CBS Newsletter
Fall 1997
pg. 8

A-Team Report

Energy Savings Performance Contracts

The federal government is the largest single consumer of energy in the United States, spending more than $3 billion yearly to light, heat, and operate its buildings. Money is also spent to maintain aging buildings, many of which are inefficient, having been built before the 1970s. As these costs have increased, budgets have been dramatically cut back during the last two years at the Departments of Energy and Defense and the General Services Administration.

Last spring, DOE announced the award of a new type of contract for federal agencies to purchase "energy services," the super energy savings performance contract (Super-ESPC). This contract is a partnership between a Federal agency and a private-sector energy service company (ESCO). The ESCO pays the up-front cost of purchasing and installing new energy-efficient equipment, and the government repays the company over the life of the contract from the savings resulting from reduced energy costs. No capital funding through federal appropriation is required.

Applications Team members Brad Gustafson, Steve Kromer and Mike Holda are working on a project with DOE to develop guidelines, standard procedures, and training for federal agencies that want to develop ESPCs. Some $5 billion in investment is needed to repair or replace aging equipment in federal buildings between now and 2005 to meet a federal goal of reducing energy use by one-third. According to DOE estimates, each dollar invested in energy efficiency results in a savings of four dollars, which translates into federal deficit reduction as well as jobs in the construction and manufacturing industries.

Although some of the money for energy-efficiency projects may come from Congressional appropriations and some power companies provide energy-efficiency services in their role as energy suppliers, chances are that the ESPC will evolve into a major source of funding. The new DOE contract can help accelerate the use of ESPCs by streamlining the procurement process, reducing the time required to buy more-efficient systems. This step reduces procurement costs and opens up the huge federal market to the private sector. The project team anticipates a total savings of $20 billion over 20 years from performance contracting, if it is widely adopted. At the time of this report, the first of six regional contracts has been signed. In addition, three contractors have signed letters of intent for the first ESPCs and are now making preliminary estimates of energy savings at federal sites.

—Brad Gustafson

Info icon

Brad Gustafson
Applications Team
(202) 586-2204; (202) 586-0888 fax

This work is supported by the Federal Energy Management Program.

For more information on ESPCs:

FEMP Help Desk:
(800) DOE-EREC (363-3732); (202) 586-3000 fax

Tanya Sadler, ESPC Program Manager
(202) 586-7755; (202) 586-3000 fax

John Archibald, Acting Director
(202) 586-5772

Federal Energy Management Program,
U.S. Department of Energy
1000 Independence Ave., SW
Washington, D.C. 20585

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