Has the MUSH market gone cold? This post examines the current and potential market for providing energy management services and building retrofits to municipal (state/local government) facilities, universities, K-12 schools and hospitals. It also looks at some of the ongoing barriers into the MUSH market while highlighting a handful of success stories by sector.
by Debbie Van Der Hyde, Green Economy Post
Providing retrofit and energy management services to make US buildings greener is big business. But has the influx of stimulus money into the federal market or the rising potential of the commercial market made the MUSH market look—pardon the pun–like cold oatmeal? [Note: MUSH stands for municipal (state/local government), universities, K-12 schools and hospitals.]
“Not in the least,” says Donald Gilligan, president of the National Association of Energy Service Companies (NAESCO). “US energy service companies (ESCO) are doing approximately $3.5 billion per year in the MUSH market but there’s still $80 billion or more in the potential market,” he says, adding that new building technologies are helping to ensure continued market growth.
An ESCO is a professional business providing a broad range of comprehensive energy solutions, including energy savings projects, energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk management.
The MUSH market has been fertile ground for energy service companies for over 30 years. Many state and local government buildings, universities, schools and hospitals buildings are aging and need to make building improvements. However, these entities often lack the capital funds for building retrofits or to achieve LEED certification, which partially explains why the potential MUSH market is so big but so hard to capture.
Finding Funding for Improvements
So how do MUSH building managers pay for capital improvements and maintenance? “If they need a new boiler, lighting system or windows, building managers often turn to ESCOs because there is nothing in the state or local budgets to support the need,” Gilligan says.
According to the US Department of Energy’s website, the MUSH market often uses energy savings performance contracts (ESPC) to implement their projects. In an ESPC, an ESCO provides a turnkey service to develop and deliver the retrofits and to arrange the project financing. The capital cost of the retrofits is repaid from savings over a relatively long (10 to 15 year) contract term. Project capital is provided by a variety of sources, including utility incentives, public or utility revolving loan funds, bonds, bank loans and leases.
NAESCO says there are approximately 30 ESCOs in the US, which provide full turnkey services and have a balance sheet to guarantee savings. These are major companies like Johnson Controls, Inc.; Trane, Inc. and Honeywell International, Inc. For example, in February, Honeywell announced the installation of the first two solar photovoltaic arrays for the City of Wilmington, Delaware. The solar installations are part of a broader $14.5 million energy retrofit and renewable energy program for city-owned facilities and infrastructure.
MUSH Market Obstacles
However, securing funding for MUSH building retrofits or energy management services is only part of the problem. According to NAESCO, the main hurdle is bureaucratic at the state and local level because ESCO programs are run subject to state laws. Many state energy offices have programs to actively encourage ESCOs in the MUSH market,” Gilligan says. However, these programs are subject to state laws, which determine how a public entity can acquire a project.
Additional barriers include a state’s landlord agency, sometimes known as the general services administration, which has policies in place for how to upgrade and service the municipal buildings. A third barrier is variations in state budgeting processes that cannot accommodate performance contracting.
All these hurdles are making it easier for ESCO-like competitors to move into the MUSH market. Some of these niche companies are information-based companies that specialize in energy management software; others are hardware manufacturers like Cypress Envirosystems, which develops smart HVAC thermometers and other devices. And some are companies like Energy Education, Inc., which specializes in people-driven energy conservation programs for schools, churches, colleges and universities.
Moving Ahead in Each of the Sub-Sectors
Regardless of the MUSH market barriers, many building managers in the sector are committed to getting their buildings on a greener track—no matter whether it’s an ESCO or another type of company that provides the guidance. Here are a few success stories by sub-sector:
State/local government–Demonstrating leadership by example, the US Green Building Council reports the City of Seattle is pursuing LEED for New Construction Silver certification for every new construction or major renovation project that it undertakes greater than 5,000 square feet.
According to the council, the City of Seattle plans to use stimulus funds to strive for higher LEED ratings in new construction projects and to implement deeper energy conservation measures and add green elements to existing facilities .
Universities–According to the College Sustainability Report Card, the University of Colorado earned an A- in 2010—in part for requiring that all new buildings and renovations must meet LEED Gold standards.
To fulfill the green building section of the report card, the association notes that the University of Colorado installed motion sensors and insulating windows in many existing buildings. Water-saving technology has also decreased consumption by 30 percent since 2003.
Schools–At the K-12 level, the Consortium for Energy Efficiency states that schools, due to their large investments in energy and unique purpose, continue to be an interesting and profitable target for energy-efficiency programs. The ENERGY STAR® for Schools program puts a number on it, saying that the annual energy bill to run America’s primary and secondary schools is $6 billion. The least efficient schools use three times more energy than the best energy performers.
Recognized as an ENERGY STAR top performer in 2009, the Council Rock School District in Newtown, Pennsylvania has achieved double-digit energy efficiency improvements for the past three years. To achieve these savings, Council Rock partnered with the Technical Services group in ARAMARK Education to implement a comprehensive energy-reduction program, including a building management control system enhancement and repairs to HVAC equipment field controls.
Hospitals–In February, Fast Company penned an article titled, “An In-Depth Look at the Hospital of the Future,” reporting that hospitals consume twice as much energy as typical office buildings—in part because they operate around the clock in response to the never-ending need for healthcare.
Unfortunately, hospitals can be challenging buildings to make sustainable. But that is not stopping a new LEED for Healthcare initiative, spearheaded by the US Green Building Council, which also helped create the Green Guide for Health Care (GGHC) to foster best practices and ensure the health care industry has the tools and resources it needs to build green.
To achieve a truly green status, however, some hospitals are finding they need to start from scratch. For example, Seton Healthcare Network broke ground in 2004 on the Dell Children’s Medical Center of Central Texas, the world’s first LEED Platinum Hospital.
MUSH Still Hot for Jobs
As these success stories suggest, the MUSH industry still has plenty of potential, especially for green workers. Per Recovery.org, as the rest of the $11 billion set aside for energy efficiency in the states trickles down and is spent between now and early 2011, ESCOs and non-ESCOs alike will likely see an ongoing need for skilled workers in the green building industry, including energy auditors, designers, engineers, electricians, pipe fitters, data managers, and building system managers.
© 2010, Debbie Van Der Hyde. All rights reserved. Do not republish.