Bruce Wilson knows that money is tight at Pennsylvania’s public universities. He recognizes, then, the importance of the new partnership between West Chester University and Honeywell Building Solutions SES.

By Dan Rafter

The partnership between the school located in West Chester, PA, in the Philadelphia area, and Honeywell Building Solutions—an entity created earlier this year when Honeywell acquired Sempra Generation—will allow West Chester University to upgrade heating, lighting, ventilation, and cooling on its 402-acre campus, without having to raise any student fees or request additional dollars from the state’s General Assembly.

Those are both important benefits in these days of budget tightening, says Wilson, energy projects manager at West Chester.

“This partnership is what makes all these improvements doable at all,” Wilson said. “There is no way the university could come up with the nearly $19 million we are investing in these changes without the partnership. We would have foregone any investments without this kind of program.”

The partnership, a 15-year, $18.7-million energy savings and building modernization project, is an example of an energy savings performance contract. These contracts are popular at universities and government agencies, because they allow these clients to make dramatic improvements in their facilities’ energy efficiencies without forcing them to raise fees or taxes to do so.

Here’s how they work: An energy services company designs a project to boost the energy efficiency at a building or facility. The company then purchases and installs the equipment needed to realize this efficiency, everything from energy-efficient windows to up-to-date heating, ventilation, and air-conditioning equipment, to automated controls and monitoring systems.

The client does not have to pay for this equipment, thus it doesn’t boost fees or taxes. The client does, though, promise to pay the energy services company a share of the savings that result from the building improvements. The energy services company is responsible for maintaining the equipment and measuring energy savings.

The West Chester University project is a good example of how performance contracts work. This project, which is still in its early stages (Honeywell recently completed its audit of the campus and plans to have all its recommended improvements installed by the summer of 2008), spans nearly 60 buildings on the 402-acre university campus.

The improvements recommended by Honeywell include improved lighting, heating, ventilation, and cooling equipment; energy and water conservation measures; and a new control system that will allow university staffers from a central location to monitor and optimize energy management across the campus.

The university will, over a 15-year period, pay for the work from the energy and operating savings generated by the improvements. Those savings will hit $1.7 million a year, and are guaranteed by the performance contract between Honeywell and West Chester. This means that the upgrades will not affect capital budgets or require additional taxpayer dollars.

This is an important benefit for public universities that are supposed to remain affordable to state residents. It’s hard to do this when energy and operating costs, among other financial pressures, force universities to constantly raise tuition.

With the performance contract, though, at least some of these pressures will be relieved at West Chester.

“Colleges and universities across the country are caught in a vicious operating cost squeeze, caused in large part by soaring energy prices,” according to Joe Puishys, president of Honeywell Building Solutions SES. “Honeywell’s energy performance contracts help them cut energy use sharply, improve the comfort and efficiency of their buildings, and clear up deferred maintenance lists—all without having to tap current budgets, or raise tuition and fees.”

A Mad Rush
West Chester is far from being the only university, in Pennsylvania or across the country, taking advantage of a performance contract to upgrade its facilities. State officials in Pennsylvania, in fact, are on record as big boosters of performance contracts.

In 2004, the commonwealth showed concrete evidence of this. Governor Ed Rendell signed Pennsylvania House Bill 1996 into law after it passed through both the state’s House and Senate. The bill, known as the Guaranteed Energy Savings Act, allows performance contracts to last 15 years, giving entities, such as West Chester University, a long-enough time to use energy savings to pay for these contracts’ cost.

Recognizing the benefits of these contracts, and spurred by the new, longer payback time, West Chester took the plunge this year with Honeywell. “The governor has kind of pushed the issue,” Wilson said. “He made it clear in his statements regarding budgets that he expects universities to take advantage of programs like these. There’s been a bit of a mad rush now among universities to look at these. Most of the state universities are in the process of doing something with the guaranteed energy savings arrangement.”

As a state-funded university, West Chester is limited in what it can do to raise money and to finance projects. In the past, it could not pay for maintenance or improvement projects on a 15- or 20-year payback schedule. The legislature’s approval of the Guaranteed Energy Savings Act, though, changed this. “That has made a world of difference,” Wilson said. “These projects are now viable options for us.”

The widespread acceptance of performance contracts has also proven lucrative for energy services companies, providing them with a steady stream of business. For example, Bellevue, WA-based Proven Alternatives, way back in 1995, entered into a performance contract with South Seattle Community College. The company provided new lamps, variable speed drives on college fans, and an energy management control system for the college’s heating and ventilation system. The work on the 16 campus buildings cost $1.07 million and provides $207,000 in annual energy savings. The college paid the entire cost of the project through these energy savings.

In 2001, the federal government’s National Vehicle and Fuel Emissions Laboratory in Ann Arbor, MI, entered into a performance contract with Westborough, MA–based NORESCO to provide energy infrastructure upgrades to the 184,208-square-foot laboratory. NORESCO installed two new chiller/heater units, 35 air-handling units, and converted a once-through cooling water system into a more efficient closed-loop cooling system. The improvements reduced annual energy costs at the laboratory by 60% and annual water consumption by the same amount.

This year, Framingham, MA–based Ameresco was scheduled to complete an $18.5 million energy infrastructure renewal project at the Massachusetts Department of Corrections Norfolk/Walpole Correctional Complex. The improvements—two new power plants with dual-fuel boilers and cogeneration equipment, computerized temperature controls, and new lighting—are expected to result in more than $1.5 million in annual energy savings. The department of corrections will pay back the costs of the program through a 20-year loan, using the annual energy savings to make its payments, thus avoiding any budget increases.

These success stories are not surprising to officials at Honeywell Building Solutions SES. “The marketplace is very active in higher education,” said Bob Kennedy, vice president of the Eastern regional division of the company. “Higher education and large institutional settings are a major focus of our group. We’ve seen an increasing trend for performance contracts year after year. It’s been a good business to be in. We can combine satisfaction, energy upgrades, and environmental benefits into something that makes sense for everyone. Everyone wins, and we’re happy for the work, too.”

Even before acquiring Sempra Generation, a subsidiary of Sempra Energy, Honeywell Building Solutions had tackled several energy saving performance contract projects.

For example, the company has a longstanding agreement with the Harrisburg Housing Authority in Harrisburg, PA. The company had originally entered into a 12-year, $8.5 million performance contract with the housing authority, and then expanded that to include an additional $2.9 million in energy upgrades. The additional upgrades will be paid for by surplus savings generated from the initial phase of work that had been completed in August of 2005.

The first phase of the energy-conservation and modernization program helped the housing authority reduce electricity use by 1.2 million kWh per year. The project also reduced carbon dioxide emissions by almost 760 tons annually. The second phase of the program will focus on 1,400 of the 1,700 units that the housing authority manages. Combined with phase-one savings, this should cut the authority’s annual operating costs by an estimated $1.3 million. Honeywell guarantees these savings under its performance contract, meaning that the work will not impact the authority’s capital budgets or require additional taxpayer funding.

“Capital budgets are tighter these days,” Kennedy says. “The ability to fund these upgrades out of avoided costs is a unique way to save energy, create environmental benefits and, at the same time, handle infrastructure upgrades. Some of the work at West Chester will create long-term benefits. For instance, we’ll reduce humidity in the university’s pool area. We’re doing this while, at the same time, we are saving energy.”

Planning
Bringing energy savings to any facility requires careful planning. Every university, government building, or municipal center is different. They each present unique challenges.

Before making any recommendations at West Chester, then, Honeywell officials first interviewed staffers at the school. The goal? To learn about what accomplishments and improvements they wanted to see from the partnership. It also gave Honeywell the chance to find out directly from the men and women who work on the campus what the biggest energy-related problems are at the school.

At the earliest stages of the partnership, Honeywell sent a survey team to the Pennsylvania campus to catalogue the school’s existing systems. Their mission was to decide what was working well, what wasn’t, and what could be improved. Team members also interviewed school officials about any planned future expansions or changes to the campus.

Through this careful, and time-consuming, planning, Honeywell officials were able to compile a more thorough energy savings plan for the school.

“We needed to spend a lot of time getting to understand the campus and the systems it already had,” says Dan Mori, senior project manager with Honeywell Building Solutions SES. “You can’t really learn all that just by studying blueprints. You can’t tell from blueprints what is really functioning, and what is not functioning.”

The preliminary work included a monitoring period. Using electricity monitors and temperature loggers, Honeywell team members were able to uncover valuable information about how efficient—or inefficient—the university’s energy systems were, and plan improvements accordingly.

“The goal of this planning period is to understand exactly what is going on,” Mori said. “We need to know this, not only from a paper standpoint, but from a real-world standpoint. We need to work with the customers to consider their long-term needs at the university.”

The planning process also allowed Honeywell to determine what unique challenges this particular project would bring. For instance, the university had a large amount of deferred maintenance to address. The ideal solution, for university officials, would be to pay for some of this put-off maintenance, through the increased energy savings. That meant that, not only would the energy savings have to cover the costs of the modernization project itself, but would also have to generate enough extra income to pay for other maintenance projects on the campus.

The campus’ size presented another challenge. West Chester University’s campus covers more than 2 million square feet. It also holds several different types and ages of buildings, meaning that the campus is served by a number of different energy control systems. This isn’t unusual. When public universities add new buildings, as West Chester has during the years, they often aren’t able to stipulate that all energy systems are consistent with those already existing on campus. University officials, then, also requested that the improvement project integrate, as much as possible, the control systems on campus.

Those requests represented a lot of work. Honeywell officials, though, have drafted a plan that will meet the demands, and leave enough energy savings, so that the university will have enough money to both pay back its project loan and address several of its deferred-maintenance issues.

More Control
One of the key features of the West Chester program is a central-monitoring unit. Because the West Chester campus is so large, it’s difficult for school officials to know how much energy is being used at any time in specific buildings of the university.

The monitoring system, though, will change this. University officials will be able to check with the central monitoring system to quickly discover any unusual variations in energy usage. It will also allow them to quickly discover which university buildings are too hot or cold, and then remedy the situation before it becomes a prolonged nuisance.

“It allows the university staff to be more proactive in identifying and resolving comfort problems,” Kennedy said.

Honeywell is also building submeters for the campus. By having smaller areas of the campus metered, university officials will be able to tell, by studying their utility bills, exactly which areas of the campus are using the most energy. Perhaps they’ll discover, when examining their utility bills, that one building on campus is using a higher-than-normal amount of energy. The problem may be caused by an air-handling unit not shutting off. Thanks to submetering, officials will be able to isolate a problem area, and investigate more closely, hopefully finding the underlying problem before it costs them too much money.

“That’s a big difference than having to look at one or two massive bills a month,” Mori says. “You’d never be able to see individual problems if you’re not submetering. If you’re facing a $6 million energy bill, it’s almost impossible to see problems at a smaller level.”

Wilson, the university’s energy projects manager, is looking forward to the added control the central monitoring system will provide him and his staff. “Right now, we have no means of monitoring, let alone controlling, our energy systems in the 60-odd buildings that are on campus, without actually having to go to those buildings,” he says. “With this new system, we’ll have more control of those buildings; we’ll be better able to track our energy use.”

Another key ingredient of the West Chester plan is the replacement of several pieces of heating, ventilation, and air-conditioning equipment. The university currently is relying on several air-handling units that are near the end of their useful life spans.

Honeywell, for example, will be consolidating six out-of-date units at one campus building with one larger rooftop unit. This will provide savings, as university officials have to contend with fewer motors, bearings, and belts. Fewer moving parts also means less opportunity for malfunctions.

“Most of our chillers and air-handling units have usable lifetimes of 20 to 25 years. We are starting to stretch beyond that, and we are seeing some impact from that,” Wilson said. “These systems are old, and they’re giving us some major problems. Like most state facilities, we try to stretch our capital equipment for as long a life as we can. We have buildings where the HVAC is as old as the building itself. Not only is it a benefit to improve the efficiency of our HVAC equipment, but it’s also a benefit to replace that outdated equipment with something new.”

New bathroom fixtures will help the university consume less water. Some buildings will receive new occupancy-driven sensors that turn faucets on and off when they sense bodies in front of them. “These are important in the overall energy savings,” Mori said. “People always focus on the natural gas and electricity, but water and sewer costs, too, have risen. In this project, we recommended a broad, comprehensive water conservation element.”

The university’s pool provided one more challenge for the Honeywell staff. The school requested that Honeywell somehow cool and dehumidify the indoor swimming pool area. This would not only make the area far more comfortable for fans watching swim events, it would also reduce corrosion around the pool building.

The pool improvements were one example of a deferred-maintenance item that university officials hoped to tackle, with the energy savings resulting from the performance contract. Honeywell officials, then, will install a cover on the pool that will reduce evaporation loss. They will also install a dehumidifier in the pool building—Honeywell does not yet know which brand it will select—to improve conditions in the building.

“Thanks to the extra savings in some of these projects, we can include things that have longer paybacks, or, in some cases, no paybacks at all, as long as the aggregate economics are attractive enough to meet the energy savings criteria,” Kennedy said. “In this instance, we are able to provide these improvements to the pool, even though their energy savings are not significant. It will provide some benefits to the building, though. By reducing corrosion of the steel in the building, it will extend the life of that building.”

This kind of creativity is one of the reasons why Wilson swears by the benefits of the performance-contract model.

“Being able to now borrow money through a bond, and pay it back in 15 years, with payments covered with the savings we are making, is a huge advantage to us,” Wilson said. “This is a tremendous benefit to an institution like ours.” 

Writer Dan Rafter is based in Chesterton, IN.

DE - March/April 2008