Energy Conservation: Projects Using Performance Contracting Mark K. Krog Account Executive

1. Energy Conservation: Projects Using Performance Contracting Mark K. Krog Account Executive Siemens Industry Inc. Joint Base Sustainable Energy Workshop, San Antonio, TX June 9, 2010

2. Agenda • Introduction • Brief Comparison of Delivery Methods • Project 1 – Energy Security • Project 2 – Demand Side Management • Project 3 – Effluent Irrigation • The Process • Conclusions

3. Introduction • Performance Contracting • Utilizes legislation to address infrastructure issues in a proactive manner • Allows for modernization to occur when capital funds are limited or restricted through Energy and Cost Savings • Re-directs operational expense towards capital improvements with a Neutral/Positive Cash Flow • Turnkey Project Performed Now • Guaranteed Results • Alternative Financing using private sector funds • Avoids U.S. Government increasing its debt (taxpayers) • U.S. Government has flexibility on payment(s)

4. Introduction • What is Performance Contracting? • Preliminary evaluation of opportunities with the ESCO 100% at risk • Letter of Authorization outlining project goals and constraints • Detailed/Investment Grade Audit to define final costs and savings to meet goals within constraints • Contract that includes scope, guarantees, financial solution and ongoing division of responsibilities • Turnkey Project Implementation • Performance period including Measurement & Verification, Service, On-going Maintenance

5. Delivery Methods • Bid & Spec • Generally Least Expensive in initial price • Potentially largest cost overruns • Owner knows exactly what they want • Least measureable in performance • Design/Build • Some price protection • Owner knows goal, but flexible on exact method to obtain the goal • Performance Contracting • Not necessarily a delivery method as much as a financing tool to get some operational benefits implemented • More being performed with capital funds under new tool • Elements of Design/Build, but most applicable for measurable goals (maintain and operate)

6. Delivery Methods • Bid & Spec • In federal government usually small energy projects • Otherwise large projects (typically new construction) • Capital Budget • A/E may be used • Design/Build • Small to large projects • Bonds, Capital Budget • Integrated Design/Construction Team • Performance Contracting • Relatively medium to large projects • Operating Budget or alternative financing • Results oriented, incorporate measurable objectives

7. Case Studies • Three projects illustrate potential benefits and opportunities: • Scope Outline • Project Results • M&V Approach

8. Project 1 – Energy Security • Scope • Virtual Chiller Plant • Elimination of $10 million in capital funding • Redundancy in SCIF area • Cool 9 facilites with 2 – 4 chillers instead of 15 chillers • Extend equipment life of major equipment • Reduction in maintenance costs and required manpower • Cost to implement just over $1 million • Upgrade to energy management control system • Remote Monitoring and Control • Reduced Travel and Labor • Pump Motor Replacements • VFD rated hi-efficiency motors • Hi-efficiency motor replacements • Synthetic turf (football field) – meet PT needs • DOE’s Energy Security Project of the Year in 2007 • Also recognized by MAJCOM for 2008

9. Project 1 – Energy Security • Results • System are working close to design • Savings are “greater” than predicted (Electrical cost reductions of up to 15% by site)

10. Project 2 – Demand Side Management • Scope • Lighting Retrofits • Controls Upgrades with open protocol • Water Fixture Retrofits • HVAC Upgrades • Plant additions to accommodate future expansion • Thermal storage to provide redundancy and load shaping • Rebate Procurement

11. Project 2 – Demand Side Management • Results • Lighting (reductions of 30%) is straightforward for energy (utility rebate programs typically provide this assurance) – ensure performance is included • HVAC – Performance is guaranteed by measurements of energy but also ongoing ability to address loads efficiently. Thermal storage and central plant work provide not only energy savings but future cost reductions for expansion • Rebate Procurement (seven figures) - provides an immediate funding source. The use of load management techniques (Controls and Thermal Storage) provide a more attractive load profile to CPS

12. Project 2 – Demand Side Management • M&V Approaches • IPMVP Option A for Lighting • Baseline sampling measurements of lighting energy • Post-installation sampling measurements lighting energy • Stipulated operating hours • Light level measures to ensure performance • IPMVP Option B for HVAC and Controls • Baseline modeling or measurements of system loads/energy • Periodic measurements of HVAC and Controls systems to ensure ongoing performance criteria are sustained

13. Project 3 – Effluent Irrigation • Scope • Two 11M gallon ponds (one acts as a water hazard on the golf course) for effluent storage • Two pump stations and 3 miles of piping • Negotiations for effluent water delivery and design and routing of piping for the City

14. Project 3 – Effluent Irrigation • Results • System is working as designed • Savings are greater than predicted (155,000 kgal of effluent for the 11+ months compared to the predicted 160,000 kgal/yr) • Irrigation loads still being added • 2003 Presidential Award for Leadership in Federal Energy Management Award for “Results” • Three subsequent task orders (to date)

15. Project 3 – Effluent Irrigation • Strengthened ties between the City and largest customer • M&V Approach • IPMVP Option C • Baseline identification of irrigation needs • Ongoing post-installation whole bill monitoring with comparison to the irrigation needs projections.

16. Building Owner/Operator Federal Agency Authorization for Audit Task Order Contract Closure Change of usage, consumption, accounting Cursory Investment Grade Audit Final Implementation analysis Phase Energy saving, Planning, installation, measurement, Cursory Study Detailed Study project management verification, operations and maintenance Siemens Building Technologies Siemens The Process

17. Conclusions • Performance contracting is a possible tool • Measures can be energy, utility or cost reductions • Measures can be revenue enhancing • In other cases, measures can be politically motivated • Regardless, the projects should be goal oriented and measurable • Financing should be considered as one of the primary drivers

18. Questions