Frequently Asked Questions
Pay for Performance Program
What constitutes program eligibility? Pay for Performance is available to existing buildings with a peak electric demand in excess of 200 kW in any of the preceding twelve months. Buildings that fall into the following five customer classes are not required to meet the 200kW eligibility requirement in order to participate in the Program: hospital, public colleges and universities, non-profits, affordable multifamily housing, and local governmental entities not receiving direct Energy Efficiency and Conservation Block Grants. Could gas consumption (therms) be combined with the kW to reach the minimum demand requirements? No, only the electric demand can be used in determining eligibility. Is Pay for Performance available for both public and private customers? The program is available to all Commercial, Industrial, Institutional, and Multi-family customers with a peak demand in excess of 200 kW in any of the preceding twelve months who contribute to the Societal Benefits Charge (i.e. customers of at least one of New Jersey's public utility companies). Buildings that fall into the following five customer classes are not required to meet the 200kW demand in order to participate in the Program: hospital, public colleges and universities, select non-profits, affordable multifamily housing, and local governmental entities not receiving direct Energy Efficiency and Conservation Block Grants. To whom are the incentives paid? Incentives are paid to the Participant (customer). Can the incentive payments be assigned to Partners? No, the Partner will be paid by the Participant. Under certain programs, the Partner must be paid and documentation must be provided prior to the Participant receiving an incentive payment. Will Pay for Performance work this way? The Partner must ensure the contract structure with the Participant covers this item. Are the incentives adjustable or fixed per project? There will be three incentives. Incentive #1 is based on the size of the facility and Incentives #2 and #3 are based on the level of savings in kWh and/or therms. View a detailed Incentive Structure. What if actual post-retrofit savings are higher than estimated? Incentive Payment #2 represents 60% of the total performance incentive, based on estimated savings predicted by the simulation results. Savings in excess of (or less than) the estimate will result in a re-calculation of the total performance incentive. This will be “trued-up” with Incentive Payment #3. The payment per kWh and therm saved is for what period? Incentive payments #2 and #3 are based on annual electric kWh and natural gas savings, as applicable (not to exceed 50% of total project cost), 80% for buildings that fall into the following five customer classes: hospital, public colleges and universities, select non-profits, affordable multifamily housing, and local governmental entities not receiving direct Energy Efficiency and Conservation Block Grants. What incentives can be expected for a multi-building (campus type) situation where there are only two meters? The established incentive cap per meter is $1,000,000 for each utility (regulated electric and natural gas utilities). Buildings that fall into the following five customer classes are eligible for up to $2,000,000 for each utility: hospital, public colleges and universities, select non-profits, affordable multifamily housing, and local governmental entities not receiving direct Energy Efficiency and Conservation Block Grants. How much of a reduction in kWh (or therms) is required to receive an incentive? A minimum of 15% source energy reduction is required, which can be achieved through a combination of electric and gas reductions. What are the 15% savings based on? The 15% savings represents source energy savings (estimated Btu site energy savings converted to Btu source energy) and can include electric, natural gas and other fuels (i.e. fuel oil, steam, chilled water, etc.). Can fuel oil reduction be included as savings? Fuel oil (and other fuels) may be included in the savings to meet the 15% source reduction requirement, however no incentives are provided for these fuel types. Do other available incentives jeopardize Pay for Performance incentives? Pay for Performance projects are not eligible for incentives from the NJ SmartStart Buildings Program. Local Government Energy Audit Program participants are eligible to participate in Pay for Performance. What is the average amount in incentives expected for a typical project? The conservative estimate for expected incentives is roughly 25% of the total project cost. Pay for Performance spreadsheets can be utilized for an estimate on specific projects. Do Interruptible Gas clients qualify for incentives for therms saved? Yes, as long as the interruptible gas client has an active account for gas service and pays the Societal Benefits Charge they are eligible for incentives from the program. What if the 15% source savings cannot be met after the audit is performed? The Program will not provide Incentive #1 if the savings cannot be met. The Partner must inform the Participant and should make certain that their contract covers this situation. Identified measures could then apply for NJ SmartStart Buildings incentives. What is the reason behind the 15% savings not being allowed from a single energy conservation measure? Pay for Performance is designed to be comprehensive in nature, thus savings are anticipated to be provided by multiple energy conservation measures. If savings are anticipated to be derived from a single measure (such as lighting), the Participant should be referred to the prescriptive or custom tracks offered as part of the NJ SmartStart Buildings Program. Once I complete my Energy Reduction Plan am I required to continue with the rest of the Program? You are not required to continue with the Program but you will not receive Incentive #1. Incentive #1 is distributed contingent on the installation of the energy efficient measures outlined in your Energy Reduction Plan. Is it a requirement that all energy conservation measures evaluated must be implemented? The decision on implementation of ECMs (Energy Conservation Measures) is to be determined by the Participant with input from the Partner. It is not a requirement that all ECMs be implemented. Section III of the ERP requires a list of recommended ECMs (with associated savings), and listing of non-recommended ECMs with an explanation as to why these are not included. Any change in the list of ECMs to be installed after ERP approval requires approval from the Program Manager. Can energy savings from Operation & Maintenance items be included (e.g. if economizers are not working)? Retro-commissioning type items may be incorporated into the ERP, however savings estimates associated with these should be well documented. What about electric demand reduction measures (e.g. thermal storage)? Pay for Performance is designed for, and provides incentives for, energy reduction measures. Electric demand reduction measures may benefit the Participant and can be included in the ERP, however no incentive is specifically associated with demand savings. Is the use of Portfolio Manager required? What effect would a change in operating hours have on the project? If a substantial change in operating hours occurs during the construction and/or post-retrofit period, this change would be accounted for by documenting the changes and adjusting the hours of operation in Portfolio Manager. In some cases, a change to the baseline simulation model may also be required. Since the program is designed around utility billing history, how will the Partner get this when in many cases this goes to corporate management offices? The Program Manager is available to facilitate the process; however Partners will need to make arrangements with the Participant to obtain the utility history. Will utility release forms be available? Is it a requirement to meter each piece of equipment? Pre-metering should be completed for the major energy systems, and is required for equipment that will be replaced or directly affected as part of the Pay for Performance retrofit. Section 8 of the Pay for Performance Program Guidelines covers the scope of metering. ASHRAE 90.1-2004 is currently in effect; will this change to ASHRAE 90.1-2007? ASHRAE 90.1-2004 was adopted by the State of New Jersey in mid-2007. If the state adopts ASHRAE 90.1-2007, Pay for Performance will be updated to incorporate those provisions. The update would be required for new projects only, and would not be retroactive. Is the Internal Rate of Return calculated on an individual energy conservation measure basis, or on a total project basis? The Internal Rate of Return for the entire project must be 10% or greater. There is no IRR requirement for individual measures. What can be included in total project cost? Partner fees, equipment and installation costs, design fees, construction management, measurement and verification / commissioning fees are included. What if another energy conservation measure is found during the construction phase? This would be considered a scope change and may require re-submittal of the ERP. The performance incentives would be recalculated to include the additional estimated energy savings. Can the Participant choose a different Partner after the Energy Reduction Plan has been submitted and approved? The Participant can choose to change Partners. Partners should make certain that their contract covers this situation so they are paid for their services. Should the Participant choose not continue in the Pay for Performance Program, the funds associated with Incentive #1 must be returned by the Participant. Some Participants such as school districts may not be able to commit to the Pay for Performance process, due to New Jersey laws that require such entities to go out to bid. Pay for Performance must comply with any state laws, but will work with Partners and Participants in these particular situations on how best to proceed. What types of bid and/or construction documents are required? The Partner role is to perform services as necessary to ensure that the measures are bid, designed, and installed as presented and modeled in the ERP. Submission of these documents is not required. What happens if construction costs are higher than those estimated, which would lead to a lower Internal Rate of Return? Pay for Performance only considers the initial cost and Internal Rate of Return provided in the ERP. This will not be modified. If a Participant requires a multiple bid process and must select the low bidder, which is not the Partner, is the applicant still entitled to Incentives #2 and #3? The Participant can only receive Incentives #2 and #3 if an approved Partner remains with the project in some capacity. Partners should be aware of the procurement requirements of the Participant to guard against this. Post-Construction Benchmarking What happens if the building becomes vacant, or if there is a shift in operation due to economic issues, after the Baseline is developed? This must be adjusted in Portfolio Manager pre- and post-benchmarking data. There will be a case-by-case review if this causes source savings to drop below the required 15%. What happens if the 15% source energy reduction target is not met after the Post-Construction benchmarking? If the benchmark is not met using 12 months of post-construction billing history, an additional 6 months will be allowed to accomplish this goal. If, after the 18 month period the reduction is not met, Incentive #3 will not be paid. Certain programs allow payment in shorter time period if performance criteria are met (i.e. 6 months worth of billing history), will New Jersey’s Clean Energy Program consider this? No. Incentive #3 will be calculated based on 12 months of post-construction utility bills. Can tax incentives associated with EPACT be applied to a Pay for Performance project? Yes. Information on EPACT tax incentives can be found at http://www.energy.gov/taxbreaks.htm. Do the Simulation Guidelines require modeling of the actual utility rate tariff? Yes. Can you provide tariff inputs for simulation? What is the purpose of calibrating the Baseline Model? Calibration of the baseline model with actual utility bills is required to ensure that the model accurately represents energy use at the facility. This will result in higher accuracy of estimated savings. Suppose weather conditions are an anomaly in the post-retrofit year? Portfolio Manager normalizes for weather. Is there a method for ranking the Energy Conservation Measures? What is the basis of the site to source conversion? Site to source conversions are based on EPA’s Portfolio Manager software. The conversion values are provided in Section 5.7 of the Program Guidelines. The simulation software reports energy use in terms of site energy, will we need to convert it to source energy units? The conversion is done automatically in Portfolio Manager and in the ERP tables provided, however the energy units must be input in kBtu. Additionally, for fuels other than electricity and natural gas, the conversion must be done by the Partner using Section 5.7 of the Program Guidelines. Are Incentives #2 and #3 based on site or source energy? Incentives are calculated based on site energy, in standard units (kWh or therms). If a building is being brought up to code (e.g. more ventilation, etc.), will there be any allowance for this in the modeling? The ERP must provide a minimum 15% reduction. If there are significant factors affecting energy use in bringing a building up to code, this should be brought to the Case Manager for review. eQuest is not on the approved software list for EPACT. The next version has been formally submitted for consideration. eQuest may be used with Pay for Performance. For CHP projects, is downtime for maintenance to be included? The Partner is to estimate real usage, so inherently downtime is included. Where are system parasitics entered? Is the funding for a CHP study part of the ERP? No, the cost of the study should be included in the cost of the CHP project. How would the installation of an absorption chiller under the ERP be handled if it is intended to utilize the CHP waste heat? The Partner must achieve the 15% source energy reduction under the ERP, and the waste heat from the CHP cannot be factored in. If the building is efficient (i.e. an ERP would not be able to achieve the 15% source reduction), what requirements are there to install CHP. A CHP system may be installed on an ENERGY STAR® Certified building. For building types that cannot obtain ENERGY STAR Certification the LEED-EB approach may be used to determine energy efficiency of the building. Can a maintenance contract be included? The required 5 year maintenance contract can be included in the cost. Are we requiring the manufacturer to warranty a specific level of operation (e.g. 75%, 90%), as there may be a large cost associated with this? Reasonable service requirements are expected. At what point is the CHP incentive committed? When the detailed feasibility study is approved by the Program Manager and the BPU approves the incentive request, the incentive dollars are set aside. Can incentives be combined? Cost for CHP projects is net of incentives, and cannot be combined with any other incentives from New Jersey’s Clean Energy Program. Will Pay for Performance have a portal? It is not currently planned. Communication will be via email through P4P@trcsolutions.com What is the estimated timeframe for receiving incentive money? Between 60 and 90 days from satisfactory final inspection. Would a loan program help Pay for Performance to be more successful? A loan program is currently not established. The Economic Development Authority does provide financial assistance for qualified projects. Please see the “EDA Programs” page for more information. Can an ENERGY STAR rating be achieved through Pay for Performance? Yes, the measures installed under Pay for Performance could result in the building being eligible for the ENERGY STAR Label. Can the Partner seek work through the program or must they wait to be contacted by a potential Participant? Partners are encouraged to seek Participants and bring them into the Program. As one of the 5 special classes of P4P exempt from the 200kW requirement,
when should we apply for Direct Install (DI) and when should we apply for Pay for Performance (P4P)? If you have the option of pursuing either P4P or DI, consider TWO things: Here are some cases where Direct Install would be better for smaller nonprofits: Here are some cases where Pay for Performance would be better: |
