Energy-performance contracts

maintenance, refurbishment, Honeywell Building Solutions
Using energy savings to finance improvements — James Napier.

Once an organisation starts saving energy, those savings can be used to finance measures to save more energy and reduce the cost of maintenance. James Napier of Honeywell Building Solutions looks into the world of energy-performance contracts.

Given the challenges that building managers face in meeting energy-efficiency targets while simultaneously contending with declining capital budgets, there won’t be many of them who feel the properties under their care are performing to their maximum potential — or have any chance of doing so in the foreseeable future.

In my experience, many public-sector bodies have a whole host of backlog maintenance issues that simply add to the problem. Fortunately, most public-sector organisations can also take a long-term view of their operation — unlike the growth- and profit-orientated private sector. This makes the concept of energy-performance contracts (EPCs) a more realistic proposition to councils, health authorities, university campuses and the like — and here’s why.

Implementing appropriate energy-efficiency programmes using EPCs enables public-sector organisations to benefit immediately from control improvements while using future energy savings, which are guaranteed by the EPC provider, to pay for those improvements and reduce capital-budget requirements for maintenance and refurbishment.

And those improvements can be quite significant, particularly when the comparatively low maintenance requirements of upgraded assets are also taken into consideration.

For Peterborough City Council, for example, a range of energy-conservation measures in eight facilities are expected to generate annual energy savings of around £163 000 at current usage rates over a 15-year period.

One of the facilities being improved is a swimming-pool complex, where each of the four existing sand filters costs tens of thousands of pounds per annum to maintain. The maintenance cost of the new filters is around half the previous figure.

A long-term EPC for the Aneurin Bevan University Health Board in Wales has enabled two major hospitals to benefit from a range of improvements, reducing their carbon footprint by 4153 t and creating energy and operational savings of £1.29 million in 2013 — a cumulative saving of £13 million since the contract began.

Improvements funded by the EPC have included the installation of CHP systems, complete BMS and energy-management-system upgrades, installing a low-voltage distribution panel in a main switch room, fitting variable-speed drives, motor inverter controls, water-saving devices and almost 10 000 high-frequency light fittings.

Given the current economic climate and the need to focus on front-end services, it is difficult to envisage how these improvements could have been identified, funded and implemented within an acceptable timeframe outside the parameters of an EPC.

But assuming an organisation recognises the benefits of using an EPC to fund upgrades to its assets, avoid embedded capital costs, reduce its maintenance backlog and to cut energy usage and its carbon footprint, there are still hurdles to be overcome before those benefits can be realised.

The pressure to achieve short-term results still exists in the public sector. After all, budgets are still being cut, and targets are still being set.

The temptation can be strong to look for quick wins — changing light bulbs for example — without also giving much thought to meeting the challenges that will undoubtedly come tomorrow.

maintenance, refurbishment, Honeywell Building Solutions
With Honeywell’s help, Peterborough City Council is expecting to reduce energy costs by £163 000 a year and reduce maintenance costs.

For an EPC to succeed:

• Senior management within the organisation has to commit to the strategy.

• The estate has to be viewed holistically, rather than as a series of discrete projects.

• Great care has to be taken when deciding which facilities will benefit from improvement. There may be little point investing in a building that could well be sold in the next 10 years if the payback period is a decade or more.

Great care also needs to be taken when selecting the long-term EPC partner. It’s fair to say that a significant number of EPCs generate zero results because the energy savings can’t be proven, so no works take place. The only results are wasted time, resource and opportunity.

To get the selection right first time.

• Choose a partner with a proven record of EPC success; invest time in getting to know them and giving them a chance to gain a better understanding of your own aims and objectives

• Look for integrity and quality in the proposals and ensure the proposed contract is workable.

• If you already have existing FM agreements in place, ensure the contract is written around the current structure, but allow the EPC supplier to provide a maintenance regime for existing contractors to follow, to ensure measurement and verification is justified.

• Commit to obtaining good-quality energy consumption data from your systems — the better the data, the better the output.

• Understand there will be some challenges, but be prepared to work in partnership to overcome them.

• Ensure there’s a continuous improvement clause in the contract to ensure there’s no sitting on laurels once the light bulbs have been changed.

James Napier is general manager — energy with Honeywell Building Solutions.

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