successful public private partnerships

Successful Public Private Partnerships Lesson Learned; 3rd Party Financing, Design, Construction, Operations & Maintenance of Combined Heat & Power Plant and Campus Wide Distribution Utilities.

If I knew then… experience of a former energy services performance contractor

Big 10 and Friends 19/21/2015

If I knew then what I know nowConfession No. 1

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For Every Project that was successful there are 5 that were not!

Big 10 and Friends

DC Water Blue Plains AWTP Cogen

British Embassy Chancellery Cogen

Atlantic City Convention Center Solar

Bethlehem Landfill Gas

Eastern Landfill Gas

NIH Cogeneration Project

2012 Design, installation, commissioning and operations & maintenance of the DC Water Cogeneration project at the Blue Plains Advanced Water Treatment Plant.

Construction: $ 83,000,000 O&M: $ 83,000,000

2011 Design, construction and commissioning of a cogeneration plant at the Connectiv Thermal Central Utility plant in Atlantic City, New Jersey. Project Value: $ 14,000,000

2010 Design, installation, commissioning and operations & maintenance of the British Embassy Cogeneration Project. The project consisted of a gas fired 250 kW Man E 2842 E312 IC engine, a complete renovation of the embassy central plant

Project Value: $ 9,500,000

2009 2.5 MW solar power installation on the roof of the Atlantic City Convention Center,

2008 Permitting, design, construction and commissioning of a 5 MW Solar Taurus 60 combustion turbine for the landfill gas to energy project at the Bethlehem Landfill in Bethlehem,Pennsylvania.

2006 Permitting, design, construction and commissioning of 3 1-MW Waukesha engines for landfill gas to energy project at Eastern Landfill in Baltimore, Maryland.

2007 The design, installation and commissioning, and maintenance of the North Carolina Department of Administration Thermal Energy Storage System. Project Value: $ 22,000,000

2001 to 2005 National Institutes of Health Cogeneration System. (23 MW Electric/ 180,000 pph Steam) The project is a design/build/operate performance contract with 10-year O&M Project Value: $ 38,000,000.

9/21/2015

Campus

• Campus– 12 million square feet– Infrastructure 50 + Years (Steam, Electric)– 300 + Buildings– Adding New Facilities (LEED Silver)

• Physical Sciences Complex -200,000 SF (2014)• Prince Fredrick Hall-200,000 SF (2014)• Edward St. John (2016)• A. James Clark Hall (2016)• Iribe Computer Sciences

• Reduce electricity use 20% by 2020

• Carbon neutral new construction and renovations • Eliminate carbon emissions from purchased electricity: 2020

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President’s Energy Initiatives

Big 10 and Friends9/21/2015

No Donor's Plaque for Utilities

PPP Background at UMCP

• Private Public Partnership began 1999

• Nominal 27 MW Cogeneration Plant

• 2 GE PGT 10 GTs, No longer supported by OEM

• Existing Plant 1930s

• Campus Steam Distribution System (50 years)

• Campus 13.8 kV Electrical Distribution System

• 10,000 Chilled Water Plant and distribution to buildings

• Financing: Maryland Economic Develop Corporation, Tax Free Bonds

• Off Balance Sheet through MEDCO operated by Suez GDF

• Contract Expires 2019

4Big 10 and Friends9/21/2015

Cogeneration System at UMCP


Project Drivers

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Prerequisites

Big 10 and Friends

Successful 3 rd Party

Project

Scope

Energy Savings

RiskSchedule

Performance

9/21/2015

Lessons Learned

• Setting expectations.

• Understand the remaining life and existing conditions.

• Hire a competent 3rd party to asses the physical conditions of your assets.

• Understanding the underlying economics.

• Developing the business case.

• Constructing a program with a manageable risk.

• Ensuring that the facility is actively involved in managing the asset.

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Prerequisites


If I knew then what I know nowConfession No. 2

I was a lead on the team that lost this project in 1999, if I only knew then what I know now!


Expectations

• Realistic timeframe for working in your culture. (Schedule)

• Making sure that all stake holders are working together.

• Having a team ready to manage the project from cradle to grave (Design through Operations).

• This will not solve all of our lack of capital, deferred maintenance and energy security issues?

• Is a decision maker a project champion?

• There is no such thing as a free lunch.

• If it sounds too good to be true it is.


Shared Goals

Campus Community

Stakeholders

Commitment of Resources

Champions

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Campus Community• Rebates to Colleges for Conservation• Sponsor Energy Awareness

Competition amongst students and colleges

Commitment of Resources• Monetize energy savings and

carbon reductions• Take advantage of utility rebates• Commit capital funding when

justified by Life Cycle Cost Savings and simple payback

• Use grants and tax free financing

Champions• Commitment of resources• Public support/Walk the talk• Accountability• Provide personnel

Stakeholders• Coordinate across groups• Maintain existing facility

systems• Commit dedicated personnel

One Group or Organization Cannot Be Successful!


Understanding the Economics of a Long Term Agreement

• 3 rd Party Agreements. – Financial–Operations and Maintenance

• How does the local energy market work? (Import/Export)

• Understanding the “spark spread” and how the asset will fit into the overall energy procurement overall strategy?

• What can you monetize?• How much deferred maintenance is part the facility?• Is the goal economic or energy security?• How much value is left at the end of the contract.

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Structure the Program to Meet the Financial Goals


Develop Program with Manageable Risk

• Do not pass risk to the 3rd party that can’t be quantified or controlled– Examples

• Performance?

• Schedule?

• Unknown conditions?

• Deferred Maintenance Backlog?

• Energy Security?

• Regulatory ?

– Air Permits

– Utility Rates/Interconnection

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RISK


Deferred Maintenance

Challenge

• Ensure that a transition plan is in place prior to 2019 when the MEDCO contract expires.

• Fund as much performance improvement and utility distribution system replacements that are near or at the end of their useful life with savings.


Plan

• Explore renewal of public private partnership with MEDCO under the existing contract for additional 20 years (Phase 2)– From Present thru 2019

• Fund system condition assessments and build business case, Return on Investment and Life Cycle Costs of various options. 75% Complete

• Develop contract for renewal of 3rd party operations including; capital improvements during the term, performance metrics and assets valuation at contract completion.

• Fund Investment Grade Analysis of improvements prior to contract expiration.

– After 2019

• Fund utility improvements after 2019 using current capacity charge of $ 12.5 million per year, savings and capital infusion.

• Series of multiyear programs.


Case Studies

• Ones that worked.

• One that did not.


Pepco Energy Service Atlantic City New Jersey

Installing a New 6 MW CHP System

In An Existing District Energy Plant


A Success Story

Atlantic City District Energy SystemAgenda

• District Energy System Overview• Central Plant Overview• Decision to Install Cogen• Project Development Approach• Plant Design• Plant Construction • Construction Highlights• Plant Performance


Atlantic City District Energy System

• Energy Distribution System• 4 miles of steam/CHW piping

• Fiber optic controls throughout system

• Chilled Water• 27,300 gpm, 41oF

• Steam System• 175 psig, Saturated steam

• Customers Served• 7 Casino Facilities + AC Boardwalk Hall

• Satellite Plants• Support system during peak load

• Bally’s Park Place

Energy Distribution System & Satellite Plants


Atlantic City District Energy System Energy Distribution System



• Existing Central Plant • Built in 1998• Initial cost $106M• Partial Funding by NJ Thermal

Energy Facility Program• District Energy Plant

• Three 70,000 pph steam boilers• 210,000 pph total capacity

• Fourteen Centrifugal Chillers• 18,000 tons total capacity

• 1 MW Emergency Generator• Three independent electrical

feeders

Midtown Thermal Control Center (MTCC)



• Plant Staffing• Plant & Maintenance Mgr.• 10 Full time Operators

• PES Responsibilities• All plant modification &

improvements• All customer metering & billings• All permits & environmental

reporting• Plant & System Maintenance

• Maximo used for maintenance

Midtown Thermal Control Center (MTCC) - Operations


Atlantic City District Energy System Decision to Install Combined Heat & Power

• Reduce operating costs• Displace expensive electric• Replace inefficient steam

production

• Evaluate Project Economics• Construction &

O&M Costs• Internal Funding• Perform Sensitivity

Analysis• Manageable Risk

Pricing at time of decision: $6.79/MMTBU; $0.12/kWH

• Increase Revenue• Local Electric Deregulation

• Viable market for excess power

NPV Sensitivity to Change in Market Prices



Pepco Energy Services . . .• Served as General Contractor• Subcontracted Engineering &

Construction• Responsible for all Permits• Procured Major Equipment

• Dual Fuel Gas Turbine Generator• Heat Recovery Steam Generator

and SCR• Managed Startup & Commissioning

• 3rd Party Commissioning Agent

CHP Project Development Approach


CHP available for energy dispatch

• Gas turbine operates to meet MTCC electric demand• Operate at 100% load; export surplus based on LMP• If MTCC demand > 100% GT load Purchase from grid

• HRSG operates to meet MTCC steam demand• Steam demand is always > GT full load unfired output

• HRSG duct burner fired to increase steam output

• If MTCC steam demand > fired HRSG fire supplementary boilers

CHP Plant Operating Dispatch



Successfully overcame risks

• Interconnection agreement delayed• Construction permits delay

• City permits - delayed• DCA NJ/AC – jurisdiction turf war

• Gas Utility Connection• Filed BPU rate case• SBC % reduction

CHP Plant Construction

HRSG Installation

Stack Installation



• Performance exceeds guarantees • Payback goals reached in 5 years

CHP Plant Performance to Date


Casino’s finances in decline.

NIH Cogeneration ProjectA Success Story


National Institutes of HealthPepco Energy Services

Cogeneration Plant

• Contract Construction Cost: $38,000,000,

• Major Equipment

– Siemens GT 10B Gas Turbine: 23 MW

– Heat Recovery Steam Generator: 100,000 pph Steam

– Auxiliary Duct Burner (Dual Fuel) 80,000 pph Steam

– Inlet Air Cooling System

Highlights:

– Guaranteed Energy Efficiency

– Guaranteed Availability

– Most Effective Reduction of NOx Emissions w/o a scrubber by a commercially available Combustion Turbine

– Constructed without major disruptions to the NIH Campus Operations


Existing NIH Campus

• 25 Institutes

• 15,000 Employees

• Medical Research and Hospital.

• Existing NIH Central Plant– 5 Dual Fired Boiler Units: 800,000 pph Steam.

– 60,000 Tons Chiller Capacity (Steam Driven Auxiliary Capable).

– Existing steam and chilled water distribution in tunnels.


NIH and PES Partnership

• Pepco Energy Services– 3rd Party Finance.– Engineer/Procure/Construct.– 10 Year Operate & Maintain/ Transfer Operation to NIH After 10 Years.

• Took CHP Plant Efficiency Risk• Took Reliability Risk

– 10 Year Performance, Electricity and Steam Supply Contract.– Provision for Additional Steam from Temporary Boilers If Necessary.– Interconnection to NIH Electrical Distribution System all behind meter.– Coordinated Air Permit Compliance and Testing with NIH Title V.– Complement of Overall NIH Utility Plant Upgrade.

• NIH– Provided Air Permit and Utilities from NIH Central Plant.– Provided business case.

• 24/7, 365 operation sized to produce maximum steam output without duct firing.

– Defined Risk.– Defined essential project requirements, but did not dictate details.– Took purchased natural gas using block and index, took commodity risk.


Placement of the GT-10 B


Installation of Building Shell


Acceptance Test Results

Guarantee:EmissionsNOx: 12ppmdvSO2: 0.16 lb/hrCO: 10 ppmdvPerformanceNEO: 21,675 kWNHR: 12,389 BTU/kwh NSO: 104,900 pphNSOgas: 180,000 pphNSOoil: 180,000 pphNoiseNoise: 45 dB(A) @ Property LineAvailabilitySeven Day Availability: Pass

Result:EmissionsNOx: 8.25 ppmdvSO2: 0.08 lb/hrCO: 2.00 ppmdvPerformanceNEO: 22,115 kWNHR: 12,292 BTU/kwhNSO: 107,434 pphNSOgas: 180,688 pphNSOoil: 181,000 pphNoiseNoise: 39-43 dB(A)AvailabilitySeven Day Availability: Pass


Success • 2011 EPA Energy Star CHP Award

• Operating Efficiency: 76%

• Savings $ 4 Million per year

• Reduces CO2 Emissions by 51,400 Tons Per Year

• NOX Emissions average 10 PPM without dry

• CHP contract completed with expected remaining life of 20 years.

• Operations reverted by to NIH in 2015.


Customer 1- CHP A project that did not recover.


Difficult Site Conditions


Original CHP Plant Proposal


Challenges

• Lifecycle Cost was negative

• Initial Construction Cost Exceeded Business Case

– Open book pricing provided.

– Schedule was not met by 3 of 5 bidders.


Challenges

• Original Program Objectives – Provide N+1 Reliability.

– 200,000 pph steam available with either Natural Gas or Fuel Oil.

– Air Permit incorporated tied to other major plant equipment and time limits for incorporation.

– Customer Operates and Maintains, requires 3rd Party guarantees performance and reliability.

– Project must be completely paid for by savings.

– Older plant systems required upgrades.

– No credit for avoided cost of meeting Boiler MACT.


Ways to Reduce Costs Rejected

Commitment to Design Build Concept instead Design, Bid, Build

Relax Design Manual used on office building construction

• Reduce prescriptive terms and conditions from Division 1 RFP Section

• Limit submittal 50%, 95% and Final

• Reduce construction submissions

• Expedite review and approval

• On-board review of design documents

Share Contingency where possible

Project included owner contingency of 7.5%

Customer handles all PCB/Lead and historic restorations.

Re-task Customer Multi-year funding for CHP Oversight for early design or procurement of shop drawings from OEMs


Recommended Savings and Performance Changes

Interest Rate and Term Reduction:

• Use 15 year term with 3.87% interest rate

Decrease steam output to match load:

• Plant sized so any one of 5 boilers can meet load.

Decrease Export of Electricity:

• Potential 30.7M kWH = $1.6Mper year= $18M

Offset CHP Cost with Boiler 1 & 2 MACT Compliance Cost and O&M

• Avoided construction cost NPV $28.8M

• Avoided O&M cost : $ 60,000 per year, 15 yr NPV $0.7M


Projection of Electric Export/Import

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Po

we

r (k

W)

Month

CHP Power Output

Avoided Electricity Import Avoided Electricity Import Value: 0.096$/kWh

Export @0.042$/kWhCHP Generation Gas Cost: 0.045$/kWh

Import

Export

Reduce project size to meet thermal load and reduce export


Revised Proposal


New General Arrangement

Peer Reviewed by:• Solar Turbines and HRSG Mfgr.• 3rd Party Engineer

Plan View Cross Section


Customer Would Not Modify Requirements

• Project did not meet expectations in budget or cash flow.

• Project delayed.


Process

46Big 10 and Friends

Adapted from: DOE Clean Energy Application Centers Website

9/21/2015

Screening and Preliminary Analysis

• Concern about future energy costs?

• Concern about reliability (risks) ?

• Is there an existing central plant ?

• What value does your institution place on reducing environmental impact or cost to implement reductions to meet permits?

• Electrical load profiling.

• Thermal load profiling (Is there thermal load year round).

• Utility rate structure analysis.

• Unit sizing.

• Thermal use determination (what to do with the heat) .

• Installation cost estimations .

• Overall place in energy procurement strategy.

Big 10 and Friends 47

Adapted from FEMP First Thursday Seminars

9/21/2015

Risk Mitigation

• Contract with a 3rd party design engineering firm that has experience to determine condition of existing assets.

• Permitting impacts.

• Utility interconnection requirements.

• Financial (simple play-back, ROI, Life Cycle Cost Analysis).

• Financing option availability .

• Analysis of different ownership structures with recommendations as to project structure.

• Discussion of design/construction models.

• Cost/savings information can then compared to what your facility would pay if the CHP system were not installed .



9/21/2015

Investment Grade Analysis

• Results in basis of design and business case that can become part of an RFP

• Consider best technologies. (CHP, Biomass)

• Include review of utility required upgrades "interconnect study” and environmental permits.

• Assessment of existing infrastructure, distribution systems, plant and equipment.



9/21/2015

Procurement Operation and Maintenance

• Guarantees, financial and performance.

• Equitable risk share.

• Using a third party to reduce cost and increase efficiency will require establishing the right amount of control.

• Ensure that assets are maintained and retains residual investment value.



9/21/2015

Successful Project that Works

• Meets expectations

• Manages risks

• Verifies savings

• Reduces costs and increases savings

• Strong business case (Savings and Investment)

• Schedule

• Meets performance and environmental metrics

• Continued management by Owner


Thank You for Your Consideration!

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Go Terps!

Big 10 and Friends

John Fratangelo, PE

Assistant Director, Utility Infrastructure

University of Maryland, College Park

[email protected]

[email protected]

9/21/2015

mailto:[email protected]

successful public private partnerships

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