The research group segmented project data results by market segment — federal and state/local government, schools, universities and hospitals. The project database was developed and managed in partnership by Berkeley Lab and the National Association of Energy Services Companies.
As direct appropriations from Congress as well as state and local governments for energy efficiency retrofits have become harder to obtain, many federal and municipal agencies, school districts, and colleges have turned to ESCOs and performance contracting for an alternative source of financing these improvements.
Typically, ESCOs evaluate a customer’s facility, and recommend a set of energy efficiency and distributed generation measures and strategies to reduce energy use and costs. The ESCO then develops the project, financing a portion of the improvements, and then recoups its investment from a portion of the customer’s energy savings in the years that follow.
The "MUSH" market (municipal governments, universities, schools and hospitals) over the same period was between $12 and 16 billion in project investment.
Hospital projects showed the highest median benefit to cost ratio (2.6 median) followed by state and local governments, universities and colleges, and federal agencies (1.8, 1.9 and 1.6 respectively).
K-12 schools showed the lowest median ratio (1.1), but the researchers observed that many schools undertook performance contracting not just to reduce energy costs, but to replace and modernize HVAC infrastructure or install other needed improvements (e.g. replace windows or aging roofs), because no other funding mechanisms were available to them for this purpose.
The report notes that these indirect benefits are important: "ESCO projects often provide other difficult-to-quantify yet important benefits to customers. Examples include equipment modernization, improved quality of lighting and space conditioning, enhanced worker productivity and environmental improvements. For some customers, these benefits are the primary motivation to install projects." All of these additional benefits are essentially "free" in that they do not reduce the energy or water savings and are attendant to them.
A recent GAO report questioned the appropriateness of financing government energy-efficiency projects and raised concerns that ESPCs may cost the government more than direct legislative appropriations for these projects.
The Berkeley study evaluated costs and benefits of 109 federal Super ESPC projects, comparing net benefits of these financed projects to alternative scenarios involving congressional appropriations. The results are positive for Super ESPC projects. The report states: "Even under the most conservative discount-rate assumptions, the presence of positive net benefits for the 109 Super ESPC projects as they were actually financed indicates that these projects are solidly cost-effective." The analysis also demonstrates the impact of project delay (e.g., when appropriated funds are not immediately available or inadequate to fund all recommended measures) and lack of savings persistence (e.g., when savings decay over time because of the lack of performance savings guarantees) on net benefits. The authors find that delays of more than one year or savings decaying at 2% per year result in reduced net benefits for projects funded by congressional appropriations relative to ESPC-financed projects.
Median turnkey costs for federal projects analyzed in the study were $2.04 million. Median costs in other market segments ranged from $0.72 million for health/hospitals to $1.25 million for K-12 schools. Federal government and universities/colleges projects had the lowest median investment ($2.32/ft2 and $2.43/ft2 respectively). "We believe these results are linked to the large facility size characteristic of these customers," write the authors.
The researchers found that median energy savings are about 15 to 20 percent of the utility bill baseline in all market segments. On a per-square foot basis, the highest annual energy savings are observed in the health/hospitals market segment (median savings of 22 kBtu/ft2), and the lowest in K-12 schools (12.5 kBtu/ft2 median). These differences reflect typical operating hours of these facilities.
For more information on the report, go to http://eetd.lbl.gov/EA/EMP/ee-pubs.html.
