High capital investments can deter public facilities from taking on energy efficiency projects. While the benefits of energy efficiency projects may be well known, such as energy and monetary savings, public facility operating budgets are limited and can hinder their ability to invest in potential money-saving upgrades.
Reducing energy waste in public buildings saves taxpayer dollars. Minnesota sought to reduce both energy waste and costs by creating the Guaranteed Energy Savings Program (GESP). This Program is housed within the Minnesota Department of Commerce Division of Energy Resources (DER), which receives funding from the U.S. Department of Energy’s State Energy Program. The goal of GESP is to create jobs and reduce operational costs through energy efficiency efforts while working to reduce energy consumption in state agencies by 20%.
GESP works with state agencies, local governments, school districts, and higher learning institutions by providing technical, contractual, and financial assistance for energy efficiency projects. Energy efficiency projects through GESP are funded by energy savings performance contracts (ESPCs), which provide performance based financing options that eliminate the need for large upfront costs and use future energy savings to pay for the project. To further reduce the burden on public facilities, GESP has a list of prequalified energy service companies (ESCOs) who develop and install energy efficiency projects. Other assistance from GESP includes:
- Evaluating energy efficiency opportunities
- Determining available financing options
- Selecting an ESCO to perform ESPC services
- Evaluating ESCO proposals including the annual guaranteed savings
- Facilitating contracts between the ESCO and the public entity
- Providing project management oversight
- Providing technical assistance throughout the performance period of the contract
The project process is broken down into four phases – opportunity assessment, investigation, implementation, and performance. The opportunity assessment phase consists of DER working with the public entity to develop a plan and identify potential energy efficiency upgrades and issues that need to be addressed. During the investigation phase, a Request for Proposal is advertised to the prequalified ESCOs. The selected ESCO then performs an Investment Grade Audit. The energy efficiency measures are installed and completed during the implementation phase by vendors selected by the ESCO through a bidding process. The project wraps up with the performance phase where the ESCO tracks the savings from the newly installed energy efficiency measures. The energy savings are reported annually from the ESCO to the public entity and DER. If the guaranteed savings are not reached, then the ESCO is responsible for making payments exceeding the guaranteed savings.
Without GESP, this project process can be daunting and difficult to navigate. DER’s creation of a third-party advocate for public entities in the ESPC process removes any uncertainty from the public entities and the need for additional staff from facilities to oversee energy efficiency projects. With GESP, Minnesota has been able to realize energy savings across multiple public facilities.
To read more about GESP successes, read Part 2 – The Proof is in the Savings
The Energy Department's State Energy Program provides funding and technical assistance to states, territories, and the District of Columbia to enhance energy security, advance state-led energy initiatives, and maximize the benefits of decreasing energy waste. The State Energy Program emphasizes the state’s role as the decision-maker and administrator for program activities tailored to their unique resources, delivery capacity, and energy goals.