Do Your Homework: Successfully Starting a Performance-Based Energy Project

Posted on 6/1/2011

By Brian Wagner, CCG, Inc. President, reprinted from OPFMA's Newsletter

Performance-based energy projects have become a popular tool for many organizations to finance capital improvements. Done correctly, they are a great alternative to traditional funding. In their simplest form, the energy savings realized are used to pay the debt service on the loan.

For organizations with a long list of capital improvement needs and no available funding, performance-based contracts can be a great tool to some of these problems.

There has been a tremendous influx of companies implementing performance-based projects. How is an end-user supposed to sift through all the promises each one makes? The answer is simple: Do your homework. The success of your project will most likely be directly proportional to the time you invest finding the right Energy Services Company (ESCO).

To start, you need to define the goals of the project. Is the purpose of the project simply to save energy? Do you need to improve comfort? Update the facility? Are you looking to reduce the burden on your maintenance staff?

The design of your project can change based on these goals. As an example, a lighting retrofit may be limited to lamp/ballast upgrades if your focus is energy savings, while it may include new fixtures and drop ceilings if your goal is to upgrade your facilities.

Whether energy savings is the primary goal of the project or simply the means to an end, you want to ensure that the projected savings are met. This is where your homework begins.

Many of us have learned about the Environmental Protection Agency’s (EPA) ENERGY STAR® Portfolio Manager Program through the OPFMA – BOC training classes. Now would be the time to put this knowledge to use.

You probably wouldn’t invest money with an investment firm unless you knew their performance history – yet many owners contract with an ESCO without knowing its true background.

Use Portfolio Manager to check the ESCO’s track record! Ask for the before and after ratings, including the BTU/Ft 2, of the last ten projects the ESCO completed. If you wish, you can get copies of the actual utility bills from your peers to verify the ratings.

If your building’s average annual consumption is 70,000 btu/ft2 and the ESCO’s portfolio of similar buildings averages 65,000 btu/ft2 after a project is complete, you may want to question if the ESCO shows savings projections of, say, 40% of the total bill. You can also use Portfolio Manager to compare the annual consumption of completed projects of several ESCOs.

Another way to evaluate ESCOs is to perform site visits to review the energy conservation measures that were implemented. Is the quality of the final product what you were looking for? Was there a marked improvement to the building or are the changes between the “before” and “after” photos undistinguishable? Ask pointed questions to the maintenance staff while at the building. Find out if they feel if the project was a success.

The importance of researching ESCOs before choosing one for an energy project resonated with me, recently, when I was at my son’s basketball game. The game was held at the middle school of a neighboring school district that just completed an energy project. After seeing very low light levels, I brought my light meter into the gym and read (11) footcandles under the basket – much less than the recommended (50) footcandles. If the district had done its homework when finding an ESCO, perhaps the project would not only have saved the district money, but would have had better overall results.

Done right, an energy project is a great way to get exactly what you want – from scope to contractors to product. You will live with the results of your project for many years, and good choices mean a better future.

The time you take doing your homework will be rewarded.

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