The Road to Growth, Texas Energy Services Coalition (ESC)

How the Texas Energy Services Coalition (ESC) overcame dormancy and became the largest ESC chapter in the U.S., increasing GESPC growth and engagement throughout the state.

Every state has a unique set of issues, processes, and hurdles when tackling energy efficiency. From navigating special interests to capitalizing on natural resources, finding the right balance between economic health and sustainability can take years to perfect.

Texas is home to the nation’s most concentrated area of natural gas and oil production, as well as being a leading wind provider. The state has a rich history of energy interests influencing policy and legislation at all levels. Over the past decade, Texas has used several programs to advance the cause of energy efficiency while saving money for state agencies and local governments.

Leading the charge is the State Energy Conservation Office (SECO), part of the Texas Comptroller’s office. SECO partners with local and county governments, public K-12 schools, public institutions of higher education, and state agencies to reduce utility costs and maximize energy efficiency. SECO also adopts energy codes for single-family residential, commercial, and state-funded buildings.1

Since its inception in 1973, SECO has served several critical functions, from responding to state fuel shortage emergencies to administering federal energy conservation grants. In its present capacity, the office promotes energy efficiency across Texas and provides energy management services when programs impact expenditures and local property tax rates.2

SECO has experienced quite a bit of success with its capital retrofit and statewide energy demonstration program, the Texas LoanSTAR (Savings Taxes and Resources) Revolving Loan program. The program was launched in 1988 to provide financing to state agencies, universities, public schools, and local government institutions to fund energy efficiency projects. Loans are paid back through energy savings, with an average payback period of 10 years. Since its inception, the program has issued more than 325 loans totaling over $545 million, and these efforts have saved taxpayers an astounding $665 million.

While the Texas LoanSTAR initiative is a proven solution to complete energy retrofit projects in the public sector, the state has developed a new program over the past two decades to supplement LoanSTAR’s capabilities. This new initiative, an Energy Savings Performance Contract (ESPC) program, capitalizes on longer-term, more comprehensive energy savings opportunities. Projects funded via ESPC can utilize a LoanSTAR loan or be completely independent of SECO’s flagship program.

In the early 2000s, several energy performance policies were passed by the Texas state legislature. These policies allowed state agencies, local governments, public K-12 schools, and public institutions of higher learning the ability to enter into an energy performance contract (EPC). At the time, EPCs—also known as energy savings performance contracts (ESPCs) or guaranteed energy savings performance contracts (GESPCs)—were becoming a common contracting mechanism to complete energy efficiency projects with the support of third-party funding.

With the onset of these new ESPC policies, SECO began the process of creating an Energy Services Coalition chapter (ESC). An ESC is a public-private partnership that promotes the benefits of, provides education about, and serves as an advocate for the widespread use of GESPCs by state and local governments. The partnership is formed between the public sector (the state energy office) and private sector (energy service companies). Both parties work together to increase the reach and availability of ESPCs within the state. ESC has state chapters across the U.S. that are managed and overseen by leadership teams generally consisting of a public sector and private sector co-chair. In some cases, larger chapters have other officers, such as a secretary, treasurer, and individuals who coordinate workshops/conferences and public communication. 

SECO’s strong partnership with the ESC chapter is essential to sustaining the state’s ESPC program. The ESPC program is currently led by a single individual within SECO who is responsible for all state-level reporting on energy saved through ESPCs and who is the champion for all projects as they work their way through the various phases of approval. Although SECO does not administer projects or dictate which projects should be prioritized, coordinating energy efficiency projects across the state is a major endeavor. Partnering with an organization like the ESC chapter enables SECO to access more resources and be part of a larger collective voice that propels the value of ESPCs.

Early Lessons Learned

As Texas’ ESC chapter developed in the early 2000s, it faced several unanticipated dilemmas. During the initial outreach and education phase, it received opposition from a surprising source—the public sector. A recently completed ESPC project had come under scrutiny by the state auditor’s office due to a few inconsistencies with the contract. Even though the state had experienced significant progress with ESPCs in general, this one project took on magnified importance in public perception. The fallout created uncertainty, driving pushback against new projects.

The chapter also struggled with communicating a unified message. At the time, the ESC was a fairly new organization and concept for energy service companies; it allowed competitors to collaborate on the growth of ESPCs in a win/win scenario instead of working against each other. Despite the potential power of such a localized organization, at the time, the chapter wrestled with how to best spread the message as a collective unit. The chapter co-chairs quickly realized that formal processes and guidelines would allow the coalition to operate more effectively across the state.

The combination of public sector pushback and internal turbulence made it evident that a firm foundation needed to be created before the chapter could flourish. For a time, the chapter went dormant. The SECO ESPC team began developing the building blocks necessary to facilitate a well-run allied chapter and provide the required support for project development and execution.

The first step was developing step-by-step procedures for implementing performance contracting for both state agencies and local governments. The team developed checklists for certifying various aspects of performance contracting proposals, standardizing and streamlining the process. Certification forms were produced for the legal department, the finance department, and the executive officers to review and sign along each step in the process.

Meanwhile, in 2011, ESC implemented a code of conduct at the national level. In 2016, it followed up with a playbook that outlined best practices for operating a successful state ESC chapter to increase GESPC activity within a state.

In 2013, Texas passed legislation to provide new guidance for cost savings review. Combined with SECO’s internal changes, this ultimately quieted some of the skepticism the public sector had about ESPC projects and overcame negativity from the previous “bad” project. Since then, SECO has continued to carry out its responsibility of information sharing over the last several years, most recently in 2018 when it published ESPC Guidelines for State Agencies and ESPC Best Practices—From the Experts. Both documents provided tremendous detail for those interested in pursuing ESPC projects.

With clarity and effective protocols in place, SECO re-launched the ESC Texas chapter.

Renewed Strength

When the discussion about rebooting the ESC Texas chapter began, many expressed eagerness to be a part of the renewed organization. During the chapter’s dormancy period, energy performance contracting had gained tremendous momentum around the U.S., and the market was growing rapidly. New energy service companies (ESCOs) were entering the market, and current companies were expanding their teams and territories.

Fred Yebra, head of the SECO’s Energy Savings Performance Contract program and the public-sector co-chair of the Texas ESC chapter, stated: “When we rebooted the program, right away there were 75 members and a lot of interest. I think there was an appetite for companies to organize together with the public sector. That’s the unique thing about the coalition: it’s a public-private partnership.”

Notably, Yebra was named the national 2019 ESC Doug Dahle Public Sector Award recipient. This award recognized the incredible work Yebra has completed over the last four years while in his role.

In February 2019, the chapter officially re-launched. Since then, the chapter has been very active: conducting regular public meetings, creating a leadership team, and executing numerous outreach and education efforts. It currently has the largest state team among all ESC chapters, with a public sector co-chair, private sector co-chair, secretary, treasurer, conference/workshop coordinator, and a communications coordinator.

Renewed Trust

As the chapter developed and gained steam, the Texas Facilities Commission (TFC) published information about the savings it had achieved from an ESPC. At that point, the TFC was the only state agency to enter into an ESPC in the preceding decade. The $3.6 million project, contracted with Performance Services, created an annual guaranteed savings of $485,000. In April 2019, the Texas Legislative Budget Board staff released a statement formally encouraging the use of ESPCs.

Progress Through Partnerships

Information sharing, outreach, and education are integral to the continued success of ESPCs. With this in mind, the Texas ESC chapter developed key partnerships with stakeholder organizations like the South-central Partnership for Energy Efficiency as a Resource (SPEER) and the Texas Commission on Environmental Quality (TCEQ).

SPEER is a regional energy efficiency organization targeted at accelerating the adoption of advanced buildings systems and energy efficiency products and services in Texas and Oklahoma. It was formed in 2011 to be a voice for the booming energy efficiency industry in the south-central region of the United States. SPEER has a robust team that executes numerous activities and initiatives that have generated significant impact. Through the collaborative partnership with SPEER, the Texas ESC chapter has used SPEER’s local government program manager to help with communication and outreach.3

TCEQ is an environmental agency for Texas. It strives to protect the state’s public health and natural resources in a manner consistent with sustainable economic development. Its goals are clean air, clean water, and the safe management of waste.4 One of its primary responsibilities is reporting and monitoring emissions across the state. In Texas, 41 counties are designated as non-attainment areas, which means they have air quality worse than the National Ambient Air Quality Standards as defined in the Clean Air Act Amendments of 1970.4

Each year the Energy Systems Laboratory (ESL) at Texas A&M University hosts its annual Texas Energy Summit to bring light to the non-attainment areas and review opportunities to adopt lower emissions. Key sponsors of the event are public and private sector stakeholder organizations like SECO and SPEER. Attendees include policymakers, public employees, nongovernmental organizations, energy service companies, trade associations, professors, and students. The conference aims to explore the intersection of energy systems, emissions reductions, and economic development. During the 2020 summit in November, five themes were consistently promoted: Path to Net Zero Emissions, Electrify Texas, Justice and Health, Clean Energy Jobs and Investment, and Energy Issues in 2021. SECO and the ESC chapter helped organize the event and provided topic ideas related to energy and energy management. At the summit, the chapter committee discussed the benefits of ESPCs and the advantages of working with or being a part of the ESC state chapter. The ESC has quickly become an indispensable resource for energy efficiency in the state of Texas.

Through these partnerships, the Texas ESC chapter increased its influence in all areas of energy efficiency.

The Blueprint for Success

The Texas ESC chapter is an excellent example of resiliency within a state energy office. Every state energy office and every ESPC program has faced obstacles; those hurdles can either hold a program back or provide an opportunity for improvement.

When faced with opposition, SECO took the time to develop a firm foundation that allowed the chapter to succeed. Creating internal checks and balances through checklists and approval processes was a critical cornerstone. Adopting the national code of conduct and chapter playbook set by ESC formed another crucial step. Partnering with thriving organizations within the Texas energy efficiency market (such as the SECO ESPC program and TCEQ) renewed trust and drove the Texas ESC chapter to be a sought-after resource for ESPC projects.

In just two short years, the Texas ESC chapter grew to be the largest U.S. state chapter and is driving an increased interest in energy savings performance contracting.