New Mexico’s State Energy Program has grown and strengthened over the last several years. Since 2013 they have completed roughly $150 million in Energy Savings Performance Contracting. In the fall of 2019, they were awarded the Race to the Top Most Guaranteed Energy Savings Performance Contract (GESPC) investment per Capita award by the Energy Services Coalition.
Erica worked for the State Energy Department, Energy Minerals and Natural Resources, from 2013 – 2018. She then transitioned to her current role with the General Services Department, Facilities Management. Along the way, Erica has earned several awards. Most recently she was named Energy Manager of the Year by New Mexico’s Association of Energy Engineers and New Mexico’s Energy Services Coalition. We interviewed Erica to get an inside look at New Mexico’s success.
Can you give us a snapshot of where the New Mexico Department of Energy is today, and how it has grown and developed in the past seven years?
It’s grown to a point where the energy department staff is back up. We have come from a point where we had a bare-minimum of eleven staff members in the energy department. Now they’re inching their way up to fifteen, and they have a few more positions that they’re advertising for, so it’s grown. As far as the performance program it has taken off since about 2013. In 2013 the bureau chief Brian Johnson worked very closely with the Energy Services Coalition (ESC). Brian is one of the founding members of our ESC chapter in New Mexico.
He went ahead and did the legwork it takes to run a request for proposal (RFP) to create an Energy Savings Performance Contract (ESPC) price agreement for pre-qualified energy service companies (ESCO). The request for proposal was completed in 2013. In 2014, we awarded several providers. That activity sparked interest.
That same year, 2013, one of our largest universities, New Mexico State University, went through a fifteen-million-dollar performance contract. They greased the wheels; they were the first to go through an ESPC. Through that project, the higher education capital outlay committee saw the benefit of utilizing performance contracting. The committee encouraged and challenged colleges and universities to look at what could be performed through a performance contract and be paid for by utility savings instead of asking the state for capital. With that, along with the price agreement, the program quickly took off from there. All but three of our universities and colleges have either completed an ESPC project or are in some phase of an ESPC.
Could you give us an example of an ESPC that you’re taking advantage of right now?
The project that I’m running right now is an excellent example. It’s a 32-million-dollar project being performed on all of our Santa Fe general service buildings. In total, it is a 1.7 million-square-foot project, and it is going to net us a guaranteed savings of 1.1-million-dollars a year. However, we know it’s going to realize closer to 1.4 or 1.5-million-dollars. It will include energy efficiency in 32 buildings. Nineteen of those buildings will have solar PV installed, including three covered parking structures. One building, in particular, will have energy storage along with PV. That one building, located in our capital, Santa Fe, is the only all-electric building in the state.
This performance contract provided a unique and creative solution to implement solar PV and battery storage to an all-electric state-owned building. This building needed over two million dollars of HVAC and ducting work. There was no way that they could have funded a full HVAC and ducting remodel with capital. But because we were able to bundle it with all the other savings, we were able to realize this project. We will be using that building as a pilot on how to become net zero.
Are you running into any hurdles with that project?
None so far! It has been a perfect storm. We’re getting so much support right now. We are boots on the ground tomorrow (8/1/19). We will do a walk-through to tackle the schedule and rate of production. We have partnered with Trane Inc., our ESPC contractor, they have been really great to work with. We have a good project ahead of us.
From start to finish, you were able to execute the procurement in 8 months, what are some key factors to the quick turnaround?
We were fortunate enough to have several processes already in place, for example, the Energy Savings Performance Contract price agreement for pre-qualified energy service companies (ESCO), the third-party review program, and a Standard Operating Procedure that was created specifically for the General Services Department (GSD).
Another significant factor was higher-up buy-in and decision-maker buy-in. You have to get those decision-makers to buy in because if you can push from above, sometimes hurdles become less significant because of the powers that be. I would also say that your financial team needs to completely understand the process and the concept and how it all flows through their ledgers. Their world is different from our engineering world.
Over the past decade, how has ESPCs impacted the state of New Mexico?
It has freed up capital. We are an oil and gas state, which means our capital is limited to and dependent on the prices for oil and gas. When you have limited capital, anytime you can find a way to complete a project without using all of your capital, it helps. For example, I served on the higher education board for capital outlay. While I was on board, Clovis community college needed funding, and they needed it as soon as possible. The HVAC system was running on one leg, and they needed money. They were going to request 5-million-dollars through a Government Obligation Bond (G.O. Bond). It can take upward of 2 ½ years after a request to see the G.O. Bond monies. There was no way that they were going to make it another 2 ½ years.
We felt that a performance contract would benefit them, so we asked them to look at the performance contracting method. They were able to complete their project before the G.O. Bond money was ever released to the other institutions. And instead of asking for the full five million dollars, they only needed to ask for two million. So, it freed up three million dollars for other institutions. In a capital strapped state, performance contracting is an excellent method to holistically complete your project.
How have you been able to educate your stakeholders and get them on board with the ESPC process?
When I first went to interview with the energy office in 2013, they told me that because of the political climate we were in we did not have teeth. We couldn’t push anybody, but we could be cheerleaders. I took that and said, “ok, we’re energy cheerleaders.” It’s all about finding what your audience’s bottom line is. Does your audience want to save money? Does your audience want to look politically responsible? Are they tree huggers? I lead with that, I’m a tree hugger, I tell everybody, and if you aren’t that’s fine, I’ll hug a tree for you! But if your goal is to save money, well that’s what this process does as well. So, know who your audience is and show your passion, whatever that may be.
The other thing that New Mexico did to support this program is, through a DOE grant, they were able to create a third-party review program. They ran an RFP and got a couple of engineering companies onboard to complete third party reviewing of the performance contracting projects. With that, we were able to provide that extra hand-holding for smaller municipalities or public schools that do not have the expertise on board. For every performance contract, there is a one percent fee that covers the third-party review of that project. They are the ‘owners rep’ throughout the entire process.
New Mexico recently launched the State Building Green Energy Project. The initiative was set to push the state towards achieving energy efficiency. The project will result in lower utility bills and better working environments for state employees. The end goal is to convert 750 government buildings.
Through perseverance and dedication, the New Mexico state energy program has grown to be robust and thriving. With the implementation of the price agreement with Energy Service Companies and the third-party review program, they have been able to provide the resources and structure to start, run, and execute energy savings performance contracting projects.