Hosted by the Initiative for Renewable Energy and the Environment 27 January 2012 • University of Minnesota, Twin Cities

Dick Hemmingsen, Managing Director, Innitiative for Renewable Energy & the Environment Mayor Chris Coleman St. Paul, Minnesota Commissioner Paul Aasen, Minnesota Pollution Control Agency U.S. Senator Al Franken

Bill Heaney, MN Energy Jobs Association Jay Behnken, Trane

Madonna Rykken, Honeywell Building Solutions Commissioner Rhonda Sivarajah, Anoka County

Andrew Dykstra, Anoka County

Retrofitting of Public Buildings

Agenda

■Overview of Performance Contracting (PC)

■Why use Performance Contracting . . . The Benefits

■Some Myths…Busted

■Case Study – Anoka County

■Questions (if time permits)

Existing MN Legislation

■ Procurement method for state, municipal and k-12

■ Payback requirements varies by sector

■ Provides funding for capital projects

■ Savings offset project costs

■ No new taxes

■ No upfront money required

■ Performance and savings are guaranteed

■ Improves operating efficiency/ Enhances working environment

■ Flexible and unique for each customer

Benefits of PC

Traditional Bid / Spec Performance-Based

Low bid awarded based on specifications Awarded based on performance & lifecycle costs

Project costs funded by capital budget Payments for projects are offset by guaranteed savings freeing up capital for other needs

Piecemeal approach based on available dollars

Comprehensive approach

Up-front fee for evaluation/studies No up-front fee required

Performance & savings are not guaranteed Long-term performance & savings are guaranteed

Multiple contracts with multiple vendors One contract, single-point accountability

Contractors have no accountability to lifecycle costs

Performance-based contractor is tied to guaranteeing savings over term of contract

Owner assumes risk Performance contractor takes risk

How it Works Performance Contracting is a way to fund improvements with no additional cost to taxpayers.

Existing facility, energy,

operations & maintenance

costs

Before

Existing facility, energy,

operations & maintenance

costs

Excess Savings

Savings Fund Improvements

During

Existing facility, energy,

operations & maintenance

costs

Savings

After

$

The Myths

■ Loss of project control

■ Unsure of guaranteed savings measurement process

■ Project costs more through performance contracting

■ I don’t have a choice of the product manufacturer

■ We have our own skilled personnel

■ Only applies to greater Minnesota areas

Lighting Water Waste Water Street Lighting Parking Meters

HVAC Ice Arenas Swimming Pools Plumbing Fixtures

Building Envelope Issues

Potential Opportunities

. . . & more

Landfill Sites

City of Rochester

Challenges ■ Aging facilities & infrastructure

■ Limited capital

■ Increasing energy & operational costs

Project Details $5.6M

12 Year Agreement

Utility Savings:$502K/year

Operational Savings:$102K/year

Rebates - $300K

Solutions Lighting, Temperature Controls, Water Upgrades

Building Envelope issues

Traffic Signal Upgrades

Steam Trap Repair

Boiler Replacements

Building Automation Systems

Ice Arena Dehumidification, energy recovery & ceilings

Variable speed drives, high efficiency motors & pumps

Fire alarm & security upgrades

•Results ■ Addressed long overdue capital improvements ■ Improved reliability of mechanical systems ■ Improved comfort, efficiency and taxpayer image ■ Environmental benefits – reduced GHG emissions

Anoka County – Government Facilities Challenges ■ Aging facilities & infrastructure

■ Budget shortfalls/limited capital

■ Increasing energy & operational costs

■ Uncomfortable working environment

Project Details ■ $12.5M of facility upgrades

■ Annual energy/operational savings of $873,000

■ 30+ buildings

■ Over 1.4 million square feet

■ 7 phases of work

Solutions ■ Lighting and fixture upgrades ■ Occupancy sensors ■ Exterior photocells ■ Energy efficient motors and pumps w/ VFD’s ■ Water saving retrofits on fixtures ■ Energy management system ■ Central heating & cooling plant upgrades ■ Mechanical system improvements ■ Temperature control system upgrades ■ On-site generator to manage peak demand ■ Training of staff ■ Measurement and verification

Results ■ Addressed long overdue capital improvements ■ Improved reliability of mechanical systems ■ Improved comfort, efficiency and taxpayer image ■ Environmental benefits

Questions

Madonna Rykken | 612.865.1492 Business Development Manager Honeywell Building Solutions Madonna.Rykken@honeywell.com Jay Behnken | 651-468-2715 Comprehensive Solutions Manager Trane Minneapolis/St. Paul jbehnken@trane.com

MEPC Meeting

April 7, 2011

Andrew Dykstra

Director of Facilities Management and Construction (763) 323-5385

Anoka County

Anoka County Facilities

Anoka County Parks and Recreation

Facilities

Anoka County Library Facilities

Anoka County Facilities

Total of 2,500,000 square feet of buildings.

Inefficient Infrastructure

Increasing IAQ Requirements Physical Asset

Deterioration

Degrading Building Envelope

Obsolete Control Systems

Aging HVAC

Why Anoka County Did a Project?

Aging Infrastructure/Deferred Maintenance

Increasing Energy and Operating Costs

Occupancy Comfort Issues

Lack of Funding $$$

Types of Projects

Lighting Retrofit Energy Management System Upgrades Energy Efficient Motors/Variable Speed Drives Central Heating and Cooling Plant Replacements Dual Duct Ventilation System Conversion Back-up Generators Temperature Control System Repairs Water Conservation Insulation Replacement Power Factor Correction Miscellaneous Improvements

Financial Results

$12.5 million in projects – 7 phases – Over 10 years

Energy and Operational Cost Reduction Exceed $873,000 annually (for all 7 phases).

Annual Energy & Operational Savings by Year

Janet Streff Manager, State Energy Office

Minnesota Department of Commerce

How the State’s Guaranteed Energy Savings Program and Public Building Enhanced Energy Efficiency Program Can Help.

Encouraging Energy Efficiency and Public

Building Retrofits in the State of Minnesota

• Minnesota Department of Commerce • Division of Energy Resources

• State Energy Office • Providing energy information

for over 35 years… • Energy conservation, efficiency, &

renewables • Through technology, analysis, grants,

programs, & public outreach • Data, reports, publications, presentations,

website, call center, training, public events 21

• Getting Started – Tools • Access B3 Benchmarking Website

• Building Construction Data –

• Square footage, operational equipment, occupancy and usage

• Energy Consumption Data –

• Electrical and natural gas – kW, kWh, therms

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• Benchmarking your buildings gives you the information you need to get started

• MN has benchmarked 6,400 of its public buildings

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0

20

40

60

80

100

120

10 40 70 100 130 160 190 220 250 280

Annual KBtu/sq. ft.

Num

ber o

f Bui

ldin

gs

50% Over Code

Set Energy Code Target Range

Best Candidate Buildings for Investing Energy Efficiency Dollars

Dramatic difference in return on investment for retrofit $$

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•Mechanical Systems •Heating Systems •Ventilation Systems •Air Conditioning •Electrical Systems •Energy Management Systems

•Lighting Retrofits •Building Envelope •Water Conservation •Renewable Energies

• MN Public Sector Programs • Public Buildings Enhanced Energy

Efficiency Program (www.PBEEEP.org) • Retrocommissioning through extended

studies • Smaller capital projects

• Guaranteed Energy Savings Program • Revamping state performance contracting

program via Dayton’s Executive Order 11-12 • RFQ for energy service companies 1/30/12

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• Legislative Background – State Energy Improvement Financing Program • Minn. Stat §16B.321 – 16B.322 enacted in 2008 to

address two fundamental constraints to reducing energy consumption in state buildings: • Access to expert technical assessment to

identify measures to reduce energy consumption

• Access to financing to implement recommended measures

• Economic feasibility is determined by ability to pay back financing out of savings realized by energy improvement project

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Through People and Organizations

Program: Center for Energy and Program Administrator Environment (CEE)

Provider: PBEEEP Qualified Contractor(s) Complete projects

State Department of Commerce, Div of Energy Resources

Local Government: City, County, School District Project Building Owner

Enhances public building energy efficiency through retro- CX and retrofits •Reduces energy use •Reduces operating costs •Reduces greenhouse gas

emissions •Creates/retains jobs •Promotes renewable, alternative

energy sources

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• Guaranteed energy savings program reinvigorated through Executive Order 11-12

• DER staff provide technical, financial and contractual assistance to local units of government seeking building retrofit programmatic support.

• DER is part of the Energy Service Coalition – MN Chapter

• National, nonprofit, organization of public & private sector members, working in partnership with the U.S. Department of Energy

• Working together at state & local level to increase energy efficiency and renew building infrastructure through the use of Energy Savings Performance Contracts

MN Dept. of Commerce Energy Service Companies

MNSCU Product Manufacturers

Local Unions Utility Companies

Renewable Energy Cos Installing Contractors

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Significantly reduce energy use Improve facilities’ environment Reduce deferred maintenance Avoid expenditure of capital Reduce operations and maintenance Improve productivity Reduce waste Fund projects through energy

savings

Energy

Liability Repairs

Savings

Comfort Productivity

• SEE Action Network • State and local effort facilitated by the federal

government that helps states, utilities, and other local stakeholders take energy efficiency to scale and achieve all cost-effective energy efficiency by 2020.

• Existing Commercial Buildings WG goals include enlisting 10 state and 30 local governments to adopt one or more solutions (benchmarking, green leasing, RCx)

• http://www1.eere.energy.gov/seeaction

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• Launched by President in December 2011

• Partners commit to an energy savings pledge, a showcase building, and to share their progress

• MN participants include State of MN, Best Buy, 3M, Cummins – and more?

• 1.6 Billion sq. ft. committed, $2B financing through allies

• 300+ manufacturing facilities

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• GreenStep Cities – 30+ MN cities signed up for voluntary challenge, assistance program •Building efficiency one of 28 best

practices •City policies/programs useful to

other cities •http://greenstep.pca.state.mn.us

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www.MnGreenStep.org

State programs and GreenStep Buildings & Lighting Best

Practices Actions:

1. B3 Benchmarking 2. GESP 3. PBEEEP

Division of Energy Resources Contacts

PBEEEP: Abby Finis abby.finis@state.mn.us GESP: Peter Berger peter.berger@state.mn.us GESP: Eric Rehm eric.rehm@state.mn.us

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Deputy Secretary, U.S. Department of Energy

Mayor Jim Hovland of Edina Former State Senator John Doll

Kate Worley, Co-Executive Director, Minnesota Waste Wise

Retrofitting Private Buildings

EDINA EMERALD ENERGY PROGRAM (PACE)

Mayor Jim Hovland City of Edina

January 27, 2012

EDINA PACE PROGRAM DOCUMENTS •Program Report and Administrative Guidelines •Application and Petition for Special Assessment •Bond Purchase Agreement •Bond Resolution •List of Eligible Improvements •Summary of Financing Process •Flow Chart of Financing Process

Property Assessed Clean Energy Financing

Senator Franken - GreenStep Cities Event January 27, 2011

John Doll Former State Senator, District 40

nearly 35% of U.S. energy use

and carbon emissions come from our buildings

Benefits of Deep Energy Retrofits in Commercial Buildings

• Significant Energy Consumption Savings

•Net Increase in Cash Flow

•Healthier Environments for Tenants and Employees

•Improved Productivity Levels

•Higher Occupancy Rates/Higher Rents

•Improved Marketability of the Property

•Increased Property Values

• Energy Efficiency Credits

Why PACE? PACE provides a pathway to overcome inherent barriers to investing into critical deep energy retrofits in the private sector: short term investment horizons, split incentives, capital competition, high upfront costs, tight credit or low levels of liquidity. It provides a perpetual funding mechanism for EE and RE projects that can overcome the above concerns. And because energy savings make the projects cash-flow positive, and because total asset value is increased, companies improve their financial position without having to tie up any of their equity or debt capacity.

What is PACE?

Property Assessed Clean Energy financing is a local government program that uses a 100+ year old provision of the property tax code to create a land secured financing district that allows property owners to pay for improvements that are in the public interest. In this case, improving building energy efficiency and installing renewable energy upgrades.

PACE Basics

Provides capital to fund energy

retrofit

Pays special assessment on

property tax bill

Contractor paid for retrofit

Energy savings pay for capital improvements

PACE Basics

Commercial Lender

Local Government

ESCO

Property Owner

Pay collected Assessment to lender

Construction Payments

Owner –arranged PACE financing model

Arrange Financing Pay Special

Assessment Through Property Tax

Guaranteed Energy Saving

Performance Contract

Apply for and receive approval

for Special Assessment

Key Provisions of MN PACE • MN Statute 216C.436 authorizes local governments to issue and sell revenue bonds under the program through special assessment on property tax.

•Allows multi-jurisdictional PACE programs through an authorized implementing entity.

• Senior Lien Status (Tax Lien) of Financing not to exceed 10% of assessed value

• Transferability of lien – Financing is land/property secured. A change in ownership of the property does not accelerate or otherwise alter the original payment period.

• “Opt-in” program - All properties within energy financing district are eligible and, if owners qualify under established underwriting rules and guidelines, may participate in PACE program.

•Best Practices and strong underwriting guidelines significantly reduce the risk of default.

• Requires an energy audit or renewable energy system feasibility study

• Program sustainability ensured through quality assurance and controls

•Bonds issued under this subdivision are not a debt or obligation of the issuer or any local government that issued them, nor is the payment of the bonds enforceable out of

Benefits of PACE

To Lenders • Very Low Default Rates

• Better Loan-to-Value Ratio

• Improved property value

•Improved marketability of asset

• Guaranteed revenue stream - Positive cash flow improves property owner’s financial position, thus their ability to repay the financing •ESCO participation provides additional layer of performance security

To Property Owners • No upfront cash needed

• Improved Cash Flow

• Less investment risk •Off-balance sheet financing • Savings to Investment Ratio > 1

• Improved property values/marketability

•Minimizes the split incentive barrier •Property tax liens can pass through to tenants

• Removes Holding Period Bias

•Special assessments can transfer

Commercial PACE

PACE Financing for Commercial Buildings to Reach $2.5 Billion Annually by 2015 – Pike Research, June 2010 According to a new report from Pike Research, PACE programs will continue to proliferate in the United States, and by 2015 investment in PACE financing for commercial buildings will total $2.5 billion annually, under a baseline forecast scenario. This level of investment would result in the creation of 50,000 new jobs, and would mitigate almost 8 million metric tons of carbon dioxide (CO2) emissions, equivalent to taking 1.7 million cars off the road for a year. “PACE programs are gaining momentum around the country, and they represent a very promising mechanism for overcoming many of the barriers to energy efficiency retrofits for commercial buildings,” says Pike Research managing director Clint Wheelock. “The majority of buildings would benefit from energy retrofits, with neutral to positive cash flow in addition to the other environmental and social benefits.”

Building a sustainable future based on clean energy

For more information - Contact: John Doll at 612.366.6822 or 2johndoll@gmail.com

Getting Started

Know Utility Rebates Program Rebate Lighting Efficiency Rebates for installing efficient lighting in existing and

new buildings.

Heating and Cooling Efficiency Energy efficient boilers & burners, furnaces, steam traps, chillers, economizers, PTAC’s. Prescriptive & custom.

Motor Efficiency Prescriptive and custom rebates for motors and VFD’s that meet or exceed NEMA premium efficiency standards.

Efficiency Controls Automated building systems controls for lighting, HVAC and others.

Custom Efficiency Projects that involve energy savings but are not included in other programs.

Recommissioning Building system tune-up—improve efficiency of existing operating systems and controls.

Refrigeration Recommissioning Commercial refrigeration system tune-up—improve efficiency of existing refrigeration systems.

50% Bonus Rebate for T12 Lighting through March 31, 2012

If you still have T12 lights, now is the time to act. Financial incentives are their highest.

Pick up a lighting rebate form today

Xcel Energy T12 Bonus Rebate

Catalog private commercial buildings How many, how big, who owns, etc.

Identify private sector targets Prioritize (value, sq. ft., business type, etc.)

Develop outreach plan Who makes contact, when, how, etc.

Conduct energy audits Identify mid-cost vs. ESCO projects

Identify upgrade options & take to City Hall

The Private Sector Continuum

Where to Turn for Help

Useful Resources in Minnesota Green Step Cities

Energy Smart

Your energy utility

Minnesota Division of Energy Resources

Center for Energy and the Environment (CEE)

Minnesota Technical Assistance Program (MnTAP) or Retired Engineers Technical Assistance Program (RETAP) Clean Energy Resource Teams (CERTs)

Your city economic development department

Your county or regional economic development programs

Contact Info

www.mnenergysmart.com

Kate Worley (651) 292-4662

kworley@mnchamber.com

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For those joining us online,

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Hosted by the Initiative for Renewable Energy and the Environment 27 January 2012 • University of Minnesota, Twin Cities

Thank You for Joining Us!