New Market Study Indicates Western Public Schools and Governments Can Save More Than $800 Million through Performance Contracting

Western Resource Advocates and McKinstry released a new market study indicating that schools and governments in Colorado River Basin states (AZ, CA, CO, NM, NV, UT, WY) can save $859 million annually by using performance contracting to implement energy and water conservation measures.

At a time when western states are looking at all options to save energy, reduce carbon pollution, and conserve water, the report, Tapping the Power of the Market: Financial, Energy and Water Savings, and New Revenue Streams through Performance Contracting in the Colorado River Basin States, presents new research findings indicating performance contracting is a financially powerful tool to achieve these goals. The report shows how government and school facilities would save more than 6 million megawatts of electricity, 4 million cubic feet of natural gas, and 40,000 acre feet of water a year by implementing conservation measures using the performance contracting approach. Those energy savings could power all of Denver’s homes for a year and those water savings could supply more than 150,000 homes per year.

 “The energy and water conservation benefits, as well as the fiscal savings, are staggering,” said Jorge Figueroa, coauthor of the report and Senior Policy Analyst at Western Resource Advocates. “Schools and government need to understand how powerful and financially effective performance contracting can be.”

 Though it’s unfamiliar to many, the performance contracting model, is a smart approach for cities, counties, school districts, and wastewater/water utilities to implement energy and water efficiency improvements in their facilities, the report concludes. Performance contracting is a mechanism that allows public entities, such as a school district or local government, to quickly perform comprehensive energy and water retrofit projects in public buildings using a qualified private energy services company. Savings on water or electric bills resulting from the installation of energy and water conservation measures are guaranteed by an energy services company to exceed the financing costs necessary to implement the energy and water-saving upgrades. If the realized savings do not exceed the financing costs, the contracted energy services company makes up the difference. Innovative governments, schools and other public entities have used performance contracting for more than two decades to save energy and promote renewable sources of energy.

 “This study spotlights a powerful tool to address two of the Colorado River Basin’s most pressing needs: water conservation and energy savings,” said Leslie Larocque, director of McKinstry’s Rocky Mountain region. “We believe this approach can help public entities clear the financial hurdles to implementing important water and energy conservation efforts.”

 Report authors noted that stretching limited water supplies is more important than ever with the over-allocation of the Colorado River Basin as well as extended droughts and growing populations in many western states. The report found that water utilities in Colorado River Basin states could use performance contracting for water meter replacement projects that introduce advanced technologies to not only reduce apparent water loss (resulting from customer meter inaccuracies) by 461,000 acre-feet per year, but to also provide $593 million in additional revenue per year.

 “Drought and water shortages are on the top of every westerner’s mind these days,” Figueroa said. “Installing advanced water metering technologies that pay for themselves with this innovative financing mechanism would help us make really great strides in stretching our water supplies.

 “It might sound too good to be true to build the backbone of drought resilient cities in the West with projects that pay for themselves and generate revenue,” Figueroa added. “But this is what we found. We hope this study educates and alerts water utilities and decision-makers so they can implement solutions faster.”

 For Tapping the Power of the Market, McKinstry and Western Resource Advocates evaluated the amount of water savings, energy savings, and revenue that public entities can realize using performance contracting in the Colorado River Basin states by quantifying: 1) Electricity, natural gas, and water savings in public facilities; 2) Revenue and water savings achievable in municipal water service areas through water meter replacements; and 3) Electricity savings achievable in municipal water supply and waste water treatment systems. For the Executive Summary and Full Report