By Kelly Biemer
Looking for a way to fund energy efficiency upgrades for your school, county or town without draining your budget? An energy savings agreement may be the answer.
Five West Virginia towns—Beckley, Clarksburg, Martinsburg, Morgantown and Wheeling—have undertaken energy efficiency upgrades that will save more than $550,000 in utility costs and 4,400 metric tons of CO2 emissions annually for the next 15 years. They are doing this without upfront capital or increased taxpayer costs, thanks to the help of a guaranteed energy savings agreement (GESA).
Guaranteed energy savings agreements are budget-neutral mechanisms for implementing energy efficiency projects. They enable organizations to fund the implementation of energy conservation measures based on the amount of utility savings that are guaranteed from the projects. No upfront capital is needed because the investment will be paid back over time, typically 10 to 15 years, from the reduced energy costs.
In recent years, states such as West Virginia, Pennsylvania and Ohio have enacted legislation that permit public entities, such as schools, counties or towns, to enter into energy savings contracts with a qualified energy service company (ESCO).
According to the National Association of Energy Services Companies (NAESCO), an energy services company is a business that develops, installs and arranges financing for projects designed to improve energy efficiency and maintenance costs over a period of seven to 20 years. An ESCO is also responsible for measuring and verifying a project’s energy savings and assuming the risk that the project will save the amount of money guaranteed.
How a GESA Works
Once an ESCO has been selected by the public entity through a competitive bidding process outlined in the individual state’s legislation, a detailed energy audit is conducted of an organization’s facilities and systems, as well as its utility costs. From that information, an audit report is developed that serves as the technical and economic basis for the GESA. The report identifies recommended energy conservation measures (ECMs), outlines a work plan and costs for implementing the ECMs and provides the projected energy consumption savings as a result of the implementation of those measures.
A GESA is typically used to implement upgrades to HVAC systems, boilers and chillers, interior lighting, street lighting and traffic signals. The GESA can also be used to install systems that help improve an organization’s energy efficiency such as building automation systems, occupancy sensors and water conservation measures. Building envelope upgrades to doors, windows and roofs are also sometimes included in a GESA, if there are enough savings to fund the improvements.
Energy efficient lighting and programmable thermostats are often the easiest and most cost effective upgrades an organization can undertake. According to the U.S. Environmental Protection Agency, approximately 25 to 30 percent of a building’s energy bill is for lighting. In addition, lighting upgrades are considered low-risk and typically have a greater than 25 percent (less than four-year) rate of return. Programmable thermostats can save 10 percent a year on heating and cooling bills just by turning back a thermostat 10 to 15 degrees for eight hours during un-occupied periods. Public sector buildings can achieve additional savings by cutting back heating and cooling for extended periods such as weekends or holidays.
Savings Guaranteed
Constellation Energy, headquartered in Baltimore, MD, has completed more than 4,000 energy efficiency projects across the United States, including those in these five West Virginia towns. While the savings generated from energy efficiency upgrades is unique to each project, on average customers can expect a 20 percent reduction in utility bills, according to Constellation Energy Project Manager Jeff Guttman.
“Not only are organizations saving in the form of reduced utility bills but they’re able to apply those savings to brick and mortar improvements or to install on-site renewable generation, such as solar, to further offset utility costs,” says Guttman. “Another benefit of energy efficiency upgrades is the reduced maintenance time and costs needed on new equipment and systems.”
In order to ensure that the energy conservation measures meet projected reductions in utility use, Constellation Energy conducts utility savings measurement and verification reports for their GESA customers. The cost for these evaluations are built into the GESA and covered by the guaranteed savings, ensuring the public entities will have evidence to confirm the savings are indeed occurring. The measurement and verification methods follow the federal standards that are universally accepted in the International Protocol for Measurement and Verification Performance. If the projected efficiencies are not met, the ESCO is then responsible to make up the guaranteed savings shortfall to the public entity. This ensures that the debt service would be funded by the energy and operational savings, part of the individual state’s energy legislation.
Results
In 2010, the City of Morgantown implemented conservation measures at its city hall, public safety building, parking garages, airport, ice rink and other city buildings. The city’s conservation measures included high efficiency lighting, automatic temperature controls, pipe insulation and a boiler upgrade. According to a preliminary assessment by the Morgantown Municipal Green Team, the city is on track to reduce electricity usage in these building’s by 10 to 20 percent.
“This is a positive step for our city in terms of energy saved and the benefits to taxpayers,” says Morgantown City Manager Terrence Moore. As a continuation of its GESA with Constellation Energy, Morgantown has additional energy efficiency upgrades planned for the city garage, library and municipal airport. “Working with our green energy committee, we have the opportunity to achieve even greater results,” he adds.
For the City of Clarksburg, the energy usage saved as part of its GESA has provided funding for needed upgrades to its city hall, public works building, central fire station and two parking garages. “A GESA has not only been a great opportunity for us to reduce our carbon footprint and save energy costs but it has allowed us to complete upgrades that otherwise wouldn’t have been possible,” explains Clarksburg City Manager Martin Howe.
In addition to the GESA, the city received a $79,000 grant from the U.S. Department of Energy to fund improvements and completed its energy efficiency upgrades in early 2011. Conservation measures include a new boiler and motion-activated light sensors in the city hall, new traffic signals and street lights that are 30 percent more efficient than the previous lighting. “The new induction street lights will also save maintenance costs,” says Howe. “There are fewer parts to replace, and the bulbs last for 15 to 20 years compared with two to three years.”
Forward Thinking
GESAs allow public entities to lock in energy savings for the long term and when designed properly can also provide a road map for additional energy conservation measures and opportunities for savings.
In addition to cost, the energy saved as a result of implementing the energy conservation measures also has a significant positive impact on the environment. Conservation measures help to avoid the release of carbon dioxide that is a by-product of electricity generation from non-renewable sources, as well as putting less strain on local water supplies by reducing use. In a time of doing more with less, that’s a priceless benefit now and for future generations.
