Atlanta Sees Major Savings from Energy Performance Contracting

By Leo Wiegman

The Atlanta Civic Center’s 45-year-old air-handling systems and domestic water heating equipment were in very poor condition. With annual energy costs exceeding $500,000, the Civic Center— with its aging heating, cooling, lighting, and water systems—was a poster child for the need to retrofit existing buildings.

This work was done thanks to Georgia’s voters, who approved a constitutional amendment in November 2010 to allow energy savings performance contracting (ESPC). Georgia was the 49th state to adopt such ESPC-enabling legislation. ESPC for public sector buildings has grown dramatically nationwide in the past year or two. Many states, exemplified by recent developments in Georgia, have rapidly growing public–private sector partnerships that are delivering energy savings without requiring large public capital investments.

To encourage this growth, the Obama administration launched the Better Buildings Challenge, a national initiative of the administration and the U.S. Department of Energy that aims to make commercial buildings a minimum of 20% more energy efficient by 2020 while accelerating private sector investment in energy efficiency projects. The Civic Center became the first building in the downtown area to complete the Atlanta Better Building Challenge, reducing its energy consumption and improving its water efficiency.

Through a partnership between the city and its gas utility, Atlanta Gas Light, the energy improvements at the Civic Center were implemented as a design-build- finance project. This arrangement required no up-front capital outlay by the city because it took advantage of an initiative that allows the utility to extend financing to its clients for energy efficiency upgrades—the Georgia Sustainable Environmental or Economic Development (Georgia SEED). In 2009, Atlanta Gas Light received approval from the Georgia Public Service Commission to launch this experimental initiative for a 5-year period.

For customers who can establish significant economic and environmental benefits for the state, Georgia SEED offers three potential options for service contracts. For those customers building new plants in Georgia, SEED provides the benefit of a new utility service extension to plant sites. For those seeking energy efficiency upgrades, SEED offers financing for the purchase and installation of new, higher efficiency gas equipment, such as engines, boilers, fleet vehicles, refueling stations, and gas-fired air-conditioning equipment. Finally, SEED extends discounted utility rates to help lower overall energy costs. Customers have few or no up-front costs and can pay back the investment over the life of the project.

In the case of the Atlanta Civic Center, Georgia SEED will recover the project investment of $2.1 million through the city’s avoided energy, water, and maintenance costs. In addition, the city is receiving new revenue because the improvements have increased demand for use of the facility. With recent growth in the local film industry, the Civic Center’s upgraded exhibit hall has become more desirable as a sound stage for several movies and TV series.

Atlanta’s Office for Sustainability reports the actual savings over the 2009 baseline are 23% in energy use and $93,000 for the initial 6-month period ending May 2012. In short, the building’s upgrade is performing as projected and delivering savings. The city expects to save $200,000 per year, or a total of $3.57 million over the 15-year life of the Georgia SEED contract.

ESPC allows a state to finance building improvements designed to lower energy consumption. Through multiyear contracts, state agencies may partner with energy service companies (ESCOs) to complete energy and water efficiency initiatives. The ESCOs are paid back out of the energy savings from the buildings improved performance. “Energy savings performance contracting is a vehicle providing technical and primarily financial solutions to public sector entities that have a need to address deferred maintenance and infrastructure improvements and no real ability to fund those things,” explained Ray Hinson, regional director for the Indiana-based Energy Systems Group. “Performance contracting allows a solution to those needs working within existing budgets. I think that’s kind of the magic of performance contracting.”

“The ultimate mission as it relates to energy performance contracting is not only a financial proposition, but it is also more of a systems approach to doing building upgrades,” noted Rhonda Courtney, president of the Energy Services Coalition. “Instead of installing a mechanical system and a lighting design independent of each other, it is a proposition that enables you to pay for those energy measures over time, but it also states that we’ll guarantee the performance and the energy savings those measures will provide.”

In 2011, as part of a city-wide “Power to Change” initiative to make Atlanta a leader in urban sustainability, Atlanta’s new mayor, Kasim Reed, appointed A. J. Robinson, the president of Central Atlanta Progress, a private nonprofit community development organization, as head of the new Atlanta Better Building Challenge.

Atlanta has benefited from a long-standing civic planning collaboration of corporations, nonprofits, and local governments that has focused on the downtown area since the 1940s. The Atlanta Better Building Challenge program has been able to exploit these existing networks of civic leaders to ramp up a high-impact building efficiency program within 12 months.

Under the Atlanta Better Buildings Challenge, the city has joined forces with both the business and nonprofit communities to undertake a comprehensive energy upgrades program for downtown buildings. The initial funding for the Challenge came from the 2009 American Recovery and Reinvestment Act grants. The program’s goal of a 20% reduction in energy consumption by 2020 parallels the nationwide Better Building Challenge efforts.

“In the first six months, we’ve gone from standing still to about 28 million square feet out of a total of about 40 million square feet signed up for the assessments and taking the Challenge,” explained Robinson. “Our mission is to make our downtown Atlanta community and all of Atlanta better—a better place to live, a better place to work, and a better place to visit.”

The program began with a benchmarking initiative in 2011 for Atlanta’s 220-block Downtown Improvement District, which includes City Hall, the Boisfeuillet Jones Atlanta Civic Center, and other landmark downtown buildings. Building operators were asked to record their baseline energy use in the U.S. Environmental Protection Agency’s Portfolio Manager database, which allows easy comparison among similar building types around the country.

The City of Atlanta owns and operates some 750 buildings. The Atlanta Civic Center is a 231,000-square-foot facility originally developed in 1967 as an all-electric building. The benchmarking revealed that the Center ranked 12th highest on the city’s roster in terms of electric consumption, and 10th highest in terms of electricity costs (excluding the city’s large airport).

“The Better Buildings Challenge for Atlanta will create jobs, as we have no vertical buildings going up, or very few of them. We’ll be able to take the opportunity at this time to go inside the buildings and put Joe the plumber and Sally the electrician back to work,” noted Rutherford Seydel, an Atlanta-based attorney recognized for his sustainability practice.

“We will be able to use the energy that we are sort of wasting in some of these buildings, and we’ll be able to use that energy in the new buildings as they come on line,” concluded Seydel, who helped increase energy efficiency at Philips Arena in downtown Atlanta.

Over time, throughout Atlanta and the rest of the state—from airports to colleges and schools-project partners will work with banks, funders, energy service companies, and others to enable deep retrofits of buildings from the university, healthcare, municipal, and commercial sectors.

“The Northwest Georgia Housing Authority board has decided to move forward with the development of an energy performance contracting program that could result in energy savings of between $300,000 and $400,000 annually,” noted Jim Arwood, interim executive director of the Energy Services Coalition.

By mid-fall 2012, 30 states will host Energy Service Coalition chapters that are actively seeking to develop and share best practices across all the energy performance phases of the work, from project development to implementation to performance management.

The Coalition has a robust library of tools, including sample contracts and best practices for each stage of the work. Each state is different, but as patterns of best practices do emerge, the Energy Services Coalition is quick to capture and pass on these lessons around the country.

“The Georgia Environmental Facilities Authority has adopted and implemented many of the Energy Services Coalition’s best practice models for programmatic design, including establishing a list of prequalified vendors and program administrator,” elaborated Arwood.

“Typically, states select an ESCO through their qualifications. That’s what the state’s enabling legislation enables them to do. They also look at some other criteria: price, bench strength, safety record, and financial background,” explained Tom Walther of Johnson Controls.

“Any way you shake a stick at it, this is just a darned good thing to do,” concluded Walther.