Performance Contracting Pays Off for Kentucky with Big Energy Savings


In Feb. 2005, Governor Ernie Fletcher announced the Commonwealth of Kentucky’s first comprehensive energy strategy. Fletcher said the plan reflects the state’s commitment to three primary principles: maintaining Kentucky’s low cost of energy; responsibly developing the state’s energy resources; and preserving Kentucky’s commitment to the environment.

“As we implement our comprehensive energy plan, which includes greater use of clean-coal technology, bio-fuels and energy efficiency, Kentucky will be well-positioned to continue to lead the nation,” Fletcher said. Additionally, he signed Executive Order 2005-122, which directed the finance and administration cabinet to implement an energy management program with the goal of saving at least 10% annually on energy costs throughout state government.

In 1996 the Kentucky general assembly enacted an energy efficiency program for state government buildings. The goal it set forth was to achieve a 25% reduction in energy costs by retrofitting the state’s approximately 54 million sq. ft. of facility space with energy-efficient technologies. Strapped for the cash to pay for it, state agencies, including the Kentucky Department for Facilities and Support Services and the Kentucky Division of Energy, began working with energy service companies (ESCOs) to facilitate energy savings performance contracting (ESPC).

By 1998, the general assembly had enacted three bills to establish the basis for energy efficiency in state and local government buildings. Through these bills, Kentucky’s legislature created laws that permitted school districts and government agencies to pay for facility improvements via future energy savings.

In essence, these bills authorize school and government administrators to use guaranteed ESPC, which may also include private sector financing, to fund energy efficiency capital improvements.

Revised legislation took effect in July 2002 to make it easier for state agencies to execute ESPC projects by obtaining the financing themselves. Since this legislation was enacted, approximately 10 projects are underway totaling almost $40 million in energy-saving retrofits and other system and facility enhancements.

One of the ESCOs was awarded almost 40% of this work, and over the last three years, it has helped Kentucky execute ESPC projects that are projected to save the state millions in avoided energy costs over the multiyear terms of the projects. Currently, the state has another nine ESPC projects in development.

The projects with which ESCO has been involved cover the diversity of the state’s services infrastructure that Kentucky government agencies offer to its citizens. Ranging from administrative buildings and transportation infrastructure, to the campus facilities of the state’s higher education system, it has applied its experience to help the state leverage the value of its existing infrastructure while making it less costly to operate. A review of the ESPCs at work reveal a number of strategies that are helping Kentucky cope with rising energy costs and new demands for services without having to tap taxpayers for more money.

As with any institution relying upon state tax revenues, the demand to do more with less is a given. Capital spending, even on needed infrastructure improvements, is under constant scrutiny and more often than not, a target for budget cuts.

Such was the case for Northern Kentucky University (NKU), a typical, bustling college campus in Highland Heights, Kentucky. Serving the higher education needs of students from a tri-state area comprised of Kentucky, Ohio and Indiana, NKU’s campus is home to 11 major facilities. These 11 facilities roughly translate into some 1.3 million sq. ft. of space that Assistant Vice President for Facilities Management Larry Blake oversees on a day-to-day basis with support from Kentucky Division of Engineering Project Manager Jim Nordmann, who looks after new construction on campus.

The emergence of ESPCs has definitely changed the landscape of how capital improvements may be funded, as well as the ways in which companies successfully bid on projects. In general, any energy savings performance contract-based work awarded by the state must be delivered by a certified energy service company (ESCO).

“Depending on the scope and nature of the contract, we may get as few as three and as many as 10 ESCOs responding to an RFP,” Nordmann said. A committee, formed from the Division of Engineering and Contract Administration, Office of Energy Policy Management and the agency representatives, reviews the proposals submitted in response to the RFP. This selection committee then chooses an ESCO through a short-list and oral presentation process.

Many of NKU’s buildings are of the 1970s or earlier vintage with systems of similar age and operational capabilities. To its credit, the Dept. for Facilities and Support Services, Division of Engineering staff, has been proactive in implementing a number traditional energy retrofits across the HVAC, lighting and energy infrastructure. However, there is a constant inventory of projects that need attention. The question was: Is NKU leveraging ESPCs to their best advantage? Nordmann and Blake turned to the ESPC process to find out.

“[The ESCO’s] analysis of NKU’s energy cost and consumption data indicated significant opportunities for additional energy efficiency improvements,” Blake said. So, in September 2004, NKU entered into a $4.5 million ESPC with the provider. Broad in scope, the now-finished project focused on several key elements of the lighting, HVAC control and system components and plumbing and energy systems.

On the HVAC front, the ESCO upgraded the existing campus automation system and replaced pneumatic variable-air-volume (VAV) box controllers with direct digital controls in NKU’s Nunn Hall and Steeley Library. Constant-volume-air handling units were fitted with variable-speed drives to ensure occupant comfort within the Lucas Administration, Business/Education/Psychology and Fine Arts centers. High-efficiency motors and variable speed drives were also fitted to dampen the energy demands of NKU’s chilled water and hot water pumping systems.

Efficiency-improving retrofits were made to other systems, including chiller and boiler plant optimization, steam-trap repair or replacement and economizers that were repaired and fitted with enthalpy control, which now allow system operators the ability to determine the optimal amount of outside air to be used for cooling purposes.

Lighting improvements included replacing the remaining inefficient lighting with current technologies. the ESCO also installed photo sensors to lighting controls at Steeley Library to take advantage of the natural light provided by the facility’s skylights. Additionally Siemens helped manage the installation of low-flow toilets, urinals, faucets and showers across the campus to help manage and optimize water consumption.

With these improvements, the ESCO guarantees NKU will save just over $591,000 dollars annually in energy savings for a total of $7.1 million over the 12-year term of the contract.

The Bigger They Are…

Meanwhile, at the Frankfort, Ky. Human Resources Campus, the state’s ESPC program team was in search of similar savings from two of the campus’ main structures: the Health Services Building (HSB) and the Human Resources Building (HRB), which at 490,000 sq. ft., is the largest state-owned office facility in Kentucky. But that’s not to say the HSB is small. That facility occupies some 146,000 sq. ft. of space, as well.

Regardless of size, each building had its own unique aspects and issues that must be addressed. Elements of age, design and existing building automation and HVAC systems all played a role. Some upgrades were relatively straightforward and common to both. For example, lighting was universally inefficient and costly to maintain. Engineers specified new T8 lamps and electronic ballasts to save energy and cut maintenance costs by a significant margin. Similarly, low-flow toilets, urinals and faucets were installed to cut water use.

Legacy Central Plant Revived

The four Human Resources Campus buildings rely on a central utility plant to deliver heating and cooling capacity. The ESCO thoroughly evaluated the existing chilled water and water heating systems, searching for ways that the 1970s technology could be enhanced to deliver new efficiencies and energy savings without a wholesale replacement.

To enable the old system to deliver new thermal efficiencies, it fitted a side stream heat recovery chiller and installed it in parallel with the main chilled water return line to recover heat from that stream. In turn, the heat recovered there is then used to improve the thermal efficiency of the water heating system.

Some systems were just not worth saving. At HSB, eight 1958-vintage multizone air-handling units were in horrible condition and had to be replaced. Because cabinet staff could not be dislocated during the removal and replacement of these units, the work was scheduled around-the-clock on weekends. New units, by virtue of actually being able to function as specified, were earmarked to deliver both energy savings and occupant comfort.

At the time the HRB was constructed in the early-to-mid 1970s, engineers were quite comfortable specifying pneumatic controls to reliably manage the VAV boxes across this large-scale system. With energy costs relatively low at the time, some of such a system’s inherent inefficiencies were simply not considered an issue.

Fast forward to the new century and engineers are now singing a completely different tune. The consultants harmonized the system by replacing the pneumatics with direct digital controls on 203 dual-duct and 151 single-duct VAV boxes. The result is super-precise control of temperatures throughout the building spaces and a system able to react to changing temperature loads as season and time of day dictate. “With direct digital controls,” says Nordmann, “we now have much tighter control over temperature and humidity.”

Reliable, low-cost sensor technologies are advancing HVAC capabilities and adding a degree of control engineers could only wish for when these buildings were originally constructed. The ESCO delivered on this promise by installing carbon dioxide sensors in the return duct work of each of the complex building’s six primary air handlers. The sensors help generate savings by monitoring CO2 in the air so the amount of outside air may be precisely metered to meet air quality standards. The math gets pretty simple from there; less outside air means less air overall that needs to be heated or cooled and therefore, less energy is needed to do either job.

Every dollar of savings adds up. At the Human Resources Campus, annual savings are a guaranteed $411,700 per year. For the life of the 18-year contract that’s more than $7.4 million fewer dollars that Kentucky’s taxpayers have to shell out to heat and cool their elected governments’ administrative facilities.

For more information about contract performance services from Siemens Building Technologies, go to

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