Member Spotlight: Texas State Energy Conservation Office (SECO) 

The Texas State Energy Conservation Office (SECO) is a public sector member of NAESCO. We met with Director Eddy Trevino to learn more about the progress SECO has made in recent years and to gain his perspective on the challenges and opportunities that Energy Service Companies (ESCOs) have in the Texas market.

What are the advantages of a State Energy Office being a member of NAESCO?

One big advantage is continuing education. We find the webinars valuable because they're from a practitioner standpoint, which is always good for us.

Another advantage is the opportunity to meet the ESCOs, make them aware of the services we provide and enable them to ask us questions about how the state operates energy programs to see where ESCO opportunities exist.

How does SECO partner with Texas local governments, county governments, public K12 schools, public institutions of higher education, and state agencies to reduce utility costs and maximize efficiency?

By statute we only work with public entities, which are taxpayer supported entities. That includes all K12 schools, local governments, municipal utility districts, and community hospitals.

We offer technical assistance if they have a special energy efficiency need for which they don't have the staff to support. We can help them with technical assistance if they're exploring, let's say for example, “Is it feasible to put solar on top of my building?”. We do this by providing a free preliminary energy assessment followed by technical assistance if questions still exist. Often public sector entities are in need of or are looking for an independent third-party perspective on whether or not improvements are really needed on their campus. We provide that third party perspective.

We require a debriefing session with a decision maker from the public sector entity. We do this because we are looking for a champion to move the process forward. Historically we have found that if we don’t have a decision maker in those meetings the process won’t move forward.

The other thing we ask is that because we provide these services for free the public sector entity agrees to do something. They must agree to implement a measure identified in the assessment. They can use their own staff or apply for a LoanSTAR loan or even get funding from someplace else.

At the end of the day, SECO wants the public sector entity to take action, that is why we have these requirements. The last time we checked, approximately 40% of the entities where we completed a preliminary energy assessment, did something – either implemented a measure, or they've taken out a loan. We're really excited about these entities moving forward with energy efficiency projects.

How have you been able to grow the adoption of the program?

It's a matter of getting the word out to everybody to know that SECO Technical Assistance and LoanSTAR funding are available. Our outreach is significantly helped by borrower experiences, professional service firm recommendations, and ESCOs helping to make potential applicants aware of the SECO LoanSTAR funding opportunities.

We also provide updates and make announcements with groups called the Texas Energy Managers Association and the City Efficiency Leadership Council. Those organizations are a good vehicle for getting out the word to other local governments and school districts.

What types of challenges has the Texas market faced when it comes to performance contracting? What are your recommendations for overcoming those challenges?

Lower utility rates are the biggest challenge for ESCOs. Years ago, a lot of school districts entered into 10-year utility rate agreements to take advantage of the lower consumption rates. Those low utility rates made it challenging for ESCOs to propose projects that would pay for themselves out of utility savings. Many of those contracts are coming up for renewal at higher utility rates. Projects are becoming more feasible with the higher utility rates because they can pay for themselves within the expected useful life of the measure.  As you already know, ESCOs want to help the public entities finance their projects with low interest-rate financing. That’s where we can help. Our loan interest rates are below the current market rates.

How do you see the industry evolving?

The ESCO industry was no exception when it came to the volume of retirements during the pandemic. There is a new round of young ESCO staff creating new relationships with public entities. In addition, the turnover in public school districts also added to the challenge of continuing ESCO relationships with a school district.  There has been a loss of institutional knowledge as it relates to an ESCO project that may be five or six years into a measurement and verification period. There may be scenarios where newly elected school board members, looking to reduce expenses, are confused why M and V payments continue past the project construction completion period. A new ESCO staff member, with no link to the past project, may be forced to defend a hard-won project.

Another consequence of the ESCO turnover is the constant education required to transfer institutional knowledge. On occasion, we see young and ambitious candidates proposing what they think are new and innovative ideas. Unfortunately, the reason they are not seeing what they propose is because these ideas have already been tried and tested by their predecessors. It would be great for ESCOs to include historical suggestions/ideas that do not work as part of their training process if they are not already taking this step.

Additionally, the emergence of artificial intelligence and newer technologies is creating new opportunities for both the public entities and ESCOs. Artificial intelligence will definitely impact the industry going forward.

How can Energy Service Companies best support Texas customers?

Be proactive about continuing education and training happening in your state. Reach out to public entities and get involved in a way that benefits the public entity. Educating and training can be a great way to get the word out.

Another way to support the public sector is to continue simplifying the messaging and concept of energy savings performance contracting. There are so many variables that go into these complex contracts like energy consumption, temperature, heating and/or cooling degree days, operating hours, change of use provisions, and utility rates. All of these adjustments often make it difficult for the public sector financial officers to understand the contract because they are not familiar with these terms. Financial officers are primarily concerned with how much their post-construction utility bill will be reduced from their previous utility bill. The more complicated the explanation and the contract, the more reluctant the financial officers want to be involved.

Lastly ESCOs should get involved in schools’ energy literacy. Get the kids excited about energy efficiency, for example get them understanding a kWh and the impact of saving a gallon of water. Find a way to give back with an energy literacy service.