Major Project Approval Process
Stage 1 and 2 Application
Project Title: Energy Management Consultancy Support / Date of Operations Committee:
14 September 2015
Project Sponsor:Andy Sweeney
School/Professional Service: Facilities Management
Type of Project (highlight as appropriate)
Major Building Project / Minor Works / IT Project / Collaborative
Proposal / Major Bid for External Funding / Other (please specify)
1. BRIEF PROJECT DESCRIPTION
Background
The University’s annual energy and water expenditure is £6 million (Electricity £2.5m, Gas £2.7m, Water £0.8m).
On a developing estate a reduction in this expenditure is essential from both a business and environmental aspect.
The University is also captured by a number of statutory reporting schemes in relation to energy and carbon emissions and currently spends £350k annually on compliance.
The University has recently entered into a flexible procurement strategy for its gas and electricity contracts. Flexible contracts that are correctly risk managed allow clients to have much more control over their costs in relation to movements within the utility supply markets. As gas and power markets trade in months, quarters and seasons, the end user can spread their purchases and does not need to lock out all their needs for an entire contract period at one time. This is in contrast to a traditional fixed price, fixed term strategy which commits to purchasing at one point in time with the hope that this prices represents “good value“.
Although current market prices for both Electricity and Gas have fallen, there are still further opportunities in the short and long term that a flexible contract can deliver. Historically flexible contracts have outperformed fixed rate contracts and typically delivered financial savings of up to 15% over the course of the contracts.
The current contract has only been in operation for a month and the initial purchases and rates are still being finalised, but the first quarter forecast (August – October 2015) is looking positive with the flexible contract rates being £180-£200k lower than the costs submitted within the LU annual budget submission for the corresponding quarter. By the nature of flexible procurement this first quarter saving cannot be extrapolated over a full financial year or the duration of the contract.
The performance of the flexible contract will be monitored monthly and reported to the appropriate committees as required.
A wide and diverse range of projects have been implemented and these have had a direct impact on reducing energy consumption and expenditure across the campus in recent years, these have been implemented utilising a number of internal and externally supported funding streams.
Examples of projects that have been implemented include:
  • Installation of CHP units to provide ‘on-site’ heat and power generation. (51% of our electricity requirement is currently produced on-site)
  • Installation of Low Energy lighting and Lighting Controls
  • Installation of Voltage Optimisation Equipment
  • Upgrade of burner controls on the two main boiler plants
  • Upgrade of Holywell Park Energy Centre
  • Upgrade of the site wide Building Management System (BMS)
  • Development of web based energy data management and reporting systems
  • Development of staff and student awareness campaigns
FM has been asked to save £1m from its revenue budget for 16/17 and energy savings will be an important component of this. The University is committed to reducing the impact of its utility consumption and expenditure across the campus and potential funding of up to £3m over three years (£1m per year) has been identified for implementation of the energy/carbon strategy within stage 0 of the capital framework.
Identification of Energy Saving Opportunities
To assist with the identification of energy saving projects across the campus, Operations Committee supported the appointment of specialist consultants to undertake a specific piece of work that involved the identification and evaluation of suitable ‘cost effective’ energy saving schemes that would support the University’s aspirations to reduce its utility consumption and expenditure.
Consultant’s Report
The consultants have surveyed a total of 30 buildings across the University. The buildings selected were representative of the type of buildings across the campus and as a result many of the recommendations and opportunities identified could easily and effectively be replicated across a number of buildings.
The projects that have been identified and recommended have been evaluated to ensure they are cost effective and meet the financial constraints of the University.
A database of 200 projects has been developed and the data is summarised in the following table:
Annual Energy Savings / 4,000,000 kWh
Projected Annual Financial Savings / £380,000
Annual Carbon Savings / 1,820 tonnes
Projected Implementation Costs / £1,476,000
Simple Payback Period / 3.9 years
To achieve the projected financial savings a wide and diverse range of projects would need to be implemented, the following table illustrates a breakdown of the recommendations by technology:
Category / Saving (kWh) / Saving (£) / Implementation Cost (£) / Simple Payback (Years) / Project Life Expectancy
(Years)
Lighting/Controls / 1,800,000 / 205,000 / 1,020,000 / 5.0 / 15-20
Controls/BMS / 750,000 / 50,000 / 60,000 / 1.2 / 10
HVAC/HWS / 1,050,000 / 90,000 / 312,000 / 3.5 / 10
Fabric Insulation / 55,000 / 3,000 / 12,000 / 4.0 / 30
Small Power / 345,000 / 32,000 / 72,000 / 2.3 / 5-10
Total / 4,000,000 / 380,000 / 1,476,000 / 3.9
(Note –If required supporting information and consultants reports are available in relation to the specific projects)
An investment of £1.5 million in a wide range of projects across the campus would result in a financial saving of £380k, with a global pay back of 3.9 years. In addition to the direct energy cost savings, the projects would also bring additional financial benefits associated with reduced reactive and long term maintenance costs which are not currently factored into the payback.
Examples of projects that will be implemented include low energy lighting and lighting controls, high efficiency motors and variable speed controls, Building Management System improvements, building fabric insulation improvements, improved control of plant operation and hot water services, improvements to ventilation control and the installation of low energy hand dryers.
Project selection has been based on the buildings that are known to have a long term future on the campus and have not been identified for demolition or major refurbishment within the Capital Framework.
The investment would also reduce emissions which would equate to a reduction in ‘absolute’ emissions of 13% and a reduction in emissions relative to student numbers of 24% compared to the 2005 baseline.
As many of the recommendations can be replicated and rolled out across the campus, the potential exists to invest an additional £1.5 million in energy saving projects that would realise a similar level of return, this would result in a reduction in absolute emission of 20% and a reduction in emission relative to student numbers of 30% compared to the 2005 baseline.
Alongside the implementation of technical projects the energy team will work closely with the school operations managers and senior management to target specific saving opportunities in relation to reducing the campus electrical base load and ensuring the University heating policy is implemented. A 5% reduction in the campus base load would equate to a financial saving of £100k and each additional week that the heating is operational in the Spring/Autumn cost the University £10k. This offers the potential for significant financial savings. Support is requested from the Senior management of the University to direct schools/dept’s to make these savings and to support a reduced fixed heating season.
Next Steps
FM request the approval of £1m identified in the capital framework for year 15/16 as an allocation that could support the implementation of cost effective energy reduction projects, Preferably this would be fully funded as one project though it could be funded in phases if required. The potential benefits from the implementation are listed below:
£1million Fully Funded Investment Programme
Project / Implementation Cost (£) / Savings (£) / Simple Payback (Years)
£1million Investment / 1,000,000 / 259,000 / 3.9
£1million Phased Funding Investment
Project / Implementation Cost (£) / Savings (£) / Simple Payback (Years)
Phase 1 / 300,000 / 115,00 / 2.6
Phase 2 / 350,000 / 72,000 / 4.9
Phase 3 / 350,000 / 72,000 / 4.9
.
As a leading University, it is important for Loughborough to perform strongly in terms its energy performance compared to other institutions and the Estate Management Records performance compared to our peer group.
Planned project start date:September 2015 / Planned project completion date: July 2018 (3 year programme)
2. WHAT IS THE BUSINESS JUSTIFICATION FOR THE PROJECT
  1. How does the project comply with University strategies? What impact will it have on research, teaching and links with business, business premises etc.
  • Energy cost reductions (Budget Challenges)
  • Utility Management Strategy/Carbon Management Plan
  • Potential to link implementation programme with undergraduate and research projects

  1. What essential objectives is the project intended to meet?
  • Cost Savings (Energy, Water and Maintenance)
  • Utility and Carbon Savings

  1. Is the project the first of a number of related projects?
  • Potential to roll out successful projects to other buildings across the campus
  • The specific groups of projects that will be considered for implementation will be submitted for consideration for fundingonce they have been fully evaluated and a business case developed.
  • £1M identified annually in Capital Framework for 3 years.

  1. Are there any contractual issues with third parties?
  • No

  1. Will the project have an impact on university staff, students or the local community? If the answer is yes to any aspect of question 5 - then has an equality impact assessment been conducted or considered for the project? And how will the project advance equality of opportunity, and/or foster good relations between everyone and/or eliminate unlawful discrimination?
  • No

3. FINANCIAL IMPLICATIONS
  1. What are the estimated capital costs?
  • Budget Costs £1 million
  • Potential phased approach

  1. What are the estimated revenue costs, including the cost of recurrent maintenance and power consumption?
  • Reduction in utility expenditure; £259k
  • Reduced reactive and long term maintenance costs when project are implemented

  1. Have you identified any potential sources of funding including donations and/or major gifts?
  • Salix/HEFCE offer annual funding rounds for interest free loans to support energy reduction projects and transformational projects. This is open annually and there is no guarantee of receiving funding. There are many restrictions on what this funding can be used for and following guidance from the Finance Director, the University did not apply for funding during the last funding round in October 2014.
Third party funding is also available for the implementation of large scale energy saving projects whereby a third party will fully finance certain projects and recover their financial outlay over a number of years from the savings generated by the implemented projects.
  1. In the case of significant bids for external funding, what is the value and likelihood of success?
  • As Above.

  1. Will you require feasibility funding to develop a Stage 2 business plan? If so, please identify the sum required.
  • No.

4. STAFFING IMPLICATIONS
  1. To what extent is the project dependent on existing staff and are there any key person dependencies?
  • Led by Energy Manager and supported by Energy Technician and Technical Services Staff (Mechanical, Electrical)

  1. Do you have all the required skills, and balance of staff skills, to ensure the success of the project?
  • Yes

  1. Do you require key resources from other departments and, if so, have the necessary consultations taken place?
  • No additional resource required

5. IT IMPLICATIONS
  1. Are changes to the IT infrastructure needed?
  • No

  1. Will there be any replacement / upgrading costs?
  • No

  1. Have the University’s Data Management Principles been considered within the context of the project? Have any issues or implications been identified as a result? If so, how will they be progressed and/or addressed?
  • No Issues identified

6. ESTATES IMPLICATIONS
  1. Are the proposals consistent with the Estates Strategy?
  • Yes

  1. Are the proposed buildings specialist or versatile in nature?
  • N/A

  1. Can they be converted to other uses if existing demand for accommodation declines or changes?
  • N/A

  1. Are the proposals sustainable in the long term with specific reference to carbon emissions, bio-diversity, travel/transport or waste/recycling?
  • Yes – projects identified for implementation will reduce carbon emissions.

  1. What is the net increase or decrease in consumption of the following utilities? (FM will equate this to carbon increase/decrease)
Electricity
Gas
Water
  • Identified projects will reduce energy (gas and electricity) consumption by 4,000,000 kWh
  • Identified projects will reduce energy (gas and electricity) costs by £380k
  • Identified projects will reduce carbon emissions by 1,820 tonnes

  1. Disaster planning
In the event of power failure or loss of other service what would be the effect on business continuity, research or stored materials
  • N/A

  1. Will the project result in the release of other university accommodation?
  • No

  1. Are any temporary arrangements necessary to allow the department / section to continue its normal activities during the construction period?
  • N/A

  1. Will town planning consent be required?
  • N/A

7. PROJECT MANAGEMENT ARRANGEMENTS
Project Management Board (PMB) Chair
Utility Management Group Chair Andrew Sweeney
(Reporting into the SSRG)
Sponsor
SSRG Chair Richard Taylor
Client
Operations Committee
Project Manager / PMB Secretary
Greg Watts/Martina Cashin
PMB Members
David Howell/Jenny Sawbridge/Gavin Noon/Simon Taylor/Catrina Cooper/ Garry Van Geete
8. CRITICAL MILESTONES
Please identify any milestones that are critical to the success of the project. / DATE / OWNER
Funding or Part Funding Approved / September 2015 / Energy Manager
Project Prioritisation and Business Case Development / Sept - Oct 2015 / Energy Manager
Project Implementation (Subject to funding support) / October 2015 – July 2016 / Energy Manager