Launch Slideshow

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Kilowatt Killers

Kilowatt Killers

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    Director of Public Improvements/City Engineer Tom Logan (right) expects Covington, Ky., to save at least $180,000 annually with a 20-year, $2.25 million guaranteed-savings performance contract. One upgrade involved replacing fan-forced heating units at the public works garage with gas-fired Enerco Technical Products radiant heaters. Logan worked with consultants Ron Bresser (left) and Stephen Roosa. Photos: Chris Cone/Getty Images

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    A technician used technician used to fire up the boiler on Sundays to make sure fire department employees didn't come into a freezing office on Mondays. But the new boiler, controlled by an Invensys Building Systems building-management system, switches itself on when temperatures reach designated levels. Although this January was 17% colder than January 2007, the boiler used 40% less gas.

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    Twenty more-modern intersections: 483 incandescent-style, 200 W bulbs were replaced with 5 to 22 W LED traffic signal modules, and 182 pedestrian signal bulbs were replaced with 7 to 11 W LED modules. Considering that bulbs at a typical four-way intersection burn constantly, such upgrades represent a significant reduction in kilowatts per intersection.

So while it's tempting to treat performance contracting like any other contract, approaching the partnership with a design-bid-build mindset is counterproductive.

“This is basically a financial transaction, not a technical one,” says Shirley Hansen, a 30-year veteran of performance contracting whose next book — ESCOs Around the World: Lessons Learned in 49 Countries — will be published next month. “And that makes some managers uncomfortable.” Here's what to do:

  • Reduce the likelihood of future sabotage. The biggest impediment to success are plant engineers, technicians, and other “switch-flippers” who resent the implication that they're inefficient and fear losing their job.

So when forming the committee that will explore performance contracting, make sure these people are included — and listened to — in addition to the finance director, operations supervisors, and plant managers. As discussions continue, rank-and-file will see opportunities for professional growth and find that they'll be able to attack projects they'd put on hold because they lacked sufficient time for thoughtful investigation.

“You'll get a better selection process, and employees will be ready to work with the vendor's employees when they come in,” Hansen says.

  • Choose your partnerbeforean energy audit is conducted. A short project development agreement will protect your interests. A request for proposal (RFP) actually is a request for qualifications; equipment should not be included.

While some public agencies believe they'll save money if they audit operations on their own, most energy-services companies won't provide an RFP based on equipment specified by an unknown engineer. So in the end, the client ends up paying for two audits.

“Sometimes the inclination is to get an audit done first, then try to make the RFP process into a bid based on specifications,” says Hansen. “But including equipment in the RFP locks energy-services companies into using equipment that may not provide the savings they'd like to guarantee. These companies sell results, not a particular product or service. They must rely on the equipment or service they provide to deliver the level of savings guaranteed.”

  • Don't rely solely on another source for potential partners. Energy-services companies listed on the Department of Energy's Web site, for example, are required only to submit an application. And because most state statutes focus on energy-savings derived from improvements to public buildings, approved vendors may lack experience in the unique needs of infrastructure operations.
  • Get the right references. Talk not only to happy clients, but to those where an element of the promised savings went wrong. If the contractor wants your business, it will provide the necessary contact information so you can learn how responsive it was. Also, ask for an audit performed for a facility as similar as possible to yours.
  • Ask for a copy of a signed contract recently executed on behalf of a similar facility. This reveals what the performance contractor truly committed to providing, not just sales promises. The company will do this if assured the information will be kept confidential.