Energy Services Coalition chapter formed in Michigan

September 17, 2010
| By Pete Daly |
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Michigan, which is still playing catch-up with other states when it comes to energy-savings performance contracting, now has its own chapter of the Energy Savings Coalition.

The Michigan chapter, which was announced recently by Department of Energy, Labor & Economic Growth Acting Director Andrew S. Levin, will promote a public-private business model “that can help our schools, businesses and local governments upgrade buildings for energy efficiency without adding to current energy costs and without increasing capital budgets.”

"It will help promote green energy jobs and save money in the long run, allowing more of the dollars going to Michigan schools to be spent in the classroom rather than on energy costs,” added Levin.

Energy savings performance contracting allows building owners to finance the up-front installation costs of energy-efficiency upgrades by committing the future savings expected from the upgrades. The building owner or the energy services company typically finances the upgrade, which is paid back over time from the savings realized by the building owner.

The Energy Savings Coalition is a national, nonprofit organization and public-private partnership of a wide range of organizations including utilities, finance companies and state and local governments. Its mission is to educate building owners and facility managers, including managers of schools and public buildings, about energy performance contracting as an affordable way of upgrading energy and water-using systems in buildings.

“In these days of shrinking budgets, saving energy wherever possible makes great economic sense,” said Amy Butler, Director of DELEG’s Bureau of Energy Systems. “Lowering utility bills in government buildings is a great deal for Michigan taxpayers.”

One energy services company (known as ESCOs) that is active in Michigan is Ameresco, a “performance contractor” represented in West Michigan by Diane Mills, who is also a voluntary co-founder of the Energy Savings Coalition chapter now being organized in the state.

“What is different with an ESCO is that we absolutely guarantee the energy savings” that are expected to result from a project with a client, according to Mills, and that helps facilitate financing.

She said sometimes the ESCO involved in a project actually finances it, but “usually we can obtain third-party financing at attractive rates, because of the guarantee we make on the energy savings that are used to make the payments.”

The federal law pertaining to federal facilities allows up to 25 years of use of the energy savings for financing, but the financing term under state law varies. Mills said it typically is a 10- to 12-year period.

Ameresco Inc., which is headquartered in Framingham, Mass., has offices throughout North America. Ameresco and other ESCOs were established as a result of federal and state legislation that began in the 1970s to encourage facility managers in the public sector to seek and implement energy efficiencies, including structural changes that could be financed through anticipated cost savings.

“In the Great Lakes area, we’ve worked with over 100 schools,” said Mills.

A recent major project involving Ameresco was the public library in Niles, said Mills.

Historically, Michigan has done “far less than surrounding states” in the field of energy performance contracting, said Mills. “Since 1994, Michigan has done about $11 million in performance contracting,” while ESC chapters in Illinois and Ohio reported doing “more like $175 million and $178 million, respectively.”

Mills said performance contracting begins with a detailed analysis of utility bills compared to the square footage of the building, then an energy audit. A project is developed to conserve energy and it is then let out to bid to local contractors.

“We basically manage the whole construction project,” said Mills, referring to Ameresco.

The standing goal of an ESC chapter is to promote performance contracting, and it involves those contractors that would be interested in each area.

As a member of the new ESC in Michigan, Mills said the organization is looking for both private companies that want to serve as contractors and entities in the public sector that are not yet using performance contracting to reduce energy use.

Mills said a meeting will be held in the Grand Rapids area in October, and she has invited many companies to join the ESC, including manufacturers of lighting, solar energy equipment, energy-efficient windows — any product that can help reduce energy use.

Membership in the ESC “is a way they can promote their products” that can be used in energy-efficiency projects.

The financing period for an energy performance project varies, depending on the type of energy-savings equipment that is installed. “Geothermal has a much longer life than lighting, for example,” said Mills.

Mills said Ameresco also helps its clients negotiate cost-saving purchases of energy, including specific types of renewable energy such as that from wind, solar and landfill gas. She said Ameresco has participated in the purchase of about $1 billion worth of energy thus far.

Government entities and private companies that are interested in joining the new ESC chapter in Michigan can send an e-mail to miesc@energyservicescoalition.org

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