Soaring energy prices and tightening school budgets don't mix well. In fact, millions of children across the United States are being educated in energy-leaking, unhealthful facilities in dire need of physical upgrade and systems modernization.
But how can an education institution pay for the work — especially in today's trying economic times? A related question: Do schools in aged facilities have cost-effective options to heighten energy efficiency and make environmentally friendly decisions?
Increasing numbers of K-12 districts and institutions of higher learning are turning to performance-based contracting to address these issues effectively. It's a “budget-neutral” method of contracting that enables a building owner to pay for facility upgrades via the cost savings that are guaranteed to be achieved by making those improvements.
It's also an investment in academic performance because renovations often create a more healthful and comfortable classroom setting. Fewer teachers and students are out sick because of asthma and other illnesses aggravated by poor indoor air quality and inconsistent temperatures.
Performance-based contracting is a perfect fit for projects designed to cut energy use or modernize building systems. Prime examples include mechanical-system upgrades, building automation, lighting retrofits, sealing a building's envelope and water/sewer system replacements. It eliminates the need for major upfront capital investment by financing improvements over a number of years. Because the energy or operating cost savings attained each year equals or exceeds the annual financing cost, the project becomes self-funding.
School administrators are drawn to this funding strategy especially on projects that combine installing Web-based building-automation systems and sealing the building envelope.
Advanced automation enables a facility's service infrastructure, such as mechanical and lighting systems, to be monitored and controlled off-site via the Internet. The systems can adjust lighting levels, air temperature and circulation to unerringly achieve the optimal balance between energy use and comfort.
Building automation systems can schedule regular maintenance and automatically diagnose a problem, then generate a work order to repair the glitch. The technology also can integrate other essential systems, such as security, access control and real-time utility-metering, into the system. Meanwhile, the comparatively mundane process of sealing energy leaks by installing energy-efficient windows, insulation, weather stripping and roofing enables these sophisticated systems to optimize energy-use results.
Performance-based contracting also is a pragmatic way to pay for the design and installation of Earth-friendly “green” technologies. Geothermal, wind and solar systems collect clean, renewable energy from the Earth, wind and sun, and produce significant energy savings while reducing carbon footprints.
Even in a credit-constricted economy, projects premised on a performance-based contract are comparatively easy to finance. The reason: Because it is possible to accurately project future reductions in energy use, the accompanying cost savings can be forecast conservatively. And, those savings flow directly to the bottom line. In essence, money already in a school's operating budget pays for the future improvements. Financing sources are abundant. Typically, contractors can refer administrators to financial institutions willing to underwrite such projects. Experienced contractors also can help institutions prepare grant applications or build the factual case in support of efforts to pass a bond issue.
What to expect
How can school officials tell when a facility is a good candidate for funding through a performance-based contract?
Year-to-year comparative energy-use analysis that shows growing inefficiency.
Shockingly high utility bills whenever energy prices spike.
Annual building operations budget increasingly overburdened.
Mechanical, electrical, plumbing and lighting systems nearing the end of their useful life.
Building systems that break down frequently.
Conditioned environment with "hot spots" and "cold spots."
Occupant complaints about physical discomfort or safety.
Maintenance staff without the time or expertise to maintain systems properly.
A district or higher-education institution that has set a carbon-reduction goal.
The process begins with an assessment conducted by a LEED-accredited professional. The comprehensive appraisal evaluates the efficiency and life-cycle costs of building infrastructure, including climate control, (boilers, chillers, piping ventilation and mechanical equipment), building envelope (windows, insulation, doors, roofs and weather stripping), lighting, life safety (fire and security), water and sewer.
The facility assessment enables the contractor to pro-ject future energy savings based on the industry-accepted guidelines of the International Performance Measurement and Verification Protocol (IPMVP). It uses current and best-practice techniques available for measurement, projection and verification of energy use.
Engineers and developers then craft a solution that addresses the school's needs and fits its budget. Customer expectations, total cost and scheduling are finalized before any construction begins.
Typically, work is completed on a turnkey basis, with the contractor serving as the single-source authority as the project progresses. The contractor hires and manages all subcontractors, oversees all aspects of construction through completion and communicates one on one with school officials. Work usually is completed over summer break to avoid disrupting students.
When construction is complete, the contractor will make certain that all new mechanical equipment is integrated and commissioned fully, verify that systems are running at peak efficiency and train maintenance staff in ongoing operation.
Beyond energy savings
Research shows that children perform better academically in clean, well-circulated and naturally lighted environments. According to a report issued by the National Clearing-house for Educational Facilities in 2002, poor indoor air quality affects 20 percent of the U.S. K-12 student population, and American children miss millions of school days each year because of asthma problems made worse by inadequate air circulation.
In addition to air quality, room temperature and lighting also play a key role in student learning. The optimal learning temperature is between 65°F and 74°F, and some studies show that children progress as much as 26 percent faster in math and reading in spaces with appropriately designed natural lighting.
Shrinking school budgets no longer are an excuse to delay building improvements. Budget-neutral, performance-based contracting gives education institutions the ability to upgrade facilities, save money, enhance the learning environment and reduce carbon output without breaking the bank. And, perhaps best of all, the savings are guaranteed.
Bennett is managing partner of Control Technology and Solutions (CTS), a St. Louis-based company that provides design and construction services that improve energy efficiency. He can be reached at (636)230-0843 or [email protected].
Verification: The big payoff
The most satisfying aspect of a performance-based contract comes one year after project completion when the contractor returns to a school to measure and monetize the energy-saving performance of the work.
An updated building automation system and mechanical-system operating improvements at Central High School, Cape Girardeau, Mo., delivered $73,403 in first-year energy savings — more than three times the estimated $23,974.
Marshall School District, Marshall, Mo., reached $132,088 in first-year savings — almost $27,000 more than projected — thanks to HVAC and lighting retrofits paired with electrical upgrades and building automation at seven district facilities.
7 to 10
The typical term of an energy performance contract.