A New Curriculum: Energy Outsourcing Brings Cost and Energy Benefits

• By Robert N. Dickerman
• 01/01/02

Campuses of every size, in every state, must scrutinize their energy-management controls and determine the best way to manage energy resources. Energy management is much more than just monitoring the price of natural gas and electricity. As important as commodity prices are, there are many other energy-related issues that deserve attention -- facilities and maintenance staff, new equipment, capital improvements and leasing. In addition, there are critical risk elements, such as the potentially damaging failure of the energy infrastructure through fault or maintenance.

University administrators who take advantage of energy outsourcing can better focus on their core activities, secure in the knowledge that their energy needs are being managed professionally.

On the supply side, an energy services firm can help acquire energy supplies under terms that assure price stability and reliability. On the demand side, recent breakthroughs in energy information technology afford opportunities for far more efficiency in energy usage and consumption.

A complete outsourcing of energy management functions makes the most sense. This allows administrators to transfer the risk of today’s volatile energy marketplace and free up internal resources. Energy management firms can design, build, operate and maintain a university’s energy operation, often taking ownership of the entire infrastructure. Likewise, they may serve the entire university campus or a specific end-use, such as a central plant, offering such services as lighted, conditioned and powered space; process heat; motive power; and compressed air.

Action at Louisiana State University

As a landmark institution in the state of Louisiana, Louisiana State University (LSU) in Baton Rouge serves more than 34,000 faculty, staff and students. In 1989, university officials were preparing for a major expansion of the 650-acre main campus.

As part of that expansion, they wanted to overhaul the heating and cooling systems of more than 100 buildings throughout campus. By implementing major energy-efficiency retrofits through a performance contract, it was projected that more than $4.3 million annually could be saved in energy costs.

Through a period of 10 years, this amounts to more than $40 million, which could be used to pay for the entire cost of the project -- $18.7 million.

The project required devising a thermal cogeneration system using an aero-derivative gas turbine to generate steam and chilled water as efficiently as possible. Then, the campus’ 100 buildings were linked to this central plant by nearly five miles of underground piping. New equipment was installed, including a 5,000 hp, gas-fired turbine; 22 pumps and variable-speed drives; a campuswide energy management system connected by more than 2.5 miles of fiber optic cable; and an 8,000-ton cooling tower.

When completed, LSU realized annual savings of more than $4.6 million -- $300,000 more than the original projections. With its energy partner, LSU was able to invest in new equipment, rather than repair its aging equipment -- all without any out-of-pocket expense.

Improvements at Baylor

Administrators at Baylor University in Waco, Texas, partnered with an energy services manager to complete a program that has saved more than $1.5 million in annual energy costs. Baylor is the largest Baptist college in the United States, with more than 13,000 students.

In 1998, Baylor officials began looking for ways to improve the campus’ existing energy infrastructure, lower annual energy costs and prepare for future expansion. Following an extensive review of energy services companies, the university chose a firm to develop and implement a campuswide energy savings project. Prior to the project, the university reported an average annual energy bill of more than $4.8 million. It was projected that Baylor’s energy costs could be reduced by a third after implementing specific changes.

The work included 90 buildings and 3.7 million sq. ft. In less than two years, the central plant that controls the heating and cooling for approximately 70 percent of the campus was upgraded with a new cooling tower. In addition, more than 50,000 light fixtures were replaced with energy-efficient lighting, the existing co-generation unit was enhanced and a new energy management system was installed. The new system monitors the energy-related conditions and operations of all buildings and equipment throughout the campus.

These measures were implemented without any up-front costs by the university, and they will be paid by savings achieved through the next 10 years.

These are just a few examples of the tremendous opportunities that can be created by partnering with an energy services company. Timing is critical. As the nation’s energy marketplace continues to develop, university administrators have the opportunity to save precious dollars, especially when energy costs consume an increasingly larger portion of annual budgets than in years past.

Outsourcing Benefits

According to Re-build America, energy-efficiency improvements would impact 17 million students, faculty and staff and more than 280,000 buildings in 1,400 accredited universities and colleges throughout the country. In addition to energy savings, other benefits of more energy-efficient campuses include increased productivity, positive cash flow, healthier indoor air quality, improved lighting, more comfortable working and learning conditions, and a contribution to a cleaner environment.

By outsourcing to energy services experts, you can gain greater control of your energy operations without having to invest in the staff and resources. Most importantly, energy outsourcing converts liabilities of failing equipment into assets of a revitalized educational facility, despite budgetary restraints.

Not only the services themselves, but also even the terms at which these services are provided are flexible, as no two universities are likely to have the same view of a “total energy solution.” Similarly, the duration of contracts varies, but generally contract lengths range from 10 to 20 years.

A key benefit of outsourcing for some customers is cash infusion. This happens if assets are transferred from the customer to the provider. For example, equipment -- and even contracts, such as licenses -- do have a value, and they can be sold to the solutions provider, thus generating a cash payment.

The result of successful outsourcing is that universities can improve their control of operations, create a comfortable environment and devote more of their resources to improving the educational environment.

Robert N. Dickerman is president of Sempra Energy Solutions, a subsidiary of Sempra Energy, a San Diego-based energy services company. He can be reached at 619/696-4671 or .