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Energy Savings Project Update

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BWS Launches Energy Savings Performance Contract

MARCH 23, 2016 – The Honolulu Board of Water Supply (BWS) has entered into a $33 million Energy Savings Performance Contract (ESPC) with NORESCO LLC that allows the water agency to implement comprehensive energy efficiency, renewable energy generation, and operational improvements which guarantee enough energy savings over the next 20 years to pay for the contract.

The BWS is the first county water utility in Hawaii to execute an ESPC, an alternative project delivery approach that allows a government agency to enter into a long-term partnership with an energy service company (ESCO) to facilitate and accelerate energy conservation measures, or ECMs, to generate enough cost savings to cover project costs over the term of the contract. ECMs are determined and designed by the ESCO, after it conducts a comprehensive energy audit on the agency, to meet the agency's specific energy savings needs.

"The ESPC will help the BWS to proactively address rising operating costs by implementing ECMs faster to achieve energy efficiencies and develop renewable energy to directly support the State of Hawaii's goal to achieve 100 percent renewable energy by 2045," said BWS Manager and Chief Engineer Ernest Lau. "Also, under the terms of this contract, NORESCO guarantees the BWS energy savings from the installation of recommended ECMs. If the savings are not realized, then NORESCO must reimburse the difference to the BWS."

ECMs to be installed as part of the contract that will reduce the BWS's annual electrical usage by about 8 million kilowatt hours (kWh), or 9 percent of the BWS’s total purchased electricity, include:

• Photovoltaic systems at 38 sites with facility upgrades and renovations (5,265,850 kWh savings);
• Energy efficient pumps in four major production wells (1,348,979 kWh savings);
• Energy efficient lighting at BWS facilities (717,027 kWh savings); and
• Energy efficient air conditioning upgrades and controls (616,518 kWh savings).

The $33 million project cost is being financed by a loan from the Drinking Water State Revolving Fund, managed by the State of Hawaii Department of Health. The loan will be paid back by the approximately $3.3 million annual savings in energy costs over 17 years after the implementation of various ECMs. Over a 20-year period, the BWS intends to generate more than $56 million in savings through avoided electrical costs. Any cost savings from this project will be reinvested in additional energy-saving projects and will not affect water rates.
Additionally the implementation of the ESPC puts the BWS in alignment with Bill 64, signed by Honolulu Mayor Kirk Caldwell in November 2015. Bill 64 facilitates the construction, installation, and operation of solar photovoltaic systems at City and County of Honolulu buildings.

Throughout the duration of this project the BWS will continue to look at renewable energy opportunities to further manage energy use and control operating costs. The State Department of Health, State Department of Business, Economic Development and Tourism and the Hawaiian Electric Company provided valuable assistance in the development of this project.

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Frequently Asked Questions

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What is an Energy Savings Performance Contract (ESPC)?

The Board of Water Supply (BWS) has entered into a 20-year, $33 million ESPC with NORESCO LLC. An ESPC is an innovative contract method for government agencies to achieve energy savings by allowing for a long-term partnership with an energy service company (ESCO) to facilitate and accelerate energy conservation measures, or ECMs. The purpose of ECMs are to generate enough cost savings to cover project costs over the term of the contract. The ECMs were developed by NORESCO LLC., after it conducted a comprehensive energy audit to identify energy saving opportunities for the BWS. The BWS is the first county water utility in Hawaii to execute an ESPC.

What are the benefits to the BWS?

The benefits to the BWS are:

• The ESPC will help the BWS better manage rising operating costs.
• Under the terms of the contract, NORESCO guarantees the BWS energy savings from the installation of the EMCs. If the savings are not realized, then NORESCO must reimburse the difference between the guaranteed amount and the verified amount to the BWS.
• Additional benefits of the ESPC include putting the BWS in alignment with Bill 64, signed by Honolulu Mayor Kirk Caldwell in November 2015. Bill 64 facilitates the construction, installation, and operation of solar photovoltaic systems at City and County of Honolulu buildings.
• The ESPC also supports the State’s goal to achieve 100 percent renewable energy by 2045.

How is the ESPC going to be financed?

The cost for the $33 million ESPC is being financed by a low-interest loan from the Drinking Water State Revolving Fund, managed by the State of Hawaii Department of Health. The loan will be paid back by the approximately $3.3 million annual savings in energy costs after the implementation of various ECMs. The interest rate for the loan is one percent.

What is the process that the BWS followed for the ESPC?

The BWS followed the process outlined in the State Procurement Office Vendor List Contract No. 12-11, which can be found on the State Procurement Office website.

How much energy savings is expected?

NORESCO guarantees a reduction of the BWS’s annual electrical usage by about 8 million kilowatt hours (kWh), or 9 percent of the BWS’s total purchased electricity through the installation of the following ECMs:

• Photovoltaic systems at 38 sites with facility upgrades and renovations (5,265,850 kWh savings);
• Energy efficient pumps in four major production wells (1,348,979 kWh savings);
• Energy efficient lighting at BWS facilities (717,027 kWh savings); and
• Energy efficient air conditioning upgrades and controls (661,518 kWh savings).

Will the ESPC affect water rates?

Any costs savings from the ESPC will be reinvested in additional energy-savings projects and will not affect water rates. Throughout the duration of the current ESPC, the BWS will continue to look at renewable energy opportunities to further manage energy use and control operating costs.

Are other government agencies using ESPCs?

ESPCs are currently being used by the Hawaii State Department of Accounting and General Services, Hawaii State Department of Transportation, Hawaii State Department of Public Safety, and the City Department of Environmental Services, to name a few.

When will the ECMs be installed?

The installation of the ECMs are expected to begin later this calendar year, construction will last for approximately three years.

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