Using ESPC to Maximize

Energy Saving Goals

Prepared for
Environmental Business Council

Paul Popinchalk, PE Celtic Energy

 09/07/21

Environmental Scan
• Economic Downturn creating Economic
distress, staff & budget reductions
• Energy Costs variable, global upward pressure
• Environmental concerns increasing need to
reduce energy use
• US Energy use creating concerns with security
& reliability
• PA 11-80 promotes ESPC as mechanism for
efficiency & renewable energy use

Environmental Business Council 2

 09/07/21

What is ESPC?
• Energy Savings Performance Contracting
(ESPC) is an “innovative” method to
purchase energy efficiency, water, and O&M
improvements in buildings

• A “single” procurement is used to purchase a

complete package of services from an
“Energy Services Company” (ESCO) on an
open book basis (Design/Build done right)
• Self-Financing of the entire project so there
are no up front costs. Use Tax Exempt
Municipal Lease, not ESCO $
• ESPC can help improve indoor air quality
and work/learning environments, while
reducing energy costs

Environmental Business Council 3

 09/07/21
Potential Components of ESPC Project

Environmental Business Council 4

 09/07/21

ESPCs re-allocate current spending

NOT ADDED DEBT!!!

Reduce spending on:

– Wasted energy
– Maintenance of old, inefficient equipment
And reallocate the same spending to:
– New energy-using infrastructure
– Project financing costs
(mostly interest)
Will not degrade credit rating
No need to ask taxpayers for new $

Environmental Business Council 5

 09/07/21

Owner
Share Energy Owner
Cost
Utility Contractor Share
$ Bill Payment
Savings

Utility Utility
Bill Bill
Before ESPC During ESPC After ESPC
Contract Contract Contract

How Does It Work?

• Pay a lower utility bill
• Pay the contractor
• Achieve cost savings for the Owner

Environmental Business Council 6

 09/07/21

The Basic Cash Flow

Savings
Net Positive
$ Cash Flow

[Debt Service, M&V, and O&M Costs]

15
T (Time)
Environmental Business Council 7
 09/07/21

What makes ESPC Attractive?

• Guarantees for Performance, Savings, Costs, and O&M

• Multiple Financing Options – Treat Projects as Investments
• Comprehensive Energy Engineering
• Everything is Negotiable – Custom Fit for each Owner’s
Needs
• Open Book Pricing
• Cost of Construction Returned to Owner through
Conservation Savings
• Proven, Successful Practice since 1970s

Environmental Business Council 8

 09/07/21

Who are the Players?

Energy Service Company (ESCo):
– Identify and evaluate energy savings
opportunities
– Develop engineering design & specifications
– Manage project from design to installation
– Can arrange for financing
– Train Owner’s staff on O&M
– Guarantee project cost, performance & savings
– Provides long term O&M if desired by Owner
– Helpful Link: www.naesco.org

Environmental Business Council 9

 09/07/21

Who are the Players?

3rd Party Consultant
– Assist in development of RFP
– Evaluate ESCOs’ Proposals assist in
selection
– Facilitate accurate, comprehensive
Detailed Audit by ESCO
– Validate ESCO’s M&V, CX, O&M Plans
– Verify ESCO’s M&V, CX activities
– Review engineering design and
specifications
– Help Owner with contract negotiations
– Review Annual M&V reports for term

Environmental Business Council 10

 09/07/21
ESPC Benefits

Environmental Business Council 11

 09/07/21

Windham Public Schools

Willimantic, CT

• Cash strapped district with 9 older facilities.

• Major infrastructure upgrades; boilers, windows, etc.
• Solved chronic comfort and maintenance problems
(No need for parkas in class anymore!)
• Many standard measures, lighting, sensors, EMS
• Small Cogeneration at two schools allowed for
emergency shelter status
• CEI managing Performance Contract, $5.5
million at all schools, 13 year term

Environmental Business Council 12

 09/07/21
Who’s Doing ESPC?
USDOE - Transformational Energy Action Management (TEAM) Initiative
at dozens of its own facilities across the country featuring ESPC as
the main vehicle of achieving savings (CEI is managing projects at
HQ and Brookhaven Labs)
City of Stamford implementing a $6.1 million energy performance
contract in more than 20 schools (third party financing to pay to
improve energy efficiency and repaid with utility energy savings)
City of New Haven
– $6.1 million of leased improvements.
– $250,000 in utility rebates to offset capital cost.
– $8.64 million in energy, maintenance, parts and labor cost saved to date.
– $8.8 million savings guaranteed over the nine-year program.
Town of East Hartford – several million $ in ESPC, and QECBS
Town of Farmington just selected AMERESCO
Town of Cheshire developing ESCO RFP with CEI
Town of Colchester – just selected Honeywell with CEI
Town of Newtown – just selected CEI as Third Party Consultants

Environmental Business Council 13

 Thank you for your time...
QUESTIONS?

Paul Popinchalk, PE
LEED Accredited Professional
Certified Monitoring & Verification
Professional

Director of Engineering
Celtic Energy, Inc.

(860) 882-1515
paul@celticenergy.com
www.celticenergy.com

14
 09/07/21
Federal Research Center – White Oak

• Celtichired to do Quality Control over

ESPC with over $290 M in assets
• 60 MW gas fired turbines
• 20,000 tons of HE chillers
• Solar power array
• ECMs in buildings
•CEI pushed New Phase 3 to be:
•SmartGrid/PJM compliant
•Robust M&V and CX plans

Energy Savings Performance Contracting 15

 09/07/21

State of Rhode Island Energy Office

• State Administration Complex:
– Cannon Building
– Powers Building
– Chapin Laboratory Building
• Projects Include:
– Replace old HVAC, chillers, boilers
– Add campus wide HVAC controls
– Lighting retrofits and controls
– VFDs and premium efficiency motors
• Economics:
– Project Cost: $5.6 M
– Annual Savings: $534,000
– Utility Rebate: $234,000
– Contract Term: 13 years

Energy Savings Performance Contracting 16

 09/07/21

Isn’t Design/Bid/Build Cheaper?

• Yes, sometimes D/B/B is cheaper based on First Costs!
– Get what you pay for.
– Seldom are DBB designs optimized for efficiency, rarely
capture expected savings. AE firms are not trained for these
designs.
– V.E.V. = Value Engineering Victim (Typical of D/B/B, not
ESPC)
– CATNAP = Cheapest Available Technology Necessary to Avoid
Prosecution (Typical of D/B/B, not ESPC)
– ESPC allows you to select ECMs based on value and life cycle,
and not low bid!
– No guarantees beyond one year warranty period in DBB
– Rarely are systems commissioned

17
 09/07/21

US Department of Energy - HQ
• CEI Quality Assurance on ESPC
Project at DOE Headquarters -
Washington, DC
• Over $26 M of infrastructure projects
• Over $1.5M million in annual
energy/O&M savings
• ECMs include:
– High performance lighting
– Steam trap replacement/O&M
– VAV system conversion
– New HE central chiller plant
– Water conservation
• Annual Emissions Reductions (kg/yr):
– 3,600,000 CO2, 1,500 Nox, 115 kg SOx

Energy Savings Performance Contracting 18

 09/07/21

UNC Wilmington
• Hired Celtic Energy in January 2008
• Annual utilities cost $5M+, and growing
• New chilled water plant is under loaded
• Connected satellite cooling/heating plants
• Daylight harvesting/skylights
• Integrated multiple buildings into one web-
enabled, open protocol front end
• Replaced boilers, AHUs, chillers, windows
• CEI worked with Energy Office and UNCW to
modify and improve RFP
• Currently in construction
• $5M project, 20 year term

Energy Savings Performance Contracting 19