BUDGET-NEUTRAL SOLUTION TO UPGRADE INFRASTRUCTURE
Dean Hansen and team lead ESPC, uniting crossdepartmental leadership to modernize aging facilities and create educational opportunities for students 16 YEARS, 6 PROJECTS, $140M GUARANTEED UTILITY SAVINGS: THE UNIVERSITY OF ILLINOIS URBANA-CHAMPAIGN’S EPC FRAMEWORK
Welcome to Energy Services Today, a quarterly publication dedicated to the latest advancements in the energy services industry, focusing on energy efficiency and infrastructure within the built environment.
Aging infrastructure across higher education campuses is a growing financial and operational liability. As critical systems deteriorate past their service life, institutions face a rising number of unplanned failures that disrupt instruction and impact the daily functioning of campus life. These events, often tied to legacy mechanical systems, carry real costs, yet many institutions are forced to manage them with limited funding and competing capital priorities.
In this issue, we share a solution. Energy savings performance contracting (ESPC), also known as energy performance contracting (EPC) or guaranteed energy savings performance contracting (GESPC), depending on state-specific legislation, provides higher education institutions with a proven procurement model that leverages third-party financing to fund critical energy and water infrastructure upgrades paid for over time through the contractually guaranteed utility and operational savings generated by the improvements. This solution enables institutions to modernize aging facilities, tackle deferred maintenance, optimize operations, and can lead to dynamic partnerships that open the door to educational opportunities for students.
We’ve heard the skepticism before; some say ESPC sounds “too good to be true.” But once a project is completed, that narrative shifts. Schools consistently tell us it’s a win-win.
In this issue, we share real stories that prove the point:
• The University of Mississippi launched its first ESPC in 2021 and quickly recognized its value. The project expanded to five phases and includes a student learning component.
• The University of Illinois Urbana-Champaign has embraced EPC since 2009, improving 18 buildings and addressing $67 million in deferred maintenance.
If you’ve been looking for a way to make meaningful upgrades without waiting for the next funding cycle, this is a model worth exploring. The process to get started is straightforward and low-risk, beginning with a preliminary assessment to identify energy efficiency and cost-saving opportunities. The project may also qualify for grants, rebates and potential tax deductions, which offers a unique opportunity to collaborate with your energy service company (ESCO) partner to enhance financial outcomes.
Thank you to the facilities leaders who work every day to create safe, reliable, and high-performing spaces for students. We hope this issue sparks new conversations and supports your continued efforts.
Julie Chesna, Editor-in-Chief
The University Of Mississippi’s Budget-Neutral Solution to Upgrade Infrastructure: Dean Hansen and team lead ESPC, uniting cross-departmental leadership to modernize aging facilities, expand educational programs, and create opportunities for students.
The Low-Risk, Easy First Step Toward Any ESPC Project: How a preliminary assessment gives you insight into the energysavings to fund valuable building system upgrades
REFRIGERATION TECHNOLOGIES
Refrigeration Technologies, LLC is the industry leader in cold storage monitoring and controls, working with higher education institutions and energy service companies nationally, implementing energy savings solutions that reduce downtime and mitigate food loss. Learn more at refrigerationtechnologiesllc.com.
FACILITIES & CAMPUS ENERGY SUMMIT
The 5th Annual Facilities & Campus Energy Summit provides an interchange of in-depth knowledge and serves as a catalyst for collaboration across large built environments that are working to improve their overarching energy efficiencies, resiliency, and reliability in a financially sustainable manner, with many organizations also striving towards decarbonization and sustainability goals.Learn more at rscouncil.org/facilitiesenerg/.
NATIONAL ASSOCIATION OF ENERGY SERVICE COMPANIES (NAESCO)
NAESCO is the leading advocacy and accreditation organization for Energy Service Companies (ESCOs) and is dedicated to modernizing America’s building infrastructure. Uniting the energy service industry, NAESCO promotes favorable government policies, sponsors a rigorous accreditation program, provides training and education, and champions ESCOs’ interests across the Nation. Learn more at www.naesco.org.
DEAN HANSEN AND TEAM LEAD ESPC, UNITING CROSS-DEPARTMENTAL
LEADERSHIP TO MODERNIZE AGING FACILITIES, EXPAND EDUCATIONAL PROGRAMS, AND CREATE OPPORTUNITIES FOR STUDENTS
The University of Mississippi, “Ole Miss,” is known for its football and is home to what many consider the most renowned tailgating spot in the SEC. On game days, 100,000 fans flood Oxford, which more than quadruples the town’s population. Fans line the Grove, a 10-acre field in the center of campus shaded by towering oak, elm, and magnolia trees, to celebrate the deep-rooted tradition of Ole Miss football.
Surrounding the Grove is the historic architecture, standing as a testament to the university’s legacy. The stately white columns of the Lyceum, the university’s oldest building, watch over the campus just as they have since 1848. Red-brick academic halls, some dating back more than a century, frame the landscape, each building full of its own stories. These buildings have witnessed generations of students pass through their doors and remain the foundation of a university that embraces academic excellence and Southern hospitality.
The Ole Miss Physical Plant team, now called Facilities Management, has been the backbone of the campus infrastructure operations for decades. Established in 2014, Facilities Management oversees the upkeep of more than 220 buildings across 3,400 acres and manages the university’s central plant. Their work includes everything from restoring century-old facades to modernizing infrastructure in ways that respect and preserve the university’s historic character.
However, with historic buildings come unique challenges—particularly in energy efficiency and infrastructure performance. Many of Ole Miss’s oldest structures were built long before modern efficiency standards, leaving them with aging HVAC systems, outdated lighting, and poor insulation. While these buildings add to the charm and identity of the campus, they also contribute to higher energy consumption and increased maintenance needs.
In 2018, Dean Hansen joined Ole Miss as the Director of Facilities Management, bringing over 25 years of experience in facilities. Before arriving at Ole Miss, he served as Director of Facilities Services at the University of Texas
Prior to that, Hansen spent more than two decades in various facilities management roles with the U.S. Navy, where he developed expertise in strategic planning, maintenance, and operational efficiency.
Hansen has a deep understanding of the value and impact of energy-efficient operations and facilities. When arriving on campus, he quickly identified the need and urgency to implement infrastructure modernization upgrades to ensure the long-term viability of the campus.
Hansen was not alone in this vision. As he began to articulate and construct a plan to transform the campus infrastructure, a strong team formed around him, including leadership from various other departments and internal support in the Facilities department. In 2019, Hansen began to build a detailed request for proposal (RFP) for an energy savings performance contract (ESPC), which would be available for 13 pre-qualified companies in Mississippi to bid on.
Energy savings performance contracting (ESPC) is a procurement method that enables universities and other public entities to implement energy efficiency projects with minimal upfront costs. Mississippi law mandates that public institutions, including universities, adhere to competitive bidding processes to ensure transparency and fiscal responsibility. While Mississippi’s procurement laws require competitive bidding, the “lowest and best” bid provision allows universities to consider factors beyond the initial bid price, such as life-cycle costs and energy savings. This enables institutions to select energy performance contracts that offer the greatest long-term value, aligning with the university’s financial and sustainability goals.
Nancy McBee, Business Development ManagerEnergy Services,
“In my 30 years in this industry, Ole Miss stands out as one of the most sophisticated clients I’ve had the privilege to work with. The combination of Dean, Mike, Lonnie, and Hughes is a remarkable convergence of talent, experience, and dedication.”
tion project that became deeply embedded in the institution. Interestingly, a benefit of an ESPC model is its flexibility, which the university took advantage of by pulling some onetime projects they were eyeing under the ESPC to move quicker on execution and utilize time-sensitive funding.
Fast-forward to the spring of 2025. Four phases of the ESPC have been completed, with the fifth phase in the works. In addition to the operational efficiencies, infrastructure upgrades, and a substantial reduction in energy costs for the university, many students have benefited from hands-on experience through the various student involvement opportunities.
Energy Services Media (ESM) sat down with Dean Hansen and three of the key individuals who are driving this project and bringing it to life to learn about the early stages of project development, challenges, impact, and student engagement.
ESM: Why did the university explore a performance contract, and what factors drove that decision?
Hansen: At my previous institution, I was privileged to be part of a department and a unit that was very energy efficient in terms of how the campus used and tracked energy. We understood the energy that was coming in, how it was being used, and how it was going out to the various buildings and processes.
When I got here six years ago, initial reviews of the different campus buildings showed that there was a lot of opportunity for energy conservation and energy efficiency, and so that was really the driving factor in why we chose to pursue a performance contract—it was for energy efficiency.
ESM: What were the key benefits of using an energy savings performance contract?
Hansen: The primary benefit of an energy savings performance contract is the fact that we can get projects done without having to use our own capital dollars to pay for them, so they get paid for over time through the savings that are generated by the energy conservation measures that we implement.
ESM: How did you gain stakeholder alignment for the project?
Hansen: When we first considered the project, we were approached by multiple ESCOs. That presented an opportunity for us to do a competitive procurement, an RFP. I spent quite a bit of time doing research and writing an RFP that fit the needs of our campus, which we were then able to compete with multiple firms.
The concept of an energy savings performance contract essentially sells itself. So, when presenting this to the institution’s CFO, he saw the vision right away and understood the financing mechanism and how it worked.
Approval was also required from the Institutions of Higher Learning (IHL) in Mississippi. Since it had been a long time since any university had undertaken a performance contract, there was quite a bit of information sharing and discussion at the board and staff levels before it was approved.
One of IHL’s mechanical engineers on staff came down to take a look at the project, get to know our team and the university as well as Trane’s partnership and involvement, and understand how the cash flow and the financing works.
ESM: Did you leverage any external resources when developing the ESPC?
Hansen: Yes, I relied heavily on the Department of Energy’s website, incorporating many of their model documents into our RFP and contract structure.
ESM: How has this project impacted the university’s budget?
Hansen: While the total value of the projects is small relative to the university’s overall budget, within facilities it has been pretty significant. We spend about $12 million a year on utilities; when we save money, we do not need to increase the budget year over year. It has allowed us to keep our utilities budget flat despite increased enrollment and a growing building footprint.
ESM: What advice would you give to other university facilities teams considering an ESPC?
Hansen: For other universities that are considering an ESPC, I can’t emphasize enough the value of preparation going into it. Educate yourself on the process, financing mechanisms, and contract details.
Some schools and agencies may not have the expertise or resources to fully navigate the complexities of energy performance contracts, which can leave them vulnerable to less-than-ideal agreements. I’ve seen cases where schools have faced challenges due to a lack of information about the process. That’s why research is so important—understanding what a project entails, setting clear expectations, and even knowing the right questions to ask from the start.
This is especially true for some K-12 schools, where staffing and experience in facility management can be limited. In these cases, working with a third-party firm that serves as an owner’s representative can be incredibly valuable. These firms help schools and institutions make informed decisions, ensuring they get the best possible outcomes from their projects.
ESM: Can you speak to Tennessee Valley Authority’s (TVA) role in the project?
Hansen: TVA has been an unexpected but significant benefit. Their rebate programs have provided hundreds of thousands of dollars in incentives for our projects.
The paperwork, inspections, and all the stuff that goes into qualifying and receiving those rebates—if we had to do all that on our own, we probably wouldn’t be able to. Our ESCO partner has been really instrumental in helping us navigate that. They handle it from start to finish, and then the rebate checks come right to us as an added benefit.
TENNESSEE VALLEY AUTHORITY
ESM: What were some challenges you faced, and how did you address them?
Dunnavant: With any project, there were a few things missed in the audits, but for this reason, we had built in a contingency budget. As we progressed through phases, we adjusted based on what we learned, but we stayed within our contingency budget.
One of the more complex challenges of taking on a project like our LED lighting upgrade—even to a lesser degree, the controls—was managing the work in occupied campus buildings. Careful scheduling and clear communication with occupants were essential. It was important to inform them in advance about what was happening to avoid any surprises.
For the LED project alone, we upgraded nearly 50,000 fixtures across 94 buildings, and without proper planning and management, it could have been disruptive. However, we received overwhelmingly positive feedback once we explained the benefits—improved lighting, lower energy costs, and reduced long-term maintenance. As we moved from building to building, the response was largely positive.
A project of this scale requires extensive communication because we’re dealing with thousands of people—faculty, staff, and even students in classrooms. From the start, we focused on getting communication right.
At Ole Miss, we had strong support from the Chancellor’s Office and the Vice Chancellor for Administration and Finance. We also worked closely with our system of building mayors or managers, who served as key contacts to distribute information and address questions. Some concerns came up, like whether LED lighting would cause headaches or be too bright. But during that same period, a separate project, we also constructed new buildings with all-LED lighting, and people walked in without noticing a difference.
However, in buildings where older fluorescent lighting had deteriorated, the contrast was striking. We had people step off the elevator and wonder if they were in the right building because the colors and lighting levels had changed so dramatically. The difference was immediately noticeable.
ESM: How does working with an ESCO differ from traditional contracting? Dunnavant: We took a long-term big-picture approach to this project, and an ESCO could provide that long-term partnership because you can’t do it all at once; it depends on annual funding. There is always a backlog of projects, whether it’s mechanical equipment upgrades, controls improvements, or other infrastructure needs.
Mike Dunnavant is the Associate Director of Facilities Operations with 40-plus years of experience in facilities management. Dunnavant has been a critical resource in the development and implementation of the energy savings performance contract.
ESM: What were you looking for in an ESCO partner?
Dunnavant: We wanted a long-term strategic partner—not just a vendor completing isolated projects. Our goal was to have an integrated approach to campus energy management, ensuring all initiatives worked together efficiently. Experience, stability, and a willingness to engage with students were also key criteria.
When projects are done piecemeal, as they were for decades here, you end up with a patchwork of systems that don’t integrate well. We wanted a partner who truly understands the campus and the business— one that learns the campus and becomes a long-term collaborator, not just with facilities management but also with other key groups, like our engineering departments and the Facilities Planning Department.
It’s not just about addressing current needs; it’s about planning for the future—considering our new central plant under construction, the new electrical substation, and our evolving energy demands. We needed a contractor who takes a holistic approach, looking beyond a single project to a long-term strategy rather than completing a contract and potentially disappearing for years.
ESM: How has staff training factored into the project?
Dunnavant: Our staff has received training, especially on the controls side—both from the current energy services contrac tor and the controls vendor—which has been extensive.
We had been using older-generation building automation sys tems on campus, and our team was accustomed to the old-fash ioned coding methods that had been in place for decades. Now, with modern systems largely shifting to drag-and-drop pro gramming, it was a completely new experience for them. There was some initial resistance, but we made a point to include them in the process early on to gain their buy-in. Over time, they’ve really embraced the new system and appreciate its benefits.
The controls contractor has also provided hands-on training, bringing in actual setups for them to work through various phas es of the system. They’ve gained a much deeper understanding of how it all works. So far, we have six or eight buildings running on the new system, with plans to migrate another 100 or so over the next few years. The controls training has been a significant effort, and it’s been instrumental in the transition.
The University of Mississippi’s energy savings performance contract (ESPC) has evolved into a broader collaboration. Alongside critical energy efficiency upgrades, the initiative has provided hands-on learning experiences for students in engineering, business, and sustainability programs.
Engineering Engagement: Senior capstone projects have incorporated real-world campus energy challenges, allowing students to analyze and propose solutions that align with ongoing infrastructure improvements. Several participants have transitioned into full-time roles in the industry.
Business Collaboration: Marketing students explored the feasibility of a potential solar PV project, gaining experience in energy services sales and project analysis through a semester-long assignment.
Sustainability Initiatives: Micro-internships have supported data collection for the university’s AASHE STARS rating, while a campus-wide digital media contest promoted awareness of a major LED lighting project.
University leaders recognize that integrating students into these efforts has strengthened the program, turning a traditional energy project into a true educational partnership.
From my perspective, I needed to communicate our challenges effectively. Having those issues quantified helped ensure I could do that. We had solid data to support our concerns and gained a better understanding of some existing issues—ones we knew were there but didn’t fully understand.
Trane was able to identify and clarify these problems, essentially putting a name and face to them, which has been incredibly beneficial.
ESM: Prior to 2021 what were some pain points with the facilities and equipment? How is the ESPC solving those problems?
Weaver: Lighting was a significant focus for us, as we were spending a great deal of maintenance labor on it. We still had fluorescent lighting across parts of the campus, so upgrading to LED has been a major improvement. The lighting quality has increased, maintenance costs have decreased, and where it made sense, we implemented automation to further enhance energy savings. Overall, it’s been a positive change for the campus.
ESM: What infrastructure upgrades are a part of this project?
Weaver: In addition to lighting, we’ve also completed some control projects as part of this effort. Right now, much of the audit is focused on mechanical systems, which involve substantial work. Like many college campuses, we have a significant backlog of deferred maintenance—there’s a long list of projects that need attention.
This type of project, and the performance contract model, provides an opportunity to address those issues in ways that capital funding alone couldn’t. Capital budgets can only stretch so far, and leveraging this approach has been a major financial benefit to the campus.
Nancy shared the scope of Trane’s work on campus while also expressing interest in broader engagement with the university beyond its ESPC.
We discussed how Trane could align with our programs, from recruiting students and building a talent pipeline to engaging in the classroom and collaborating with faculty on curriculum development. As a public university, we also have an obligation to serve our surrounding communities, so we worked with Trane Technologies Foundation and Corporate Social Responsibility teams to identify common goals that the university could partner around.
ESM: Can you describe the real-world experience these students are gaining and why these opportunities are important?
Miller: One of our early discussions focused on how Trane could support our educational mission. An obvious way to engage and work with the engineering school and get involved in the classroom is through senior projects, which was identified as an early next step.
Working with colleagues and faculty in the engineering school, we took a look at Trane’s interests and existing projects they had in place at the university to understand how they could tie into student learning.
It is something that continues to see success for both organizations. Trane has built strong visibility among university
students, which has developed an emerging talent pipeline for them. Our students have benefitted from applied learning and professional development programs Trane representatives have helped facilitate, from being able to go on-site and see different facilities that we have at the university that a lot of students probably don’t even realize are here to some great career opportunities, from internships to fulltime hires for our students.
ESM: What is the future of these student-related initiatives, particularly those aligned with the performance contracting project?
Miller: I think it will always go back to what type of projects Trane has in place with the facilities management team, but it’s only poised to grow. Initially, we started with the projects we had in place, but then we realized we were looking at all this energy data. That resulted in our students getting involved in data science classes. So, as Trane’s relationship and involvement with the university continue to expand and evolve into future phases, as I think it has already done, we are going to keep seeking other ways to involve them in our educational programs.
The project is already showing results, and its full impact is poised to grow even further as the university is set to launch the fifth phase in April, which includes chilled water loop correction and optimization, building automation systems, major HVAC upgrades, and duct sealing. The university’s success is due to many factors, but the primary factor is leadership across departments. From senior leadership to boots-on-the-ground technicians, everyone is aligned on the value, opportunity, and vision. This can be attributed to the foundation Hansen, Dunnavant, Weaver, and Miller laid in the early stages of the development and implementation of the ESPC and their engagement with the university’s energy service company partner.
• Facilities Management
• Facilities Planning
• Procurement
• Office of the Chancellor
• Office of Finance & Administration
• Business Office
• School of Engineering
• School of Business Administration
• Office of Sustainability
• Ole Miss Data Science Institute
• Division of Outreach
• Office for Research and Economic Development
To date, the ESPC includes five phases to align with financial and operational priorities.
FEB 2021
2021SEPT 2021 Preliminary Assessment
Awarded | October 2022
Construction Phase Completed | June 2023
Contract Term | 20 years Contract Value | $5.9M
Total Projected Savings | $1.46M ($73k/year)
Rebate Amount | ~$72,000
Federal Grant Funding | $5.9M HEERF Funds
Awarded | February 2023
Construction Phase Completed | February 2025
Contract Term | 20 years Contract Value | $9.9M
Total Projected Savings | $13.80M ($690k/year)
Rebate Amount | ~$260,000
In the Fall of 2022, Higher Education Emergency Relief Funds (HEERF) became available for ALC control upgrades in 3 buildings; in order to use the funding before they expired, the university decided to pull the scope under Phase 1 of the ESPC. This is a non-traditional approach; typically, projects are awarded after the Investment Grade Audit (ASHRAE Level III) is completed and reviewed by a 3rd party, but it was critical for the university to move quickly to take advantage of the funds.
ECMS
Direct digital controls installation on 3 campus buildings – upgrading from old pneumatic controls systems, coil cleaning and retro-commissioning.
Awarded | August 2023
Construction Phase Completed | November 2024
Contract Term | 1 year Contract Value | ~$1.9M
Total Capital Avoidance Amount | $1.9M
Once the lighting audit was completed during the ASHRAE Level II audit, it did not require a 3rd party Investment Grade Audit review, so the university decided to move forward with LED Lighting for 93 campus buildings.
ECMS
LED Lighting Upgrades and Lighting Controls on 93 campus buildings, ~4.3M square feet.
Awarded | April 2024
Construction Phase Completed | February 2025
Contract Term | 12 months Contract Value | $350,000
Total Capital Avoidance Amount | $300,000
Specialized lighting project, the university opted to treat it as a separate phase.
ECMS
Specialized LED Lighting for House Lighting in Ford Theater.
At the time Trane was completing its audits, the university was designing a new 3,000-ton chilled water plant to add to its loop. For the new chiller plant to keep the project timeline intact and ensure the university received the most efficient equipment with the lowest total lifecycle cost rather than just the lowest first cost, the university elected to use the ESPC project.
ECMS
(2) 1,500 ton Centrifugal Chillers & (2) 250 ton Heat Recovery Chillers for new Central Plant still under construction.
Awarded | Projected April 2025
Construction Phase Projected Start | Projected April 2025
Construction Phase Projected Complete | Projected November 2026
Contract Term | 19 years Contract Value | ~$10M
Total Projected Savings | $10.58M ($556k/year) Rebate Amount | ~$630K
ECMS
Chilled Water Loop Correction & Optimization, Building Automation Systems on 15 buildings and 4 chiller plants, major HVAC upgrades at 4 campus buildings, and Aeroseal duct sealing at 7 buildings.
BY CHADD CURRIER
Energy Savings Performance Contracts (ESPCs) allow public and private organizations to implement energy efficiency projects and facility improvements with limited to no upfront capital costs. An Energy Service Company (ESCO) works with the organization to identify, design, finance, and implement Energy Conservation Measures (ECMs). The annual cost savings are used to pay for the efficiency upgrades during the contract term, and any excess savings, in addition to post-contract term savings, accrue directly to the client. An ESPC involves four primary stages: Pre-Development, Development, Implementation, and the Performance Period. One of the first steps during pre-development is often a Preliminary Assessment (PA), also referred to as a Feasibility Study, to identify potential ECMs, determine project savings ranges, and an estimated project budget. Some organizations are hesitant to pursue an ESPC because of cost concerns, complexity, or uncertainty of its requirements, but the first step of an ESPC, the Preliminary Assessment, is low risk and easy to initiate.
A PA is the first step of an ESPC used to determine the project opportunities and to ensure the outcomes would meet the expectations of the organization. It serves as an initial evaluation of a client’s current energy usage, the condition of facility systems (like lighting, HVAC, insulation, etc.), and any potential areas for energy efficiency improvement. This may include but is not limited to, evaluating potential energy and water cost savings, energy unit savings, building conditions, energy-consuming (or water-using) equipment, and usage hours or occupancy.
The objective is to give the client enough information to make a confident decision about proceeding with an ESPC.
A high-level audit and data provided description of a feasible project based on the ESCO’s walkthrough A detailed audit and proposal
Expected to give client enough information to make a confident decision about proceeding
Expected to be exact in pricing and savings, or to reflect a complete evaluation
A PA takes about 30 days to complete. During this time, the ESCO conducts site visits, catalogs data, and creates a document summarizing the entire assessment.
There are many advantages to choosing to conduct a PA. Most significantly, it is both easy and low risk because:
1. No Upfront Financial Commitment or Investment by the Client ESCOs typically offer PAs for little to no cost to the client. Thus, organizations can explore the potential for an ESPC without committing to a significant financial investment. Since ESCOs have a vested interest to deliver the most energy savings as possible, the client can be assured that the assessment is targeted toward the clients needs and achievable.
2. No Obligation to Follow Through with Assessment Results (Go/No-Go Decision)
At the conclusion of a PA, organizations are not bound to proceed with the suggested improvements or the project. There is no financial penalty or long-term commitment for choosing to not proceed with the project. Thus, risk is significantly minimized with the implementation of the PA.
3. Data-Driven Decision Making
It provides the client valuable data to make an informed and confident decision to take action. If the organization elects to go through with the proposed ESPC, the client can feel confident in their decision with the support of site-specific data as justification. In the event that the organization does not go through with the ESPC, the organization still gains an immense amount of data about its facilities. Either scenario results in benefits for the organization.
4. Limited Facility Disruption
It is a straightforward process, requiring limited time by your staff and minimal disruption to the client’s facilities, and significantly aids in the decision process.
5. Quick Identification of Benefits and Low-Cost Improvements
Additionally, it may help gauge the return on investment before any work begins based on energy savings projections and financial analysis. It reveals a range of simple to complex improvements that yield immediate energy savings. Additionally, the client can establish a good long-term partnership with the ESCO by being able to provide feedback on the outcome of the PA.
By the end of the assessment, the client should have a clear understanding of the recommended ECMs, potential savings, technical feasibility, and a preliminary financial overview of the project. After reviewing the contents of the PA, the following options are available for the organization:
1. Go Decision — The organization reviews the plans outlined in the assessment and elects to proceed with the ESPC. An Investment Grade Audit (IGA) then occurs with this information, confidence, and outline regarding the project.
2. Modification of ESPC — The customer’s team reviews the plan outlined in the assessment and provides inputs and preferences that align with their energy goals and requirements.
3. No-Go Decision — The organization reviews the plan outlined in the assessment and decides to not proceed with the ESPC. However, the organization leaves with valuable data and recommendations for their facilities.
The PA is the “easy” and “low risk” entry point into an ESPC project. It serves as a stepping stone, providing valuable insights into energy-saving opportunities without significant financial or operational risks. By understanding the potential benefits and feasibility upfront, organizations can make confident, informed decisions about whether to move forward with more extensive energy efficiency projects. It’s the perfect first step for those looking to reduce energy costs, improve sustainability, and ensure long-term savings with minimal initial risk.
CEG Solutions (CEG) is a national leader in energy savings performance contracting. CEG partners with clients to deliver comprehensive solutions that improve energy and water efficiency, enhance energy security, protect the environment, and save money. As a turnkey design-build contractor, CEG identifies, designs, engineers, and implements these solutions at little or no upfront cost to your organization.
Contact Chadd Currier to learn more at chadd.currier@cegsolutions.com.
Partner with an Energy Service Company today for a more efficient tomorrow.
Since 1990, ESCOs have delivered:
⚡ $70B in projects
BY JOSH HOWES
There’s been a lot of excitement in the public arena around the Section 179D tax deduction since it was expanded in the Inflation Reduction Act (IRA), and rightfully so. For public universities 179D provides an opportunity to provide some additional funds for your retrofit project and build a better relationship with your energy service company (ESCO).
Interior lighting systems, HVAC, hot water systems, and the building envelope (walls, roofs, windows, doors, etc.) all qualify for the 179D tax deduction, and they are very common in retrofit projects. Due to the low baseline standards, most projects that include these energy efficiency measures will qualify for some amount of 179D money. The baseline for 179D is ASHRAE 90.1-2007 through the 2026 tax year, which makes the deduction a relatively sure bet.
For public energy efficiency improvement projects, the public building owner must allocate the 179D tax deduction to a designer of one of the energy efficiency measures in the project. The designer is often an ESCO on these types of projects. The questions the public building owner must ask the ESCO are 1) will you take the 179D deduction and 2) will you share it?
In some cases, the ESCO may not require the 179D deduction to support their project, and if they do pursue it, they may have specific plans for its allocation. A conversation needs to happen, preferably prior to construction, between the owner and ESCO about how the 179D deduction will be handled. This is where the opportunity to build a mutually beneficial relationship between the building owner and ESCO presents itself.
If the project qualifies, the ESCO would reduce its corporate profit by the deduction amount. The tax savings realized would be found by multiplying the tax deduction amount by the company tax rate, which is typically around 20%. While 179D isn’t going to be enough to fund the project, it is an opportunity that should be evaluated. You could be leaving savings on the table.
It’s necessary for both parties to work together to find value in the 179D deduction. The building owner must sign over the tax deduction to the ESCO in order for them to claim the 179D tax deduction. The ESCO must deliver an energy-efficient project that qualifies for 179D and results in an acceptable return on investment.
The 179D tax deduction should be discussed at the beginning of the project. Considering the value of 179D is relatively small compared to the cost of the project, aligning on the opportunity early sets a good tone for the project and can be used to build a better relationship between the owner and ESCO with the potential to con tribute additional savings to the project.
The §179D Energy-Efficient Commercial Buildings Deduction was established under the Energy Policy Act of 2005 to encourage energy efficiency in commercial buildings. Initially intended as a temporary incentive, it provided a tax deduction of up to $1.80 per square foot for installing energy-efficient systems in lighting, HVAC, and building envelopes. In 2020, the deduction was made permanent through the Consolidated Appropriations Act. The Inflation Reduction Act of 2022 expanded the benefit further, increasing deduction amounts.
Josh is a Professional Engineer licensed in all 50 states and has been an advocate and leader in all things related to the 179D tax code since 2011. In 2013, he founded Blue Energy Group, an engineering firm that specializes in commercial building energy tax incentives, partnering with building owners, energy service companies, accounting firms, design-build firms, and renewable energy developers to maximize energy tax benefits.
Contact Josh Howes to learn more at josh@bluergy.com
The University of Illinois Urbana-Champaign (U. of I.) has established itself as a leader in campus sustainability and infrastructure modernization using energy performance contracts (EPCs), having completed six projects across campus since 2013. Facing the challenges of aging infrastructure, deferred maintenance, and rising operational costs, the university has embraced EPCs as a key tool to finance critical energy efficiency projects. This approach has allowed the U. of I. to upgrade its facilities, improve energy efficiency, and support its longterm climate leadership commitments—all while lowering financial risk using guaranteed energy savings.
Urbana campus sustainability targets are outlined in the Illinois Climate Action Plan (iCAP), which includes being carbon neutral as soon as possible and building resilience to climate change in the local community. As part of this initiative to reach iCAP energy objectives, EPCs have played a critical role in accelerating energy efficiency improvements across campus, from research facilities to chilled water and power plants. The university’s ability to align stakeholders, implement measurement and verification (M&V) protocols, and maintain a structured approach to EPCs has made it a model for other institutions facing similar challenges.
EPC 1: COLLEGE OF VETERINARY MEDICINE 2010
EPC 3: COLLEGE OF ENGINEERING 2014
EPC 2: OAK STREET CHILLER PLANT 2011
EPC 4: ABBOTT POWER PLANT 2015
EPC 5: LABORATORY FACILITIES 2016 EPC 6: CAMPUS CWS OPTIMIZATION 2022
To better understand how the U. of I. has successfully integrated EPCs into its campus infrastructure planning, Energy Services Media (ESM) spoke with Sylvia McIvor, Associate Director of Energy Performance Contracting at Facilities & Services (F&S). McIvor brings a diverse background in utilities, energy service companies (ESCOs), and now in higher education. With experience both on the provider and client side of EPC projects, she offers valuable insights into the university’s procurement process.
ESM: Can you provide some context on the university’s financial challenges?
McIvor: Like many public universities in the state, the university faces significant financial challenges due to a long-term decline in state funding and rising operational costs. Since 2009, Illinois public universities have experienced a 17.2% reduction in state general funds for operations.
approach to EPCs, the challenges of implementing these projects in a public setting, and how the institution plans to sustain this model for the future.
ESM: Why has the university continued to choose EPC as a procurement model for campus infrastructure upgrades?
McIvor: The university has continued to choose EPC as a strategic procurement model because it enables critical infrastructure upgrades, utilizing utility savings to pay for the projects over time. EPCs leverage guaranteed energy savings—measured and verified through a structured process—to fund improvements, ensuring fiscal responsibility while advancing campus sustainability goals. This approach not only accelerates project implementation but also addresses deferred maintenance by replacing outdated equipment with new, high-efficiency systems. By partnering with firms that specialize in energy conservation, called energy service companies (ESCOs), we can make meaningful progress toward our iCAP goals while enhancing overall building performance and operational efficiency.
This decline in state appropriations for higher education—amounting to a $530 million reduction—has forced eleven of the twelve Illinois public universities to raise tuition and fees over the past 16 years.1 As a result, the U. of I. has had to be strategic in its financial planning, balancing affordability for students while ensuring the necessary reinvestment in campus infrastructure. Meanwhile, the university’s backlog of deferred maintenance continues to grow.
To address these financial challenges, the university has prioritized self-funded solutions, like EPCs, which allow for critical infrastructure upgrades without relying on state appropriations for specific projects. By leveraging guaranteed energy savings, the university can modernize facilities, improve sustainability, and reduce deferred maintenance, all while conserving fiscal resources.
ESM: Does the university carry any risk when using the EPC model?
McIvor: While EPC provides guaranteed energy savings, the process carries similar exposure risks as with any major construction project. These include potential disruptions to research activities, unforeseen site conditions, and the complexities of M&V. While the ESCO contractually guarantees savings, the goal of these projects is to reduce energy consumption and advance sustainability efforts—not simply to be reimbursed if savings fall short. To mitigate these risks, the university takes a structured and proactive approach, including utility-level metering in all buildings, rigorous ESCO vetting, ongoing performance monitoring, and careful project execution planning to minimize possible inconveniences to students, faculty, and staff. With six projects executed on campus, we have “lessons learned” for varied types of facilities, which help us further mitigate risks with every new project. By prioritizing energy conservation and operational efficiency, the university ensures that EPCs remain a valuable tool in achieving long-term sustainability and infrastructure renewal goals.
ESM: How has the university gained stakeholder alignment on the value of EPCs?
McIvor: Gaining stakeholder alignment is key to implementing successful EPCs. It helps to have a champion at a high enough level that can promote the value of EPCs to executive management and leadership teams to gain buy-in.
Taking advantage of state resources can help create trust internally; for example, the university worked with an EPC subject matter expert in the early years through the Illinois Department of Commerce and Economic Opportunity (DCEO). Having an outside voice who can speak to the history of EPC and how it is used nationally by other higher education institutions and the federal government gives the procurement process credibility and legitimacy.
As we work on new projects, the proven success we have seen allows us to position EPCs as a strategic procurement option.
Overall, the university has done an excellent job at engaging faculty, administrators, facilities teams, and campus departments by demonstrating the financial, operational, and sustainability benefits of this model.
ESM: What is the most successful aspect of the framework the university built to execute EPC projects?
McIvor: The most successful aspect of the university’s EPC framework is its structured, scalable, and collaborative approach, which ensures both efficiency and long-term impact. The university has developed a robust model that integrates key stakeholders, leverages existing campus infrastructure, and maximizes energy benefits. The most successful pieces of our framework are;
• Centralized facilities and services oversight: A dedicated team that manages all EPC projects, ensuring consistency, adherence to university project delivery processes and standards, risk mitigation, and alignment with campus priorities.
• True M&V: The university’s existing utility infrastructure and building metering capabilities allow for precise tracking of energy consumption and guaranteed savings.
• Strategic facility groupings: We have found that energy savings generated in one building can help fund deferred maintenance in another, optimizing financial and operational efficiency. We also maintain a database of buildings, sorted by their utility use, and target those facilities for EPC projects.
• Cross-disciplinary collaboration: EPC projects are informed by input from crafts and trades teams, retrocommissioning experts, EMS controls/ recommissioning teams, and campus departments, ensuring that known facility issues and unfunded energy-saving opportunities are addressed.
• Procurement & compliance oversight: The University Office of Capital Programs, Real Estate and Utility Services ensures all EPC projects adhere to state regulations, procurement standards, and legislative requirements.
“As we work on new projects, the proven success we have seen allows us to position EPCs as a strategic procurement option.”
ESM: Over the past 16 years, EPCs have been used, how has the F&S team evolved to manage the projects and ESCO partners?
McIvor: F&S’ Utilities & Energy Services (UES) division at the university has evolved to better manage EPC projects and partnerships with ESCOs. What began as a single-person initiative with management support has grown into a dedicated EPC team of three professionals with diverse expertise, bringing a combined 40+ years of EPC experience and 50+ years of university experience across various disciplines. Over the past 16 years, our team’s focus has been to;
• Expand internal expertise: The team now includes specialists with backgrounds in controls installation, inspection, recommissioning, project management, utilities, and business/account management, allowing for a well-rounded approach to EPC execution.
• Data-driven project management: Enhanced tracking tools and real-time monitoring ensure projects are delivering on their energy savings guarantees.
• Stronger ESCO partnerships: The team has shifted toward a long-term, collaborative approach with ESCOs, focusing on continuous project optimization and accountability.
• Alignment with campus-wide energy strategies: EPCs are now more integrated with the iCAP and long-term sustainability goals, maximizing their impact.
ESM: What type of challenges have presented themselves while using EPCs, and how did the F&S team overcome them?
McIvor: While EPC has been a successful strategy for the university, several challenges have emerged over the years.
We have seen stakeholder skepticism about the guaranteed savings. There was initial hesitation about EPCs due to concerns over whether projected savings would materialize. F&S addressed this by implementing robust M&V protocols, ensuring transparency and accountability in tracking energy savings.
The university has experienced funding constraints. As state funding for infrastructure projects remained uncertain, the university used internal financing within UES to sustain EPC investments. Additionally, the university has leveraged utility incentives and cost-sharing models, including the Office of the Provost’s matching funds program, which allows departments to contribute toward EPC projects while receiving financial support.
We’ve had project complexity in older buildings. Many campus facilities have unique infrastructure challenges, making EPC implementation more complex. The F&S team mitigates this risk by conducting detailed pre-project audits and engineering assessments to develop tailored and fully designed solutions.
We have been challenged to identify new savings opportunities. The university is a highly energy-conscious campus with active retrocommissioning and EMS controls/recommissioning teams that continuously optimize building efficiency. While this is beneficial and provides savings, it also makes it more challenging to identify large-scale savings for EPC projects. To overcome this, these UES departments work closely with one another to pinpoint facilities and systems that have not yet been optimized, ensuring a pipeline of viable EPC opportunities.
Managing multiple ESCO partners has been complex. With multiple projects running simultaneously, maintaining consistency across vendors is critical. F&S has implemented standardized reporting, oversight protocols, and regular performance reviews to streamline project management and ensure accountability.
The EPC team has addressed each challenge through strategic process improvements and stakeholder collaboration.
ESM: What typical funding structures are used – bonds, tax-exempt lease agreements, etc. to finance EPC projects?
McIvor: The university can employ a combination of financing mechanisms, in addition to the internal financing, to ensure financial sustainability while maximizing project feasibility, including:
Tax-Exempt Lease Purchase Agreements: TELPs allow the university to finance projects with repayments made using guaranteed energy savings, ensuring a cost-neutral approach. This financing mechanism has been used on one project on this campus and one at the University of Illinois Chicago Bond Financing: When EPC projects align with larger capital initiatives, bonds may be utilized to fund infrastructure upgrades. NOTE: To date, this has not been a source of EPC project financing on the Urbana campus.
Utility Incentives & Other Grants: The university actively pursues utility rebates and external grant opportunities to offset project costs and improve the financial viability of EPC investments.
ESM: Where do you see the future of this EPC work going? What’s next for the university?
McIvor: The future of EPC at the university is focused on streamlining and accelerating project implementation to keep ESCOs engaged and encourage competition, executing projects in utility production facilities as well as campus buildings, executing more “small” projects (under $5M), expanding into new facility types, and leveraging emerging technologies to drive deeper energy efficiency and sustainability improvements. It’s a balance of finding the “low-hanging fruit” to help pay for higher-cost deferred maintenance projects in a group of energy-intensive campus buildings and secure the funding commitments to execute these projects. We have several initiatives, which include:
• Scaling the small project program: The university aims to expand its sub-$5M EPC initiative, allowing for more frequent, faster-executing projects while creating opportunities to engage a broader range of ESCO partners.
• Energy management and smart buildings: The integration of analytics and automation will further optimize energy performance, improving operational efficiency across campus facilities.
• Targeting research-intensive facilities: Energy-intensive labs and research buildings present significant opportunities for EPC-driven savings and modernization.
ESM: What advice can you provide to other higher education facility leaders who need infrastructure upgrades or are interested in exploring an EPC?
McIvor: For higher education institutions exploring EPC as a strategy for infrastructure upgrades, success hinges on careful planning, strategic stakeholder engagement, and strong project execution. From the outset, it’s critical to secure partnership with a high-level organizational champion who can help drive the initiative forward, garnering executive buy-in and aligning key decision-makers with the long-term benefits of the program. I also recommend:
• Engaging stakeholders early: Building consensus across faculty, administration, facilities teams, and financial officers ensures campus-wide support and long-term buy-in.
• Implementing a rigorous M&V process: A strong M&V framework is critical to tracking savings, holding ESCOs accountable, and demonstrating project success.
• Aligning EPCs with sustainability goals: Connecting EPC projects to carbon reduction, resilience, and campus sustainability plans (such as the university’s iCAP goals) can enhance funding opportunities and institutional support.
• Standardizing contracting and procurement: Developing repeatable, structured contracting models simplifies the process, reduces administrative burden, and allows for faster project deployment.
• Leveraging multiple funding sources: Institutions should explore tax-exempt financing, utility incentives, and internal funding pools to maximize financial feasibility.
• Prioritizing high-impact buildings first: Universities with aging infrastructure and limited retrocommissioning and recommissioning programs can achieve significant savings and infrastructure improvement through EPCs.
As the university continues its work toward decarbonization and infrastructure modernization, EPCs remain a core strategy for advancing its sustainability goals. Since 2009, the Urbana campus has executed over $109M of EPC projects, yielding $140M in guaranteed utility savings. To date, eighteen buildings have been upgraded through the EPC delivery method, addressing over $67M in deferred maintenance. By utilizing performance-based contracting, the university has demonstrated a replicable model that balances fiscal responsibility with environmental impact.
The success of the U. of I.’s EPC initiatives demonstrates the importance of clear procurement structures, internal stakeholder alignment, and robust M&V practices. With a dedicated team overseeing these projects and a commitment to longterm energy conservation, the university is poised to continue leading the way in higher education sustainability and campus infrastructure upgrades.
To date, eighteen buildings have been upgraded through the EPC delivery method, addressing over $67M in deferred maintenance.
EPC 1: COLLEGE OF VETERINARY MEDICINE
Awarded | March 2010
Construction Phase Start | December 2010
Construction Phase Completed | 2013
Contract Term | 18 years
Contract Value | $21.2M
Total Projected Savings | $24.4M
Energy Service Company | Energy Systems Group
Rebate Amount | $1.8M
ECMS
Lighting retrofits, occupancy sensors, daylight harvesting, water conservation: DX compressors/sterilizers, steam trap replacement, coil cleaning, duct cleaning, AHU upgrades/ replacements, motor upgrades, doors/weather-stripping, chilled water variable flow reset, cooling tower modifications, fume hood conversions, demand control ventilation, loading dock stat relocation, VAV retrofit, roofing, ward displacement ventilation control, insulation, SAC South Wing improvements.
Awarded | August 2011
Construction Phase Start | January 2012
Construction Phase Completed | 2013
Contract Term | 10 years
ECMS
Contract Value | $11.1M
Total Projected Savings | $12M
Energy Service Company | Siemens Industry, Inc.
Rebate Amount | $952K
Two high-efficiency electric drive chillers, cooling tower mods, and associated support equipment.
EPC 3: COLLEGE OF ENGINEERING
Awarded | August 2014
Construction Phase Start | December 2015
Construction Phase Completed | 2020
Contract Term | 20 years Contract Value | $40.5M
Total Projected Savings | $41.9M Rebate Amount | $196K
Energy Service Company | Energy Systems Group
ECMS
New clean room and wet laboratory, occupancy sensors, steam trap replacement, centralized water cooling for laboratory equipment, direct digital control systems, air-handling unit replacements and retrofits, pipe insulation, air-duct cleaning, heat recovery system modifications, exhaust fans, variable air volume boxes, and highefficiency fume hoods.
EPC 5: LABORATORY FACILITIES
Awarded | October 2016
Construction Phase Start | January 2019
Construction Phase Completed | 2024
Contract Term | 20 years Contract Value | $32.5M
Total Projected Savings | $58.2M Rebate Amount | $615K
Energy Service Company | Schneider Electric USA
ECMS
Direct digital controls system, variable air volume conversion, air handling unit replacements and upgrades, window replacement, seal building envelope, laboratory exhaust upgrades, new heat recovery chiller, and LED lighting retrofit
Awarded | November 2015
Construction Phase Start | August 2016
Construction Phase Completed | 2018
Contract Term | 10 years Contract Value | $2.1M
Total Projected Savings | $2.1M
Energy Service Company | NORESCO
ECMS
Water-cooled chiller and chilled water coils.
Awarded | September 2022
Construction Phase Start | November 2023
Construction Phase Completed | 2024
Contract Term | 10 years Contract Value | $2.49M
Total Projected Savings | $3.2M Rebate Amount | $750-$862K
Energy Service Company | Veregy Central, LLC
ECMS
OptimumLOOP control software at Oak Street and North Campus Chiller Plants to enhance system performance, using proprietary algorithms to continuously analyze and adjust operations in real-time, optimizing control of chilled water plant equipment for maximum efficiency.
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