Campus energy projects are costly, even with rock-solid paybacks, and colleges of modest means often need to find creative ways to pay for them. A suite of financing options from third-party contracting agreements to revolving loan funds are making this work easier, but looking off campus doesn't always work out the way facilities directors hope.

The San Diego Community College district in California, hoping to increase the percentage of its energy portfolio that comes from clean sources, is using a method called a power purchase agreement, in which a third-party company will install solar panels on ground owned by the district, sell the power to the college at a reduced rate, and sell any extra electricity to a local utility.

The Community College Times reports: "The idea for the power purchase agreement (PPA) originated from the
district’s policy requiring that 10 percent to 20 percent of power for
new buildings come from renewable sources, said David Umstot, the
district’s vice chancellor of facilities. College officials mulled over
whether to build a solar system to meet the requirement with its own
funds, through bonds or through a PPA."

One of the biggest benefits to a PPA is the low upfront cost. SDCCD only had to pay for landscaping and roof repairs in preparation for the solar panels, and permitting, designs, installation and maintenance are being handled by the contractor. So, the college reaps the benefits of cleaner, cheaper energy, but without the hefty initial bill. Plus, if the college comes up with the money later, it has the option to buy the panels and own them outright.

Atlantic Cape Community College has a similar deal in place: Pepco will install enough solar panels on the campus to provide half of the electricity the school needs. The same CCT article reports that "The agreement will save the college about $220,000 in its first year
and up to $6.8 million over the 20-year life of the contract."

But not all schools have successfully outsourced this kind of work. A story in the Chronicle of Higher Education notes increasing numbers of colleges are turning to energy-services
companies (ESCO's) for large-scale energy installations and retrofits, but as they become more popular, colleges may be more likely to end up "stuck with
deals that overpromise and underdeliver." 

The lede story is a case study in best intentions gone awry. A deal between the University of Kansas and Chevron was supposed to save the university about a million dollars in wasted energy by replacing windows, sealing ventilation, installing more-efficient lights and using other proven techniques. However, the savings that were supposed to pay off KU's initial bond didn't materialize, to the tune of about $500,000 annually. After years of haggling over the missing money, Carlson reports, "Finally, this year, the university and Chevron hammered out an
agreement: The company will pay the university $400,000 a year for the
next 12 years, no questions asked."

The key to successful contracts of this nature seem to be a mix of reasonable expectations and careful selection of the kinds of projects that will have the most long-term benefit. For example, expecting all initial costs to be paid back within a decade means the ESCO can only work on short-term projects, such as lighting retrofits, rather than anything so ambitious as clean energy or complete building overhauls, which usually have greater benefit in the long haul.

Also problematic? Relying too much on individuals to conserve energy. The article notes: "Lack of experience may have been the primary problem in the University
of Kansas' case. Mr. Steeples, the senior vice provost, says the
company officials who devised the university's contract did not
understand campus culture. 'They overestimated what they could do to
train people to turn lights off when they leave the room, or close the
sash on the fume hoods,' he says." (We have written about individual conservation in the past, with a similar hypothesis. Read the full story here.) 

As more schools sign the President's Climate Commitment and move towards climate neutrality, it will become even more imperative that they tread carefully. Between budget crunches and the need to reduce greenhouse gas emissions–and fast!–schools considering these kinds of contracts would do well to look over guides, like those from ACUPCC and NACUBO, which warn against pitfalls and help staffers navigate the process.

Published: March 22, 2010