Energy – Your Largest Controllable Expense
Presented by:
Michelle Simon and Gregg Baty
May 9, 2012
•
Combat shrinking budgets
•
Make the most of your energy
•
Avoid future capital costs
Agenda
●
Florida’s Fiscal Conditions
●
Energy Landscape in US and FL
●
Economics of Energy Efficiency
●
Strategic Opportunity Defined
Introduction
Schneider Electric (Michelle Simon, LEED AP)
● Global leader in energy management
● Works with public entities to stretch budget dollars and help make the most of their energy
● Over 75 years of experience in Florida
● Have guaranteed over $75 million in savings to public entities
Grant Capital (Gregg Baty)
● Leading provider of financing to the public sector with 3 decades of experience and has been awarded over $3.5 Billion in public financings nationally.
● Finances almost any type of essential-use capital equipment, vehicles, real property and Energy Performance Contract projects.
● Designs lease-purchase agreements, operating leases with terms up to 17 years and transaction size from $500,000 to $50million.
“Out of clutter, find simplicity. From
discord, find harmony. In the middle of
difficulty lies Opportunity.”
Slow economic recovery:
●
Reduction in taxable values
Operating costs are increasing:
●
Greater need for public services
●
Top five utility providers increased
rates
32%
from 2004-2009.
2●
Aging current assets
1Department of Revenue – Property Tax Oversight 2Florida Public Service Commission
Property Tax Values in Florida1
800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 2006 2007 2008 2009 2010 2011 2012 P ro p e rty T a x (M ill io n s )
U.S. Average Retail Electricity Price
6 7 8 9 10 11 12 1999 2001 2003 2005 2007 2009 Year Cents per kWh
Heightened scrutiny on spending
Maintaining and expanding assets (buildings and water/waste water)
will become more difficult
Less dollars available to advance city initiatives
11% 12% 14% 17% 25% 33% 62% 67% 0% 10% 20% 30% 40% 50% 60% 70% Cuts in human services
Renegotiate debt Cuts in public safety Across-the-board cut Modify employee health benefits Cuts in other services Delay/cancel capital projects Hiring freeze/layoffs
Common Expendite Reduction Tactics among
Cities Across the Nation, 20091
Series1
1University of North Carolina - School of Government, “Budget-Balancing Tactics in Local Government
Energy Consumption by Source
Energy Landscape in Florida
● Florida is home to 3rd largest consumer of energy
● Rates have increased
32%
since 2004 $18,000 $23,000 $28,000 $33,000 $38,000 $43,000 $48,000 2002 2003 2004 2005 2006 2007 2008 2009 FPL TECO Gulf Power Progress EnergyImpact of Energy on Budgets
●
Buildings represent a huge area of energy consumption
●
3
rdto 5
thLargest Budget Item
●
Largest Unverified Expense
●
This represents a significant item in your budget which is largely
Increasing list of projects being deferred
Only high priority projects being funded
●
When will there be funding allotted for the deferred projects?
●
When will there be funding allotted for energy efficiency projects?
●
How do we prioritize the energy projects? Low hanging fruit?
What if there was a way to fund energy related
projects AND major capital improvement projects?
Scenario 1: Business as Usual
Utility bill expense
60% 65% 70% 75% 80% 85% 90% 95% 100% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Scenario 1: Business as Usual
60% 65% 70% 75% 80% 85% 90% 95% 100% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Utility bill expense
Sunk cost to Utility
Provider
Scenario 2: Budget then Implement
60% 65% 70% 75% 80% 85% 90% 95% 100% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Utility bill expense
Savings but used capital outlay
funding to achieve results
Energy Consumption 100% 70% Efficien t devices and installation
Optimized usage via automation
Monitoring & Maintenance
Time
Lack of monitoring, maintenance programs, regulation and control systems
●Efficient devices and installation (saves 10 to 15%)
●Optimized usage via automation (save 5 to 15%)
●Without regulation and control systems (up to 12 % lost)
●Without Monitoring and Maintenance (2 to 8% lost)
Maximizing Savings
Scenario 2: Budget then Implement
60% 65% 70% 75% 80% 85% 90% 95% 100% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Utility bill expense
Sunk cost to Utility
Provider
60% 65% 70% 75% 80% 85% 90% 95% 100% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Scenario 3: Financed Comprehensive Energy Project
Utility bill expense
Reallocated utility expense
to cover the financing
NO capital outlay or budgeted dollars used, frees up those funds for other needed projects
EVERY tax dollar being used to help the county, NO sunk costs
A Financed Performance-Based Energy Project:
●
Reallocates money being spent on utilities to fund improvements
●
Maximizes energy savings NOW to avoid sunk tax dollars to utility
company
●
Guaranteed performance and ROI
●
Frees up funds for other government needs
Energy Costs Savings
$0 $5 $10 $15 $ 20 $ 25 $ 30 $ 35 $ 40 $ 45 J F M A M J J A S O N D Ut ilit y Cos ts ( $1, 000s )
Electric Fuel Savings
The Financing Component – Municipal Lease is the
Preference
Tax-exempt lease financing is perfectly suited for transactions between
$500,000 and $50million
Versus a bond, the tax-exempt lease hits the operating side of the budget – without impacting the capital budget side
Unlike bonds - lease agreements do not require a referendum allowing municipalities to finance various essential projects in a timely manner. Lower transaction costs
9 Typically the interest rate
associated with a tax-exempt lease includes all fees
9 bond fees include both the cost of the interest rate and cost of
issuance.
More flexibility in term & payment structure
Fewer documents
Less complicated for the municipality Unlike bonds, there is no public
voter approval required for
tax-exempt leases, which allows for more timely financing.
Typically, lease agreements can be completed in 30 to 60 days -providing the opportunity for:
Does not encumber any other lessee’s tax revenues
There is non-appropriation with tax-exempt leasing
What if we have already done a lot for energy efficiency
and have produced our own savings?
●
Will those savings sustain over 15 -20 years? What happens if your
“energy employee” leaves in a few years? What happens if the focus
isn’t on energy savings anymore?
●
What happens if those savings flourish after a few years?
Is it in the government’s best interest to make sure savings
aren’t being left on the table?
What do we save if the guaranteed savings pay for the
turnkey project?
Long Payback Cost Savings Quick Payback Cost Savings
Lighting
Building Automation
Systems
Water Conservation
Roof Upgrades
Major HVAC
Water and Waste
Water Plant Upgrades
Efficiency
•
replacing a piece of equipment with a higher efficiency model
•
Design around optimizing systems as one
Conservation
•
Reducing system runtimes
•
Reducing load on systems
Performance Based model = marrying the two and
sustaining the savings
Schneider Electric – Energy Solutions 23
Summary
• Local governments in a tough financial position
• Every tax dollar counts
• There are creative and proven funding mechanisms
available to address:
•Facility capital improvement projects •Deferred maintenance projects
•Water/Waste Water Plant upgrades •Irrigation systems
Schneider Electric – Energy Solutions 24
