control systems, HVAC units, windows, roofs and building automation systems. The ESCO will identify each potential measure and estimate the itemized cost and saving, but the bottom line is what determines which bundle of measures can be included in the ESPC project. Some measures with short payback periods (e.g., lighting) can offset those with longer payback period (e.g. boiler and chiller replacements or renewable energy systems) if they are bundled under one contract.
- The school District works with their municipal financial advisors or lending institutions to arrange for upfront financing. One of the most common financing for a government ESPC project is a municipal tax-exempt lease-purchase agreement where the school district will issue a certificate of participation (COP) with a lending authority. Districts should also consider internal financing or general obligation bonds and compare rates and benefits. Typically, approval is only required by the Board of Education and financing institution.
- The ESCO implements agreed-upon ECMs, then monitors energy savings success through measurement and verification.
ESPC projects can include one school facility, or all the facilities within the school district. The size and scope of project is governed by the savings opportunities in the facilities, the types of funding sources that can be applied, the minimum size project an ESCO is willing to manage, and the financing capability. Schools facilities are generally good candidates for ESPC projects, because with long-term ownership of the facilities, most state legislation allow for 15 to 20-year financing terms.
For additional information, check out the US Department of Energy, Office of Energy Efficiency and Renewable Energy
About the author – Paul Harrell is a business development manager with Navitas. His background as a Certified Public Accountant and 33 years of experience in the education sector help him bring a practical approach to developing strategies for school districts wanting guidance in how to manage their overall budget and utility costs. He can be reached at pharrell@navitas.us.com or 913-344-0049