Energy Savings through Performance Contracting at Wastewater Treatment Plants

The cost of energy has become an increasing concern to water and wastewater utilities. Economic drivers, combined with general industry concerns about energy supply reliability, climate change, and sustainability have encouraged many utilities to consider alternative project delivery methods to finance desired energy efficiency and renewable energy projects. One such alternative delivery method is the Energy Performance Contract.Energy performance contracting has been applied most actively by Energy Service Companies (ESCOs) to implement building efficiency improvements at institutional facilities: universities, schools, hospitals, and government buildings. It has been only within the past five years that municipal water and wastewater utilities began using this alternative delivery method to implement energy efficiency improvements at their treatment plants.An Energy Performance Contract is a contractual arrangement with an ESCO that allows a wastewater utility to finance energy-saving capital improvements – usually over a 10 to15 year term — with a guarantee from the ESCO that the cost savings from energy efficiency improvements will meet or exceed annual payments covering all activity costs related to the project or bundle of projects. As a result, the capital projects can be financed through the wastewater utility's operations and maintenance budget, and in some states, outside the utility's debt limit. The guarantee provided by the ESCO through the Energy Performance Contract allows for greater flexibility in financing method, reduced risk to the wastewater utility, and potentially reduced financing costs. It is primarily a means for the wastewater utility to help secure financing, fund projects without up-front monies from capital budgets, and to implement energy-saving capital projects at reduced risk.ESCOs have a long and proven track record of developing and delivering comprehensive energy retrofit projects in buildings and institutional facilities. Their collective experience in the municipal wastewater industry is less well-developed, but it is expanding as wastewater utilities pursue energy cost reduction, sustainable energy, and/or climate change mitigation initiatives in an economic and regulatory environment that has become increasingly favorable to non-traditional project delivery methods in recent years. Upper Occoquan Sanitation Authority is only one of a handful of U.S. municipal wastewater utilities that have initiated energy performance contracts to date.The paper will help the audience to better understand the energy performance contracting process, its advantages and disadvantages, and to benefit from the lessons learned at UOSA, as well as other relevant projects.