Performance Contracting is a method to protect the client in an energy efficiency project and to ensure the contractor stands by his or her claims. By implementing a performance contract, a client is protected while the contractor or ESCO stands to gain higher profit for taking the initial investment risk!
What a Client should know about Performance Contracting
1. It is a contract that requires medium or long term commitment.
2. It is a contract that required a new relationship understanding the fact that the contractor is now an investor.
Awareness 1 : Energy Savings Partners Beware!
As an investor, the contractor will seek to protect his or her investment. There will be new operational rules, new information flow lines to be established. Some "performance contractors" will hide such details in a contract and highlight in when claiming savings. An example of a potential issue is described below :
A 5 star hotel was keen to reduce its energy consumption. It signed up a performance contract which was not thoroughly spelt out. The contractor's first step (which is the easiest and a no brainer) was to increase the chilled water supply (CHWS) setpoint temperature at the chillers - without investigating the room and load conditions. By increasing the CHWS, the chiller compressor works less harder which means lower electrical energy drawn in... Viola! Energy Savings was achieved!Over time, guest complaints started to increase - particularly during peak periods. The contractor claimed undersized chillers were to blame - a fact that cannot be determined unless a full audit is done. The operators of the hotel had to handle disgruntled clients and still did not realise that guest comfort was compromised for "energy savings". Note the fact that temperature and relative humidity in the hotel rooms are governed by the CHWS temperature from the chillers.One smart engineer understood the concept and reset the CHWS temperature, averted complaints but was caught by a clause in the performance contract which stated that the contractor has the right to reset or change operational conditions to achieve the savings! By allowing contractors to reset the CHWS to higher levels, there will be power savings but the affected areas - i.e. rooms which generate income for the hotel - is left out in the details. Thus when owners reduce the CHWS from the chillers, the contractor cries foul and claims savings stating that the contract did not state anything about the rooms!
At Energy IR we never let the above happen - because we reduce losses in the system and will not alter operational conditions unless an overall change is done after a detailed audit. In the case above, a total retrofit with changes in AHU, room FCUs and overall design would have allowed an increase in CHWS but not with the existing system.
Awareness 2: A Performance Contract is Not a Standard Contract
Performance contract is not similar to standard contracts. Here the contractor needs to act as an investor and contractor which is a different ballgame altogether.
Performance Contracting requires an Index to work with. The index is the baseline that needs to be established as soon as possible when a performance contract is inked
The index can be kW/ton, CFM/ton, usgpm/ton or production output/kW.
Why use an Index:
1. Index is a near constant
2. Index does not vary when there are high or low loads
3. An index is a true measure of efficiency - Output / Input
Measuring kW alone cannot gauge efficiency improvement! Many projects claim efficiency just by measuring kW which simply means you are getting half the picture!
The index is similar vehicle efficiency - km/gallon!
An example of an index is shown below:
Figure 1 : Cooling Tons Index , kW/ton before Retrofitting
The data above represents an
audit on a chiller system where cooling tons generetaed and
its power consumption was measured and logged.
The linear curve provides the before retrofit or “old”
kW/ton
Upon completion of a retrofit, a new index should be
generated with measurements
Figure 2 : Cooling Tons Index , The Savings After
Retrofitting
The
savings is than calculated using the above concept. So
during low loads, the savings will lower and vice versa
during high loads. This way, both the client and contractor
are not shortchanged and fairness will
rule.
Using kW alone would not show the actual savings and
fluctuation in load might show lower kW consumption which
is not savings.