Case Study - Hill Air Force Base, Utah
Energy savings performance contracting at Hill Air Force Base generated much interest during a recent training session on energy management that downlinked 12 Department of Defense sites. Energy systems in 940 buildings on the Base will be upgraded under an 18-year ESPC between the Government and the energy service company, CES/Way. Improvements are distributed over five task orders that will be completed in five years, with CES/Way providing $2.5 million in up-front costs for the first two task orders. Utah Power & Light will provide $8 million in rebates to help cover the contractor's initial investment, maintenance services, and interest costs. The remainder of the costs will be reimbursed from the Government's share of energy savings.
The potential annual energy savings at Hill AFB are estimated between $250,000 and $350,000 for task orders 1 and 2. Implementation of an initiative to replace faulty steam traps throughout the Base will result in annual savings of about $1 million. There may be six or more additional task orders under this contract, worth a total of $1 million in potential energy savings. Actions taken under the first task order are already accruing savings; in the first six months after electrical improvements were made in 25 buildings, use of electricity fell 25 percent in those facilities.
There was a need to reduce energy and water use at Hill Air Force Base, which is subjected to extreme temperatures during summer and winter in its desert location north of Salt Lake City. Projects to improve the energy efficiency of lighting and HVAC systems are expected to generate significant savings for the Base over the life of the energy savings performance contract.
The Base has some unique features that are suited to other efficiency projects, including industrial operations at its Air Logistics Center and a steam distribution system that could be improved. Water conservation and other projects are expected to generate additional energy savings at Hill AFB.
The first two tasks of this contract focused on lighting and HVAC systems, which are responsible for about 30 percent of the energy demand at Hill Air Force Base. Hill AFB retained the energy cost savings realized from early lighting retrofits and invested these savings in HVAC upgrades throughout the Base at no additional cost to taxpayers. Although new HVAC systems produce lower overall energy savings than energy-efficient lighting, the older HVAC systems were in such poor repair that the savings will be significant.
Approximately two-thirds of the energy used at Hill AFB is for production of steam heat, and 26 percent of that energy is lost because of poorly functioning steam traps. A "Steam Initiative" is underway to audit and replace all the steam traps.
Hill AFB is one of five Air Force Bases with an Air Logistics Center, with three industry-like "directorates" where aircraft components are rebuilt. Industrial equipment operated by the Center are intensive users of energy (e.g., electroplating vats, parts washers, and paint booth technologies), and the potential for energy savings from this equipment is being studied. The Air Force Materiel Command is in favor of using ESPC and private-sector utility funding to pay for industrial retrofit projects up front, and is also looking into the potential use of ESPC at other Bases.
Contracts at Hill AFB are prepared to cover four phases of a project: (1) an energy survey and audit of the facility(s); (2) a report to the U.S. Government that evaluates the contractor s proposal, showing the potential energy savings; (3) implementation of the project; and (4) maintenance of HVAC equipment (where appropriate)
Benefits of Using an ESPC
By using an ESPC, Hill AFB replaces aging and energy-wasting equipment without incurring up-front capital costs, reduces its utility bill, reduces operation and maintenance costs, and meets its energy-reduction goals.
In the course of its ESPC experiences, Hill Air Force Base identified opportunities to overcome institutional and financial barriers:
Scope of the Contract Expanded: In February 1995, the energy manager identified faulty steam traps as being responsible for a significant loss of energy at Hill AFB. However, the "intent of the contract" was to achieve electricity savings only, and upgrades to steam traps could not be included in the contract. The utility, Utah Power & Light, finally agreed to offer rebates on a "blended" project (of lighting and steam traps), and a new task order was prepared to include all steam traps.
Competition for Department of Defense (DOD) Project Funds Overcome: In recent years, Hill AFB has found it easier to produce energy savings through the use of utility rebates and ESPC than to compete for scarce project funds from DOD. Utility rebates fund 50 percent of the lighting retrofits, and contracts are written that incorporate these rebates into their scope. Offerors pay for up-front HVAC work, and their investment is returned according to the energy savings realized each month.
Length of Contracting Process Shortened: The use of energy savings performance contracting helped shorten the ordinary contracting process significantly. By gaining approval for performance of the "Steam Trap Initiative" through ESPC, Hill AFB shortened the DOD contracting process from 18 to 7 months. Further analysis showed that more than $700,000 in energy costs were saved by reducing the approval process by eleven months.
Maintenance Personnel Reductions Offset: There has been a reduction in the size of the maintenance staff at Hill AFB because of DOD downsizing, and it was therefore deemed crucial that the contractor be required to maintain the equipment installed under ESPC. All major installation of equipment (lighting and HVAC retrofits, steam-trap replacements, and water conservation steps) will be completed by the contractor within five years. Because the contractor "owns the equipment" during the 18 years he is collecting a portion of the energy savings, the contract states that the equipment will be maintained by the contractor during that period.