11 July 2013 — UPDATED: The NSW’s Office of Environment and Heritage is set to inject some new life into its energy efficiency upgrade program for its buildings portfolio, as a similar program in Victoria said it was on track to save up to $2 billion in energy bills by 2020.
In a revamp of the program, the OEH has collaborated with the Victorian Department of Treasury and Finance to improve processes and decide on a new panel of ESCOs or energy services companies.
Up to $40 million a year is already available for the work through the NSW Treasury Loan Fund but in the program’s 15 year life the take up has fallen short of available funds.
So far lending in the program has reached $62 million with 54 efficiency upgrades saving taxpayers $120 million in energy bills, senior team leader sustainable government Susan Read said.
Ms Read told The Fifth Estate the potential was far more but new energy targets had yet to be released.
Most of the buildings in the program, which offers low interest loans to government agencies, will be smaller sites related to railway, fire stations, ambulance, disability and residential care premises. But some large schools, health facilities and correctional centres will also be included.
Upgrade work will generally include lighting, airconditioning and hot water systems.
“The program is a focused way of saving opportunities and assisting them to access loans,” Ms Read said.
A recent audit of the NSW Ministry of Health found energy savings had fallen well short of targets, albeit with some plausible reasons, such as urgent health issues to manage.
See our report NSW Health audit report: too much energy waste; try harder
The audit report came at a good time for remedial action.
Ms Read said 13 health energy managers had now been trained in energy efficient lighting upgrades – considered “low hanging fruit” on the energy savings scale.
The collaboration with Victoria has also been a fillip. This has included joint selection of the ESCO panel.
Sam Burke, senior manager property and accommodation for the Victorian Department of Treasury and Finance who leads the Greener Government Buildings Program, says the two state panels will be “almost identical”.
There was a “bunch of projects” about to commence, he said. All needed to pay for themselves through energy savings within seven years, down from an eight-year payback period previously.
According to Burke, investment would be between $30 million and $50 million a year, helping to shave 35 per cent from total annual energy bills of about $70 million.
Total savings to 2020 would be about $2 billion, the Department of Treasury and Finance website says.
New projects will include:
- RMIT University – in a program managed by executive director property services Darren McKee there will be core energy savings projects of $27 million, plus additional upgrade works taking the total outlay to about $100 million
- $4 million upgrade of the Melbourne Sports and Aquatic Centre in Albert Park, built for the Commonwealth Games
- Federation Square, where Siemens will manage an energy upgrade budget of about $6.5 million, with about half of this to be for a cogeneration energy system, and work at the Melbourne Cricket Ground, the Museum of Victoria and LaTrobe University
The health sector was another key focus. As with NSW, Victoria’s health department services were recently subject to an audit on energy efficiency performance in the past few years, with “scathing” results, observers said.
The first tranche of programs in health have already gone to tender – for the Alfred, St Vincent’s and Barwon health services, at a total work value of $30 million and savings of about $3-4 million a year, Mr Burke said.
More tranches of projects will open to tender later in the year.
- UPDATE: 3 PM 11 JULY 2013: In an online social media update, Tiernan Humphrys, acting manager strategic asset management at Department of Health, says the, “The Victorian Department of Health currently has tender processes underway for energy performance contracts at 10 health services, which collectively consume close to 2 petajoules of energy. Our latest EPC update is available at https://www.health.vic.gov.au/sustainability/energy/epc.htm
Also on the way are some large tenders for regional rail and other facilities.
But processes were taking a little longer than previously to bring to market.
This was to assure buy-in from board levels of agencies, that had in some cases caused delays in the past, Burke said.
“Projects might have been approved at the executive or senior management level that the board was not aware of or supportive of it. And it’s caused delays in terms of providers who had spent thousands of dollars putting bids together.
“So every agency we engage with now all needs board approval, which doesn’t mean it’s a shoe-in, but they should be approved.”
NSW Treasury Loan Fund
According to the NSW OEH, the NSW Treasury Loan Fund provides up to $40 million annually in low interest capital expenditure funding to enable NSW general government sector agencies to implement energy and water efficiency upgrade projects, which deliver significant reductions in energy and water consumption and greenhouse gas emissions.
Investing in resource efficiency is a key way for agencies to demonstrate their commitment to fiscal responsibility.
Energy and water efficiency projects help agencies save money and reduce their exposure to rising prices, which helps redirect budget to frontline services. The TLF provides capital expenditure funding to general government sector agencies to upgrade a range of technologies within government assets.
Funded projects to date have included upgrades to
- lighting systems
- heating, ventilation and airconditioning (HVAC) systems
- renewable energy systems
- hot water systems
- improvements to building management controls.
How does it work?
A government agency submits an application to OEH for an energy and/or water efficiency project they are interested in doing. The TLF provides capital expenditure in the form of a low interest loan so that government agencies can implement the project without using their own capital budgets.
Loans are structured to be repaid from the savings in utility bills and once the loan is repaid the agency benefits from improved building efficiency and lower bills.
OEH provides technical and project management support from start to finish to ensure that projects are cost effective and will deliver the proposed savings.
Interested in applying for funding?
Two streams of funding are available for general government sector agencies. The appropriate stream of funding for your project will depend on the size of the project and how it is developed and delivered.
Finance between $10,000 and $500,000 (or $1 million for Ministry of Health projects) is provided under the Sustainable Government Investment Program (SGIP).
Larger projects requiring over $500,000 (above $1 million for Ministry of Health), are to be developed and delivered by means of a performance contract.
Who can apply?
Funding is available to NSW general government sector agencies. A list of general government agencies can be found on the NSW Treasury website within the 2012/13 budget papers.
TLF track record
TLF has provided more than $60 million in low interest loans to finance 54 efficiency upgrade projects since its inception. This includes 21 projects delivered through performance contracts, totalling over $49 million, and 24 Sustainable Government Investment Projects totalling over $11 million.
These projects saved NSW government agencies over $8.8 million in operational costs in 2011/12, and helped them to avoid the negative impacts of energy price rises on their operating budget.
Victoria Greener Government Buildings program
According to the Victorian Department of Treasury and Finance, the Greener Government Buildings program commonly includes lighting upgrades and controls, heating and cooling efficiency improvements, building automation, water conservation measures and on-site electricity generation such as co-generation and trigeneration.
At 30 June 2012 the program achieved its first milestone target, having tendered projects at sites accounting for 20 per cent of the government’s total energy use.
Results show average savings (energy, greenhouse gas and water) of over 40 per cent, with some as high as 70 per cent, while still delivering a cost-effective return on investment of at least 12 per cent (IRR).
Over the longer term, the Greener Government Buildings Program is projected to reduce the government’s greenhouse gas emissions by at least 30 per cent by 2020 and deliver over $2 billion in accumulated cost savings.
Departments are required to implement energy performance contracting to meet the following milestones:
- by 2012, departments must have committed to implement energy performance contracting or equivalent processes at sites accounting for at least 20 per cent of their total energy consumption
- by 2018, departments must have committed to implement EPC or equivalent processes at sites accounting for at least 90 per cent of their total energy consumption
- Greener Government Buildings projects are required to ‘”pay for themselves” within a seven-year period using energy and water cost savings delivered by the project.
Energy Performance Contracting
Greener Government Buildings projects are delivered using a market-based instrument known as energy performance contracting, or EPC.
This approach requires service providers to not only design and install energy and water saving solutions, but to guarantee annual cost savings.
The presence of this guarantee not only provides greater certainty that energy and water savings will be achieved, but enables the project costs to be financed, with annual cost savings used to repay the loan over the life of the investment.
Under the program’s competitive EPC tender process, contracts are awarded to the provider that identifies the greatest savings over a seven-year payback period.
There are 32 large scale projects under way including:
- Melbourne Sports and Aquatic Centre and State Netball and Hockey Centre
- Federation Square
- Melbourne Cricket Ground
- Museums Victoria, including Melbourne Museum
- Royal Exhibition Building and Scienceworks
- 16 owned office buildings include Treasury Reserve
- Seven TAFEs – South West, Kangan, Sunraysia, Box Hill, Holmesglen, NMIT, Chilsholm
- Six water authorities – Central Highlands, Coliban, Grampians Wimmera Mallee, Western, Barwon and East Gippsland Water
- Latrobe and Ballarat universities
- 43 major parks managed by Parks Victoria
- Upgrade of traffic lights around the State from incandescent to LED technology.