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Energy-Savings Performance Contracting to Address Aging Infrastructure

This article originally appeared in the November 2022 issue of School Business Affairs magazine. Click here to download a PDF of the article.

Jefferson City is the capital of Missouri and home to the Jefferson City School District. The school district serves nearly 9,000 students in 16 school buildings. Like many school districts, Jefferson City is faced with aging facilities, rising utility costs, and limited financial resources.

When school district patrons passed a general obligation bond issue to build a second high school and renovate their existing high school, available bond dollars were allocated to the two high school projects. However, the district did not have a clear mechanism to fund the improvements needed in other aging facilities.

Frank Underwood, Jefferson City School District’s director of facilities, safety, transportation, and security, was faced with the challenge of how to maintain and update the school district’s remaining 14 facilities when new general obligation bonds were targeted toward the high school projects.

Underwood wanted to find ways to increase discretionary dollars available to his department by leveraging money already being spent on electricity, gas, and water to finance the needed upgrades and repairs. He saw performance contracting as a potential avenue to make that happen.

By partnering with an energy service company (ESCO), the district entered into an energy-savings performance contract to generate funds for additional improvements in the remaining school sites.

What Is an Energy-Savings Performance Contract?

An energy-savings performance contract (ESPC) uses guaranteed savings from the maintenance, operations, and utilities budget to upgrade and modernize a building’s environmental systems, which are then financed over a specified time.

By partnering with an ESCO, school districts can use ESPCs to improve the energy performance of their buildings, thereby enhancing building operations and saving energy.

ESCOs are project developers; they integrate the project’s design, financing, installation, and operational elements and typically offer turnkey installation ser- vices. The primary differentiator between an ESCO and other energy-efficiency contractors is the guarantee of energy savings, which is specified as part of the terms of an ESPC.

With an ESPC, the school district repays the money borrowed to finance the project, usually over several years, using the energy cost savings generated from the project.

The ESCO monitors the performance of the project for the life of the contract and verifies the resulting energy savings. In some cases, the ESCO may also operate and maintain the new equipment and systems.

Benefits of Hiring an ESCO

Hiring an ESCO is a proven strategy for identifying and implementing energy-saving capital improvements, while managing risks inherent in such projects.

ESCOs can provide a range of services, from an energy audit to a third party–financed turnkey project, with a comprehensive set of measures and guaranteed energy savings. Their specialty is the energy-savings performance contract that shifts some of the project’s performance risk to the ESCO in exchange for allowing the ESCO to capture a share of the savings.

The following are key benefits of working with ESCOs:

  • Effective building performance
  • Options for project financing and risk management
  • Access to professional expertise
  • New equipment
  • Training with little to no up-front cost

The ESPC can apply to an individual building or an entire campus.

The Jefferson City School District Project

The Jefferson City School District completed a request for qualifications process to select and hire an ESCO. The selected ESCO was engaged to perform an investment-grade audit to identify critical facility issues and develop energy conservation and facility improvement measures to address them.

The school district was able to complete the following projects through the ESPC:

  • Upgrade the interior lighting with energy-efficient LED lamps and fixtures
  • Upgrade heating, ventilating, and air-conditioning (HVAC) equipment
  • Coordinate building automation systems
  • Replace water-source heat pumps
  • Implement water conservation measures
  • Weatherize buildings
  • Optimize building performance through data analytics

Underwood explains, “Without using general obligation bond dollars, the district was able to fund $16 million in improvements by utilizing a guaranteed energy-savings performance contract and reallocating dollars made available through the [Elementary and Secondary School Emergency Relief] funding.”

By implementing this project, Jefferson City School District will save an estimated $10.8 million over the 15-year term of the ESPC.

The Jefferson City School District project improved the environment with the annual reduced emission of an estim

ated 6,015,994 pounds of carbon dioxide, a harmful greenhouse gas. That emission reduction is equivalent to preserving 20 acres of forest from deforestation or conserving 308,525 gallons of gasoline.

The school district also qualified for a $586,000 rebate from Ameren, its electric services provider. In April 2022, Ameren recognized the school district for its efforts with its Energy Efficiency Champion Award for conserving resources by upgrading its HVAC systems.

To learn more about ESPCs, visit the National Association of Energy Service Companies website at www.naesco.org.

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

This article originally appeared in the November 2022 issue of School Business Affairs magazine and is reprinted with permission of the Association of School Business Officials International (www.asbointl.org). The text herein does not necessarily represent the views or policies of ASBO International, and use of this imprint does not imply any endorsement or recognition by ASBO International and its officers or affiliates.

Missouri DNR Energy Audit Reimbursement Program

The Missouri Department of Natural Resources (DNR) has recently made a new program available for Missouri public entities. It is the Energy Audit Reimbursement Program (EARP), which will pay a reimbursement, up to $20,000, for the cost for an energy audit completed by a qualified energy professional.

There are only a couple of steps to get this process going, which I have outlined below. We also suggest that you take a couple of preliminary steps to set yourself up to take the best advantage of this program.

First, speak with a qualified, energy professional that can complete an energy audit. Talk with them about what you would like to accomplish with this energy audit. From what we’ve seen some public entities want the information to help them reduce utility consumption, but others want to address their aging infrastructure and use energy saving to help pay for those improvements.

Once the goal, or goals, of the energy audit is defined, the next step is to select a firm to complete the audit. The program requires that you select an energy auditor and that you be under contract with them to complete the audit.

A good choice is an Energy Services Company (ESCO). ESCOs are already set up to help public entities take advantage of this program. Not only will they be able to complete the energy audit, they are in a good position to give you ideas on how to save money and will also help you create a plan to implement the improvements in a cost-effective way.

The last step is to finalize your application for the Energy Audit Reimbursement program and submit it to the Missouri Department of Natural Resources. Your selected ESCO partner can assist with submitting it to the DNR.

This DNR program was designed to provide reimbursement for around 50 public entities. So, the funds are limited. At the current rate we see schools and other public entities applying for this program, we believe funding will run out in the spring of 2023.

Contact me at rterry@navitas.us.com, I would love to discuss if this audit reimbursement program can be a value to your operation!

About the author – Ryan Terry is Navitas’ Vice President of Business Development. His background as a professional engineer and 19 years of experience in the energy industry help him bring a practical approach to developing strategies for public sector clients who want guidance in how to initiate an energy conservation program in their facilities. He can be reached at rterry@navitas.us.com.

Oak Grove R-VI School District – A Case Study

Originally posted on the Missouri Association of School Business Officials website

School administrators are always challenged with balancing building needs and capital project funds. One strategy school business officials have at their disposal is the Performance Contracting mechanism. Enabled by RSMO 8.231, this allows school districts to fund building projects out of energy savings, and often provides flexibility to address building needs outside of a bond issue. Alternatively, we have seen schools combine bond issues with an energy project through a Performance Contract to effectively extend the amount of work that can be accomplished through the bond issue. In this article we discuss how schools can potentially address lingering facility concerns that may have been delayed as school administrators have prioritized life and education during the Pandemic.

In Missouri, our schools consume $240,000,000 annually on energy to power our buildings. This equates to between $200-300 per student. Outside of salaries and benefits, energy costs are typically the second most costly item for a school district. We often see schools that are able to save between 20-35% on their energy bills through more efficient operation. These potential savings provide a huge potential for budget reductions or could be used to fund other needs throughout the district.

One school district that has effectively used this mechanism to help address building needs is the Oak Grove R-VI School District. As is often the case with schools, Oak Grove recognized they had far more needs than funds available. So, the District considered the implementation of a performance contract along with their bond issue. Through the performance contract, the district was projected to save over $3,000,000 in utilities over 15 years. This project focused on old and inefficient HVAC equipment and building automation systems throughout the district and was completely funded with energy and operational savings. This allowed the other part of the design team, the architect and construction manager, to focus on new square footage and other renovations to existing space. Ultimately, this process allowed the Oak Grove School District to effectively extend their bond dollars by 25% through financing part of their project through energy and operational savings!

The first year is showing great results from the projects implemented. The district saw a reduction of over $300,000 on their utility bills the first year of their program! This projects to over $4,500,000 of savings over 15 years the school can now re-direct to education programs and other facility challenges.

The example above with Oak Grove School District is one success story of many we see across the state. Effectively redirecting utility funds back into education is something we have found is a great success story for school boards and communities! While this mechanism is somewhat different than a typical design and construction process, it may have utility to you as you evaluate your building needs. An Energy Services Company (ESCO) can help you through the process of evaluation of utility bills and a preliminary evaluation of your buildings to help determine if this mechanism could be of value to your school district. If you are not familiar with an ESCO, you may start with NAESCO, the National Association of Energy Services Companies, where you can find active companies that might be able to help you in this effort to improve your buildings.

About the author – Ryan Terry is a business development manager with Navitas. His background as a professional engineer and 19 years of experience in the energy industry help him bring a practical approach to developing strategies for public sector clients who want guidance in how to initiate an energy conservation program in their facilities. He can be reached at rterry@navitas.us.com.

Thermostats Simplified

Thermostat

Key Objectives

  • Temperature control – maintain heating and cooling set points
  • Reduced utility expense – unoccupied / occupied modes
  • Accessibility and usability

As with most technologies, there are numerous varieties, makes, and models of thermostats. The point of this article is to identify their purpose, and effective strategies in a general sense. While commercial buildings typically have a wall sensor that accept a few user inputs and contain the “smarts” on a controller elsewhere, the occupant’s interaction with residential and commercial thermostats are often similar.

Temperature control through maintaining set points is a primary focus of thermostats.

The heating, ventilation, and air conditioning (HVAC) unit operates to maintain defined heating and cooling set point based on the information it receives from the thermostat. Desired set points lie outside the scope of this narrative, but it is worth noting that the topic has received a great deal of discussion throughout homes, facilities, and engineering design groups the world over. ASHRAE Standard 55: Thermal Environmental Conditions for Human Occupancy was developed by the American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) and addresses this topic, among others.

Typically, a heating set point, as well as a cooling set point, is defined within the stated standards of ASHRAE Standard 55. While these set points are aimed at satisfying most users, an adjustment range is typically included for some slight modifications. In other words, while these standards meet most of the population demands, an individual user may raise or lower the set point slightly to meet their preferences. Depending on the system type, the unit will likely switch between heating/cooling modes depending on indoor or outdoor conditions. Otherwise, the user selects the mode seasonally.

When the room temperature is outside the set point range, the unit reacts by heating or cooling the space. To avoid constant cycling of the unit on/off, the temperature is driven slightly past the set point before shutting down and allowed to drift slightly past it again before returning to heating/cooling.

Reducing utility expenses through unoccupied / occupied modes is another benefit of modern thermostats.

Reduced equipment wear/tear and energy consumption are also worth noting. As mentioned above, maintaining occupant comfortable is an important focus. Therefore, when the space is occupied, a tighter tolerance of set points is needed. Whereas when the space is unoccupied, it can be allowed to operate under a wider range of temperature conditions. Inanimate objects are largely unconcerned with the temperature (not withstanding exceptions of museums, specialized equipment storage, etc.). This approach reduces the stress and runtime on equipment substantially and is made possible through setting a schedule either online or at the thermostat itself.

Setting an “occupied” schedule is great, but what happens when a room inevitably becomes occupied without being scheduled? A local override on the thermostat allows the user to temporarily override the schedule for a timed duration. This allows the occupants to utilize the desired set points and then the system returns to unoccupied schedule thereafter.

Accessibility is key to achieving your heating, cooling, and ventilation goals.

The ability to conveniently set operating parameters around schedules and set points quickly and conveniently is critical. The feature to easily put the system into occupancy mode temporarily thermostat avoids the over/under scheduling. Without the override, occupants will be frustrated, or the space will run occupied while vacant more frequently. Offering a limited adjustment of set points at the thermostat provides greater occupant satisfaction without sacrificing equipment runtime and energy. Having the ability to view current conditions and make changes remotely is highly advantageous. Lastly, simplicity leads to greater results.

In summary, there are four main attributes of thermostats to be considered beyond accuracy, dependability, and functional needs of the equipment.

  • Indicator of occupied / unoccupied mode
  • Ability to temporarily override occupancy mode
  • Ability to adjust the set points up/down within a defined range
  • Web access

Zack FlageolleAbout the author – Zack Flageolle is Navitas’ Director of Optimization Services. His experience in planning, design, and construction has allowed him to gain a greater understanding of what makes a successful project. He provides leadership of our Optimization Services activities for our clients and is instrumental in ensuring the program is successful. He can be reached at zflageolle@navitas.us.com.

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