Partnering With ESCOs Can Create Cost Savings

11/9/2022

The type of project that managers want to take on depends on sustainability goals, but maximizing energy-savings as cost-effectively as possible takes time and resources. While more robust operations may have dedicated sustainability teams or grants departments to make these decisions, it can still be difficult to work through the process.  

This is why a relationship with an ESCO is vital for success. Partnering closely with energy service providers ensures that best practices are followed and that managers are reaping all available economic benefits, says Johnny Halman, owner and managing director of Alpha Facilities Management Solutions. 

A great working relationship with an ESCO is also essential in identifying energy-saving projects that are best fits. During his time as facility manager at the Jacksonville Transportation Authority, Halman recalls working with his service providers to understand how his facility succeeded and where it could use some improvement.   

“Every year I would sit down with them, and they would compare our energy portfolio to the prior four years,” Halman says. “I would get a five-year snapshot, and that scorecard could be used in order to demonstrate we are meeting our ESG goals.” 

By using this scorecard, Halman’s service providers would make recommendations on future projects and even predict which ones would have the greatest return on investment.  

The types of projects organizations choose to undertake can vary greatly based on that information as well. Energy performance contracting projects can have a variety of goals, including carbon reduction, energy and water efficiency, addressing facility and deferred maintenance, resiliency, sustainability, social and financial goals, Larocque says.  

At McKinstry, Larocque says with recent projects they’ve seen more client interest in carbon neutrality and fully funding the next 2 to 3 years of deferred maintenance.  

“These are exactly the types of goals that can be addressed, developed, implemented and accomplished through an ESCO project,” she says, adding that “typical projects include a bundle of components where a client will see both quick and long paybacks such as HVAC, electrification, solar, energy storage, occupant behavior engagement, lighting and water measures.”  

Working with an ESCO also ensures organizations are meeting all the guidelines necessary to complete environmental, social and governance projects. What managers are attempting to do may or may not fit in with their standards.  

While at the Jacksonville Transportation Authority, Halman ran into this problem during the implementation of an electric bus charging station. Part of the project required the installation of a transformer to provide the power needed for fast charging of the buses. Under certain programs and by the rule of the electric company, the Authority could either purchase and own the transformer or the electric company could purchase it and own it.  

By being in close partnership with the electric company and understanding those rules and guidelines ahead of time, Halman was able to make the best and most cost-effective decision for his organization.  

Securing opportunities 

The up-front costs associated with sustainable or energy-saving projects are a hurdle for many when considering upgrades or when building. However, financial assistance for these types of projects is steadily growing. In fact, many ESCO projects are typically eligible for utility rebates to offset the initial capital cost of the project.  

The ESCO will work directly with the utility on behalf of the facility to determine which measures are applicable for rebates and the dollar amount that can be secured, Larocque says. Then during construction, “the ESCO will apply for those applicable rebates on behalf of the public agency and the rebates will allow for offset of the initial project cost lowering the overall project payback,” she says.  

Larocque adds that it is also common to integrate incentives, grants and stimulus from local, state and federal governments.  

“An ESCO will use the same approach as with rebates, researching and keeping watch for these opportunities throughout the audit process. If the project is determined to be eligible, the ESCO will help to apply for and secure the additional dollars to bring to the project and offset the initial cost,” she says.   

This is where Halman says having a strong partnership with service providers pays off.  

“As a good facility manager, you have to ensure you are looking under every rock and in every crevice for cost savings,” he says, adding that “if you have a strong relationship with your ESCO, they should make you aware of cost savings, but never be afraid to ask.”   

Amy Wunderlin is a freelance writer based in Fort Atkinson, Wisconsin.