Water Online

March 2013

Water Innovations gives Water and Wastewater Engineers and end-users a venue to find project solutions and source valuable product information. We aim to educate the engineering and operations community on important issues and trends.

Issue link: http://wateronline.epubxp.com/i/110987

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Page 8 of 38

Energy Efficiency Figure 2. The ESPC process, step by step. projects and approach for implementation. service and is responsible for designing, implementing, and The ESPC approach includes a guarantee from the conmeasuring the results of an energy performance contract. tracted energy service company that the project will result in Utilities also use energy performance contracting to achieve a specified reduction in operations and maintenance (O&M) facility upgrades that they may not otherwise be able to juscosts over a contracted guarantee term. Cost savings may tify. The ESCO can help utilities identify projects with rapid result from reduced energy and chemical use and maintepayback and then use the resulting savings to fund additional nance costs. improvements with presumably lower or no payback. If the guaranteed savings are not realized as defined in the Black & Veatch and an ESCO partner are currently assistcontract, the ESCO pays the utility the shortfall amount. The ing the Upper Occoquan Service Authority (UOSA) in Fairfax guaranteed O&M savings can be used to finance the capital County, VA, with implementation of ECMs, including the project. Figure 1 shows how utilities can finance an efficiency installation of new biogas cogeneration facilities and replaceproject by shifting operational savings to debt service, with ment of two aeration blowers with high-speed turbo blowers excess savings available for other uses. to increase aeration efficiency. The ECMs were selected based The ESPC guarantee allows for greater on the owner���s goal of being cash-flow posiflexibility in financing method, reduces If the guaranteed tive from year one and achieving a maximum risk to the wastewater utility, and can years. savings are not payback period of approximately 12 annual potentially reduce financing costs. It helps Preliminary estimates indicate potential utilities secure financing, fund projects realized as defined savings of approximately $600,000. without up-front monies from capital budAccording to in the contract, Chuck Boepple,UOSA Executive Director gets, and implement energy-saving capital this energy performance projects at reduced risk. contract created a nonthreatening way to the ESCO pays the The ESPC is a multistep process (Figure ease in to energy projects with the util2). It begins with a preliminary audit utility the shortfall ity���s board of directors. (planning level analysis), which typically ���Our board liked the fact that there was amount. leads to a contracted investment grade no cost associated with the preliminary audit (IGA). The IGA identifies potential audit,��� says Boepple. ���The projects tended improvements and culminates in preliminary design and a to sell themselves when the board was informed that the proposal for implementation of identified energy conservaannual guaranteed savings would exceed the principal and tion measures. The proposal includes a preliminary design of interest on the loans that funded the projects.��� the energy conservation measures (ECMs), a detailed scope Utilities that take this approach essentially transform for final design and construction of the ECMs, a guaranteed reductions in O&M costs that result from a project into debt maximum price for final design and construction, and perservice for that project. Savings for carefully selected projects formance guarantee stipulations. can equal or outweigh the new debt service, resulting in no If the utility accepts the proposal and hires the ESCO to increase in overall rates in the near term, more efficient operamove forward with implementation, there is no separate cost tions, and, perhaps, additional money available for other for the IGA, and the utility commits to pay the ESCO for the priorities. Through performance contracting, utilities have an final design and construction. If the utility chooses not to additional funding option to help make significant accept the proposal and not move forward with the project, improvements to their facilities while alleviating the utility is required to pay the ESCO a walk-away fee to capital budget pressures. compensate the company for performing the IGA. After conWhat could be better than that? ��� struction and implementation of the ECMs, performance is Peter Thomson (top) is a project director in the Gaithersburg, MD, office monitored to verify savings. If the guaranteed savings are not of Black & Veatch, and Fred Ellermeier (bottom) is a vice president in the company���s Kansas City, MO, office. Together they lead Black & Veatch���s achieved, the ESCO reimburses the utility for underperforESPC services within Black & Veatch���s global water business. mance. As part of the process, the ESCO provides a turnkey wateronline.com ��� Water Online The Magazine 9

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