Introduction to Energy Performance Contracting by decree

VIEWS: 31 PAGES: 38

									Introduction to Energy
Performance Contracting
Presented by Robert Turner

at EPC Conference

Perth WA

Tuesday 21 October 2003
Introduction

       Aim of this Presentation:

         to introduce AEPCA
         to introduce the concept of EPC
         to explain the recommended
          procurement process

       About Robert Turner
Jargon

    ESCO - Energy Services Company
    ECM -      Energy Conservation Measure
    EOI -      Expression of Interest
    RFP -      Request for Proposal
    DFS -      Detailed Facility Study
    IRR -      Internal Rate of Return
    M&V -      Measurement and Verification
    Facilitator - External specialist to assist
     Customer with procurement
Australasian Energy Performance
Contracting Association - AEPCA

         Established 1998
         Promotion of EPC industry
         Development of tools and
          procedures to assist customers
AEPCA (cont)

  Government support
 AEPCA has been funded by:
  AGO - $110,000

  DISR - $80,000

  Aus Industry - $114,000

  NSW, SA, WA - >$20,000




 AEPCA is well regarded
AEPCA (cont)

    Tools

      BestPractice Guide to EPC
      web site: www.aepca.asn.au
      Standard Detailed Facility Study
       Agreement
      Standard EPC Contract
AEPCA (cont)

   Procedures

     Procurement    process
     Facilitator selection
     ESCO Accreditation
AEPCA (cont)

   Case Studies

     on web site
     Summary list 45 projects
     Individual projects
AEPCA (cont)

   Policies

     Actions if ESCO ceases
      business
     Issues using non-accredited
      ESCO’s
     AEPCA position on other non-
      EPC issues
AEPCA (cont)

   Under Development

     Best  Practice Guide to M&V
     Facilitator accreditation
     Improvements to web site
      content
AEPCA (cont)

      Yet to come

        M&V auditor accreditation
        Wish list of 20+ projects



   # Benefits for all from a robust
     industry Association
Why Save Energy?

   For the Environment

     Less   emissions
    1 MWh electricity = 1 Tonne CO2
    ( fill 3 bedroom home)
     Less waste
     Preserve finite resources


   To Save Money!
    Money
Conventional Investments
   Bank Retail Accounts     up to 2%
   Cash Management Accounts    4 - 5%
   Shares                      7-10%
   PCA composite index
    Com/Ind/Ret - 5 yr         10.35%

Energy Projects
   2 Year Payback     40% IRR
   3 Year Payback      25% IRR
   4 Year Payback     19% IRR
   7 year payback     10% IRR
Traditional Approach to
Energy Reduction

   Energy Audit
     not always accurate,
     no responsibility

   Design and Specification
     expensive,
     no   responsibility
     Traditional Approach (cont)

   Tender
     focus   on lowest cost not best outcome
   Construction
     no   responsibility for results


    No Implementation commitment
    Little proof of savings
    Outcomes rarely satisfactory
Energy Performance Contracting
      What is it?

        Process where ESCO identifies
         and guarantees savings
        Savings repay capital cost then
         Customer keeps 100%
Energy Performance Contracting
(cont)
        Overcomes major barriers of

          Lack  of resources
          Aversion to risk
          Difficulty in accessing capital
Energy Performance Contracting
(cont)
        Where can it be used?

          Any   type of facility
             commercial,    industrial, vehicles
          Any   purchased resource
             energy,   fuel, water
          Any   purpose
                   saving to complete plant
             energy
             upgrade
Energy Performance Contracting
(cont)
        Some possible objections
          Procurement       change
             different   to traditional tendering
          Culture   change
             Long-term     relationship
          Singlesource of supply
          Innovative



     # EPC industry is sensitive to
       these issues
Energy Performance Contracting
(cont)

   Experience to date

     Internationally
          USA   FEMP :A$1,230 since 1988
            • energy down 20%
          USA private sector : A$1,300 million
          Canadian FBI: A$220 million
            • A$30 million pa saved
Energy Performance Contracting
(cont)
   Australia
     AEPCA members on web site
      Hospitals 12 worth $22 million

      Offices     18 worth $7.2 million
      Education 2 worth $7.4 million

      Councils    5 worth $5.8 million
      18 Retail, Defence, Industrial,Clubs
       worth $6.1 million
Energy Performance Contracting
(cont)
   Australia (cont)
      Non disclosed projects
      EOI stage

   >50 projects worth >$52,000,000,
   savings >$9,000,000 pa, >50,000 tonnes
    CO2 pa;
   more under negotiation


          # No longer a new industry
      Energy Performance Contracting
      (cont)
NSW
  Hornsby          $1,600,000             Completed
  Sutherland       $1,040,000             Completed
  Lake MacQuarie   $250,000               Implementation
  North Sydney     $500,000               RFP
  Blue Mountains   $100,000               DFS
  Baulkham Hills   $300,000               DFS
  Canterbury                              Facilitator
  Mosman                                  Facilitator
VIC Moorabin                               EOI
QLD Brisbane x 2    $3,358,000   1 completed 1 implementation
SA Onkaparinga                             EOI
EPC Advantages
    Minimises Technical Risk

         Risk management transferred
          from Customer to ESCO
         Single party responsibility

         Outcomes verified

         Outcomes delivered long-term
EPC Advantages (cont)
    Minimises Financial Risk

         Guaranteed   savings
         Contractual requirement

         M&V agreed beforehand

         If not met ESCO does extra work
          or pays shortfall
EPC Advantages (cont)
    Project financing
      Customer

        • Most frequent to date
        • Usually cheapest
        • Own funds or borrowings
      ESCO

        • Flexibility of terms
        • May be more expensive
        • Loan limit implications for Govt?
     Entirely Customer’s choice, free to
      choose which he prefers
EPC Advantages (cont)

   Broad   focus
     ESCO   looking for maximum benefits
     “Energy” can incl. electricity, gas,
      water, etc
     Other savings from: O&M , GH
      Credit, OH&S, avoided capital
     Savings can pay for capital
      upgrades or buy new equipment
     EPC Procurement

Refer to BPG
Process designed for Public bodies.
  Not essential for private sector but
  recommended from DFS.

   EOI
     Publiccall
     Evaluation criteria disclosed
     Evaluation to 3-4 ESCO’s
        EPC Procurement (cont)

AEPCA Members active in WA
 ESCO’s

     Energetics         ECS
     Honeywell          Trane
     Trane              EES
   Support Services
     Conway  Leather Shaw - Lawyers
     Robert Turner Consulting - facilitator
EPC Procurement (cont)

   RFP
     Detailed   Brief of requirements
        Performance  Specification
        Evaluation criteria disclosed

     Siteinspection by 3-4 ESCO’s
     Proposals +- 20% accurate
        DFS   Fee disclosed
     Evaluate and Select 1
     Negotiate based on DFSA
    EPC Procurement (cont)
   DFS
     ESCO does more work to confirm
     proposal +- 0%
       If can’t, process stops with no
        obligation to pay DFS fee
       If can, process proceeds to EPC or
        pay DFS fee
     Negotiationbased on EPC contract
     M&V plan agreed
    EPC Procurement (cont)
   EPC
     Implementation
     M&V   to Confirm Savings

Customer must stay involved.
             designs
     Finalise
     Commission works
     M&V
     Maintenance
Facilitators

   External EPC specialist to help
    customers
        understand their obligations
        provide all relevant information

        evaluate proposals

        establish reasonable conditions and
         obligations in the EPC
        understand the procurement process,
         DFS and EPC contracts, M&V,
         financing etc
Facilitators (cont)

   STRONGLY RECOMMENDED BY
    AEPCA
   Currently negotiating with WA Govt to
    establish Training program
A Word on IRR

        Use Internal Rate of Return, not
         Payback
        IRR benefits
          Time  value of money
          All savings/costs included
          Variable cash flows allowed for

        Use common spreadsheet for
         comparisons
What This All Means for You

        EPC is now a proven success.
        It is one tool you can use to
         overcome entrenched barriers to
         energy and greenhouse savings
        You can guarantee real
         outcomes for your organisation
         or client.
        It is a LOW RISK process
    A Reminder!
   To learn more about EPC look up
    the AEPCA web site
    www.aepca.asn.au
   or contact Robert Turner,
    robturner@bigpond.com
     (02) 8850 0479/0418 275 474
   or ???????, SEDO
    ??????????
   or any AEPCA member
    (members details on web site)
THANK YOU

and have a



SUSTAINABLE FUTURE

								
To top