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Session 3233

Evaluating Energy Services Performance Contracts With Engineering Students – Learning From Real Projects

Darrell D. Massie United States Military Academy

Abstract

Most campus heating and cooling plants can provide a wealth of real life opportunities to educators who teach energy topics. This can be accomplished by evaluating existing heating and cooling systems or by analyzing potential plant upgrade projects.

A common method of obtaining funding to upgrade new equipment on campuses and other institutions is through Energy Service Companies (ESCOs). ESCOs purchase and install new and improved equipment and then obtain reimbursement from cost avoidance from the energy savings. Unfortunately, savings are often based on faulty assumptions or from complex computer simulations that may or may not represent reality. Campus plant managers often either lack the technical experience to verify Energy Service Performance Contract (ESPC) calculations or are so busy performing other administrative functions, that they do not verify cost avoidance savings. Detailed thermodynamic analysis complete with economic evaluation is required to effectively evaluate these contracts. This paper discusses common problems associated with ESPCs and methods that can be used to evaluate them. This paper also details an approach that can be used for coordinating work effort with campus plant managers and how to proceed with evaluation of proposals. An example of a successful student project will be included. Common pitfalls and approaches that work well will be provided.

Introduction

A common method of obtaining funding for upgrading mechanical equipment on campuses and other institutions is through Energy Service Companies (ESCOs). ESCOs purchase and install new and improved equipment and then obtain reimbursement from cost avoidance that would have otherwise been spent for energy. The incentive for building owners is that they could lower operating costs even after the ESCO received reimbursement or they could replace aging equipment with newer, more reliable equipment.

Unfortunately, savings are often based on faulty assumptions or from computer simulations. Lack of a Measurement and Verification (M&V) plan may leave many institutions at risk of unrealized savings. Campus plant managers often either lack the technical experience to verify Energy Service Performance Contract (ESPC) calculations (because state-of-the-art has changed since they were students) or are busy performing other administrative functions and do not verify cost avoidance savings. To effectively evaluate these contracts, there must be a M&V program, complete with detailed thermodynamic and economic analysis.

Measurement and verification costs can consume a significant portion of the entire project budget. For simple equipment upgrades requiring little verification or technical expertise, the

Proceedings of the 2003 American Society for Engineering Education Annual Conference & Exposition Copyright © 2003, American Society for Engineering Education

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Massie, D. (2003, June), Evaluating Energy Services Performance Contracts With Engineering Students Learning From Real Projects Paper presented at 2003 Annual Conference, Nashville, Tennessee. https://peer.asee.org/11916