Energy Efficiency Case Study: Performance Contracting

Transcription

1 Energy Efficiency Case Study: Performance Contracting 3N 111(d) Meeting December 4, 2014 Ashley Patterson Director, Government Relations & Public Policy Ameresco Chris Hessler Partner AJW, Inc.

2 ESCO Working Group Extensive expertise delivering projectbased energy efficiency An Energy Service Company (ESCO) specializes in performance-based contracting for energy savings Energy efficiency is a cost-effective emissions reduction strategy Third-party delivered energy efficiency Performance Contracting should be an acceptable compliance mechanism ESCO working group submitted comments to the EPA on 111(d) Link to ESCO Comments to EPA: 2

3 Performance Contracting Program Third-party delivered, project-based program for energy efficiency Leverages well-established existing U.S. market; all states have enabling legislation for performance contracting and majority have active markets Program can be incorporated into various CPP pathways Comprehensive, performance-based projects are funded through private capital energy savings ($) repay investment over time Realigns existing utility expenses towards improvements which save energy and reduce CO2 emissions Projects will be implemented by Energy Service Companies Contractual agreements that guarantee energy savings Measurement and Verification (M&V) to verify project savings, EM&V for programmatic CO2 reductions Projects can occur in public and private sector buildings and facilities Federal, state, municipal, educational, hospital, institutional and commercial 3

4 How Performance Contracting Works Realigns utility expenses towards improvements which save energy Bundles multiple efficient solutions (lighting, HVAC, controls, building envelope, renewables, etc.) Budget-neutral approach Cost savings are amortized and accrue over the term of contract Sufficient to repay project cost Typical project energy reduction ranges between 15% to 30% Contract term typically ranges between 10 to 17 years Typical per project investment can range from $1M to $45M+ 4

5 Program Funding Investment in energy efficiency through ESCOs and utility programs, categorized by program, , ($bn) Source: Bloomberg New Energy Finance, Sustainable Energy in America Factbook Performance Contracting does not rely on state or utility investment Can incorporate other program incentives, rebates and credits See light purple bar to left $7B+ U.S. market investment annually through financing which is repaid through energy cost savings Projected to grow to $10 billion to $15 billion annually by 2020 Scalable for 111(d) compliance 5

6 State Program Example As of June 2014, Colorado s Energy Performance Contracting Program portfolio includes 182 active and completed construction projects totaling $447.4 million in investments ESCOs guaranteeing $28.8 million in annual utility costs savings Project penetration across 75% of Colorado counties Colorado ranks #3 nationally in total PC investments and #5 in investments per capita (according to Energy Services Coalition s Race to the Top) The Colorado Energy Office provides technical assistance to public agencies, monitors and establishes standards for ESCOs, maintains contract documents, and provides education/outreach Standardized and state pre-approved contracting documents Pre-qualified contractors Standards for Success document 6

7 SIP Compliance Example City of Shreveport, Louisiana, Energy Savings Performance Contract utilized for SIP Shreveport s Early Action Compact (EAC) submission to USEPA for the 8-Hour Ozone Standard under the National Ambient Air Quality (NAAQ) Standards 20-year Performance Contract for 33 Municipal Buildings - Energy Savings of 9,121,335 kwh/yr Energy savings contractually guaranteed by Energy Service Company with annual true-up to ensure savings Measurement & Verification (M&V) consistent with EPA Roadmap for Incorporating EERE Policies and Programs Into State and Tribal Implementation Plans Demonstrates State and Federal enforceability to utilize performance contract within SIP 7

8 PC Contribution Scale Potential of Million tons of CO2 reductions in

9 PC Contribution to 49 State Goals 53 lbs. CO2/MWh 89 lbs. CO2/MWh 9

10 Incorporating Program into 111(d) Plans Performance Contracting is compatible with EPA Criteria for Evaluating State Plans and Emissions Reduction Measures Performance Contracting is a viable, highly-predictable and credible source of CO2 reductions and provides long-term persistent electricity savings PC electricity savings can reoccur annually through PC Program can complement other energy efficiency programs and policies (supports robust EE program) Performance Contracting is: Measurable Enforceable Quantifiable Verifiable 10

11 Projecting PC Contribution to Plan State can utilize State Energy Office, other agency or third-party to develop reasonable and conservative estimate of PC program projects based on size and building type(s) of projects Example, Federal PC Program & Presidential Memorandum States could provide this information to Utility-Run program Would support ability to mitigate double counting High-level of predictability for future year reductions based on long-term nature of PC project contracts Energy Service Companies design projects through Investment Grade Audits which provides predictability of project electricity savings on annual basis well before construction commences (12-24 month lead time) Annual electricity savings determined and contractually guaranteed PC projects incorporated into registry support ongoing benchmarking of program progress 11

12 Year PC Project Contract Signed Predictability from PC Project Pipeline Contracted Project in Construction Measures Operating Under Guarantee Measures Operating w/o Guarantee 111 (d) Compliance Year

13 Program Mechanics Summary Establish or Utilize Existing Performance Contracting (PC) Program Leverage existing enabling legislation, augment with mechanism to increase utilization and capture project data Include PC Program in State Implementation Plan Include a conservative estimate of PC contribution to plan Develop PC Projects Contractors develop projects which provides annual electricity savings information which supports long-term visibility for program goals Register PC Projects Utilize project registry to support data capture for savings, M&V, etc. PC Projects Implemented Annual project-level M&V occurs to verify savings occur PC Program Evaluation Program-level EM&V can occur to benchmark program progress 13

14 Quantification and M&V Quantification of CO2 reductions can be tracked via national, state or regional project registry Projects have specific KWh savings calculations on annual basis High-level of predictability for programmatic approach Measurement and Verification (M&V) of electricity savings will occur at project level M&V occurs at measure and project level Pre- and post-installation report on measures installed On-site inspections and reconciliation report to verify performance ESCO reports electricity savings to the project registry whereby savings will be documented Evaluation, Measurement and Verification (EM&V) of electricity savings will occur at program level Can include, for example, auditing of a sample of project M&V reports 14

15 Non-Duplicative and Permanent CAA Requirement STATE PC PROGRAM ELEMENT EPA GUIDANCE NEEDED/DESIRED - othin in the C re uires or accounts for the reductions achieved C pro ects C-derived can e easil separated from other utilit - or staterun pro rams trac in use of re ates and incentives should clarif that C-derived emission reductions ill e treated in the same manner as pro ects and state- and utilit -run pro rams Compara le to other control measures he life of C pro ect elements ill var, ut C performance is ell understood, and ell documented usin appropriate protocols should determine accepta le methods of incorporatin in state plans and pro ress reports reductions related to C pro ect C s that have een properl measured and verified 15

16 Enforceability State-Run Pathway Use conservative estimates of PC project in State Plan Use public building requirements similar to existing State/fed models Energy audit/retrofit requirements EE incentive payments Part of a robust EE portfolio Surplus (compared w/ plan) GHG reductions from PC projects can delay/avoid more expensive compliance actions EGU-Obligated Pathway EGUs can contract with project participants to take ownership of the GHG reduction value of the project Alternately, tradable emission reduction credits could be generated by projects and purchased by obligated parties To increase quantity/rate of PC projects, EGU could offer incentives similar to EERS Rigorous PC M&V supports contractual agreements and generation of credits 16

17 Process for Reporting on PC Program The conservative and reasonable estimate of PC contribution is the baseline for the PC program The State energy office and air agency can work together to capture project data into a project registry or utilize data provided by a national or regional project registry This could generate report of projects occurring in state and scheduled CO2 reductions that will occur in future years The inherent long-term predictability of reoccurring annual savings associated with PC projects provide high-level of visibility on program performance during compliance period Project-level annual M&V provides ongoing mechanism for tracking PC program progress Individual project information to be reported into project registry and/or project attributes could be collected directly by state agency 17

18 Roles for State Agencies and Others Clean Air Agency Include PC contribution estimate in compliance plan Report Actual PC-related CO2 emission reductions in progress reports Notify appropriate offices if PC contributions need to be increased State Energy Office Work with Clean Air Agency on PC contribution estimate for plan Support PC Program Contracting as applicable Manage/monitor the registry of projects/emission reductions Report to Clean Air Agency actual EE/CO2 emissions reduction from PC projects for progress reports PUC Ensure that EGUs are using least costly options for 111(d) compliance Facilitate use of emissions credit trading Support ISO-wide use of EE-derived GHG reductions 18

19 Roles for State Agencies and Others (Cont d) Registry Collect and catalogue PC-projects, attributes and information Aggregate projected and actual PC-derived CO2 emission reductions Ensure use of consistent data sets and formats to facilitate oversight Can be utilized to generate data for state reports ESCOs: Contractual agreements, project implementation, and M&V Implement projects according to contractual agreements Conduct M&V needed to validate CO2 reductions for compliance 19

20 PC Supports Flexibility Example: Georgia State 111(d) Final Goal State 111(d) Compliance Rate without PC State 111(d) Compliance Rate with Low- Case PC State 111(d) Compliance Rate with High-Case PC Utilize BSER Baseline Levels BSER Baseline, except RE at 90% of BSER levels BSER Baseline, except RE & EE at 90% of BSER levels

21 Summary Performance Contracting (PC) projects are consistent with the Clean Air Act and the Clean Power Plan PC projects can add flexibility to, and lower the costs of, state implementation activities Most states only need to create an aggregation/registry activity to utilize GHG reductions from PC projects under 111(d) Encourage state air officials to familiarize themselves with performance contracting in state Encourage state energy officials to support increased utilization of performance contracting to have bigger contribution impact for compliance 21

22 Thank You & Questions Ashley Patterson Director, Government Relations & Public Policy Ameresco Chris Hessler Partner AJW, Inc. Link to ESCO Comments to EPA: 22

23 PC Program Mechanics Establish or Utilize Existing Performance Contracting (PC) Program Leverage existing ESPC enabling legislation Utilize Executive Order or legislation to increase utilization across public facilities; Utilize PACE legislation or other programs to increase private sector utilization Address use of incentives to mitigate double counting ESCO qualification, contract standardization and M&V Requirements Include PC Program in State Implementation Plan State Air Agency can work with State Energy Office or other agency currently responsible for performance contracting in state Include conservative and reasonable estimate of potential PC contribution towards state plan (i.e. potential cumulative electricity to be avoided) Includes federal, state, municipal, county, K-12, institutional, commercial 23

24 C g M h s (C d) Develop PC Projects Energy Service Companies design projects through Investment Grade Audits which provides high-level of predictability of project electricity savings on annual basis well before construction commences Annual electricity savings determined and contractually guaranteed Register PC Projects Project entered into state/national project registry detailing guaranteed energy savings, carbon reductions, implemented measures, measure life, contract term, M&V details and incentives/rebates/emissions credit allocation and ownership Utilization of third-party project registry will reduce cost and resource burden on state (potential for use of DOE e-project builder) Registry will capture M&V data and can support EM&V 24

25 C g M h s (C d) PC Projects Implemented Project will be installed and commissioned and will enter performance period Electricity savings and CO2 Reductions will start occurring Project-level ongoing Measurement &Verification (M&V) will occur Completion of first year M&V report using EPA approved protocols (e.g., IPMVP, FEMP, ASHRAE) will verify savings are occurring Project shortfalls can be identified through M&V and addressed accordingly PC Program Evaluation Utilize registry to produce report of PC Program cumulative progress State can utilize independent evaluation (e.g., every three years) consistent with other utility/state EE programs EPA approved program-level EM&V protocols can be applied to a random sample of projects Results compared to project-level savings projections, project-level M&V reports and program-level savings targets and used to adjust energy efficienc realization factors prospectivel applied at a pro ram level 25

26 C g M h s (C d) Program Shortfalls can be addressed in two ways: 1. Preventing shortfalls The savings guaranteed in PCs are less than those projected, meaning conservatism is inherent in the industry Plans can include a portion of projected savings from PC, allowing some margin for shortfall Making up for shortfalls Program-level shortfalls can be compensated for with increases in EE projects driven by increased incentives or requirements for energy retrofits in additional sectors State could also choose to utilize other EE programs (such as residential EE) to ramp up other EE savings In EGU-obligated approach, more credits could be purchased 26

27 PC Market Activity 85% of activity is in Federal, State, Municipal, University, Schools, Hospitals (MUSH) Driven by budget constraints, energy costs and policies All states have enabling legislation Majority of states have active performance contracting markets 27

28 Savings: ESPC vs. Appropriation-funded 28

29 GWh Potential Cumulative Electricity Savings 200,000 Potential Cumulative Electricity Savings from PC Projects 180, , , , ,000 80,000 60,000 40,000 20, Low Estimate High Estimate 29

30 Potential Market Scale

31 Average Potential Contribution 31

32 Associated Jobs Impact 32

33 Appendix: Georgia Table Example 33