eBook - September 2014
Schneider Electric: Energy and Sustainability Services
OPERATIONAL AND ENERGY EFFICIENCY
for Water and Wastewater Utilities A comprehensive, integrated approach through performance contracting
Cit
yo f Suc Deni ces son s S , Te tor xas y
™
1
Schneider Electric: Energy and Sustainability Services
Executive Summary Countless municipalities and utilities are faced with aging water and wastewater facilities. Addressing these issues is expected to cost $2 trillion over the next 25 years. Budget shortfalls, shrinking revenues and staff reductions make it difficult to tackle inefficient infrastructure and escalating regulatory demands. As political and public pressure mounts for utilities to operate more efficiently and become more sustainable, the gap between financial needs and what rates and fees will cover is growing. Rather than turn to traditional designbid-build solutions, more and more municipalities are choosing performance contracting, which offers a way to fund costly upgrades and improve operational efficiency — all with a guarantee that transfers risk from the utility to an energy services company, such as Schneider Electric. However, understanding performance contracting, as well as choosing the right partner, are key to achieving desired results.
2
Schneider Electric: Energy and Sustainability Services
City of Denison, Texas The way Shane White, project development manager at Schneider Electric sees it, the water and wastewater treatment facilities in Denison, Texas, were like a 25-year-old car running at top speed — with the brakes going out. Due to long, delayed infrastructure improvements, the plant’s slide gates were no longer working. That meant the city had to run the facility at top capacity, as if it were treating 6 million gallons of water, even though only about 2 million gallons were flowing through it daily. “That’s like saying your car is capable of doing 100 mph, but only needs to go 33 mph,” says White, part of Schneider Electric’s Energy and Sustainability Services. “But because the system had fallen out of repair, it had to run at 100 mph constantly.”
“Schneider Electric worked closely with us to identify a cost-effective way to make upgrades in our municipal buildings through the creative and low-risk funding mechanism of an energy savings performance contract.”
Jared Johnson Mayor, City of Denison
And since the city didn’t have any redundant capacity — not to mention the money to address the issue — fixing the problem only seemed more impossible. “If you only have one car, you can’t work on it while you’re driving it — and they were driving it all the time,” White says going back to the auto metaphor. “Once those slide gates fail, it’s like the brakes failing on your car while you’re already at top speed. You don’t have an easy way to stop without hitting something.” Fortunately, White and the team at Schneider Electric were able to head off that disaster, fix the ailing plant — and save the City of Denison significant money in efficiency upgrades — all with limited financial risk on the part of the city. How did Schneider Electric help enable the client’s immediate and long-term vision? Through an effective funding mechanism called performance contracting. Aware of performance contracting as a way to fund necessary renovations through energy savings, Denison’s decision makers began talking with Schneider Electric about the city’s current and future needs. Challenges on this project included taking the wastewater plant offline for a brief period, installing new equipment and systems in some facilities, and renovating other facilities throughout the city — all while keeping Denison open for business. Undaunted by these challenges, Schneider Electric got right to work.
3
Schneider Electric: Energy and Sustainability Services
Going Beyond Traditional Equipment Upgrades Typically, new and more efficient equipment and automation systems generate utility savings while maximizing operational efficiency. To reap those benefits, Schneider Electric worked closely with city officials and their preferred water and wastewater design engineer to develop a project that would address major needs city wide and also focus on more efficient systems and operations.
$340k saved annually for the City of Denison.
The first order of business addressed issues at the wastewater treatment plant. Schneider Electric replaced failed control gates and made various other improvements to the aeration basin and aerobic digester equipment. Wastewater undergoes biological treatment in the aeration basin; biodegradable waste undergoes treatment in the aerobic digester. In addition to exchanging a coarse bubble diffuser grid with new, fine bubble diffuser grid, Schneider Electric replaced three 250 hp constant-speed aeration blowers and four 105 hp maintenance prone pumps with smaller, more efficient equipment. Variable-flow blowers optimize control and reduce the blow load from 500 hp to 300 hp in the aeration basin. Facilities ranging from City Hall, fire and police stations to the library, communications center, and service center all received energy efficiency upgrades as well.
To improve comfort levels and enhance operating efficiency in various facilities, Schneider Electric installed occupancy sensors that turn off lights in unoccupied rooms, and exchanged inefficient T12 lamps and magnetic ballasts with more energy-efficient T8 bulbs and electronic ballasts. Schneider Electric also replaced rooftop units and split systems at various city buildings. Installation of a new citywide energy management system (EMS) enables more energy- and cost-efficient operations. The new EMS also provides centralized control, flexible scheduling, and remote access. Schneider Electric also brought additional benefits to the attention of Denison officials and assisted them in applying for rebates to help offset the cost of the improvements.
4
Schneider Electric: Energy and Sustainability Services
The Bottom Line Thanks to the performance contract, the city only had to pay for approximately half of the improvements. The rest of the funds came from savings Schneider Electric found through utility conservation measures such as pump, system and aeration improvements, which not only headed off the utility crash, but also saved the city $340,000 annually — 20 percent more than projected — thanks in part to almost $200,000 in a one-time rebate Schneider Electric secured. “That’s a very big number for the City of Denison,” says Robert Hanna, city manager. “This first project was an astounding success. Job well done!” But for every City of Denison, countless other municipalities are still faced with aging water and wastewater facilities that seem impossible to repair or renovate. While today’s cities and counties face numerous challenges, few operations are confronted with tougher requirements or more demanding circumstances than water and wastewater utilities. Budget shortfalls, shrinking revenues and staff reductions make it difficult to tackle inefficient infrastructure and escalating regulatory demands. As political and public pressure mounts for utilities to become more sustainable, the gap widens between financial needs and what rates and fees will cover. Addressing water and sewer infrastructure needs is the most important issue currently facing the water industry, and many communities need to significantly increase their levels of investment to address aging water and wastewater systems in order to sustain public health and safety, and to meet the next generation of environmental standards according to 2014 State of the Water Industry Report. In fact, the report warns that United States utilities will need to spend a whopping $2 trillion over the next 25 years to meet user demand, life-cycle replacement and regulatory pressures. Rather than turn to traditional construction methods, more and more municipalities like Denison are choosing performance contracting, which offers a way to fund those costly upgrades, improve performance and efficiency — all with a guarantee that transfers financial risk from the utility to an energy services company, such as Schneider Electric. However, understanding performance contracting, as well as choosing the right partner, are key to a successful project.
City of Kirksville, Missouri saves nearly
$350,000 annually
The Challenge: The city historically had problems with water loss within its antiquated water and wastewater system. The citywide water metering system comprised a broad assortment of meters that no longer provided accurate information. The Solution: Working with the city, Schneider Electric replaced more than 7,000 aging water meters with more accurate automated equipment and renovated the water system. Schneider Electric also put a Revenue Protection Plan in place, which monitors monthly billing data to identify and report alarming trends, and help the city prioritize water meter and distribution maintenance. The Result: Revenue and savings generated allowed the city to move forward with a comprehensive energy savings performance contract with Schneider Electric that included $4.7 million in renovations. The project is providing the city with nearly $350,000 in annual savings, eliminating the need to raise taxpayer rates and enhancing the city’s budgeting stewardship.
Learn more at
www.enable.schneider-electric.com
...more and more municipalities like Denison are choosing performance contracting, which offers a way to fund those costly upgrades and improve performance and efficiency... 5
Schneider Electric: Energy and Sustainability Services
Performance Contracting Explained
CREATIVE SOLUTIONS
FINANCING
CAPITAL IMPROVEMENTS & IMPROVED OPERATIONS
6
Schneider Electric: Energy and Sustainability Services
So what exactly is performance contracting and how can it benefit utilities? Performance contracting was developed in the early 1980s as an alternate project funding and delivery mechanism for public agencies to make improvements to their infrastructure. Today, performance contracting is a turnkey solution that integrates scope development, design, construction, start up and performance verification services. By working with energy service companies (ESCOs) that specialize in the development and application of the programs, utilities are able to leverage the economic benefits of process improvements and efficiency measures to make much-needed improvements to their water and wastewater facilities without the need for additional capital investment. Instead, utilities can reallocate utility and operatingexpense savings to pay for targeted improvements. “People are scrutinizing a lot more what cities are spending their money on,” says Jordan Lerner, regional director for Schneider Electric’s Energy and Sustainability Services. “Performance contracting offers a lower risk way to spend that money. There is a guarantee. There is accountability.” That’s because program improvements generate alternative sources of revenue through energy and operational savings, maximize energy efficiency, decrease life-cycle costs, and improve the utility’s ability to meet future regulatory mandates and operational demands. Best of all, these economic benefits are guaranteed by the ESCO and are used to fund the program’s capital requirements. In the event of a savings or revenue shortfall, the ESCO is required to make restitution. As such, the performance risk is transferred from the utility to the ESCO. “If you’re going to spend a large amount of money to make improvements to your city, wouldn’t it be great if you could do that in a way that mitigates your risk by providing a real guarantee?” asks Lerner, adding, “That’s what we do.”
City of Riverbank, California to save
75%
of their energy spend The Challenge: The city’s existing facultative lagoon system would not comply with anticipated future treatment standards for California. Upgrading the existing system through a conventional design-bid-build process would have required an investment of $9 million to $12 million. The Solution: Schneider Electric worked with the city to develop a turnkey retrofit solution that converted existing lagoons into activated sludge extended aeration treatment, which utilitzes the Parkson Corporation Biolac patented technology. The Result: Without impacting service, Schneider Electric will implement the city’s self-funded system upgrade, which is guaranteed to save the city 75% of their energy spend and $2 million over the life of the project. The project continues the greening of the city initiative, saving more the 2.5M kWh annually — the equivalent of taking 372 cars off the road, or powering 224 homes.
Learn more at
www.enable.schneider-electric.com
“Performance contracting offers a lower risk way to spend that money. There is a guarantee. There is accountability.”
7
Schneider Electric: Energy and Sustainability Services
Performance Contracting vs. Traditional Procurement
Traditional Procurement
Performance Contracting
For more than 50 years, most municipal and public agencies have done infrastructure projects a traditional way — the designbid-build (DBB) model of procuring and implementing capital projects. This firstcost only model is cumbersome and filled with numerous disadvantages, proving it to be an ill-suited delivery system for complex projects. This often leads to scope, cost and schedule creep, making it more expensive to the utility owner and typically ending in missed expectations.. In addition, DBB does not transfer risk from the owner in the same way that performance contracting does.
In contrast, performance contracting allows for a performance- or outcome-based approach with carefully prescribed, longterm operational goals. The time from start of development to completed installation is significantly shorter and simpler, as the projects are delivered through a single source of responsibility with robust performance guarantees that are measured and verified annually. Additionally, the performance contracting delivery method is dramatically less expensive than traditional procurement methods over the life of the improvements.
Accelerating Trends These trends have disrupted the very notion of energy management and have pushed energy managers to reinvent themselves in an era when many believe asking for help is tantamount to losing their jobs. In reality, the job of an energy manager has changed dramatically in the last several years and the standard training has not prepared them to handle the complexity of the new energy market.
What about legislation? Government officials have recognized the effectiveness of performance contracting, and are making it easier for utilities to use the funding mechanism. In fact, 48 states have enacted performance contracting legislation. However, each of these laws comes with its own nuances that allow certain activities to occur or not, so each must be evaluated on a case-by-case basis. Additionally, more and more funding is becoming available for public water and wastewater improvement projects — if you know where to look for it, says Andrew Apgar, business development executive at Schneider Electric’s Energy and Sustainability Services. “We’re starting to see some federal and state programs that are making low interest loans and
8
Schneider Electric: Energy and Sustainability Services
Performance Contracting for the Water Sector Client Success Story
Finding those resources is key, because water and wastewater infrastructure is often the largest single capital investment and energy expense of a city or county. Its sustained and reliable performance is critical to quality of life and continued economic development and growth. Well-maintained water and wastewater infrastructure is critical to a utility’s ability to properly and efficiently manage water use, water quality, and water resources. The active maintenance of infrastructure requires significant capital investment, and today’s municipalities face a sizable structural deficit where capital needs outpace available funding. At the same time, energy costs continue to rise, while regulatory and sustainability pressures mount. “We need to take advantage of technology and new solutions to reduce the cost of operations and protect the environment,” Apgar says. Without action, declining infrastructure will impact a state’s water and wastewater systems serving millions of U.S. citizens across the nation.
However, utilities do have options, and a performance contracting program that is integrated into a comprehensive strategy may very well be the answer. With performance contracting, cities and counties can achieve operational savings of up to 60 percent, which offers a tremendous opportunity for them to monetize savings, implement infrastructure upgrades expeditiously, and transfer equitable project cost, performance, and delivery risk to a financially sound and proven ESCO partner. A comprehensive, integrated strategy implemented through performance contracting offers an attractive option to the utility owner to leverage savings, implement infrastructure improvements, address non-revenue water, and drive maximum benefits from an existing capital investment that may or may not be performing to its highest potential. “Whether your mission is environmental sustainability or financial responsibility, there’s a smart way to do this,” Apgar says.
34% of utilities think they will struggle to cover the full cost of service in the future.*
70% of utilities feel the general public has a poor or very poor understanding of water systems and service.* *AWWA 2014 State of the Water Industry Report
9
Schneider Electric: Energy and Sustainability Services
Opportunities in Water and Wastewater Infrastructure
Being smart, starts with knowing where the most energy is consumed — and how to reduce those costs. In wastewater treatment, biological reactors are most energy intensive and constitute up to 60 percent of the annual spend at the facility, followed by collection system pumping. With energy costs escalating annually, municipal owners are focusing on driving efficiency and implementing solutions that result in favorable outcomes.
Performance Contracting Opportunities Pump Efficiency.
In water utilities, pumping consumes most of the energy. Performance enhancement solutions for water utilities are typically limited to high service pumping and mainly involve improved automation and controls that allow plants to be managed in a real-time mode.
Cogeneration.
Of late, larger plants with anaerobic digesters have recognized the value of capturing and enhancing methane gas production to power cogeneration units providing a renewable source of power.. Achieving energy neutrality is gaining momentum, and most municipal owners are evaluating or implementing strategies to offset energy costs by generating power from within the plant. 10
Schneider Electric: Energy and Sustainability Services
Dynamic Pump Station Optimization.
Wastewater pumping stations, commonly referred to as lift stations, are usually operated by rudimentary controls and operator discretion. Dynamic pump station optimization solutions will result in favorable economic outcomes in specific energy savings and life-cycle extension of the operating systems. Optimum operational efficiency is achieved based on demand and system pressures, sequencing of pumps, pump operations within the preferred operating ranges or ‘sweet spot’, and leveraging the maximum use of variable frequency drives. Dynamic pump optimization allows for extended pump life and elimination of transients, thereby limiting pipe bursts due to water hammer, tracking pump health on a real-time basis, and saving energy by minimizing specific energy consumption.
Technology Process Improvements.
Comprehensive integrated strategies and solutions dictate a complete and thorough understanding of the treatment technologies, and their collective impact from one process to another, as the wastewater flows through the plant. Detailed process knowledge and understanding allows a focused, forensic assessment of plant operations, and leads to customized solutions that offer the opportunity to extract the maximum output from the process and the plant as a whole.
Advanced Metering Infrastructure.
The percentage of non-revenue water (NRW) is a key area of concern to municipal utility owners. Non-revenue water is defined by AWWA as the “sum of unbilled authorized consumption (water for firefighting, flushing, etc.), apparent losses (customer meter inaccuracies, unauthorized consumption, and systematic data handling errors) and real losses (system leakage and storage tank overflows).” More simply put, NRW is water that has been distributed, but is not reflected in any customer billings. Advanced metering infrastructure (AMI) and automated meter reading (AMR) solutions, solve this problem with appropriate meters for all flow conditions and applications, coupled with leak detection. These improvements result in timely revenue enhancements and real and apparent water loss correction.
City of Clute, Texas to save
$300,000 in annual operational and energy costs
The Challenge: The growing city needed to rebuild its wastewater treatment plant and replace the old water meters — responsible for more than $250,000 annually in lost revenue. The Solution: Schneider Electric replaced the old water meters with new advanced metering infrastructure (AMI), allowing the city to maximize its water revenue. It also rebuilt the wastewater treatment plant using the latest technology to create more efficient blowers and piping optimized to meet changing plant demands. The Result: The combined improvements are projected to save the city 57 percent in annual energy costs. The plant will also meet the Texas Commission on Environmental Quality (TCEQ) permit limits. As part of a larger $5.7 million energy savings performance contract, the city is expected to save $300,000 in annual operational and energy costs.
Learn more at
www.enable.schneider-electric.com
11
Schneider Electric: Energy and Sustainability Services
Selecting the Right Partner While performance contracting is an excellent procurement and delivery vehicle for utilities to use selecting the right partner — the right ESCO — is critical. ESCOs’ traditional performance contracting applications in the water sector concentrated solely on energy efficiency and included infrastructure replacements, like pumps, motors, and blowers. This rudimentary approach often falls short as very little attention is focused on why the utility attained an inefficient operational status in the first place.
Over time, utilities and plants have undergone myriad changes and expansions, often delivered by the design engineer using applicable state design thresholds and favoring peak flow estimates. These changes can result in the cascading effect of conservative design, selection of oversized equipment, and incorporation of inefficiencies and operational challenges. While traditional ESCO solutions are easily implemented and have quick paybacks, they often prove themselves to be little more than short-term fixes that can adversely impact the long-term operations of the facility.
“These are complex processes and systems. They’re all interrelated,” says Zia Qureshi, national manager for Schneider Electric’s Energy and Sustainability Services. “If you don’t have a company that’s looking to influence the entire treatment process, they’re not taking full advantage of everything that can be done to achieve efficiency and savings.” Performance guarantees can be leveraged by municipal governments and utilities, which can develop a single (savings) or hybrid funding strategy that serves the best interests of the owner with the least impact to an enterprise fund and ratepayers — a true win-win proposition. 12
Schneider Electric: Energy and Sustainability Services
These elements in Figure 1. are applied to the entirety of the utility operations or treatment processes, and solutions are developed that complement each facet of utility operations, as opposed to a singular upgrade or enhancement. The aggregated impact of this approach generally results in the development of solutions that facilitate greater savings and enhanced performance.
“When you’re looking for a performance contracting partner, you want someone with the ability to deliver a comprehensive solution. Schneider Electric has the depth and breadth cities are looking for in a partner.”
Disparate vendors focusing on their own specification may compete, not align. But with a single source vendor, the efficiency is compounded to deliver the optimal solution. Schneider Electric’s ability to tap into its deep resources helped achieve success for Denison and other cities. “If the local folks we were working with at the moment did not appear to have the experience or knowledge needed for a specific problem, they very easily and quickly were able to get needed help through other expertise within the company,” Hanna recalls. Schneider Electric’s expertise shines through in other ways as well: • Ability to directly source equipment • Deep understanding of performance contracting • Proven know-how in finding the most inexpensive funding sources, including rebates • Experience and expertise in energy efficiency upgrades • In-depth training for on-site personnel • Public image outreach and education
Performance Enhancement Procurement Efficiency
Operational
A Efficiency Comprehensive Integrated solution
Energy Efficiency
Regulatory Compliance Sustainability and Public Image
Figure 1. This integrated, performance-based approach addresses six key elements
But Schneider Electric’s strongest asset is its ability to meet clients where they are, understand their needs — and develop a plan that meets, and even exceeds, those needs.
“Everything we do is geared toward the client and aligning their operations with their vision,” Qureshi says. “We want to help you optimize the systems you’re currently operating, so you can be good financial and environmental stewards.” 13
Andrew Apgar Business Development Executive Andrew is a Florida native and has more than 18 years of experience working with cities, counties and utilities to develop solutions that renew infrastructure, reduce operating costs, increase system reliability and enhance sustainability.
Jordan Lerner Regional Director Jordan has more than 20 years of experience in the energy efficiency, engineering design and construction industries. He leads teams in the Western and Midwestern US to develop, design, build and guarantee sustainable operational and energy performance.
Zia Qureshi National Business Development Director Zia brings over four decades of engineering design and water and wastewater expertise to Schneider Electric. Responsible for the company’s water market nationally, Zia helps develop performance contracting projects for customers to achieve capital projects implementation paid for through savings.
Shane White Project Development Manager, PE, CEM, PMP In his 14 years with Schneider Electric, Shane has led the development of 70-plus projects, exceeding $190 million in total value. He led the City of Denison Phases 1 and 2 projects, which included a complete renovation of the Paw Paw Wastewater Treatment Plant.
Put Hidden Revenues to Work to Enable your Ultimate Vision Our industry experts use the latest energy saving practices and technologies to upgrade aging equipment, reduce maintenance expenses, lower utility bills, and improve building performance – often reducing energy costs by up to 30 percent. Together, we can achieve substantial energy savings and convert those savings into assets such as up-to-date facilities, modern technology and compelling public programs that demonstrate financial stewardship and environmental responsibility. Our Performance Contracting Record •
550+ performance contracts underway
•
$1 billion in total managed savings
•
Unmatched knowledge of and relationships with financial resources
•
Zero litigation in 20+ years of projects
About Schneider Electric •
140,000+ employees focused on energy and sustainability
•
Offices in more than 100 countries
•
Award-winning Industry Steward
•
Energy expertise from supply to demand
•
#13 on the 2013 Global 100 ranking of Most Sustainable Companies
Learn more at
www.enable.schneider-electric.com
14
Schneider Electric Industries SAS 1650 West Crosby Road Carrollton, TX 75006 www.enable.schneider-electric.com Doc # 3000HO1401 © 2014 Schneider Electric. All Rights Reserved. Schneider Electric and Make the most of your energy are trademarks owned by Schneider Electric Industries SAS or its affiliated companies. All other trademarks are property of their respective owners.