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Energy service companies (ESCOs) can help school districts improve their buildings without putting more demands on capital budgets.

The following Navitas article was published by the Association of School Business Officials International (asbointl.org) in their December 2021 edition of “School Business Affairs”. It also appears on the Missouri Association of School Business Officials (MoASBO) website.

It’s a hot, humid August morning at Center School District in Kansas City, Missouri. Teachers and students aren’t expected to arrive for another week.

Still, the district’s energy specialist, Nicole Williams, has been on-site working around the clock to make sure the district’s heating, ventilating, and air-conditioning (HVAC) systems are tuned up and ready for the new school year.

“With the district opening back up this year, we want to make sure that we’re providing the best learning environment for our students and teachers. Classroom comfort is a large part of that,” she says.

As Williams walks the halls at the high school, she uses her phone to check the district’s new building automation system (BAS) to pinpoint trouble spots. She explains: “The BAS is a wonderful tool. It has allowed us to manage classroom comfort while also reducing our energy consumption by almost half.”

The BAS was installed as part of a larger energy savings performance contract that allowed the Center School District to install energy conservation measures and make much-needed improvements to its aging buildings.

Deferred maintenance in school districts is common because of the difficulty in finding funding to meet all their infrastructure needs. The unfortunate consequence is that the deferred maintenance will affect the quality of the learning environment for students and staff.

ESCO Basics

One way to improve school buildings without putting more demands on capital budgets is to use an energy service company, or ESCO. An ESCO is a project developer that guarantees energy savings to organizations through a comprehensive array of energy efficiency opportunities, including HVAC, weatherization, building automation systems, and lighting by retrofitting the organization’s inefficient and costly equipment.

The work is detailed in an energy savings performance contract (ESPC). The ESPC process is transparent, collaborative, and flexible and allows all stakeholders to reach a consensus. Energy savings come about through the ESCO’s exhaustive analysis of the organization’s existing facility conditions and equipment to implement energy efficiency measures sufficient to cover the project’s debt service.

Energy Savings and More

Yolanda Cargile is the superintendent of the Center School District. The partnership between her district and an ESCO, which began before her tenure, helps the district financially today and the students today and in the future.

“Prior to my arrival at Center, we needed new roofs and other facility improvements. Rather than ask the voters to include these energy savings–related projects in an upcoming $48 million bond issue, the district decided to use an ESCO to help generate internal savings to fund the improvements,” she explains. “We ended up with $55 million of improvements at no additional cost to the taxpayer. It was a worthwhile experience.”

By working with the ESCO, Center School District could complete all its building improvements. In addition, the district added energy conservation measures that will provide energy cost savings and reduce the district’s operations and maintenance costs.

The U.S. Department of Energy maintains a qualifications process for ESCOs that provide energy savings performance contracts to their clients. The department has created a rigorous annual qualification process for firms that want to be included on its list of qualified ESCOs. Those approved are allowed to compete for federal and other ESPCs. (Access the list at www.energy.gov/eere/femp/energy-service-companies)

In most instances, an investment-grade audit is required as part of the energy savings performance contract. This audit quantifies the existing deficiencies within the school district’s facilities and identifies the measures necessary to remedy those deficiencies. It is usually performed by the prospective ESCO and details the course of action the ESCO will take to deliver guar- anteed results for the school district.

What to Ask

What questions should a school district ask potential ESCO partners about their energy savings performance contract? Because ESPCs guarantee measurable savings and equipment performance over time, the district needs to know that every dollar paid to the contractor at least offsets, if not returns, additional dollars of savings measured in energy reduction and equipment life. Although risks can never be eliminated from any business venture, the school board must know that the ESPC has considered known risks and offers mitigation plans for each. The process of measurement and verification shifts consequences of underperformance to the contractor through the performance guarantee.

Another question districts should ask relates to the type and depth of training the ESCO provides for district employees. A good ESCO will offer equipment training and guidance for district staff on how to minimize energy consumption and extend equipment life.

Finally, the district should ask for a list of references of other district customers.

In the Long Run

Depending on the terms negotiated in the energy savings performance contract, the ESCO may supply ongoing annual performance reports detailing the utility cost avoidance for the district. These reports often provide granular details on each facility in the district, including greenhouse gas reductions.

Once the district’s facility and maintenance staff have been trained in the efficient operation of the HVAC equipment, staff attention turns to other pressing district tasks. Without dedicated ESCO attention, the performance of the HVAC equipment can begin to decline through unintended neglect. Often, the energy savings performance contract will call for ongoing review of the HVAC equipment by the ESCO to ensure optimal performance and notify the customer when apparent mechanical issues may hinder the equipment’s full performance.

Lastly, but perhaps most important, the ESCO should foster a culture of energy conservation in the district among staff and students through formal and informal news reports on changes within the organization’s energy consumption.
In response to the changing climate, everyone must be educated on their responsibility in school and at home to reduce fossil fuel consumption for the benefit of future generations.

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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

Essential maintenance and capital improvements are chronically underfunded in our school buildings across the United States, leaving school leaders to make difficult decisions on what to prioritize in terms of school building updates. In this article, we will heavily draw on information provided in a recently released report by The 21st Century Fund, The International Well Building Institute and The National Council on School Facilities. This report dives into the importance of comfortable environments for our students, teachers, administrators and staff, along with information on how much we currently spend on our school facilities and what we should be spending.

The report calls out three aspects of public education and school facilities that are important:

• Education is a social enterprise that depends on buildings and grounds where staff, students and community come together
• The economy depends on universal elementary and secondary public education for workforce participation and productivity
• Longstanding deficiencies in public school facilities pose health risks for students, staff, and families, particularly in low wealth communities.

As such, we should be prioritizing funding to education and to our buildings, but we have fallen short of that in the last 10+ years. In 2016 it was found that there was a $46 billion annual gap in the level of funding for maintenance, operation, and periodic capital improvements needed for good stewardship of schools in the US. Since then, that gap has increased. Now, in 2021, while we spend $110 billion in educational facilities, we are still short $85 billion every year, meaning that deficiencies are growing in our educational spaces.

The following graph depicts the percentage of buildings that are in need of updates or replacements. Each bar represents the estimated percentage of public school districts in which at least half of the schools need updates or replacements of selected school building systems and features.

In the last 10 years of working in Missouri schools, we can corroborate this finding. We often find buildings that have heating and air conditioning systems that are 20 years old or older. Most of these types of systems have an expected life of 15 years. So, in most school districts, facility staff have at least one building that equipment is past it’s useful life and is likely struggling to maintain a comfortable learning environment with old and ineffective equipment.

In spite of these somewhat ominous findings, we observe in our visits throughout the state that business officials, school boards, facility directors, and facility staff do everything possible with the funding available. Our purpose of this article is to share a potential strategy to overcome funding shortages chronic shortage of school business officials have at their disposal.

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.

We typically see school districts save between 20%-30% on their utility bills when implementing these types of energy projects. Whether your utility bill is $100,000 per year or over $1,000,000 per year, reductions in energy consumption could fund building improvement projects that would begin to answer the call to action posed by the National Council on School Facilities.

For additional resources on this subject, please visit the NAESCO (National Association of Energy Services Companies) www.naesco.org. Additionally, for access to the State of our Schools report, visit https://www.wellcertified.com/state-of-our-schools.

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About the author – Ryan Terry is a business development manager with Navitas. His
background as a professional engineer and 15 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.