About a year and a half ago, Ron Wilcox, the superintendent of schools in Madison County, North Carolina, had a big problem. Electricity bills for the district were 38% higher than budgeted. Apparently the local utility had been burning oil to make power, and oil prices were way up back then. Wilcox went to the county commissioners to ask for more money and got it—along with a lecture about energy efficiency.
Since then, Wilcox has become an evangelist for efficiency and for renewable energy, and so he was invited to speak today at the 2009 Energy Efficiency Forum in Washington sponsored by Johnson Controls. His little school system—2,600 students, one high school—has an energy-efficiency success story to tell, albeit one only indirectly related to the forum’s topic: “How Stimulating is the Stimulus?”
First, some background: Madison County is a beautiful place, according to Wilcox, but it’s a poor and rural country, dependent on tobacco farming, which is in decline. The uptick in its energy bill last year was $118,000. That’s a lot of money for local taxpayers who finance about $2.6 million of the school’s budget, most of which comes from state and federal sources.
So Wilcox was connected by a county official to Johnson Controls, which studied the schools and found lots of waste. Wilcox told me: “We were having teachers tell us they couldn’t get the air conditioning to work. Sometimes the heating worked, sometimes it didn’t.” I don’t know about you but I can still remember sitting in stuffy, overheated classrooms back in my school days. That’s a real waste.
Johnson Controls, a $35-billion a year company that has a big business in building efficiency, proposed what’s called an energy performance contract. Here’s how it works: If the school district made the recommended improvements, Johnson Controls would guarantee—yes, guarantee—that it would save enough money on its energy bills to pay all the costs of borrowing the money to renovate the schools, and still have some savings left over. It’s pretty much a no-lose proposition for the schools.
Madison County borrowed about $3.7 million from a bank. Johnson Controls says that, after repaying the loan, the district would realize $5.9 million in energy savings over 15 years. The company estimates that “facility improvements and behavior modifications strategies” (that sounds ominous, but it’s mostly about turning out lights and regulating building temperatures) would reduce energy use by 36 percent across six schools and three administrative buildings. Of course that’s good for the environment, as well as for teachers and students. The project’s reduced emissions will be equivalent to removing 8,250 passenger vehicles from the road, according to this press release.
Once Wilcox got to thinking about energy, he didn’t stop. So he turned to his local utility company, which in partnership with the Appalachian Regional Commission, came up with federal money to buy three small windmills (about 2-3 kw each) for the county’s schools. The utility company is also helping Madison County finance solar photovoltaic panels on school roofs and solar hot water heating.
“We’re rural. We’re small. But it’s our goal to be the school system in NC that leads the way with alternative energy,” Wilcox says.
One thing led to another, as it does in small towns. The owner of the local landfill called to say that if the schools got serious about saving and recycling all of their cardboard, he’d buy it from them. “Last year, we made $16,000 by recycling,” Wilcox said. That money is used to help the district’s low-income kids take school trips and participate in more activities.
Madison County is also expanding its curriculum. “They’re going to have a solar energy class in the high school,” says Felicia McDade, a Johnson Controls executive who works with school districts across the south to promote efficiency. It must be fun for the elementary school kids to look out their window and see a wind turbine, although ideally you’d want them paying rapt attention to the teacher.
What does all this have to do with the stimulus package? Well, Wilcox is now getting creative about financing the improvements. It turns out that the project may be eligible for something called “Qualified Energy Conservation Bonds,” which can be used to fiannce energy efficiency projects in public buildings. The stimulus package provides $3.2 billion in bonds, and Madison County is getting in line. These will lower his interest rate to close to zero, and make the efficiency project an even better deal for the county. Of course they won’t “stimulate” anything since the project was underway already.
In fact, these energy performance contracts have been around for more than 20 years, and they are designed to work without government subsidies. Johnson Controls has about $4.5 billion in performance guarantees in place, all around the U.S.A., one of its execs told me.
The bigger question is why so many buildings, particularly in the private sector, remain so inefficient. As Kevin Kampschroer, a buildings expert with the General Services Administration, put it: “Buildings in this country are operating with the same degree of energy efficiency, on average, as they were 20 years ago. Why hasn’t it changed?”
That’s complicated. One answer is that there’s a market disconnect around commercial buildings–owners and developers don’t have much incentive to make capital improvements to the energy systems because they don’t pay the electricity bills. Homeowners, meanwhile, are famously indifferent to efficiency until prices get very high. And most corporations demand a rapid payback, say, three to five years, before they will invest in efficiency. This is one arena where government works better than markets. People like Wilcox can think long-term.
Then there’s the human factor. “It’s nice and fun and glitzy to build a new building. I’ve done it,” said Kampshroer of the GSA. No one gets excited about upgraded the HVAC system and installing more insulation. But it’ssmarter to invest in existing buildings, and to make what we have last longer, than it is to build new.
A nice lesson from the students of Madison County.