Question and Answer with Industry Experts

by Cassandra Lovejoy

One way energy savings performance contracting (ESPC) is unique is its reliance on public–private partnerships to achieve success. The Energy Services Coalition (ESC), a network of experts working to increase energy efficiency through ESPC, embodies the public–private partnership approach. In July, State & Local Energy Report asked three members of the ESC board to discuss the present and future of ESPC.

PARTICIPANTS

Jim Arwood, Executive Director of the Energy Services Coalition

Rhonda Courtney, Vice President of LED Lighting and Solutions at Energy Focus, Inc., and one of ESC’s Representatives of Equipment Suppliers and Technical Services Providers

Thomas Walther, General Manager of Southeast Areas, Energy Solutions and Building Efficiency, at Johnson Controls, Inc., and Vice President, Private Sector at ESC

First, we asked the participants what role the ESC plays in support of statewide ESPC programs and the ESPC industry. Jim Arwood began with a brief introduction of the ESC and the services it provides. “The ESC has a unique role in our industry. The organization is a 50/50 partnership of private- and public-sector stakeholders. The collective goal of the organization, both the public- and the private-sector sides, is to accelerate the broader use and acceptance of performance contracting. It is our mission to have performance contracting viewed as an option for facility improvements when the situation fits the performance-contracting model. Our message to states and industry has been to value the lessons learned of others. As an organization we have rolled up that collective expertise in the form of our best practices, guidelines, documents, and tools that reflect countless lessons learned over many years, and we share these through our network of state chapters. The information we offer is intended to help states establish, or enhance, a sustainable ESPC program and get more projects off the ground for all the right reasons—job creation, energy savings, and environmental stewardship.”

Thomas Walther then highlighted the resources that ESC offers to both the public and private sectors. “The ESC provides a forum for all stakeholders to develop and execute outreach and education about ESPC programs, including state-specific resources such as Request for Proposal, audit, and contract templates for public-sector agencies to use to implement these programs. The ESC, by its very nature and organization, serves as an enabler of ESPC across all market sectors.”

The second question focused on how state energy offices can help to support the development of the ESPC industry. Thomas began by explaining the benefits of the current role of many state energy offices. “In many cases, the state energy office serves as the public-sector co-chair of the local ESC chapter. This works out very well for both the private-sector members and the public, because the interaction between them helps to better define how and where ESPC is best achieved. Through this process, best practices can be identified and leveraged to drive more projects, increasing competition and reducing costs.”

Jim continued the conversation, adding specific actions state energy offices can take to support ESPC and how the ESC supports those efforts. “The common denominator across the country is that the scale of need and number of end users is huge. States can accelerate the process so industry can get about the business of implementing performance-contracting solutions. States have achieved highly satisfactory results by following the ESC best practices model and adopting and modifying our contract documents. The energy services industry is familiar with these best practices—whether it is a procurement document, Request for Quote, or Request for Proposal—as they reflect examples of someone else that has done it right.”

Rhonda added that the state energy office has a role throughout the ESPC process. “The state energy office can promote education as a way for agencies to learn if ESPC is a viable program for them to utilize in upgrading their facilities and how to gain the best results when engaging and sustaining ESPC programs. The energy office can also track and report on ESPC results to encourage state energy and operating efficiency improvements.”

Next, we asked what the federal government can do to support ESPC. Jim highlighted the existing partnership between the federal government and the ESC, stressing the value of ESPC due to its flexibility in implementation, and the importance of the federal support for the tool. “The federal government has in the past and continues today to work with the ESC on performance contracting solutions at the state level. The ESC has learned over time that mission critical is understanding what each state needs and the conditional restraints they face, and that these programs are tailored to fit those states and their primary missions and concerns as opposed to a one size fits all. Furthermore, most state governments, as well as the federal government, find themselves in an increasingly budget-constrained environment, requiring better and more judicious use of funds. Performance contracting is an ideal mechanism by which a variety of goals relative to improved building efficiency and reduced energy consumption can be achieved in a fiscally prudent manner. This is a fact that the federal government understands and is embracing; continuing to get that message out and articulate the value of the performance-contracting solution would be very impactful.”

Rhonda took a more granular approach, recommending specific actions the federal government could take to support ESPC. “The federal government can encourage each state to learn about the value of ESPC by mandating energy offices to take an active role in the ESC to ensure a state chapter exists to provide the required education to promote ESPC, which will lead to the best long-term sustainable results.”

Lastly, we asked the participants to identify barriers to further growth in ESPC. Jim and Rhonda agreed that lack of education about ESPC was the most important barrier. According to Jim, the public sector needs to become more comfortable with ESPC. “Performance contracting is a procurement method—nothing more. It is a different way of buying building improvements. If the public sector is educated and understands the value that performance contracting provides, they will know when it is the right situation. The ESC was formed to educate the public sector about this type of procurement, this type of solution. And overcoming this barrier is something our state chapters work to achieve through workshops and meetings that are localized by state or by market.”

Rhonda added that the public sector also needs to then educate its partners about ESPC. “The largest barrier is the lack of public-sector involvement needed to help encourage education of ESPC. The lack of knowledge of how best to engage and sustain successful projects has led to many unsuccessful projects and limited-scope projects not taking full advantage of an ESPC program.”

Thomas mentioned other barriers to growth in the ESPC market. “The commoditizing of ESPC from a financial solution to a design/build/construction management at-risk program is probably the greatest risk to growth. In addition, lack of reasonable financing sources, incentives, and rebates, and constant attempts to modify existing enabling legislations, are threats to growth.”