SAVING BILLIONS FROM ENERGY EFFICIENCY IN THE FEDERAL SECTOR: INSTITUTIONALIZING ENERGY EFFICIENCY IN FACILITY MANAGEMENT
Federal Energy Management Program
The federal government has set itself ambitious goals for energy efficiency. The Energy Policy Act of 1992 and a series of Presidential executive orders have established the goal of reducing energy consumption about 30 percent below the 1985 consumption by the year 2005. Because the federal government spends about $8 billion each year on energy purchases to operate its 500,000 buildings (3.2 billion square feet of space), power its vehicles, and perform its mission, energy savings are an important way to reduce the cost of government. The federal government is, in fact, the largest energy consumer in the country, using more energy than the entire state of Alabama.
The Federal Energy Management Program has the task of leading this continuing effort. It goes straight to the bottom line of deficit reduction. Since 1985 energy efficiency measures have saved the government $9 billion, enough to provide the annual energy needs of the state of Vermont. Energy efficiency measures will save more money than all of the base closures (and without the negative economic impacts of base closures). The efficiency gains to date, if we considered the government as an enterprise, would have paid for the investments needed to make those efficiency improvements and would pay for all of the other projects needed to reach the 30 percent savings goal. It gives us free pollution prevention along the way, and by 2015 it will have given the federal government a net "profit" of over $15 billion.
Overcoming Barriers to Energy Efficiency
If the gains are so obvious, why is it not happening more quickly and more easily? There are some barriers of institutional policy, of procurement, of information, and of funding.
Institutional and policy barriers. Agencies tend to focus on their primary missions. But if efficient delivery of services is seen as integral to our missions, then energy efficiency is fundamental to every agency's mission. Everyone who manages facilities should place a high priority on energy efficiency. In particular, the tendency to concentrate on initial costs rather than life-cycle costs, (which is a matter of federal policy, but rarely used) should be combatted. The temptation is to build a cheaper building-reducing insulation, buying cheaper air conditioners and so forth. The truth is that energy efficiency does not have to cost more initially, and wasteful energy systems will cost far more in the long run. We are trying to increase awareness of the benefits of life-cycle costing. Investments in energy efficiency pay large returns over the lifetimes of facilities and systems.
Other institutional barriers exist. There are stories of agencies, being unable to accept utility rebates owing to accounting problems. FEMP can help in such cases. For example, FEMP helped the Department of Veterans Affairs obtain incentives of $500,000 in Fort Worth for ice thermal storage and more than $1 million in Los Angeles for demand-side reduction measures. FEMP has working groups and other methods for overcoming institutional barriers.
Procurement barriers. The federal procurement system, as is well known, has many barriers embedded in it. In general, it stresses competition and equal access, in a complex process to prevent abuse. It also makes innovation difficult. Streamlining the procurement system is a high priority today.
The federal government, with the help of the Federal Energy Management Program, has taken action to put government procurement in the service of energy efficiency. The Energy Policy Act of 1992 and Executive Order 12902 require federal agencies to purchase products that are at the upper end of energy efficiency, in fact the top 25 percent. It is not easy, however, to know which products meet that goal. Life-cycle cost analysis is one way to make such determinations, but not all products list
their energy efficiency ratings. So FEMP is preparing technical reports on product guides on 35 technologies to help guide federal facility managers and purchasing agents. Twenty-two agencies have signed pledges to buy in the upper 25 percent as part of a Federal Energy and Resource Conservation Procurement Challenge. The major military and civilian purchasing agencies are considering identifying qualified products in their catalogs.
These initiatives have substantial effects on the market. The federal government spends $20 billion a year on energy-consuming products, $8 billion just on office equipment. When it sends a signal to industry that it wants to buy in the upper 25 percent of the market in energy efficiency, industry recognizes that desire as the basis of a receptive market, and will produce products for it.
For example, a few years ago the General Services Administration, the Environmental Protection Agency, and the Department of Energy announced that they wanted to buy in the upper end of the energy efficiency market for desktop computers. Now we have Energy Star computers that use less energy than desktop computers did previously.
The Federal Energy Management Program also offers leadership for those outside the federal government. For example, FEMP is actively supporting a state collaborative lead by the New York State Energy Research and Development Authority, to expand the pool of governments buying energy-efficient products and multiply the public sector procurement clout. As a direct result, prices of these products should go down for everyone as volume sales grow.
Information barriers. Information barriers are the products of rapid advances in technology. There are so many products and competing claims that it is often difficult for federal energy managers to make informed decisions. Lighting technologies are advancing so quickly, for example, that it is probably cost-effective to invest in new lighting systems even if they were replaced with high-efficiency units only five years ago. Today's motors are highly efficient, and replacing chillers (required in any case for environmental reasons) generally results in improved efficiency. The technologies are advancing so rapidly that it is hard to keep track of the state of the art.
The Federal Energy Management Program provides direct technical assistance, on-site audits, training, a variety of new technology
demonstrations, "showcases," and the tools federal facilities need to get the job done.
Funding barriers. Declining appropriations are placing heavy pressure on the funds available for investments in energy efficiency. The appropriations for energy efficiency investments have declined from more than $250 million in fiscal 1995 to about $75 million in 1996.
As appropriations go down, it becomes necessary to seek other sources of energy savings. One of those sources is energy savings performance contracting. Another is utility incentives. Energy savings performance contracts are required by the Energy Policy Act. As competition takes hold in the electricity industry, the federal government can take advantage of that competition as energy service companies offer to provide many of the services that utilities have provided in the past. Rules and procedures in place as a result of the Energy Policy Act are available to agencies to help them use energy savings performance contracts.
The Federal Energy Management Program also works with utilities, the traditional suppliers of power, which want to retain some of their largest customers. A Federal Utility Partnership Group has met every few months for the past two years or so to look at utility incentives. The group includes representatives of three dozen of the largest utilities in the country, who are interested in working with the federal government. The evolving relationships with utilities have resulted in some successes:
The General Services Administration and FEMP have explored streamlining the procurement of a broad range of services through areawide agreements that some utilities have with the government. A new hybrid approach is evolving. One example, the New Mexico Initiative, makes all federal facilities in the Public Service of New Mexico territory eligible for reimbursable project funding.
The Potomac Electric Power Company has given the Department of Energy headquarters an old-fashioned utility rebate combined with an energy savings performance contract. Combining the utility incentive and the energy savings performance contract, DOE was able to replace 30,000 fixtures, reducing the energy consumption of
lighting by more than 63 percent. The government will save $340,000 over the life of that project in that one building alone, at no capital cost to the government.
The Southern California Edison Company has provided more than $55 million in incentives to federal agencies in its service territory.
Baltimore Gas and Electric has taken a hybrid approach. BGE has become part of the agency's qualified vendors list as an energy service company. But it is also a utility, providing the kinds of services available to all customers.
San Diego Gas and Electric has not only applied energy efficiency measures, but has carried out some water conservation projects in its service territory.
Consolidated Edison in New York, one of the largest utilities, has provided $10 million in incentives to federal agencies in its service territory.
The U.S. Army at Fort Lewis and the Department of Energy's Battelle Pacific Northwest Laboratories studied how to reduce costs at the base, which is growing as other bases close. With the help of Tacoma Public Utilities, more than $20 million of infrastructure improvements were made at a cost to the Army of only $3 million.
Public Service Company of New Mexico is one of the models of the new hybrid approach, a combination of utilities and energy savings performance contracts. The utility works with all of the agencies in its service territory—Kirtland Air Force Base, several large Department of Energy facilities, Sandia and Los Alamos National laboratories, and the Waste Isolation Pilot Project facility—and has offered to finance projects in its service territory. The opportunities to save energy at Kirtland alone would result in $7 million in energy savings and $500,000 in water conservation.
If one adds it up, there are billions of dollars of savings potential in our relationships with utilities and energy savings performance contracts. Is it easy to do? Unfortunately, it is not. For that reason, FEMP is working with the agencies on these projects. To spread the news about these
opportunities, the Federal Energy Management Project uses video telecasts to more than 300 sites.
The technology and the economics of energy efficiency are well known. All it takes for federal facilities managers is the will to act. Champions are needed in the agencies. Each of these champions will have a friend and partner at the Department of Energy. Collectively, we can not only stimulate the private sector to produce more energy efficient products, not only reduce pollution, but also help save the government billions of dollars.