Performance ContractsEnergy savings performance contracts (ESPCs), performance contracts, and "shared energy savings" contracts all strive to achieve a win-win situation. ESPCs allow owners to undertake large-scale energy-efficiency upgrades without accruing capital costs. ESPCs are structured to deliver minimum or even 'guaranteed' levels of savings, usually coupled with financing that presents a favorable package for the owner.
Generally, an energy services company (ESCO) funds, installs, and, in some cases, operates and maintains the energy-efficient upgrade project. By contractual agreement, the owner then pays a portion of the annual energy cost savings to the ESCO. Since the ESCO has project risk to consider, projects that can most easily achieve the minimum levels of savings required to make the project risk acceptable are preferred. The ESCO may also be required to 'guarantee' the savings, adding to the cost of the contract. However, the ESCO's ability to acquire the lowest interest rates is driven in part by this 'guarantee' of energy savings.
ESCOs, therefore, tend to identify ESPC projects with the greatest probability of achieving stated savings and as little 'guarantee' as possible. This isn't the same as providing the owner with the most savings possible for a project, and operates against the owner's prime interest of reducing energy, operation, and maintenance costs as much as possible.
A 'Win-Win' SituationThis is one way that commissioning delivers an improved 'win-win' for both the owner and ESCO. Federal Energy Management Program (FEMP) studies show that hvac systems installed today are heavily dependent on control schemes to maximize energy efficiency. The commissioning process, through verification testing, establishes the most efficient operation for the measurement and verification 'benchmark.'
By verifying that building systems operate as efficiently as the design intended, the ESCO will maximize the savings generated, and thus the savings returned to the owner. Moreover, "... periodic reapplication of the verification tests created during the commissioning process throughout the life of a building improves the likelihood that the building will maintain a high level of performance."1
Verification testing will provide the 'proof' that building systems continue to operate as the design intended, but tests alone cannot improve the performance without the presence of properly trained operation and maintenance personnel. As observed in the Canadian performance contracting market, "Operator training is important not only to the comfort of the building tenants, but also to achieving the stated project objectives. Failure to properly maintain the equipment places at risk the ESCO's ability to provide sustained quality savings throughout the life of the contract."2
The commissioning process verifies that the "tools" (design intent, training, O&M manuals, "as built" documentation, etc.) are delivered to the facility operator so that they are best prepared to operate and maintain the building systems in their facility.
The Bottom LineThe win-win situation described above, however, depends upon the ESCO delivering the ESPC with above-minimum savings. A prime motivation for the ESCO is still to achieve the 'minimum' level of savings to make the project profitable. There is more risk involved with increasing the 'minimum' savings; however, we can reduce this risk through the application of the commissioning process.
Commissioning not only helps the ESPC achieve and maintain the minimum savings, it also has the potential to expand the number of projects that are 'eligible' for an ESPC. Thus, the market for ESCOs could expand, leading to an improved 'bottom line' for ESCOs and owners alike. ES
1. Rebuild America. Building Commissioning: The Key to Quality Assurance. U.S. Department of Energy, March 1998.
2. The Canadian Energy Performance Contracting Experience. Martin Adelaar, Principal, Marbek Resource Consultants, Frederick T. Day, President, Global FACMAN Enterprises Inc., and Marion Fraser, President, Fraser and Company. Presented to the International Seminar on Energy Service Companies of the International Energy Agency, 27-28 October 1997.