energy & facility renewal solutions for post secondary education facilities funding site...
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Energy & Facility Renewal Solutions forPost Secondary Education FacilitiesFunding Site Improvements Through Energy Efficiency
Luis RodriguesDarryl HillMay 30, 2007
Honeywell Proprietary
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120,000 employees in nearly 100 countries
Proud 122 year heritage
$1.4B in sales in Canada
A Fortune 100 company$31.4B in sales
4,900 employees in CanadaDavid M. Cote
Chairman and CEO
“We are building a world that’s safer and more secure, more comfortable and energy efficient, more
innovative and productive. We are Honeywell”
IntroductionCorporate Overview
Over 75 years in Canada
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Today’s Agenda
Introduction
Challenges
Performance Contracting
Program Development
Implementation
Additional Considerations
The Owner’s Perspective
Summary
Question and Answer
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Faculty/student safety and securityAging facilities and
deferred maintenance
Conflicting priorities for available capital
Rising operating costs
Productivity concerns
Escalating energy costs, volatility and energy security
Environmental policies
Growing Challenges and Concerns
Attracting faculty and students
Reduced levels for investment in new
infrastructure
“World class” learning experience
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An Effective Solution The Power of Performance Based Contracting
A comprehensive
“self-funded” program
whereby the equipment
and technology installed to
modernize buildings and
facilities is paid by
guaranteed energy and
operational savings
Why is Performance Based Contracting an effective solution?
Before Program - Escalating Costs
2005 2007 2009 2011 2013 2015
Savings Pay for Site Enhancements
After Retrofit
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An Effective SolutionThe Power of Performance Based Contracting
Solutions to Short-term & Long-term Challenges
Fixing Existing ProblemsUnplanned repairsBuilding damage
Life safety concernsEnvironmental issuesSecurity challenges
Capital ImprovementsCapital cost avoidanceEquipment upgrades
Deferred maintenance Facility renewal
BudgetingProcess
Unplanned / short-term immediate resolution required
Planned / long-term capital budgeted expenditures
Guaranteed savings Improve efficiency Enhance productivity Manage asset renewal
Performance Based Contracting & ImprovementsOutside of Existing Budgeting Process
10 - 15 year program where the service provider assumes the risk
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An Effective Solution The Power of Performance Based Contracting
Other Benefits to Performance Contracting
• Proactively address facilities renewal & deferred maintenance
• Enabler to implement the multi-year capital plan • Enhance learning environment through better
facilities• Redirect savings towards education priorities• Address environmental stewardship goals• Create a sustainable savings program
Fixing Existing Problems Capital Improvements
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A Comprehensive Solution
Lighting systemsMechanical & Central Plant
Building envelope
Ventilation and air quality improvements
Infrastructure improvements
Capital cost avoidance
opportunities
Productivity enhancements
Security
Environmental compliance concerns
Energy awareness programs
Renewable energy initiatives
Longer term programs provide additional opportunities to
enhance results
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Develop List of Develop List of Key Partnering Key Partnering RequirementsRequirements
Step 1
Step 2
Prepare RFQPrepare RFQDocumentDocument(Request for Qualification)
Step 3
Select Select Evaluation Evaluation
TeamTeam(Key Stakeholders)
Step 4
Solicit Solicit Responses & Responses & Presentations Presentations
Select PartnerSelect Partner(Based on Highest
Overall Value)
Step 5
Selecting the Right PartnerKey to a Successful Long-Term Program
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Define Program Criteria
Needs Assessment
Technical & operational goals
Financial objectives
Contractual requirements
Administrative processes
Decision and approval processes
Form “Joint Requirements Team”
Step 1
How the Process WorksDisciplined Program Development is an Absolute
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Documents criteria “mutually agreed” to be met
Commits each party to move forward and begin the solution development stage
Provides a “no risk” platform to the customer should criteria not be met
Commitment to Proceed
CreateLetter of Intent
Step 2Form “Joint Requirements Team”
Step 1
How the Process WorksDisciplined Program Development is an Absolute
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Step 3
Program Development
Step 2Form “Joint Requirements Team”
Step 1
CreateLetter of Intent
Identify energy & deferred maintenance opportunities
Review capital plans Define support service
requirements Identify opportunities
for grants and rebates Prepare
communications & awareness plan
Finalize contract document
Arrange financing
Final Solution
How the Process WorksDisciplined Program Development is an Absolute
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How the Process WorksThe Contract & Financing
Performance Contract Defines responsibilities of both parties
Establishes baseline measurement performance and savings measurement and verification plan
Annual savings reconciliation process
Designed to guarantee “self funding” mechanism through entire program period
Program Financing
Arrange most suitable approach
Internal vs. external options (banks, other lending institutions or through service provider)
Strategize various cash-flow models, consider existing operating and capital budgets
Consider the impact of available grants, utility rebates, and other funding sources
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During Project Construction
Bank AdvancesFunds
During Performance Period
Structured so guaranteed savings stream funds payment obligation
Client pays service providerbased on progress draws
Loan paymentregardless of actual savings
GuaranteedSavings
How the Process WorksTypical Contract & Financing Approach
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Building Energy Performance Index (BEPI) ekWh/ft2
Fa
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nd
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(F
CI)
How the Process WorksEnergy Intensity vs. Facility Condition
Using Energy Efficiency Index alone would focus on a different retrofit measure group
Using Facility Condition Index alone to plan capital renewal and address deferred maintenance
Cross-validating condition and efficiency provides a priority to best address facilities
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How the Process Works
Step 4
Program Execution
Step 3
Program Development
Step 2Form “Joint Requirements Team”
Step 1
CreateLetter of Intent
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Project Management is CriticalAttention to Detail Paramount in an Occupied Education Facility
Pre-project Post-projectDuring the Project
Provide an ongoing Quality Assurance Program
Help you assess the ongoing impacts/outcomes
Provide valuable post-project training for your teams
Experienced project managers help you better
anticipate issues
Seasoned planners with proven software
provide reliable project milestones
Know-how to implement projects in an
occupied facility
Reliably meet project deadlines via project management systems
Buying power reduces costs within your
own processes
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Additional Considerations
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Taking the Risk Out of Major Site ImprovementsAllowing Facility Staff to Take Ownership
• Training of front-line staff to upgrade their skills
• Orientation to goals and new technology
• Relevant content from different areas
– Customized programs by the service provider
– Training at supplier’s facilities
– Government training programs (NRCan)
Staff Training
Training is critical to help your maintenance staff to better manage change and ongoing facility management
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• Warranty response
• Emergency 24 X 7 response
• Equipment maintenance– Comprehensive agreements vs inspection services
• Enhanced technical services
• Emerging technologies briefings
• Energy monitoring services
• Regulatory consulting
Support Services
Taking the Risk Out of Major Site ImprovementsSupplement Facility Staff - if Required
A program tailored to meet the facility’s particular needs is important
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Proactive Internal & External EducationCommunication is Critical in Post Secondary Facilities
Public Relations - External
Employee Communication - Internal
Provides information to faculty and students
Alleviates feelings of uncertainty
Communicates implementation progress and milestones
Ongoing conservation awareness maximizes results
Positive messages to the community Responsible program to address cost control, facilities renewal and environmental stewardship
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The Owner’s Perspective
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The Owner’s PerspectiveConfederation College
Why the College Chose the Program
• Utility costs were growing faster than any other cost– In 1997 costs were $1.99/ft2, Ontario average was $1.36
• Deferred maintenance costs were about $9M• Looked to the program to provide:
– Alternative, guaranteed funding from utility savings– Reduce deferred maintenance– Environmental program cornerstone
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Admin Maintenance Caretaking Utilities Grounds Security Enineering
DISTRIBUTION OF SYSTEM INCREASE FOR 1996/97 TO 2002/03
From 19 Colleges reporting each year
% Cost increase 1997 to 2003
% Cost increase 1997 to 2003
Utility costs increase 50%
Utility costs increase 50%
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Results
The Owner’s PerspectiveConfederation College
• Utility reduction 2001-2005:
Electricity use Reduction (kWHr/yr)
Natural Gas use Reduction (m3/yr)
Electric to gas conversion
Pollutant Environmental Effect Reduction to DateCarbon Dioxide Greenhouse gas/global warming 14,910,640 kgNitrogen Oxide Acid rain and smog 27,382 kgSulphur Dioxide Acid rain 52,734 kg
• GHG and pollutant reduction:
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The Bottom Line
The Owner’s PerspectiveConfederation College
• 2005-06 costs: $1.83/sf vs Ontario College average of $2.16/sf
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000
$2,200,000
$2,400,000
$2,600,000
$2,800,000
$3,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Co
st
Pre Retrofit Utility Costs Actual Escalation Actual Utility Costs plus Loan Payment
Actual Utility Costs with 2008 & forward estimated Projected Utility Costs
$4M Positive Cash Flow + $2M Deferred Maintenance reduction
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The Owner’s PerspectiveMemorial University of Newfoundland and Labrador
• Continuing to build on the phase 1 success story
• Reduce and control escalating utility costs
• Improve operational efficiencies
• Address deferred maintenance issues and capital renewal
• Proactive environmental stewardship– Including promoting stewardship beyond just their facilities
• The guarantee & “self funded” value proposition
Why Memorial Chose the Program
Excellent buy-in from all levels within the University
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• Will reduce utility and operational costs by $1.6M annually and address capital renewal
• Environmental benefits– Cost neutral conversion from “bunker C” #6 oil to cleaner burning
#2 oil
– Reduce green house gas emissions by 7,310 tons
• Implemented a comprehensive communications strategy– Students incorporated in the program
Results
The Owner’s PerspectiveMemorial University of Newfoundland and Labrador
Significant improvements and benefits to Memorial
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Atlantic Canada Community CollegesCurrent Activity
New Brunswick Community College
Nova Scotia Community College Working with Daniel Kelly to identify and develop self
funded facility renewal program
Conducted site visits and utility analysis for Nova Scotia campuses
Participated in the APCCC college greening forum
Potential pilot project at the Moncton Campus that will involve the students
Working with Stephen Ethier to develop the Energy Management and System Technology program curriculum
College of the North Atlantic
Holland CollegeNo current activity
Completed successful EPC/Facility renewal programs at four campuses including Gander, Burin, Clarenville, Baie Verte
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Summary
Significant Benefits for Post Secondary Education Facilities
Reduce energy consumption and costRedirection of energy spend to fund improvements
Address deferred maintenance and facility renewalImproved facilities for students and faculty
Environmental stewardshipConserving resources for the future
Guaranteed outcomesResponsible initiative for facilities
Performance Contracting is provenInnovative but proven results across Canada
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Question & Answer