This blog post is an excerpt from "The Missed Investment: How College and University Endowment Funds Can Achieve the Highest and Safest Return" by Peter Fairbanks, President of Fairbanks Energy Services.
In the last 3-4 years there has been a significant movement to invest in green improvements on college and university campuses. Being among the most energy-intensive property types in the world, there are numerous opportunities for efficiency projects that address lighting, building system controls, chilled water systems, steam systems and more that have simple paybacks after utility incentives of about 2 to 3 years. Implementing these solutions will help campuses reduce their overall carbon footprint, lower energy costs, and promote a sustainable future in surrounding communities.
How, you make ask, does a university's staff go about making these upgrades happen? There are a couple of different ways to get a campus efficiency project started, some including more cons than others. Learn more below.
Typical Campus Construction Process
There is no one entity that is responsible for the overall project, project savings, or the utility incentive in this process. Based in large part on using bids to achieve the lowest cost for each phase, it is typical for each participant that “won” the bid to feel they provided a price that didn’t allow them an appropriate profit and didn’t cover contingencies. Consequently, part of the game in this exercise is to identify project details that were nebulous or ill defined. When identified after the fact, price adders ensue.
Engineering firms that make a living providing plans and specifications are typically good at providing documents for new buildings or major renovations that meet codes and cover everything in great detail to minimize the cost adder issue discussed above, but they are simply not in the business of providing cost effective efficiency upgrades to existing systems. This is why, with LED lighting having improved so dramatically in the last two years from a quality and cost standpoint, engineering firms are still sometimes specifying fluorescent lighting for new buildings.
Another consideration of this process is that there are engineering, evaluation, and management costs associated with each step that drive up the overall efficiency solution cost. Additionally, with the typical campus construction process, there would be no guarantee of savings.
Conclusion: Long process, too many entities involved, not most cost effective solution, and no guaranteed savings.
Ramp up the College Facilities Department
A second approach to a campus efficiency project would be to increase in-house resources. After years of cost cutting, the typical college Facilities Department is understaffed, dealing with deferred maintenance, and have their hands full putting out fires and keeping important systems running. There is usually some component of their jobs to make systems efficient, get utility incentives and save energy, but it is often an afterthought.
As one Facilities Director of a large university said when asked why the institution didn’t have a more robust efficiency upgrade program:
“We don’t have the budget or staff to even provide preventative maintenance of our systems – we run our systems to failure and then capital is made available to replace them.”
Staff could be added for the efficiency initiative, but what expertise would they have? Wouldn’t they become an in-house version of the typical campus construction process described above?
Conclusion: Understaffed, and too busy
Outsource the Process to an Energy Service Company
A third option is to outsource. Energy Service Companies, (ESCO) as discussed here, are large engineering/construction companies that provide all the services of an ESP as well as financing. The ESCOs will typically marshal the expertise to identify, develop, and implement efficiency solutions. They also take responsibility for the efficiency solutions, including obtaining utility incentives and guaranteeing savings. ESCOs usually operate on a shared savings basis where they take the majority of the savings over a multi-year term.
In essence, they will finance the efficiency solutions and capture the bulk of the lost savings for themselves and make the 15 – 25% return on investment – for themselves.
Conclusion: Takes a majority of the savings from project
Capture Lost Savings and Provide Positive Cash Flow for Operating Budget with an Energy Solutions Provider
The best way to capture lost savings and provide positive cash flow for the operating budget is to engage an experienced and reputable Efficiency Solutions Provider to expeditiously develop and deliver appropriate efficiency solutions. The ESP will identify, develop, and implement efficiency solutions and take full responsibility for the project, including obtaining utility incentives and guaranteeing savings.
If you want a smooth process when saving your campus money and energy, choose an Efficiency Solutions Provider for the job. From large-scale campus retrofits to targeting smaller locations where energy is being wasted, college and university campuses can seize the opportunity to save energy and make financial gains with an Efficiency Solutions Provider.