When Updating Your Building, Consider Performance Contracting

As discussed in my colleague’s last post, when considering sustainability standards such as LEED, measuring and verifying your energy use is a key component to meeting many of the required specifications. Before you get to the measurement and verification (M&V) part though, energy conservation measures need to be put in place to help achieve your goals. As many organizations are faced with doing more on a smaller budget, the idea of purchasing new equipment may seem out of the question.

If you’re faced with this dilemma, energy saving performance contracting (ESPC) could be your solution.

By implementing an ESPC, you will be able to leverage the flexibility and resources of the private sector to pay for energy saving capital upgrades using the future energy savings. The initial capital investment required to do the work is provided by the private financial community and the actual services, such as energy equipment retrofits, are delivered by energy services companies (ESCOs).

The financier is paid out of the accrued energy savings, with the ESCO guaranteeing a certain level of savings or performance. By partnering with industry professionals, you gain the perspective and resources to implement intelligent management systems that improve the efficiency of your buildings and simplify the work for your maintenance professionals.

With an ESPC, facility managers can bundle a variety of capital upgrades into one project, creating a significant guaranteed annuity that is financed over a ten- to 20-year period. Energy retrofits can easily achieve up to 30 percent energy savings and generate operational and environmental savings, while reducing carbon emissions and pollution.

Also as noted, measurement is key to capturing your results and generating savings. This is where an M&V strategy is important for assuring that projected savings occur, to identify opportunities that might impact greater efficiency, and as a means for quantifying and reporting emission reductions.

M&V Methodology

Energy savings can be collectively measured using whole-facility (utility meter) methods or through a series of individual retrofit isolation methods. As part of an ESPC, organizations can evaluate the nature of the program and develop a solution that properly balances the reduction in savings uncertainty and the cost to achieve that reduction.

Individual retrofit isolation approaches have the potential to remove most uncertainty, but without the proper measurement equipment in place, these approaches often only demonstrate the savings available from the fully functioning conservation measure. Whole-facility approaches are best at capturing the interactive effects of an energy management program and are more cost effective for long-term measurements. However, if whole-facility analysis is used on its own, only changes in performance that can erode savings are noticed, while the actual source of erosion is left unidentified. Additional analysis is required to pinpoint the cause in order to remedy the savings loss.

A well-rounded measurement and verification plan also includes performance monitoring. Measurements shouldn’t be limited to determining the magnitude of the achieved savings, but also should be used to identify degradation in performance. A system that identifies the time-frame and quantity of energy used can be your most valuable resource. These monitoring systems help ensure consistent savings and allow for more efficient use of maintenance and operation personnel’s time.

Measurement, to determine the savings, and monitoring, to identify performance of the leading indicators of savings, are essential to the success of your ESPC program. Failing to meet the energy savings goals of any program is costly, but those problems can double in an ESPC, as unrealized savings must still be paid to the utility company, and depending on the cause of the shortfall, must still be paid to the financier. Your partnership with the ESCO is critical to avoiding this unfortunate scenario. When sufficient measurement and monitoring is part of the program, the risks decrease dramatically.

If you are contemplating becoming LEED certified or are looking to implement other sustainability standards, measurement and verification of energy use is an essential step in ensuring compliance. If purchasing new equipment isn’t possible, an ESPC will help you generate the expected savings of the program, and provide the insight you need to identify further opportunities for cost-effective energy savings.

Robert Davidson is an energy performance specialist with Schneider Electric.

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