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Gary Reed was never a wait-until-it-breaks type of guy. So when he became the utilities manager for Eastern Illinois University (EIU) in 1989 and saw the old facilities he was going to maintain, Reed knew he had his work cut out for him. The 1960s-era utility systems were ancient by modern standards and terribly inefficient. The result: steep energy bills and a frail infrastructure.

The latest 10-year project began in 2003 at a cost of $2.6 million. Annual energy savings are expected to be $295,142 for a projected total savings of $2.9 million.

Reed accepted the challenge. There was one tiny problem though, limited funding options hindered him from pursuing many conservation opportunities.

Like many higher education facilities, deferred maintenance had been piling up at EIU for years and given the State of Illinois’ fiscal condition, there was not much relief in sight. It was basically a typical facility management nightmare: having to manage major educational facilities with a huge deferred maintenance backlog, aging infrastructure and a limited budget. This forced the university into a “run-until-it-fails” maintenance mentality that resulted in inefficient operations, unreliable systems and a perception of poor customer service delivery.

So when the state invited EIU to explore energy savings performance contracts in 1994 — which were an emerging method of upgrading utility systems without paying any upfront capital costs — the university jumped at the chance.

Ever since, EIU has become a model of energy efficiency thanks in large part to a series of performance contracts. In 2004, the Illinois Department of Commerce and Economic Opportunity (DCEO) cited the school in a report to the Illinois General Assembly as having the lowest energy cost per-square-foot amongst all Illinois public universities. Ultimately, being more energy efficient helps the university avoid having to pass the cost of new equipment and energy rate increases on to students and
Illinois taxpayers.

Performance contracts are agreements between a facility owner and an energy services company (ESCO). The ESCO engineers and implements facility improvements at no up-front cost, and guarantees a minimum level of energy savings from the upgrades and retrofits. The ESCO also can help the company secure financing based on that guarantee, as well as provide ongoing maintenance and monitoring services to ensure that energy savings are achieved.

The typical performance contract term runs from eight to 15 years (the term is 10 years for Illinois colleges and universities). The savings from reduced utility bills are used to pay for the capital investment in equipment, installation and related financing fees. The facility retains 100 percent of the savings to use at its discretion at the completion of the contract. If the guaranteed savings are not realized during the term of the  agreement, the ESCO is obligated to pay the difference — meaning the participating institution is at no risk.

Although, critics remain skeptical about whether performance contracts can achieve the savings they guarantee, institutions like EIU are proving they can work and EIU’s strategy has become a good blueprint.

As part of a pilot program initiated by then-Governor Jim Edgar, EIU entered into its first performance contract in 1994. Work under the 10-year agreement included upgrades to lighting, heating, ventilation and air-conditioning (HVAC), and building automation. Over time, the university was able to use an alternative avenue of funding by leveraging the utility savings to buy immediate capital improvements and help reduce deferred maintenance.

In recognition of the success of the project, the DCEO awarded EIU the State of Illinois Energy Efficient Building award in 1997.

The original contract blended basic improvements that had short energy paybacks (lighting improvements) with more complex opportunities offering longer paybacks (energy management system upgrades). EIU decided to hold off on more aggressive changes for the future.

EIU began planning for a second, more comprehensive project in 2000 and before beginning the work, the ESCO conducted an investment grade audit to determine improvements that needed to be made.

The project price tag was $10.8 million, but the plan has guaranteed an annual savings of nearly $1.2 million for 10 years. That means that if the energy conservation measures continue to perform as expected for the duration of the agreement, savings over the life of the performance contract (around $12 million) will exceed the installed cost of the project.

The scope of this project was aggressive and wide-ranging. Fluorescent lighting systems were replaced or upgraded in 30 buildings, including new electronic ballasts, T8 fluorescent lamps and light-emitting diode (LED) exit signs, all of which use less energy and have a longer life span than the old systems. A new pool filtration system in a recreation center was installed and comprehensive water retrofits in 33 campus buildings were also provided. These retrofits included new low-flow toilets, reduced-flow showerheads, faucet restrictors and aerators and new more efficient washing machines.

One of the biggest parts of the project was replacing seven 30-year-old absorption chillers with four new electric chillers. Along with the new chillers, chilled water piping modifications and new pumps with variable frequency drives (VFDs) in 10 buildings were provided. The upgrade addressed more than $4 million in capital renewal needs and mitigated the liability of major equipment failure. Two underground piping systems were extended to tie buildings together on common chilled water loops.

The project also expanded the university’s existing building automation system—new variable air volume (VAV) controls, VFDs and high- efficiency motors were installed on 50 air-handling units. In addition, these units were rebalanced and re-commissioned to significantly improve comfort control and restore proper ventilation rates.

While the facility and systems upgrades were noteworthy, it was the impact on operating budgets that drew attention. In 1998, the energy cost per square foot at EIU was $1.40 — according to the Illinois DCEO — which was middle of the pack for public universities. By 2003, the figure was down to $0.99 per square foot, the lowest in the state and more than 40 percent lower than the average. In its report, the DCEO cited the strong track record of implementing energy performance contracts and energy conservation measures as reasons for the school’s lower costs.

In one of the latest projects, wrapped up in 2005, the school implemented advanced control strategies to make its chilled water loops and airhandling systems even more efficient. For example, a global control strategy was implemented to optimize the campus’ chilled water loops. Indoor air quality sensors that determine how many people are in a building by measuring carbon dioxide levels, and then vary the amount of outdoor air introduced into that building accordingly were also installed.

Another system is allowing facility users to monitor automation systems through the Web. Minor adjustments are possible to keep particular rooms at comfortable temperatures while they are occupied outside of normal business hours. New cooling coils in several air-handling units are also helping to improve cooling and humidity control.

The latest 10-year project began in 2003 at a cost of $2.6 million. Annual energy savings are expected to be $295,142 for a projected total savings of $2.9 million.

The concept of creating a self-funding mechanism derived from utilities savings that could also solve major deferred maintenance challenges on the campus would have seemed impossible just a handful of years ago. But now, Eastern Illinois University can be looked at as a model for the successful use of performance contracts.

Ron Blagus is the energy market director for Honeywell Building Solutions. He is located in Toledo, Ohio and can be reached at ronald.blagus@honeywell.com.

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