A new tool for state’s energy reduction drive

A second critical piece of the process to help agencies reduce energy use 10 percent by January, as mandated in the 2011 energy law, is moving into place. The Department of Energy and Environmental Protection today unveils its performance contract program — also required in that law.

Performance contracts finance energy efficiency projects with the money those projects will save on energy use. Theoretically they are guaranteed. But to ensure those guarantees are borne out, they are complicated and time-consuming to prepare. As a result, while they have existed for years and are popular in other parts of the country, Connecticut has been slow to adopt them.

The point of last year’s legislation was to create a template for performance contracts, support services, financial information and pre-approvals for the energy services contractors that handle performance contract work. That way state agencies wouldn’t have to re-create the wheel each time they decided to use a performance contract, or figure out which energy service companies, as the contractors are called, are most reputable.

“If not communicated right, this can be very scary and confusing,” said Alex Kragie, the special assistant to DEEP Commissioner Dan Esty who has overseen the 10 percent energy reduction efforts. “We’ve been spending hundreds of hours figuring out how to rip away as many sources of confusion as is humanely possible.”

Equally important, the performance contract program is being made available to municipalities. Though they are not under a mandate, as the agencies are, to reduce energy use, with aging buildings, schools and other facilities in need of energy efficiency retrofits, performance contracts could help them save money. But they have even fewer resources and legal expertise for doing this on their own.

“The lack of understanding and confusing nature of performance contracts is the primary reason more of this work has not occurred,” said Jessie Stratton, DEEP’s director of policy development. “It’s really an insurance policy for municipalities and state agencies.”

What has some concerned, though, is making municipalities aware that this is even out there. Kragie said many cities and towns were notified during the program’s development, and some have been waiting for the program to be put in place. But he said, there will be more “road shows” to further spread the word.

“DEEP is really going to have to put out an incredible outreach program,” said Chris Halpin, of Celtic Energy, a so-called third-party firm often hired to double-check that energy service companies handle performance contracts properly.

“The state is going to have to very overtly and robustly proclaim that this is a fantastic idea. Otherwise we’ll be where we are now with not a lot going on.”

Halpin called the program a “giant step forward” even though it took more than a year to pull together. But he also said he would have liked consultants like Celtic to have been included as part of the program.

Roger Smith of the environmental group Clean Water Action has been following and working with the performance contract development process for several years. He agreed the proof will be in the marketing.

“One, you have to have a program to market,” he said. “Two, you need to get started on some programs and documents to explain it.

“Step three is really getting it out there.”

Performance contracts to finance energy efficiency joins the first part of the effort to reduce state agency energy use, under way since October. Known as Lead By Example, it has been using bond money to pay for energy efficiency upgrades. With a tight 16-month deadline, bonding was seen as a faster — though more costly — way to get the work going while the performance contract details were worked out.

So far under Lead By Example, $10 million has been committed to 41 different projects, with an average six-year payback on the investments. They run the gamut from new heating, ventilation and air conditioning systems for buildings, to upgraded boilers, more efficient lighting and automated energy management systems. Among the projects, the Department of Transportation is installing lighting retrofits in all the commuter parking lots it runs.

As for that January 10 percent reduction deadline, Kragie is a little circumspect about whether the state will hit it. “We’re making good progress and substantial progress,” he said. “We’re going to do everything we can and have done everything we can. We feel good about our chances.”