EnergySolutions

EnergyPerformanceContracting inthe EuropeanUnion

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1. Introduction

Contents

2. EPCBusinessModel&ContractTypes 3. ProvisionofFinancing 4. Contracts 5. FinancialGuarantees 6. ProcuringanEnergyPerformanceContract 7. DeterminingenergysavingsM&V 8. EPCBestPracticeCaseStudies

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1.Introduction
WhyshouldBuildingsreduceEnergyand CarbonEmissions?
Itisnowwidelyrecognisedthatclimatechange is probably the most serious threat to life, our health, and our wellbeing. Unless we all take effective action now and take serious action to reduce carbon emissions, millions of people around the world will suffer hunger, water shortages and coastal flooding as the climate changes. Nondomestic buildings tend generally to be large with a range of significant impacts on the environment, of which energy consumption and associated carbon emissions are considered to be amongst the most important. As a result, they have a national and international imperative to act in order to make a real difference and to set an important example. There is also a strong financial incentive to address climate change. The Stern Review5 concluded that the benefits of strong, early and coordinated action against climate change far outweigh the economic costs of doing nothing. Coupled with the significant cost of energy in most buildings, which is forecast to continuetorise,doingnothingisnolongeran option.

ESCOstherightchoiceforintegrated energysolutionsacrossabuilding portfolio

Energy Service Companies (ESCOs) have been operating within the energy sector for many years and recognise the challenges that organizations face and the need for change. With the technology, expertise and proven solutions to help develop a strategy outlining the most effective path to improvement, they take a comprehensive view of a buildings carbon footprint, identify the areas where improvements can be made and implement practical, engineered solutions to reduce energy consumption and carbon emissions. The benefits are immediate, including reduced costs, improved building comfort and legislativecompliance. A number of ESCOs can guarantee the results and take on the performance risk, funding the improvements from the savings they deliver. This solution is termed Energy Performance Contracting and while it has been implemented with great success in a number of EU member states, based on this success, it is currently gaining great interest and traction acrossEurope.

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2.EPCBusinessModel&ContractTypes
WhatisanEnergyPerformanceContract(EPC)?
An EPC overcomes the need for upfront capital investment. Rather, it guarantees future savings in energy demandtofinancepractical,engineeredplantimprovements.Itisaninnovativewayofbringingaboutchange andreducingriskofovercomingalackofinhousetechnicalskills,resourcesandbudget. AnEPCenablesanorganisationto: Reducethefinancialrisksassociatedwithenergyconsumption Utilise ESCO design, implementation and finance resources to improve the energy efficiency of buildings Conductadetailedenergyaudittoidentifywhereandhowmuchenergydemandcanbereduced Reapguaranteedcostsavings.EnergysavingsareguaranteedbytheESCO.Intheunlikelyeventofthe agreed savings not being delivered, the ESCO makes up the difference. Usually, any additional saving above that guaranteed is left to the customer to keep but shared savings model as described in the diagrambelowcanalsobeemployed. Critically, EPCs are without risk to the customer. Working with an experienced ESCO ensures that savings are measured,verifiedandguaranteed.Theguarantee,ineffect,transfersalltechnicalandoperationalriskstothe ESCO. It also ensures that change happens. Independent research shows that whilst energy surveys are commonplace, very few measures are actually implemented. Thats a lot of lost cost saving opportunity gone forever. Added to that, working with an ESCO provides organizations with access to additional and skilled resources to implement energy efficient solutions. ESCO experts can help plan and budget for capital improvements by taking a whole facility approach as shown in the diagram below. In addition, smart, webbased energy monitoring and reporting tools can be utilized to not only understand where and to what degree energy is beingconsumedbuttomonitortheimprovementstheretrofitprogramdelivers.

A total facility approach

Ventilation fans So lar g ai n m inimiz ati on L ighti ng r ep lacem ent, co ntrol systems & LED s Buil ding Management System s Damp er control

Zone temp erature contro l Voltage reductio n VSD m otor control On-Site Tech nical Resource Managem en t H igh effici ency m otors Boil er up grades, contro ls Com bined Heat & Power

C hiller upgr ad e/replacem ent & ab so rption cool ing Plug load management

A programme approach accessing over 250 energy conservation measures

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ContractTypes
The illustrations with descriptions below clarify the relationships and risk allocations among the ESCO, customer and lender/financing institution in the two major performance contracting models: shared savings andguaranteedsavings.(Source:BerlinEnergyAgency) SharedSavings Under a shared savings contract the cost savings are split for a pre determined length of time in accordance with a pre arranged percentage: there is no standard split as this depends on the cost of the project, the length of the contract and the risks taken bytheESCOandtheconsumer.
Source:Dreessen2003a

Under a Shared Savings contract, the cost savings are split by a percentage for a predetermined length of time. There is no standard split as this depends on the cost of the project, the length of the contract and the riskstakenbytheESCOandtheconsumer. GuaranteedSavings Under a guaranteed savings contract the ESCO guarantees a certain level of energy savings and in thiswayshieldstheclientfromanyperformancerisk.
Source:Dreessen2003a

An important difference to note between the guaranteed and shared savings models isthatinthe guaranteed model,theperformanceguaranteeisthelevelofenergysaved,whileinthesharedsavingsmodelitisthecost ofenergysaved(andcreditrisktakenonbehalfoftheESCO). Most ESCOs prefer to use the guaranteed savings model. Under a guaranteed savings contract the ESCO guarantees a certain level of energy consumption savings and in this way shields the client from any performancerisk. TheESCOdoesthisunderaguaranteedsavingscontractbyassumingtheentiredesign,installationandsavings performance risks. However, the ESCO does not assume the credit risk of repayment of the programme costs by the customer. A key advantage of this model is that it provides the lowest financing cost because it limits the risks of the finance institutions to their area of expertise, which is assessing and handling the customers credit risk. The customer repays the loan and assumes the investment repayment risk. However, due to the guarantee, if the energy consumption savings are not enough to cover debt service, then the ESCO has to coverthedifference.Ifsavingsexceedtheguaranteedlevel,generallythecustomerkeepsthese. In the developed EPC market in the US, the guaranteed savings model evolved from the shared savings model in response to customers desire to significantly reduce interest costs in exchange for accepting more risk due
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to their increased comfort with energy savings technologies. This was dependant on a market that included experienced ESCOs able to demonstrate a depth of experience and success in the implementation of energy savings programmes. The primary benefit of the guaranteed savings model is that its reduced financing cost enables a lot more project investment to be made for the same debt service level. The public sector normally prefers this structure in order to maximize the amount of infrastructure investment made in its facilities from an Energy Performance Contract. Although the shared savings model is still in use, developed EPC markets tendtoendupembracingtheguaranteedsavingsmodelforthereasonsdescribedabove. Thetablebelowsummarizesandcomparesthemainperformancebasedenergyservicescontractualvehicles.
ENERGY PERFORMANCE CONTRACTING (EPC)
Agent Key characteristics ESCO Implementation of technical measures (ECMs) with ongoing M&V services to provide guaranteed energy savings (kWh) High. Comprehensive and detailed approach via Investment Grade Audits-IGA covering both on-site energy conversion and demand side The ESCO guarantees the performance related to the level of energy saved throughout the contract life Directly related to the energy savings achieved Assumes technical design, implementation and performance guarantee risks High. The energy efficiency is measured before and after (throughout the contract life) of ECMs implementation typically following IPMVP International Performance Measurement and Verification Protocol (www.evoworld.org)

SHARED SAVINGS
ESCO Implementation of technical improvements to provide cost savings associated with the overall energy bill

ENERGY SUPPLY CONTRACTING (ESC)

Energy Supply Service Company Supply a set of energy services via the outsourcing of the central energy plant (primary energy conversion equipment) providing heating and/or cooling to the end-use equipment Low. Limited to the central energy plant (boilers, chillers, etc.) without regard to demandside equipment (AHUs, building envelope, space htg, lighting, ...) The ESC may have incentives related to energy use reduction, but without assuming any risk in case the expected efficiency is not reached Payment is at a fixed rate/tariff without any energy performance (efficiency) requirements Usually does not assume tech risk (energy efficiency) neither financial risk Low. An specific energy bill reduction is stablished (in euros, not in kWh). Usually the contract does not take into account the measurement of the energy efficiency

Energy savings potential Energy efficiency guarantee Payment Contractors risk Energy efficiency improvement transparency

High. ESCOs primary focus and incentive is for energy cost savings with technical operation requirements as secondary The ESCO guarantees the performance related to cost of energy saved throughout the contract life Value of payments is linked to energy prices Assumes performance and customer credit risk Low. The goal is purely cost savings related to energy. Scope of work and services are not clearly defined and at the descretion of the ESCO

ComparisonTableofEnergyContractTypes

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3.ProvisionofFinancing
Sourcesoffinancingenergyefficiencyprojectsare: o ThirdPartyFinancing o ESCOfinancing o Energyuser/CustomerFundingSource Thirdparty financing* is simply debt financing whereby the Customer sources the project financing through a thirdparty(e.g.afinancinginstitution)andnotfrominternalfundsoftheCustomerortheESCO.Theobjective is for the ESCO to provide guaranteed savings that covers the debt repayment for the required contract term (i.e.,apositivecashflow).TheguaranteedenergysavingsprovidedbytheESCOreducestherepaymentriskof the bank, which has a positive influence on the interest rate. Naturally, this is in addition to the base requirementsofthebankbasedonsizeandcredithistoryoftheCustomer. ESCO Financing refers to financing with internal funds of the ESCO and may involve use of its own capital or funding through other debt or lease instruments. ESCO rarely use equity for financing, as this option limits their capability of implementing projects on a sustainable basis. Energyuser/customer financing usually involves financing with internal funds of the user/customer backed by an energy savings guarantee provided by the ESCO (for instance, a university can use its endowment fund to finance an energy project, in which the energysavingsareguaranteedbyanESCO). Energyuser/customer Funding Source may also be associated with borrowing, but it comes from the CustomersinternalCapitalExpenditure(CAPEX)budgetandexistinglinesofcredit.
*

Theinterestcostsduringtheconstructiondesignandinstallationareincludedaspartoftheprojectfinancingagreement.

It must be clearly stated that different countries apply various financial and accounting conditions and instruments that need to be adhered to and the above is merely an overview of the main types associated with EPC. Therefore parties seeking financing need to first inquire as to the countryspecific conditions based onthespecificvehiclesavailable. OneoftheprimarybenefitsforusinganEnergyPerformanceContractisthatitprovidesafreedupsourceof revenue from the customer organisations operational budget (i.e., utility bills and O&M expenses) that, through greater energy efficiency, could significantly enhance the operation of buildings. An EPC uses the energy inefficiency that currently exists across the organisations buildings and utilises this to pay for the energyretrofitimprovementprogramme. The ESCOwillalsolooktoaccessanyavailablegrantsorgovernmentloans,but viafinance partnerspayforall the capital improvements required to deliver the identified energy savings. Alternatively, the customer can providethefinancingandmanageriskbysolelyaccessingtheESCOsenergysavingsguarantee. There is no commitment until contract closure. Up until that time, the customer may walk away without obligation apart from covering the costs of the energy audit & design activities completed to date. Following contract closure (order acceptance) with agreement of the measurement & verification plan and financing, installationandcommissioningproceeds.Nopaymentsarerequireduntiltheprojectinstallationiscompleted, thentheybeginforthedurationoftheEPCasregular,linearpaymentsasshownonthediagrambelow.
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Smooth, Linear/Equal payments

Shipment Order Acceptance Commissioning Completion

Service Programme
C usto mer Co sts for dur ation o f EPC

Linear Full-Service Payment Month

Project duration: 6-12 months

Smooth Cash flow Peace of Mind

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4.Contracts
Eurocontract
TheEurocontractwasdevelopedby theBerlinEnergyAgencyasaEuropeanIntelligent Energyfunded project. ItsoughttodeveloptwostandardcontractstructuresforEPC. IstheEurocontractstructuresuitablefordeploymentacrosstheEU? Whilst the structure is robust, throughout the contract it refers to German Industry Standard terms and conditions for construction and public tendering rules as well as other German standards.In order to be used, thecontractwouldhavetoberedraftedtoworkinthelocalmemberstates,complyingwithlocallaws.

5.FinancialGuarantees
The financial guarantee is based upon a detailed Energy Conservation Measure (ECM) list describing the baseline (asis) and postimplementation consumption, in kilowatthours (kWh), with the difference being the resulting energy savings. The changes or adjustments to the baseline conditions such as weather, energy tariffs,operationalchanges,etc.aretheresponsibilityoftheCustomer.ThekWhsavingsaredemonstratedvia theIPMVP(refertoChapter7.DeterminingEnergySavings).

6.ProcuringanEPC
FrameworkAgreements
The use of a framework agreement offers many advantages over a normal contract. Not least, if it chooses to dosoapublicsectororganisationsuchasaLocalAuthoritycould establishitselfasacentralpurchasingbody procuring these services for or on behalf of other authorities having the same requirements. This achieves both economies of scale and streamlines the procurement process since it is only the award of the original framework agreement itself that must be commenced with an OJEU contract notice and follow a fully compliant award procedure. The subsequent call off energy performance contracts which would be made by theAuthorityandotherusers,donotrequireafurtherOJEUprocess,butsimplyneedtofollowtheprocedure setoutintheframeworkitself. Under the Public Procurement Rules applicable across the whole of the EU, the term framework agreement is now used to refer to agreements, where, in essence, the parties and the main terms on which a proposed contract will be awarded have been formally agreed in writing but where there is no obligation on the purchaser to purchase at all. It is only when a calloff contract is formally entered into that an enforceable contractcomesintoexistence.Aframeworkapproachthenallowsforcircumstancesinwhichforexamplean Authoritysetsuptheframeworkforanumberofusersinitsareasuchasschools.Theschoolsareabletocall
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off the services as and when they need them but under the terms already established. Their procurement burdenisminimised. The schoolsalsohavethecomfortofknowingthat theserviceisthereiftheywantitbut thereisnoobligationonthemtoawardacalloff. Framework agreements fall within the definition set out in local Member State Contracts Regulations and for example may only be entered in to for a maximum period of 4 years(UK) save where there are exceptional circumstancesjustifyingalongercontractperiod. Whilst the framework itself has an express limit to its term, there is generally no such express maximum applicable to calloff energy performance contracts (EPCs) made under the framework. These must, however, be awarded in a way that does not distort competition. But provided there are objectively justifiable reasons for it, a calloff EPC may lawfully be entered in to for a period longer than that of the framework agreement under which it was awarded. Accordingly, a calloff EPC could be entered into for say 7 to 10 years in circumstanceswhereitsframeworkagreementwasforaperiodofnomorethan4years. TheEuropeanCommissionandtheEuropeanCourtofJusticewillonlypermitaframeworkagreementitselfto be awarded for more than 4 years where there are external factors making it necessary. One example of such external factors may be that the supplier will only be able to achieve a return on investment by means of a frameworkagreementofsay5to7years.Weconsiderthatflexibilityonthispointisbestachievedintermsof the length of calloff EPC both in policy/compliance terms and in terms of tailoring the agreement to the specificsoftheEPC. Framework agreements have long been used in the UK but were only recently recognised by the European Union. One of their practical benefits is that once a framework has been set up in accordance with the Public Procurement Rules, any of the purchasing bodies originally identified in the framework agreement can then call off EPCs from the supplier (or suppliers) as their needs arise. They can do this without the need for an additionalOJEUcontractnoticeorprequalificationstagebuttheymustawarditinaccordancewiththeterms oftheframeworkagreement. Where there is a multisupplier framework it is commonplace for minicompetitions to be held by the proposed purchaser. But these are streamlined and usually very quick competitions, resulting in significant costsavingsbothtosupplierandpurchaser.

ContractAwardProcess
There are currently four contract award procedures falling under EU public procurement regulations. These are Open, Restricted, Competitive Dialogue and Negotiated. The Open and Restricted are the procedures of first choice and contracting public sector organisations must consider using these first. Only if they are not availablecantheymoveontoconsideruseoftheotherprocedures. If a contracting public sector organisation is looking for innovative solutions to reduce energy consumption and is unable to define the technical means capable of satisfying its needs or specifying the legal or financial makeup of the project (or both) then the proposed contract may be regarded as a particularly complex contract. As an EPC is a wideranging, programme based solution that encompasses many technological and potentially behavioural solutions, it most often falls under this description. This will justify the use of the CompetitiveDialogueawardprocedurewhenprocuringanEPC. The EPC procurement process using the Competitive Dialogue procedure, which complies with current EU public procurement legislation is summarised in the diagram below. It incorporates the framework structure describedabove.

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Competitive Dialogue EPC Procurement Process

Purpose Business case approved PQQ sent to bidders PQQ evaluation Invitation to short listed bidders sent out by Authority
To find out about ESCOs proposed approach -Engineering -Financing -Contract -Organisation -Project Management -References -Measurement & verification methods -Innovative ideas

OJEU Notice issued

Dialogue

Interview & Presentation

Initial Qualification from interested parties

Prelim Proposal Actions

-Establish selection criteria -Preliminary audit results of representative buildings -Identify potential savings -Types of energy conservation measures -How installed & commissioned -Approx value -Estimated contract duration -Rates for engineering audit -Draft Framework Agreement

Preliminary energy audit of representative buildings

Reduce to three bidders

Initial Assessment by Authority

Preliminary proposals from shortlisted parties

Clarify/Specify

Negotiate Framework Agreement

Evaluate & Clarify

Authority selects successful ESCO

STANDSTILL PERIOD (Typically 10 days)

Delivery Install & maintain ECMs Measurement & Verification of savings

Contract

Submit & Present Investment Grade Proposal

Investment Grade Audit(s)

Selection of first tranche of buildings

IGP
-Identify energy conservation measures -Detail design -Finalise finance -Agree guarantee details -Finalise contract term

Process repeats for next tranche of buildings

EUcompliantEPCprocurementprocess

7.DeterminingEnergySavings

A Measurement and Verification (M&V) Plan is required to determine the savings achieved by the implementation of an Energy Efficiency Programme. ESCOs in the European Association of ESCOs (eu. ESCO) have adopted the International Performance Measurement and Verification Protocol (IPMVP) as their preferred guideline to write the M&V Plan within the Energy Performance Contracts. IPMVP is not only the most known M&V protocol around the world, but it is also the most prestigious within the international technicalcommunity. The M&V Plan, which has to be reviewed and accepted by the customer prior to project implementation, becomes part of the energy performance contracts terms and defines the measurements and computations todeterminepaymentsordemonstratecompliancewithaguaranteedlevelofperformance. Savings cannot be directly measured, since they represent the absence of energy use. The most accepted approach to energy savings is the Avoided Energy Use formulation. Under this approach, the energy savings are the reduction in energy use that occurred in the reporting period, relative to what would have been
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occurred if the facility had been equipped and operated as it was in the baseline period but under reporting period operating conditions. The second term of this equation is known as the adjustedbaseline energy consumption and the adjustments to the baseline accounts for the changes in the parameters that have measurableimpactontheenergyuse.

Figure1.Savingsaredeterminedbycomparingmeasureduseordemandbeforeandafterimplementationof aprogramme,makingsuitableadjustmentsforchangesinconditions.

In contrast, if the conditions used as the basis for adjustment are other than those of the reporting period the savings are then Normalized. In this document we will assume the Avoided Energy Use formulation as it is the mostcommonlyappliedinEnergyEfficiencyProgrammes. There are two main techniques to determine savings, depending whether the purpose of the customer is measuring Energy Conservation Measures (ECMs) or facility performance. In the first case, Options A and B represent the Retrofit Isolation technique which narrows the measurement boundary to focus only on the systems or equipment of a particular ECM. While under Option A we only measure the key parameters affectingenergyuseandestimatetherest,OptionBrequiresmeasuringallparametersaffectingconsumption. On the other hand, Options C and D represent the Whole Facility approach. In Option C the measurement is done at facility level while Option D allows the use of simulation techniques to determine the savings. The followingchartsummarizesallM&VOptionsconsideredintheIPMVPprotocol. HowSavingsAre TypicalApplications IPMVPOption Calculated
A.RetrofitIsolation:Key ParameterMeasurement Savingsaredeterminedbyfieldmeasurementofthekey performanceparameter(s)whichdefinetheenergyuseof theECMsaffectedsystem(s)and/orthesuccessofthe project. Engineeringcalculation ofbaselineand reportingperiodenergy from: oshorttermor continuousmeasurements Alightingretrofitwhere powerdrawisthekey performanceparameter thatismeasured periodically. Estimateoperatinghours
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HowSavingsAre Calculated
ofkeyoperating parameter(s);and oestimatedvalues. Routineandnonroutine adjustmentsasrequired.

IPMVPOption
Measurementfrequencyrangesfromshorttermto continuous,dependingontheexpectedvariationsinthe measuredparameter,andthelengthofthereporting period. Parametersnotselectedforfieldmeasurementare estimated.Estimatescanbasedonhistorical data,manufacturersspecifications,orengineering judgment.Documentationofthesourceorjustificationof theestimatedparameterisrequired.Theplausiblesavings errorarisingfromestimationratherthanmeasurementis evaluated. B.RetrofitIsolation:AllParameterMeasurement Savingsaredeterminedbyfieldmeasurementofthe energyuseoftheECMaffectedsystem. Measurementfrequencyrangesfromshorttermto continuous,dependingontheexpectedvariationsinthe savingsandthelengthofthereportingperiod.

TypicalApplications
ofthelightsbasedon buildingschedulesand occupantbehavior.

Shorttermor Continuousmeasurements ofbaselineandreporting periodenergy,and/or engineeringcomputations usingmeasurementsof proxiesofenergyuse. Routineandnonroutine adjustmentsasrequired.

C.WholeFacility Savingsaredeterminedbymeasuringenergyuseatthe wholefacilityorsubfacilitylevel. Continuousmeasurementsoftheentirefacilitysenergy usearetakenthroughoutthereportingperiod.

D.CalibratedSimulation Savingsaredeterminedthroughsimulationoftheenergy useofthewholefacility,orofasubfacility. Simulationroutinesaredemonstrated toadequatelymodelactualenergyperformancemeasured inthefacility. ThisOptionusuallyrequiresconsiderableskillincalibrated simulation.

Analysisofwholefacility baselineandreporting period(utility)meterdata. Routineadjustmentsas required,usingtechniques suchassimplecomparison orregressionanalysis. Nonroutineadjustmentsas required. Energyusesimulation, calibratedwithhourly ormonthlyutilitybilling data.(Energyenduse meteringmaybeusedto helprefineinputdata.)

Applicationofavariable speeddriveandcontrolsto amotortoadjustpump flow.Measureelectric powerwithakWmeter installedontheelectrical supplytothemotor,which readsthepowerevery minute.Inthebaseline periodthismeterisin placeforaweektoverify constantloading.The meterisinplace throughoutthereporting periodtotrackvariationsin poweruse. Multifacetedenergy managementprogram affectingmanysystemsina facility.Measureenergy use withthegasandelectric utilitymetersforatwelve monthbaselineperiodand throughoutthereporting period. Multifacetedenergy managementprogram affectingmanysystemsina facilitybutwherenometer existedinthebaseline period. Energyusemeasurements, afterinstallationofgasand electricmeters,areusedto calibrateasimulation. Baselineenergyuse,
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HowSavingsAre Calculated TypicalApplications
determinedusingthe calibratedsimulation,is comparedtoasimulation ofreportingperiodenergy use.

IPMVPOption

ESCOs that can successfully implement an EPC have a large amount of experience in the Measurement and Verification processes and techniques and can thoroughly prepare and execute the unique M&V Plan every project deserves. From choosing the most suitable M&V Option for each ECM to design a professional savings report, passing for establishing the baseline model and gathering energy and operating data from the reporting period, to mention a few M&V activities, every task in the M&V process is deeply analyzed and reviewed by the ESCOs energy experts team in order to produce an accurate, consistent and costeffective M&VreportingprocesstoreliablydetermineactualsavingsoutoftheEnergyEfficiencyProgramme.

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Examples ofbestpractices provided bymember companies

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8.EPCBestPractice

Customerorganizations:
TransportforLondon(UK) GwentNHSTrust(nowAneurinBevanHealthBoard)(UK) LievensbergHospitals(NL) AtriumHospitalComplex,Heerlen(NL) StElisabethHospital,Herten(DE) KlinikumLandshut,Landshut(DE)

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CaseStudies

TheCustomer
TransportforLondon(TFL),UnitedKingdom

TheChallenge


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25%Carbonreductiontarget Complexandfragmentedbuildingmixacross22buildings Capitalfundingissues

Solution(Phase1,May09)
Replacedlightingandcontrols UpgradedTFLsBuildingEnergyManagementcontrols ImprovedTFLsbuildingfabrics InstalledonsiteCHPintegratedenergysystem Fittedsolarthermalhotwatersystem

TheBenefits
ReducedTFLsgasconsumptionby20%andelectricityuseby25% Guaranteedenergysavingsof770kperannum Asaresultoftheseenergysolutions,TFLwitnessedacarbondioxidereductionof3,650tonnes perannum

EnergySolutions

TheCustomer
GwentNHSTrust(AneurinBevanHealthBoard),Wales 3Acutehospitals&20communityhospitalsserving600,000peopleinSouthWales RoyalGwentHospital:>800beds,15operatingtheatres 5.9mannualutilitybill3rdhighestspenditemafterstaff&drugs

TheChallenge Ageinginfrastructure Capitalfundingissues

Backlogmaintenancerunningintomillions CO2reductiontargets

Solution
15&25yearEnergyPerformanceContracts Capitalprovisionof6.5m Guaranteedsavingsof1,137,600pa

InstalledouruniqueonsiteCHPintegratedenergysystemwithabsorptionchiller 9000LEDlightingretrofit
2x600kwstandbygenerators LVdistributionpanels CompleteBuildingManagementSystemupgrade

TheBenefits
Reducedcostsof1.5mpa400k>guarantee CO2reductionof54,000tonnes Improvedequipmentreliability Improvedcomfortconditionsforpatients,staff&visitors ESCOstaffembeddedpartofTrustteam Proactiveenergymanagementculture Programmeoffutureplannedimprovements NHSBestPracticeAwardforEnergyEfficiency

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TheCustomer
LievensbergHospitals,theNetherlands
Serving the Brabant, Tholen and St. Philips country and the surrounding region, Lievensberg Hospital comprises 367 beds along with a day care facility. The hospital employs over 100 medical specialist and 1,600 coworkers and provides a wide range of primary and specialist healthcare services. The annual turnover of patientsgoesbeyond160,000

TheChallenge
Lievensberg had renovated their building several years previously and felt there was scope for improvement in energy efficiency. Moreover, they were looking for a solution that would enable them to streamline costs at the same time enhance facility management. They wanted a partner with new innovativeideasandsolutions. Lackofresources&budgetaryconstraintsneededfornecessaryimprovements

Solution
During the implementation of Phase 1, Honeywell focused at reducing the bottomline impact associated withenergyconsumption,costsandimprovingtheenergyefficiencyofLievensbergsfacilitiesthroughour design,implementationandfinancingcapabilities. A heat pump was installed that provided cooling during summer and simultaneously in winter provided heattotheAirHandlingUnits(AHU). CHPunittohelprecoverwasteheatforelectricitygeneration Honeywell Energy Manager, an advanced energy information application that integrates with other buildingapplicationswasinstalled

TheBenefits
Honeywell Energy Manager allows Lievensberg to view and control energy use in the facilities across hospital, and provides the hospital with an improved process for monitoring, validating and optimizing energyconsumption. Phase 2 included the renovation and optimisation of the AHU. The flexible finance option offered by HoneywellenabledLievensbergtotransferthesavingsmadefromphase1tobeinvestedinphase2. Lievensberg was able to build a Green image and contributed in its effort in reduction of CO2 and achievingitsenvironmentaltarget. Third party finance through Honeywell by provided a cash flow neutral solution without the need for upfrontcapital.Therewasnobudgetneededformodernisationofthetechnicalinstallation.

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TheCustomer
AtriumHospitalComplex,theNetherlands The Atrium complex spans three sites Heerlen, Brunssum and Kerkrade with 1, 230 beds under the care of 170 medical specialists and167 interns. Almost 30,000 operations and 20,000 consultations a year are performedacrossthethreelocations.

TheChallenge
Despiterecentinstallationofanew,stateofthearttrigenproductionunitfortheprovisionofelectricity, hot/chilled water and steam, Atriums utility costs continued to rise. The Hospital needed to get a view of what energy they were using and where and use this information to optimize plant operation and reduce costs.

Solution
The Honeywell solution uses Honeywell Enterprise Buildings IntegratorTM to integrate many different factorstoensureoptimalutilitymanagementwithoutdetractingfromhospitalcomfortlevels. The partnership sees Honeywell automated control technology bring about better utility management at the Atrium Hospital complex. This energy efficiency stems from sophisticated computer modeling which ensures an optimal utility mix in 48 hour bites. A smart weather forecasting tool pulls 48hour weather forecasts from the Internet. This data is combined with historical information to anticipate likely energy demand over the forthcoming two days. Decision support tools statistical models balance expected demandwiththecostofgasandelectricitysupplyoverthesameperiod. The Honeywell solution gives the customer the flexibility to capitalise on changing market conditions; to take advantage of fluctuating utility prices, new energy sources, changing weather patterns and internal demand profiles. Atriums improved energy efficiency is supported by a heat exchanger, also masterminded by Honeywell control technology. Flue gases from the boiler are recovered and the heat, ratherthanbeingwasted,isusedtogeneratehotwater.

TheBenefits
Honeywellisdeliveringa10%savingonthehospitalsannualenergybill SaysFacility ManagerAndreDumont,Honeywellssolutiongives meacompletepicture theinformation I need to make better decisions, and to make them more quickly. This ability to respond to changing externalconditionstakesinternalFMproductivitytoahigherlevel.

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RecentEuropeanHealthcareCustomers
St.ElisabethHospital,Herten,Germany 1.54millionplus6yearsservicecontractforMaintenanceandM&V Scope: - Replacement of the current, 1977, Air Handling Units with new high efficiency units with VSDs, heat recoverysystemetc. - CompletelynewHoneywellBuildingAutomationSystem:FromEBI,tocontrollerstofielddevices ContractsignedinDecember,2010 KlinikumLandshut,Landshut,Germany 2.6millionplusmaintenanceservicecontract Scope: - NewHoneywellEBIBuildingAutomationSystem,newDDCControls(XL5000) - WoodChipBoilerincl.constructionofnewboilerhouse - ReplacementoffansandmotorsonAirHandlingUnits

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. Siemens

Maximize Efficiency!
Success Stories

Siemens AG 2010. All rights reserved

Building Automation A major player in the energy efficiency business

Achievements1) 16.2 TWh saved (equals the amount of a nuclear power plant, Brokdorf, GER in the year 2009) 915 m total saving achieved for customers 9.2 m tons CO2 reduction (approx. annual CO2 emissions of Vienna1))

European Energy Service Award winner 2006, 2007, 2008 and 2009

GreenBuilding Endorser Award 2008 EU commission commended Building Technologies for outstanding achievements in support of its GreenBuilding program

1) based on figures from the European Green City Index, A research project by the Economist Intelligence Unit, sponsored by Siemens, 2009

Page 2

October 2010

BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

Siemens wins first GreenBuilding Endorser Award Success Story BAU (2008)

Challenges

Building sector accounts for more than 40% of energy demand in Europe Improving energy efficiency of heating and cooling buildings constitutes one of largest potential sources of energy savings

Project / site

Siemens committed to supporting GreenBuilding incentive plan from beginning Encourages building owners/users to become GreenBuilding partners Helps building owners/users implement GreenBuilding recommendations Page 3 October 2010

Siemens solution

Energy efficiency in buildings is core business activity of Building Technologies Division of Siemens Specialized in energy-saving and resourceconserving solutions in building automation and services to reduce energy consumption in buildings worldwide Energy Saving Performance Contracts guarantee energy savings with zero budget impact

Customer benefit

Siemens helps companies achieve Partner status Facility improvements that increase comfort with

Siemens Energy Services monitoring and controlling

zero budget impact

ensure guaranteed energy savings

BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

Brigittenau Swimming Pool, Vienna EU Best Energy Service Project 2007

Challenges

25-year-old city swimming pool faced rising energy costs to heat water, run ventilation system and dehumidify interior Water was heated by inefficient district heating system that wasted energy

Project / site

Brigittenau indoor swimming pool, Vienna: Green Swimming Pool CO2 reduction: 600 tons annually Siemens won 2007 energy-saving award from European Energy Service Initiative

Siemens solution

Energy Saving Performance Contracting with guaranteed savings based on facility improvement measures Solar collectors for heating pool water Ability to recover heat from pool water Improved water flow controlled by chlorine content Refurbished water treatment systems with water-saving fittings

New condensing boiler New building management system

Customer benefit

Energy used to heat pool reduced by 66%; water consumption reduced by 45% 200,000 annual energy savings while improving comfort; zero budget impact and guaranteed savings

Case study in civic responsibility for sustainability

Page 4 October 2010 BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

UniCredit Group, Milano EU Best Energy Service Project 2008

Challenges

Milan headquarters houses 1,250 employees and data center serving all UniCredit companies Data centers cooling systems are vitally important to UniCredits ongoing business operations

Siemens solution Project / site

UniCredit Group Milano: two 90,000 m2 glass-faade buildings Six-year amortization for 2.2 million in new energy systems; installed during normal business hours Siemens won 2008 energy-saving award from European Energy Service Initiative
Page 5 October 2010

Energy Saving Performance Contracting with guaranteed savings based on facility improvement measures Central cooling plant and technology of its mechanical and electrical components

Motors and heating/cooling pumps Replaced four aged cooling units Reengineered cooling and heating systems Refurbished air conditioning and ventilation systems

Customer benefit

CO2 reduction: 2,800 tons annually 460,000 annual energy savings while improving air quality and increasing comfort; zero budget impact Siemens Energy Services monitoring and controlling ensure guaranteed energy savings
BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

University of Art, Berlin, Germany EU Green building Partner

Challenges

Exploit the maximum energy efficiency measures with low investment needs for such an old building

Siemens solution Facts and figures

Energy Saving Performance Contracting Building Automation system HVAC equipment and distribution Hot water processing Lighting

Built 1880 1975 52,000 m2 27% energy savings (4,680 MWh/a) 1,100 t CO2 per year EU GreenBuilding Partner

Customer benefit

State of the art Building Management System and mechanical HVAC equipment without the need of an own financial investment Payback and Cost reduction through energy savings 236,000 p.a.

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October 2010

BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

City of Berlin, Germany Energy saving partnership

Challenges

164 buildings across the city

In 1995, Berlin launched an energy-saving strategy with the obligation to reduce CO2 emissions

Siemens solution Highlights

Prior energy costs: 17.2 m / year Reduction of CO2 emissions by 25% per year (corresponding 16,200 tons of CO2) Annual energy cost savings: 2,848 million Euros

Energy management system Heat generation / distribution Air-conditioning & ventilation Water technology Control, monitoring, maintenance

Customer benefit

Modernization of plants without further capital expenditures

Quality assurance and budget reduction Regular consumption and emissions reports Realization of environmental policy goals

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October 2010

BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

Clinical Center Bremerhaven-Reinkenheide, Germany Reference for life cycle management

Challenges

Annual energy costs were 2.1 million in 2004 Health reform, intensifying competition demanded profitability Bremen Energy Consensus climate protection agency helped pursue energy performance contracting

Siemens solution Project / site

Maximum care hospital with 700+ beds, opened in 1976 CO2 reduction: 4,130 tons annually Guaranteed energy savings: 520,000 annually Facility improvements implemented during normal business hours

Energy-efficiency improvements to steam and

120 measures led to 25% energy savings New building automation system New air conditioning and ventilation system Optimized heating systems, new heat-recovery system, load-demand heat supply, upgrades to heating circuit control system water supply

Innovative cooling absorption and screw chillers

Customer benefit

Primary energy savings of more than 25% earned BUND Gtesiegel' award in 2008 Improved comfort with zero budget impact Siemens Energy Services monitoring and controlling ensure guaranteed energy savings
Page 8 October 2010 BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

Green Hospital: St. Joseph Krankenhaus, Berlin BUND Gtesiegel in 2010

Challenges

BUND Gtesiegel in 2010

Siemens solution

State-of-the-art building management system that monitors and controls Refurbishment and new heating, cooling and air conditioning systems, air pressure, lightning, new installation of BACS, introduction of Energy Monitoring and Controlling

Facts and figures

Optimizing warm water treatment, decentralized supply and hydraulic treatment Contract 15 years CO2 reduction of 1,300 t/a Designed to demonstrate as development model for health facilities in sustainability and environmental responsibility

Guaranteed savings of 273,000/a (26%) Operating safety through modernization and

optimization

Customer benefit

Financing and saving guarantee through

performance contracting

Sustainability through warranty, energy management

and perennial contract

Reimbursement of investments through PFC

Page 9

October 2010

BAU_Master_3.1

Siemens AG 2010. All rights reserved Building Technologies / BAU

. SchneiderElectric

Best practice cases EPC cases

1. Municipality of Nykping, Sweden 2. City of rebro, Sweden 3. Swedish University of Agricultural Sciences (SLU) 4. Municipality of Hollola, Finland 5. Municipality of Middelfart, Denmark 6. University of Sheffield, UK

Municipality of Nykping, Sweden

(Public buildings, schools, care centers etc.)

Years of budget decline in the municipality resulted in poor maintenance, higher energy consumption and increased cost of unplanned maintenance Gain better control and performance tracking of facilities Develop a competent and goal-driven organisation

Motivation for engaging in EPC

Project Highlights
Comprehensive BMS system installed Continuous optimization of operations

PROJECT FACTS

Limited operating hours and temperatures

Increased functionality and upgrade of the technical level of installations Pressure controlled circulating pumps Occupancy controls Balancing heating system Local presence of Schneider Electric Increased status Creating an attractive workplace

NUMBER OF PROPERTIES 123

AREA Approx. 257 000 m2

SAVINGS POTENTIAL 17%

Appointment of a specialist Increased competence in-house Active technical administration Lowered energy consumption

Results
New structure for more efficient operations and maintenance

PROJECT SCOPE 73 MSEK (7,9M)

Competence and knowledge transfer to staff

PAY-OFF TIME Approx. 11 years

Increased focus on energy consumption

FINANCING Third party financing

New work routines ensure efficient use of resources

IMPLEMENTATION 2 years

City of rebro, Sweden

High and increasing operational expenditures have resulted in reduced ability to perform needed maintenance Possibilities to get energy efficiency grants from the government Political goal to eliminate oil dependency and decrease greenhouse gas emissions Opportunity to empower staff in energy, maintenance and operations Need to improve the standard of services and systems to provide good indoor climate in the facilities.

Bild referens
Energy conservation measures in the municipalitys facilities: Schools, Pre-Schools Leisure centers and Stadiums Swimming pools Service & cultural facilities Offices Technical upgrades of: Heating systems Ventilation systems Building Energy Management Systems and metering equipment Heat pumps Lighting Water conservation measures

Motivation for engaging in EPC

Project Highlights

PROJECT FACTS

NUMBER OF PROPERTIES Approx. 100

AREA 420 000 m2

SAVINGS POTENTIAL 26%

PROJECT SCOPE 156 MSEK (17M)

PAY-OFF Approx. 9 years

Benefits for rebro

Positive effect on the financial result Around 30% of the investments are financed through government grants Fulfilled energy certification legislation Reduced operational expenditures for reactive maintenance Increased cost control Large environmental benefits through reduced greenhouse gas emissions Increased competence of in-house staff Platform for continuous improvement of the organizations operation and maintenance work.

FINANCING Municipality loan Grants from government

IMPLEMENTATION 2,5 years

A comprehensive training program which includes more than 60 people within Estates Department

Swedish University of Agricultural Sciences (SLU)

Utilize own produced renewable energy sources (grain, wheat, wood chips, pellets) Better control of heating costs Replace outdated oil based heating plant Contributes to the university's educational program The project is a step on the way to achieving SLUs long-term strategy in creating a sustainable use of natural resources

Bild referens

Motivation for engaging in EPC

Project Highlights

Results
Energy expenditures reduced by 73% Complete conversion of oil-based and direct electric heating Lowered CO2 emission of 1 400 tonnes per year Improved cost control Increased competence of in-house staff Better flexibility in use of facilities Individual tenant billing system A platform for sustainable use of resources

Installation of two fuel flexible bio heating plants Bio plant 1: 1,4 MW Bio plant 2: 1,8 MW Installation of 3 km heating culvert duct Longest culvert duct 1,5km 40 new control panels/ outstations Utility meters installed Installation of wet heating system Ventilations system heating converted from electric to wet system Comprehensive BMS system installed New air handling plant with heat recovery Competence development of staff Tools and methods for a more effective energy management

PROJECT FACTS

TYPE OF FACILITIES - Other, research, garage - Teaching and Training - Office - Residential

AREA 30 000 m2

SAVINGS POTENTIAL 70% (3,5 MSEK/year)

PROJECT SCOPE 49 MSEK (5,3M)

PAY-OFF 11 Years

FINANCING Self financed

IMPLEMENTATION 12 months

Scope
Kungsngens farm, 18 500 m2, 17 buildings Funbo-Lvsta farm, 17 200 m2, buildings dating from 1717 and onwards Blckhornet, research station for pigs and poultry.

Municipality of Hollola, Finland

Increasing heating costs Desire to replace fossil fuel based heating system Poor indoor air quality in parts of the buildings Major challenges to control energy consumption and indoor conditions at swimming hall Need to replace out-dated Building Energy Management Systems Increasing maintenance costs in certain buildings

Bild referens

Motivation for engaging in EPC

Project Highlights

Results
Reduced energy consumption by 2000 MWh oil 1345 MWh heat 376 MWh electricity 1780 m3 of water Reduction of CO2 emission with 1177 tonnes/ year Fulfillment of ESD claim, total annual reduction 11 % Elimination of moisture stress in ice rink and swimming hall Depletion of air draughts and improvement of indoor air quality, Achievement of suitable water temperature in baby pool

Installation of more renewable heating system: wood chip furnaces wood pellet boiler ground source heating pumps Design and implementation of new heating radiator network Renovation of ceiling structure vapor barriers and thermal insulation of ice rink ceiling were completely rehabilitated Adding of tin roof underlay Conversion of condensation based cooling system from direct to indirect, Design and implementation of condensing heat recovery system Connecting the water cleaning system to heat recovery system Installation air curtain fans to reduce heat loss Training of in-house maintenance staff

PROJECT FACTS

NUMBER OF PROPERTIES 10

SAVINGS POTENTIAL 137 000 year

PROJECT SCOPE 1,45M

PAY-OFF 10 Years

FINANCING Self financed

IMPLEMENTATION Started 2007

Municipality of Middelfart, Denmark

(Public buildings, schools, day care centers etc.)

Reduce the municipality's energy usage Need to break trend with increasing amount of reactive maintenance in the municipalities buildings Lack of in-house resources to carry out a large scale energy conservation project Opportunity to implement a big project with significant savings potential in only 24 months Ensure a better indoor climate wherever possible Implement a bigger energy and property project without having to burden the municipality budgets

Motivation for engaging in EPC

Project highlights
Comprehensive BMS system installed IT-based control of the heating system, ventilation and lightning Water saving initiatives Demand controlled ventilation Implementation of Heat recovery ventilation systems Optimization of operating hours and temperatures Implementation of new modern ventilation systems in properties that had no ventilation before in order to improve indoor climate and protect building from sickness

Ejby School

PROJECT FACTS

NUMBER OF FACILITIES 98

AREA Approx. 190 000 m2

SAVING POTENTIAL 21%

Results
Higher standard of the technical equipment Reduction of the energy consumption Increased property value Centralised control of the different properties energy usage A facility staff with improve skills regarding energy optimization

PROJECT SCOPE 44 MDKK (5,0 M)

PAY-OFF TIME Approx. 10 years

FINANCING Third party financing

IMPLEMENTATION 1,5 years

University of Sheffield, UK

The University of Sheffield had made a huge investment in developing its estate prior to the partnership. Primarily channeled into new buildings This had led to significant under-investment in the retained estate Resulting in a need substantial investment in the estate at a time where budgets were under huge pressure

Motivation for engaging in EPC

Project Highlights
Refurbishment of: Air handling Units, Heating distributions circuits District heat stations

PROJECT FACTS

NUMBER OF PROPERTIES 38

Install automatic water treatment to all major heating systems Replace large chilled water system Install water temperature monitoring Improve lighting efficiency and control Incorporate all above into Building Management System Review strategies and re-commission systems

AREA Approx. 120 000 m2

SAVINGS POTENTIAL 20%

Improved indoor performance Long term quality and fitness for purpose Reduction of operational and utility costs A more sustainable University

Results

PROJECT SCOPE 3,8M (4,4M)

Install metering and provide automatic M&T

PAY-OFF TIME Approx. years

FINANCING Self financed

Better quality and reliability of the services provided by Estates Significant reduction in the risk of Legionella outbreak Removal of R22 Chiller system Minimising risk for the University

Training and competency transfer through joint activities Campaign to increase awareness of efficiency and waste throughout the University

IMPLEMENTATION 2 years

Good practice examples rebro Municipality

SchneiderElectric Sweden|20100414

The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

FacilityandInitialSituation

(1/6)

Facility: Municipality Schools, education, sport facilities, office buildings, swimming halls, senior living 97 Buildings 420.000 m2

Initial situation: High energy costs and climbing with negative environmental impact. Use of fossil fuel and direct electricity for heating.

2 |25.09.2009

GoalsandMeasures

(2/6)

Goals of building owner: Change the negative trend of increasing energy cost and emergency maintenance work. Reduce the energy cost and environmental impact. Become on of the leading municipalities in Sweden. Guaranteed energy savings balance the capital risk for rebro. Measures (selection): Ventilation recovery Controlls Insulation Woodpellets boilers and district heating systems Ground source heatpumps Education Energy management
3 |25.09.2009

BusinessModel:
EPC

(3/6)

3 phases: No.1, is Detailed Energy Analysis (DEA) of the buildings, deciding measures and calculating the savings and pay back time. No.2, is installation and education. No.3, is Guaranteeing and Project follow up (G&P) the calculated savings.

1.DEA

2.Installation

3.G&P

4 |25.09.2009

ContractsandCashFlows

(4/6)

Contractualrelationships: Thecustomerhaveaframeagreementconsistsof3parts: Frameagreementandpart1(DEA)aresignsimultaneous. ESCOdeliverstheDEAandissueaguaranteeandapriceforthe installationaspart1. Customerdecisionpointtocontinuewithpart2and3. Installationandguaranteearesignsimultaneous.

Frameagreement

DEA

Installation

G&P

Cashflows: Part1ispaidwhenESCOdeliverstheresultoftheDEA. Part2hasprogresspayment. Part3isaserviceandsupportagreementpaidquarterly.

5 |25.09.2009

Facts

(5/6)

Total investment costs: 14.000.000 Installation time 2,5 years One company takes full complete responsibility and guarantee the savings. Energy savings: 26% CO2 reduction: 36% Nox reduction: 24% Immediately positive impact on earnings

6 |25.09.2009

LessonsLearned,InnovationsandClientsAdvantages
1. Communication and co-operation is crucial.

(6/6)

2. The project have got the municipality to be much more energy savings focused.

3. Education of customer organization in energy thinking and how to optimize building performance.

7 |25.09.2009

. JohnsonControls

Jewish Museum Berlin

Energy savings: 26%

German Army Diez

Energy savings: 49%

German Army Aulenbach

Energy savings: 69%

German Army Aulenbach Training Camp

115 buildings, 80 000m2 Measures with top priority: Biomass boilers, CHP, Controls, lighting retrofit (internal, external), energy metering, water. Guaranteed energy savings of 723,000 EUR per year (69% cost savings versus baseline) and reduction of 76% of GHG emissions. 10 years EPC

German Army - Diez Medical coordination center

34 buildings, 35 000m2 Main energy savings measures: Biomass boiler, Gas CHP, Controls, lighting retrofit Guaranteed energy savings of 230,000 EUR per year (49% cost savings versus baseline) and reduction of 50% of GHG emissions 10 years EPC

Jewish Museum - Berlin Museum

Mix of old and modern buildings by famous architect Daniel Libeskind Main energy savings measures: renovation of the building automation system, innovative LED lighting, ventilation, air humidification optimized and ensured by environmentally friendly district heat Guaranteed energy savings of 165,000 EUR per year (26% cost savings versus baseline) and reduction of 31% of GHG emissions 10 years EPC