What is performance based contracting?
Energy performance contracts guarantee a certain amount of energy and water savings
that helps offset some or all of the costs of facility and infrastructure renewal projects. In
performance based contracts, the investments needed to pay for energy efficiency
improvements or are paid for upfront, either from your organization’s capital budget or
through financing from a third party for qualified organizations. The projected / expected
savings yield will be reflected in your organization’s operational budget.
Where does the saving come from?
When it comes to buildings, savings can come from a broad range of energy efficiency
improvements, Such as installing more efficient lighting, replacing inefficient water
fixtures with low-flow options, improving insulation, upgrading HVAC system, installing a
DDC building management control system that controls and integrates the mechanical
electrical systems for optimum efficiency. Properly replace old doors, windows and roof.
What happens if the expected savings are not achieved?
If guaranteed energy savings fall short of expected values, we make up the difference.
How does performance based contracting work?
The process starts with a technical and financial field analysis assessment.
For buildings, this typically includes all of the building technology and envelope.
For local government, this may be expanded to include water pumps, traffic lights and
general municipal infrastructure.
The next step is to develop a list of potential improvements and quantify the cost of each
improvement and the savings each improvement should produce. You choose the suitable
scope of work and the time line.
Accordingly, a contract then is drawn up which specifies the scope of the energy
efficiency improvements to be made, including the defined costs, estimated energy and
other savings, as well as grants, all utility company incentive programs and tax incentive
Currently available for project funding and the net resulting cost savings. Then the
contract is executed. With the contract in place, energy efficiency improvements are
implemented, and the actual performance of the items with a guarantee are measured
and verified over the duration of the contract.
What are the benefits of performance based contracting?
By making your building more energy-efficient, you improve your building’s costs of
ownership, performance, comfort and energy use. Performance based contracting helps
you identify improvements that may result in guaranteed operational benefits to your
organization.
Reduce Energy Costs
Reduce energy costs and use the money saved to make your buildings work harder
toward helping you achieve your goals. Buildings that work do so efficiently and cost-
effectively. You can reduce energy costs and usage without sacrificing comfort. The
savings you realize not only offset the cost of the energy efficiency improvements you
make, but can also be used to help your business or organization achieve key goals.
Building owners, educational institutions, healthcare organizations, and government
agencies are doing just that reducing fixed energy use.
How to reduce energy costs
The first steps are to properly analysis your building’s equipment and operations to
determine how you’re building consume energy; Identify opportunities to eliminate waste
and increase efficiency; and then to develop a program to take full advantage those
opportunities. Opportunities include upgrading or replacing inefficient equipment,
systems and provide high-efficiency lighting, and installing DDC (VFD) variable speed
drive chillers or rotary screw that operate up to 30 ~ 50 % more efficiently than the current
industry average. Geothermal heat pumps heat and cool buildings more efficiently than
conventional HVAC systems, also reducing energy costs. Consideration of renewable
energy technologies, such as Biomass waist recovery and photovoltaic solar panels that
can reduce your utility bills while providing clean, sustainable energy. Deploying a Direct
Digital Control building automation / management system can help you optimize energy
and operational efficiency, Comfort and safety. Direct Digital Controls and integrates key
mechanical and electrical building systems such as HVAC, lighting, Security, fire, and
safety.
Offset project costs via energy savings
There are a number of ways to make your projects affordable. For example, performance
based contracting is a way to fund improvements by using energy and operational savings
to offset a project’s costs. We’re committed to bringing your projects in on time and within
budget, and to providing ongoing support that can help you identify additional savings
opportunities and educate occupants on what they can do to conserve energy and water.
Shared Savings
With Shared Savings program from AET Group Global, you can upgrade equipment,
reduce costs - conserve energy - all with no or very little up-front Capital investment. Our
energy experts will help you identify, finance and carry out energy improvement projects
for your business - and we will pay for the initial cost of the high-efficiency equipment.
Any technology that saves energy may qualify for “Shared Savings”. After evaluating to
determine the most productive energy-saving solutions for your business, we will work
with you and a qualified system installing Contractors, vendors to purchase & coordinate
the installation. You repay us each month from your utility bill savings over a contract
term - typically five ~ seven years. Your energy bills are reduced as a result of the energy
savings. After the agreement is paid off, you retain the energy savings, the new
equipment, that will reduce your ongoing operational expenditures and maximizing your
bottom line for years to come.
Example of an A Typical Shared Saving Project;
One of our light industrial manufacturing client’s requested we performed a detailed
energy financial analysis audit, to clearly demonstrate they could, in fact, reduce their
yearly electric operational cost from $ 214,000.00 to $ 158,400.00. Just by properly
replacing all of the existing lighting system, with a smart high efficiency lighting system,
for their circa 1968, 178,000 square foot, 10-acre site, conditioned commercial building.
They realized an annual net savings of ……………………………………………..... $ 55,600.00.
Recognized under a one-time d179 EPAct 2005-2009 Energy Act deduction...... $ 89,000.00.
As well as receiving a one-time utility company incentive payment of...............$ 32,000.00.
Permanently reduced load was auctioned through other proprietary sources... $ 5,200.00.
The first year net-net actual realized saving yield ..............................................$ 181,800.00.
The total realized savings yielded over a ten year..............................................$ 682,200.00.
There ROI after the shared savings payment is taken into account.....................$ 382,200.00.
Year eight and beyond entire annual savings goes straight to bottom line…......$ 55,600.00.
We negotiated a lower per kilowatt hour energy rate, reducing their cost of electricity.
As well as a fixed capacity amount of paid call-able, peak load interruptible electrical
service. There were several other industrial process, that were addressed such as
compressed air and central post production collection systems upgrades that cut costs.
Immediate benefits;
With Shared Savings, your business can acquire energy-efficient equipment while
maintaining a positive cash flow.
¦ Invest with little or no risk in energy-efficient technologies and new equipment
¦ Grow your bottom line through energy cost savings
¦ Improve productivity and product quality
¦ Make capital available to invest in other areas of your business
¦ Reduce environmental impact through decreased emissions and non-renewable
resource conservation.
Example of an A Typical Client Capitalized Expenditure Project;
One of our light industrial manufacturing client’s requested we performed a detailed
energy financial analysis audit, to clearly demonstrate how they could, in fact, reduce
their current yearly electric operational cost from $ 108,000.00 to $ 69,600.00. by properly
replacing all of the existing poor quality lighting, failing HVAC and roofing systems,
with a smart high quality and very efficiency lighting, HVAC and Roofing systems,
for their circa 1986, 34,000 square foot, 4-acre site, fully conditioned commercial building.
Our client reduced their yearly electric cost from $ 108,000.00 to $ 63,600.00. By properly
replacing the failing lighting, HVAC and roofing system and sub-standard roof insulation.
In a smart, energy wise, value engineered solution to the 34,000 square foot light industrial
building. The client realized an annual net savings of …………..…………….......$ 44,400.00.
Realized a one-time 179d EPAct 2005-2009 Energy Act deduction EMS……........$ 51,000.00.
As well as receiving a one-time utility company incentive payment of...............$ 13,200.00.
Permanently reduced load to be auctioned through proprietary sources…….....$ 3,500.00.
The first year net-net actual realized cost saving yield .......................................$ 112,100.00.
Realized conservative savings yield over ten-years, based on current costs.......$ 511,700.00.
Less costs of roofing, insulation, HVAC, lighting capital expenditures…………....$ 480,000.00.
A lower per kilowatt hour energy rate, reducing their cost of electricity was ascertained
before this current project was completed. It did affect the current rate of return on
this project. We discovered that there were several other industrial processes, which
needed to be addressed; 20.1 tons of conditioned air that was being exhausted via
improperly engineered industrial process systems. Thus creating a very expensive and
uncomfortable condition, that in-turn created a very difficult to control temperature
and relative humidity problem, which created this negative air pressure condition.
We estimated this condition is conservatively costing the client, in wasted energy usage,
an additional average of $12,500.00 per year. Cost of the make-up air system is $36,900.00.
In addition to the wasted energy, they are also several other adverse indoor air quality
conditions, which will be resolved by the installation of a properly engineered, efficiently
matched, make-up air system.
Example of an A Typical Performance Based Contract Client Capitalized Saving Project;
One of our Product Packaging Distribution & Warehouse client’s requested we performed
a detailed energy financial analysis audit, to clearly demonstrate they could, in fact,
reduce their yearly electric operational cost from $ 142,800.00 to $ 105,655.00. Just by
properly replacing all of the existing lighting systems, with a smart high efficiency lighting
system, for their circa 1979, 86,000 square foot, 10-acre site, conditioned commercial
building.
They realized an annual net savings of ……………………………………………..........$ 37,145.00.
Recognized under a one-time d179 EPAct 2005-2009 Energy Act deduction............$ 43,000.00.
As well as receiving a one-time utility company incentive payment of...................$ 18,105.00.
Permanently reduced load was auctioned through other proprietary sources........$ 3,000.00.
The first year net-net actual realized saving yield ..................................................$ 101,800.00.
The total realized savings yielded over a ten year..................................................$ 436,105.00.
The first year net-net actual realized cost saving yield ...........................................$ 108,500.00.
Realized conservative savings yield over ten-years, based on current costs…........$ 475,700.00.
Less costs of lighting system total capital expenditure …………………………...........$ 96,594.00.
We recommended that the client negotiate a lower per kilowatt hour energy rate, to
reduce their current unit cost per Kwh of electricity as a package for all of their locations.
As a result of our recommendation the client ascertained sizable yearly savings.
Whether you are looking for ways to improve your current on-going operations or just
beginning to plan for a new structure or location, please consider the friendly,
very knowledgeable and able people at the AET Group Global in your decision making
process today.