Empower Energies Blog

Higher Ed Campuses Find Diversification, Creative Financing Key to Today’s Energy Initiatives

Posted by Michael Wright

9.1.2015

With more than 5 billion square feet of floor space under management, the higher education sector in the United States spends approximately $14 billion each year on energy, reports the Department of Energy’s Better Buildings Alliance. As universities continually deal with the dichotomy of increasingly technical buildings in an often inefficient, aging campus infrastructure, facility managers are finding new ways to reduce institutional energy expenditures.

The Call to Boost Efficiency

Higher costs aren’t always the primary impetus behind campus energy efficiency efforts. Energy thought leadership resides largely in academia. The higher education sector sees itself as having a special role in the drive toward greater sustainability.

As the Princeton Review puts it in its 2014 Guide to 332 Green Colleges, “Colleges train the next generation of leaders who will ultimately be responsible for putting green ideas into practice. By infusing sustainability principles into every aspect of higher education, there is a new priority for a whole generation of leaders, educated and trained, to make a greener world now.”

On campus, this responsibility falls not just to administrators and a proactive student body, but also to facility managers who, in the course of their day-to-day duties, are building appropriate business cases and then helping to deliver on the promise of sustainability efforts.

These FMs recognize this responsibility in their role, implementing programs ranging from LED lighting conversions, to on-site energy generation, to programs promoting behavioral changes as simple as remembering to turn off the lights.

“The drive to go green is now inherent within the Facilities Development and Management DNA,” says Bruce Nevel, Associate Vice President, Facilities Development and Management, for Arizona State University. “Further, we find that many of our students are also embracing and demanding the need to go green.”

For the Rochester Institute of Technology in Rochester, New York, the focus on sustainability comes from a “triple bottom line,” explains John Moore, Assistant Vice President. Cost and environmental considerations are but two components. “We also look at social models: How do our current and potential students feel about what we’re doing? The push comes from everyone — we all want to do the right thing for the right reason,” Moore says.

John Onderdonk, Director of Sustainability Programs for Caltech in Pasadena, California, presents that as a reputational consideration.

“There has been a lot of movement in higher education with commitments to net-zero and climate neutrality, such as the American College & University Presidents’ Climate Commitment, and our administration really recognized there were risks here, for liability, reputation and costs,” he says.

The bottom line is that an increasing number of college and university campuses are looking for more efficient power usage and generation solutions because it’s the right thing to do — although reduced costs and increased reliability are certainly a bonus.

 

Sustainable Power Options

Just as this push toward sustainability comes from multiple sources, FMs are now also considering diversified energy strategies — and sustainability is playing a larger role in the consideration of new technology options for reliable power generation.

For example, Caltech uses a combination of onsite Combined Heat and Power (CHP) systems, photovoltaic (PV) Solar arrays and Fuel Cells, in addition to the electricity purchased from the local utility.

“Diversification certainly made sense for us; I think it would make sense for most organizations,” Onderdonk says.

While local utilities remain ASU’s largest electricity source at present, the university has made major investments in on-site Solar systems and a CHP power plant. “This natural gas-fueled plant diversifies ASU’s energy portfolio, helps reduce ASU’s carbon footprint, and provides a reliable source of power for critical research buildings,” Nevel explains.

RIT has added a fuel cell as well as several solar arrays to its utility-purchased energy. “It is definitely adding to our repertoire and helping us,” Moore says.

Onderdonk compares this broad approach to energy to a financial portfolio, where diversification is the safest bet on increasing your return. “In an energy portfolio you want to diversify to reduce volatility and control risks,” he says.

He adds, “The most important factor for us from the energy procurement standpoint is predictability of price. ‘First Cost’ is important obviously, but it’s not the most important component. We know we’re going to be operating for the next 150 years, so if we have a predictable price then we can budget and plan for it.”

In addition to cost predictability, power reliability is an increasing focus for FMs in higher education, particularly in heavily-populated regions where the electrical grid is under greater stress, such as the Northeastern United States. Moving power generation on-site through the application of CHP or Solar arrays, even in part, reduces reliance on the local electrical grid. Further, it can help mitigate the impact of power outages such as those that occurred across the Northeast and mid-Atlantic regions following Hurricane Sandy in 2012.

“Yes, we’re going to save some money because we’re generating on campus, and we don’t have to transmit the power, but it also relieves a lot of stress on grid infrastructure,” . “The more we can reduce that pressure, the more reliability there is going to be from that infrastructure.”

Onderdonk adds that the combination of technological and regulatory changes impacting electricity suppliers today is a new cause of price volatility that can negatively impact a university’s energy budget. “By bringing on Fuel Cells and Solar and putting them on-site, and entering into Power Purchase Agreements (PPAs), we have smoothed that volatility a bit,” he says.

 

Cost Considerations

Although most FMs are familiar with the challenges of getting capital earmarked for infrastructure investment, the higher education sector’s prioritization of sustainability can, in some cases, make it easier to build into a budget. And, while administrators may be struggling to balance the ever-increasing costs occurring in almost all other areas of education, FMs are finding increasingly-creative ways to finance the capital expenditures that can make the biggest impact on their energy equation.

The U.S. Green Building Council’s “Roadmap to a Green Campus” proposes nine strategies for financing these projects:

  • Revolving loan funds.
  • Energy service company-university partnerships.
  • Energy savings performance contracts.
  • Green performance contracting.
  • Savings capture and reinvestment.
  • Bond programs.
  • Tax-exempt lease-purchase agreements.
  • Paid-from-savings approach.
  • Student fees.
  • Targeted gifts. 

RIT has found a variety of ways to finance major investments. Among those it has found most helpful is a power purchase agreement used for its recently-installed 2 MW Solar array. “This means that we agreed to buy the power produced by that Solar installation based on a rate schedule that will increase over time, but we’re paying less for that power than we would from the local utility, so we’re saving money,” Moore explains. With a PPA, there is no capital outlay upfront. “We had to provide the long-term use of the land that the Solar array sits on and that’s it. A PPA is a nice direction because I know what I’m paying, it’s predictable, and I don’t have the upfront costs associated with that major construction.”

Caltech and ASU have set out to solve the funding challenge by becoming among the many campuses using a revolving fund that can pay for the initial capital investment, but are then reimbursed by cost savings realized through the project.

“By far the biggest, most effective program has been our Caltech Energy Conservation Investment Program, a green revolving-loan fund. We set that up around 2008, and it’s been a huge benefit because it’s freeing up capital that was traditionally under-utilized in a money market fund, and it’s put to good use to fund energy efficiency projects,” Onderdonk says.

The fund has financed projects ranging from lighting and HVAC retrofits to installation of smart-meters and sensors. “The whole spectrum of energy efficiency projects is applicable,” Onderdonk says.

The energy investments made by University of the Pacific in Stockton, California, depend to some degree on priorities set by the campus community.

“We have an annual sustainability fund,” explains Priscilla Meckley-Archuleta, LEED Green Associate, Director, Capital Planning and Space Management, for Pacific. “The Sustainability Committee receives proposals from the campus community to fund projects. Going forward, it will be a renewable fund.” The Committee plans to focus on projects that will, in time, fund future renovations based on the savings they achieve.

The fund ensures that each year some type of sustainability upgrade — such as the campus’ recent conversion to LED technology for all external lighting — will be completed.

Predictability can be a big benefit to FMs as they plan their budgets for the years ahead.

 

Planning Ahead

It used to be that once the simplest or most-obvious energy improvements have been made, FMs often found it difficult to move forward. But with financing options and a firm plan in place, the potential energy improvements across a collegiate campus can be nearly limitless.

“ASU has already grabbed much of the low-hanging fruit with earlier measures, including two large energy performance contracts,” Nevel notes. “However, to continue to drive energy-use down, earlier this year, we created a new department — Energy Innovations — which, as one of its primary goals, is to champion new energy-efficiency projects.”

That group provides a liaison to industry and other universities, while looking internally for energy-efficiency projects or technologies that might be successfully implemented on campus.

“ASU has a fairly aggressive energy goal, to be climate neutral by 2025,” Nevel continues. “In order to hit the finish line, we need to get even more innovative, and the demand side is where we’re putting a lot of focus.”

Moore adds, “Like a lot of other campuses, we’re looking at our energy strategy and what we can do to stay ahead and control our costs.” Whether that’s adding more Solar, CHP or other alternatives to traditional energy generation, RIT’s FM is just one of many who has found a broad energy portfolio can lead to big rewards.

With well-thought-out strategies in place and support from the proper partners, these campuses may in fact be well on their way to their lofty net-zero energy goals.  

Topics: Higher Education

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