Energy Efficiency at APU: Performance Contracting

APU spends $783,000 annually on electricity, gas and water utility consumption and an additional $247,000/year on Operations and Maintenance to keep its ancient boilers functional (the 5 boilers in Atwood, Moseley, and Grant are all 40+ years old) for a total expense of $1,030,000 per year (an average of $3.50/square foot). The Moseley pool boiler is corroded and needs replacing this year. APU employed Johnson Controls, Inc. (JCI) to conduct an extensive Energy Audit of the entire APU campus, the goal being to find ways to create energy and operational savings which would fund facility improvement measures (FIMs). The vehicle for this is a Performance Contract wherein JCI would install the energy saving measures and guarantee annual energy savings such that there will be no net out-of-pocket expense for APU. If the annual energy costs exceed their performance guarantee, JCI writes APU a check for the difference.

JCI used a three-year history of utility spend/consumption to analyze potential savings and recommended energy savings projects that will produce 32% annual savings ($250,000-$285,000 per year) including energy efficient retrofits in the lighting, water, heating, Building Automation Systems, and mechanical equipment upgrades on a comprehensive campus-wide basis at an approximate cost of $6.4 million. They project that utility and operational savings generated by the project’s improvements will exceed the cost of the project over a twenty year term.

On the day JCI proposed this project, we discovered that Alaska SB25 provides $125 million for Performance Contracts/energy efficiency measures such as the JCI proposal. Mark Davis, the Deputy Director of Alaska Industrial Development and Export Authority (AIDEA), who will administer these funds, said we were the first agency to inquire about them. He was enthused that APU could be the test project, attended the APU Finance Committee meeting, and spoke to the availability of funds (the $125 million will come from existing state savings accounts); his willingness to work with Alaska Housing Finance Corp (who funds the residential component); advised us they expect the Governor to sign the bill; and that it would take 6-8 months to develop the regulations and implement the program.

When JCI was informed about the AIDEA available funding next year, they came back with a proposal to have APU contract with them for the comprehensive project at $6.4M, but to execute it in two phases. This allows APU/JCI to fix the pricing and availability of equipment and sub-contractors (for up to ten months), then execute the phase two construction work if and when the AIDEA funds become available. Phase One work would commence this summer i.e., residential energy efficient measures at Atwood (replace the aging boiler allowing APU to take advantage of Alaska Housing Finance Corp (AHFC) funds available to APU for residential facilities at 1.5% (or less) up to $1.6 million (our current AHFC loan availability).

Phase Two would cover the remaining campus buildings and commences when APU obtains AIEDA loan funding.

Under this phasing, JCI agreed that-in the event AIEDA funds fail to materialize as expected-APU would have no obligation to proceed with the Phase Two work.

APU Trustees approved the Performance Contract at their May Board meeting. The estimated Greenhouse Gas Emissions savings are shown below.

CO2 sequestered by 921,576 tree seedlings grown for 10 years.

CO2 sequestered by 7,663 acres of pine or fir forest.

CO2 emissions from 6,872 passenger vehicles.

CO2 emissions from 83,585 barrels of oil consumed.

CO2 emissions from the energy of 3,059 homes for one year.

CO2 emissions from burning 188 coal railcars.

Download the APU Comprehensive Project – GHG Report