As part of the 20th anniversary of the Ivanhoé Campbridge Real Estate Chair, the Immobilier Commercial Magazine has published an article on buildings energy efficiency, a commercial and financial potential worth exploring. What is an energy performance contract? What are the advantages? Find out the answers on pages 47-50. Thanks to Marie-France Lefebvre for her collaboration!
Reducing building energy consumption and greenhouse gas emissions is a constant preoccupation for property owners and managers. The newly announced governmental energy policy in Quebec lays down ambitious targets, adding to the challenge and demanding additional efforts.
However, improving energy efficiency also requires significant investments from property owners. Fully aware of the importance of this issue, energy services companies (ESCo) offer beneficial solutions paired to interesting returns on investment, resulting in energy balance improvement, electromechanical infrastructure modernization and occupant comfort optimization. Two prominent players of this field of expertise, ENGIE Services, a division of the multinational company ENGIE, and the Quebec-based company Energere, both unveil the nature of their operations.
RISK TAKING… TO THE OWNERS’ BENEFIT
What is an energy performance contract and what actual benefits does it procure? There are many solutions on the market, differing from one company to the other. Nonetheless, they all have common features, notably with the risk-taking regarding the anticipated energy consumption, a definite advantage for property owners!
“We conceive and implement strategies aimed at reducing energy consumption. In our performance contract, this reduction is guaranteed without compromising occupants comfort. In case of a budget overrun, we cover the cost difference”, explains François Dépelteau, CEO at ENGIE Services, formerly known as Cofely Services. This technical management company operates for various clients such as airports, office buildings and industrial facilities. The corporation has managed numerous projects in prestigious locations downtown Montreal, such as the 1000 De La Gauchetière, Place Ville Marie, Place Victoria, the Windsor, Place Alexis Nihon and the Jacques Parizeau building, head office of the Caisse de dépôt et placement du Québec.
“Energere also undertakes all risks by offering guaranteed return on investment, along with guaranteed energy savings and grants”, as mentioned by Marie-France Lefebvre, Business Development Manager of the company. “This solution has been proving its worth for 20 years, during which Energere provided energy efficiency expertise for hundreds of commercial, institutional, municipal and industrial buildings”, she adds. Place Dupuis in Montreal, among others, called on to their services. Energere is also responsible for the CHUM Notre-Dame Hospital, 17 schools of the English-Montreal School Board, and the implementation of Montreal’s public lighting management system, a major contract recently awarded to the company. Energere also has a leading role in the ambitious Technopôle Angus energy loop conception project, which aims at maximizing interaction and recycling among users. Its ambition is also to pair heat pump and geothermal solutions to sophisticated control systems. In order to properly assess potential savings for clients, the ESCo needs to rely on various pieces of data.
“At ENGIE Services, analysis is based on the last three years’ average energy consumption. Adjustment factors are also taken into consideration, like heating and cooling fluctuations, office occupancy rates, or the presence of special projects, such as office floors hosting energy intensive data centers. Under the terms of the contract, we absorb all energy consumption costs exceeding the fixed average, while all savings generated by lower consumption are shared between both parties,” adds Mr Dépelteau.
IMPROVING THE SYSTEMS
“One of Energere’s missions is to bind the implementation of innovative technological solutions to economically viable financial models”, states Marie-France Lefebvre. The main area in which the company engages to improve energy performance in an office building, for example, is the heating system, which generally represents more than 60% of all energy costs. Also crucial are lighting, ventilation/air-conditioning, control systems and the building envelope. “Our projects are self-sustaining, thanks to reduced energy costs, and we adapt our solutions to targeted returns on investment”, she says.
At ENGIE Services, electromechanical system optimization is also a central concern. “Ongoing personnel training is given as to ensure maximum equipment capacity and efficiency,” states Mr Dépelteau. He adds: “In this context, human factor is key. New technologies are sophisticated and the staff is not always trained to use them to their full potential. However, over time, changes were brought to the control systems without having to alter the way the operators worked. That is why our teams of experts provide personnel training on location.”
Energere also considers knowledge transfer to operators as a key factor for success. “Training and awareness are integral to all our projects. We also offer continuous remote support, which enables us to ensure follow-up on electromechanical system operation all through the project’s warranty period,” notes Marie-France Lefebvre.
A performance contract can also bring meaningful financial leverage in asset modernization. “The funds generated by cost savings can be reinvested in the renewal of obsolete equipment, for example,” says Mrs Lefebvre.
From a property owner and manager point of view, performance contracts provide several considerable benefits. They can help them stand out and face competition with an upper hand, particularly in the office building sector. “Obtaining environmental certifications – such as BOMA BEST or LEED – can be a decisive factor in becoming a market leader. Tenants often require these certifications to stay true to their own sustainable development principles. They value comfortable and intelligent environments,” adds Mrs Lefebvre.
Additionally, a performance contract can help reduce the buildings’ running costs. “Generally, the implementation of energy efficiency measures can lower the energy bill by 25% to 45%,” considers Marie-France Lefebvre.
IS QUEBEC LAGGING BEHIND?
“All buildings, either old or new, can potentially be the object of an energy modernization project. Even new constructions could be of interest, for control optimization for example. All buildings uncovering occupant discomfort, operational problems and high energy bills, or in which electromechanical infrastructure modernization is needed will benefit from a performance contract,” stated Mrs Lefebvre.
Nevertheless, the relatively low cost of electricity in Quebec represents a “good problem” but also an important challenge for the ESCo since these low costs decrease the owners’ motivation to reach for better building energy efficiency. “In comparison to the rest of North America and the occidental world in general, energy transition is hindering in Quebec. But there is no getting around it, sooner or later we will need to follow along and seek for greater decarbonisation and energy production decentralization and digitalization. The movement is underway!” says Mr Dépelteau.
Mrs Lefebvre, on her part, notices that at this time of forthcoming energy transition in Quebec, everyone must be active in the fight against climate change in order to reach the challenging greenhouse gas reduction targets set for 2030. “Energy efficiency is not only a tool used to attain energy sobriety goals. For property owners and managers it is also a means to improve their productivity and global competitive position,” she concludes.
By Emmanuelle Gril, Journalist