1、394 ASHRAE TransactionsABSTRACTIn response to a series of legislative mandates and exec-utive orders, the US federal government reduced the energy intensity of these buildings by nearly 30%, from 139,840 Btu per square foot in 1985 to 98,171 Btu per square foot in 2006 (USDOE 2008). The cost of achi
2、eving this result was approx-imately $7.3 billion, which represents the total investment in federal energy efficiency projects over the period. Approxi-mately 43% of the funding came from private sector financing. Governments in other countries and municipal/state govern-ments, universities, schools
3、 and hospitals are also leveraging private financing to help meet energy goals. This paper describes the financial analysis of privately financed energy efficiency projects as they are implemented through Energy Savings Performance Contracts (ESPCs) at US federal government sites. In an ESPC, an Ene
4、rgy Services Company (ESCO) obtains private financing to design and build an energy conservation project at a government site. The ESCO and the government agency agree on the utility and other savings the project will generate, and on the methods that will be used to measure and verify those savings
5、. The ESCO imple-ments the project, and the government pays the ESCO from the savings generated. It is shown that four key parameters in ESPC economics are the implementation price, the project interest rate, the escalation rate of energy savings, and the amount of the ancillary payment from savings
6、. INTRODUCTIONA fact that is virtually unknown among the general public is that over the past two decades, the US government and its agenciescivilian and militaryhave made dramatic improvements in the energy efficiency of their standard build-ings (which include offices, barracks, museums, etc.). In
7、 response to a series of legislative mandates and executive orders, the US federal government reduced the energy inten-sity of these buildings by nearly 30%, from 139,840 Btu per square foot in 1985 to 98,171 Btu per square foot in 2006 (USDOE 2008).The cost of achieving this result was approximatel
8、y $7.3 billion, which represents the total investment in federal energy efficiency projects over the period. However not all of this funding came from U.S. taxpayers. To accelerate investment in cost-effective energy conservation measures, the same laws and executive orders that mandated increases i
9、n energy effi-ciency at federal sites authorized and encouraged the use of private sector financing to achieve the goals. Of the $7.3 billion dollar invested, private sector financing was responsi-ble for $3.1 billion, or about 43% of the funding.The federal government is not the only institution in
10、 the US that is making use of private financing to meet its energy goals. According to one study (Hopper et al, 2005), municipal/state governments, universities, schools and hospitals obtained somewhere between $12 and $16 billion in private financing to fund energy efficiency projects in the 20-yea
11、r period from 1982 through 2002.Governments in other countries are making more wide-spread use of private financing as well: privately financing is used to fund energy efficiency upgrades at government facilities in Canada, Australia, the United Kingdom and in several other European countries. One o
12、f the aims of European Union direc-tive 2006/32/EC (see http:/europa.eu/legislation_summaries/energy/energy_efficiency/l27057_en.htm) is to increase the use of private financing for achieving energy efficiency goals in all of the member countries.The Economics of Energy Savings Performance Contracts
13、John ShonderMember ASHRAEJohn Shonder is a staff member at Oak Ridge National Laboratory in Oak Ridge, TN.AB-10-0042010, American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. (www.ashrae.org). Published in ASHRAE Transactions (2010, Vol. 116, Part 2). For personal use only.
14、 Additional reproduction, distribution, or transmission in either print or digital form is not permitted without ASHRAEs prior written permission.2010 ASHRAE 395This paper describes the financial analysis of privately financed energy efficiency projects as they are implemented through Energy Savings
15、 Performance Contracts (ESPCs) at US federal government sites. In an ESPC, an Energy Services Company (ESCO) obtains private financing to design and build an energy conservation project at a government site. The ESCO and the government agency agree on the utility and other savings the project will g
16、enerate, and on the methods that will be used to measure and verify those savings. The ESCO implements the project, and the government pays the ESCO from the savings generated. At least once per year, the ESCO produces a measurement and verification (M energy cost savings; and maintenance cost savin
17、gs. These ESCO uses these payments for four different categories: Prin-cipal payments, interest payments, M&V services, and O&M on installed equipment. Figure 1 is a Sankey diagram that shows the source of the payments, and the way the payments are distributed for the average project awarded between
18、 2005 and 2009. It is seen that the majority of payments to the ESCO (78%) come from energy cost savings. Maintenance savings account for 20% of payments to the ESCO, and ancillary payments account for only 2%.Figure 1 Source and disposition of payments in DOE Super ESPC projects, based on data from
19、 2005 through 2009.2010, American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. (www.ashrae.org). Published in ASHRAE Transactions (2010, Vol. 116, Part 2). For personal use only. Additional reproduction, distribution, or transmission in either print or digital form is not p
20、ermitted without ASHRAEs prior written permission.2010 ASHRAE 397CALCULATING THE FINANCING PROCUREMENT PRICEAs stated above, in federal ESPC projects in the US, by law all payments to the ESCO must come from savings deliv-ered by the installed equipment. Consequently, the ESCO receives no payments u
21、ntil the project is installed, accepted, and begins to deliver savings. For this reason, the ESCO must overborrow in order to make interest payments on the loan during the construction period. This overborrowing is the primary component of what is termed the Financing Procure-ment Price. The financi
22、er provides a loan to the ESCO at the project interest rate. The loaned amount is immediately placed in a money market account that earns interest at the money market rate. As construction proceeds, funds are withdrawn from the account to pay for equipment and labor. In addition, the account must fu
23、nd regular interest payments to the financier throughout the construction period. Since the ESCO receives no payments from the federal agency until the construction project is complete, the ESCO must overborrow in order to make the interest payments during the construction period.The amount of overb
24、orrowing required is a function of the project interest rate, the money market rate, and the schedule of construction payments. In general it must be calculated iter-atively. Consider a simple example of a project with a 20-month construction period. Labor costs are constant at $100,000 per month, a
25、nd capital outlays of $4,000,000, $3,000,000, and $1,000,000 are required in months 1, 9, and 16 respectively. The project interest rate is 7% per year and the money market account earns 1.5% interest per year. Note that 7% annual interest is equivalent to (1.07)(1/12) 1 = 0.5654% per month and 1.5%
26、 annual interest is equivalent to (1.02)(1/12) 1 = 0.1241% per month.In this case, the total capital required for the project is $10,000,000 and the amount of overborrowing is $1,162,182. Table 1 shows the balance of the money market account, the Table 1. Cash Flow for Escrow-Financed Construction i
27、n an ESPC ProjectMonth Beginning Balance Interest Payment Interest Earned Construction Payment Ending Balance1 $11,162,182 $63,113 $13,858 $4,100,000 $7,012,9282 $7,012,928 $63,113 $8,706 $100,000 $6,858,5213 $6,858,521 $63,113 $8,515 $100,000 $6,703,9244 $6,703,924 $63,113 $8,323 $100,000 $6,549,13
28、45 $6,549,134 $63,113 $8,131 $100,000 $6,394,1526 $6,394,152 $63,113 $7,938 $100,000 $6,238,9787 $6,238,978 $63,113 $7,746 $100,000 $6,083,6118 $6,083,611 $63,113 $7,553 $100,000 $5,928,0519 $5,928,051 $63,113 $7,360 $3,100,000 $2,772,29810 $2,772,298 $63,113 $3,442 $100,000 $2,612,62711 $2,612,627
29、$63,113 $3,244 $100,000 $2,452,75812 $2,452,758 $63,113 $3,045 $100,000 $2,292,69013 $2,292,690 $63,113 $2,846 $100,000 $2,132,42414 $2,132,424 $63,113 $2,647 $100,000 $1,971,95915 $1,971,959 $63,113 $2,448 $100,000 $1,811,29416 $1,811,294 $63,113 $2,249 $1,100,000 $650,43017 $650,430 $63,113 $808 $
30、100,000 $488,12518 $488,125 $63,113 $606 $100,000 $325,61919 $325,619 $63,113 $404 $100,000 $162,91020 $162,910 $63,113 $202 $100,000 $0Total $1,262,252 $100,070 $10,000,0002010, American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. (www.ashrae.org). Published in ASHRAE Tra
31、nsactions (2010, Vol. 116, Part 2). For personal use only. Additional reproduction, distribution, or transmission in either print or digital form is not permitted without ASHRAEs prior written permission.398 ASHRAE Transactionsinterest earned and the payments made each month. The finan-cier provides
32、 a loan of $11,162,182 at the beginning of month 1. This is placed in the account to provide the initial balance. All payments are then assumed to be made at the end of each month.At the end of the first month, the money market account earns interest in the amount of (0.1241%)($11,162,182) = $13,858
33、. The financier receives a payment of (0.5654%)($11,162,182) = $63,113. A payment of $4,000,000 is made to the equipment supplier, and $100,000 is paid to the construction subcontractor. This leaves a balance of $7,012,928 at the end of the first month, which becomes the balance at the beginning of
34、month 2.At the end of month 2, the financier once again receives a payment of $63,113 since none of the principal has been repaid. The money market account earns 0.1241% on the balance of $7,012,928, or $8,706. The construction subcon-tractor is paid $100,000 and the balance remaining in the account
35、 is $6,858,521.The overborrowed amount of $1,162,182 was just enough to ensure that the balance of the money market account would be zero at the end of month 20. The amount was determined by setting the calculations up on a spreadsheet and varying the overborrowed amount iteratively until the accoun
36、t balance at the end of month 20 was equal to zero. In most commercially available spreadsheet programs, iterative calculations like this can be automated using the “Goal Seek” function.As stated above, the financing procurement price may include other fees associated with setting up the financing,
37、but these are negligible compared to the capitalized construction period interest that must be borrowed to pay interest during the construction period.FINANCES DURING THE PERFORMANCE PERIODDelivery of savings is assumed to begin once the ESCO completes construction and commissioning of the installed
38、 equipment, and the federal agency accepts the project. This begins what is called the post-acceptance performance period. It is only then that the agency begins making payments to the ESCO.Continuing with the example of a project with implementation price of $10 million and a 7% project interest ra
39、te, let us assume that the site makes no ancillary payment from savings, so that the financed amount is $10 million plus the $1,162,182 in capitalized construction period interest, for a total of $11,162,182.Let us further assume that the ESCO and the site have agreed that the project will reduce an
40、nual energy costs by $1,000,000, and annual maintenance costs by $300,000 in the first year of the post-acceptance performance period. Thus the guaranteed savings in the first year is $1,300,000. The energy savings will increase by 3% per year and the maintenance savings will increase by 2.5% per ye
41、ar. The site has agreed to pay the ESCO 99% of the guaranteed savings.The final assumption is that the ESCOs performance period costs (which include M&V and O&M on the installed equipment) are $300,000 in the first year of the post-acceptance performance period. These costs increase by 2.5% per year
42、.Given all of the financial parameters of the project, it is most convenient to set up the project balance sheet in a spread-sheet program. Table 2 presents the balance sheet for the first 13 months and the last six months of the project. Again it is assumed that all payments are made at the end of
43、the month.At the beginning of month 1, there is an outstanding loan balance of $11,162,182. During the first month, interest in the amount of (0.5654%)($11,162,182) = $63,113 accrues on the loan. At the end of the month, the ESCO receives a payment of $107,250 which is 99% of the guaranteed savings
44、of $1,300,000 divided by 12. The ESCOs O&M and M&V costs during this month are assumed to be $300,000/12 = $25,000. The remainder is $107,250 $25,000 = $82,250, which is paid to the financier for debt service on the loan. The balance on the loan at the end of the month is then $11,162,182 minus the
45、payment of $82,250 plus the interest of $63,113 accrued during the month, leaving a balance of $11,143,045.The agency payments, the ESCOs performance period service expenses, and the payment to the financier for debt service are the same in each month of year 1. The amount of interest accrued each m
46、onth decreases as more of the principal is repaid. In month 13, the monthly payments to the ESCO increase to $110,344 to account for increases in the value of the energy and maintenance savings. The ESCOs perfor-mance period expenses increase as well to $25,625. The differ-ence is $84,719 so the pay
47、ment to the financier for debt service also increases.By month 177, the monthly payment to the ESCO has increased to $159,760 and the ESCOs performance period service costs have increased to $35,324. The payment to the financier is now $124,435 per month.The payments increase once more in month 181,
48、 which is the first month of year 16 of the post-acceptance performance period. The agency pays the ESCO $164,378, and the ESCOs performance period services costs increase to $36,207 leaving $128,170 for the debt service payment. With the accrued inter-est of $1,236 the balance on the loan at the en
49、d of month 181 is $91,623.In month 182, the ESCO would again be scheduled to receive a payment of $164,378 as in the previous month. However, the cost of the ESCOs performance period services, plus the cost of the debt service on the loan is less than this amount. Thus in month 182 the agency reduces the payment so that the ESCO receives just enough to cover its performance period service costs for the month, and to pay off the loan in its entirety. The loan balance at the end of month 182 is zero, and the ESPC is complete. At the beginning of month 183 the site begin
