leading by example · 20 years of leadership alliance to save energy 1200 18th street nw suite 900...

2 0 Ye a r s o f L e a d e r s h i p

Alliance to Save Energy

1200 18th Street NW

Suite 900

Washington, DC 20036

(202) 857-0666

Fax (202) 331-9588

E-mail: [email protected]

Web: www.ase.org

L E A D I N G B Y E X A M P L E

Improving Energy Productivityin Federal Government Facilities

AlliedSignal

American Gas Cooling Center

Andersen Corporation

Armstrong International

Calmac Manufacturing Corporation

Cascade Associates

CertainTeed Corporation

Conservation Management Corporation

D & R International

Edison Electric Institute

E-Mon Corporation

Energy Performance Services

Energy Systems Laboratory

Enviro-Management Research

ERI Services

Fannie Mae

Florida Solar Energy Center

General Public Utilities

Geothermal Heat Pump Consortium

Honeywell

Houston Industries Incorporated

Houston Lighting and Power Company

Iowa Energy Center

Jacwill Industries

Johns Manville

Johnson Controls

Knauf Fiber Glass

Lawrence Berkeley National Laboratory

Libbey-Owens-Ford

MagneTek

National Insulation Association

National Renewable Energy Laboratory

North American Insulation Manufacturers Association

Northern States Power Company

OSRAM SYLVANIA

Owens Corning

Pacific Gas & Electric Company

Pacific Northwest National Laboratory

Polyisocyanurate Insulation Manufacturers Association

Public Service Company of New Mexico

Sensor Switch

Solar Energy Industries Association

Southern California Edison

Southern California Gas Company

Susan Maxman Architects

The Society of the Plastics Industry

Volt VIEWtech

Watt Stopper

Whirlpool Corporation

Xenergy

The Federal Energy ProductivityTask Force Members

Supporting the Report

Glen SkovholtTask Force ChairmanHoneywell

Jared BlumTask Force Co-ChairmanPolyisocyanurate Insulation ManufacturersAssociation


Recommendations From

Alliance to Save EnergyandFederal Energy Productivity Task Force


Cover Artwork: Washington Crossing the Delaware by Emanuel Leutze. ©Index StockPhotography, 1998.

Just as George Washington galvanized the American Revolutionary War effort by leading thebold attack on Trenton, today’s leaders need to rally the disparate forces addressing federalenergy use into a cohesive movement that will transform the way federal facilities are managed.

© Copyright 1998 Alliance to Save EnergyPrinted on recycled paper.Printed with soy-based inks.

For more information contact:Alliance to Save Energy1200 18th Street NWSuite 900Washington, DC 20036(202) 857-0666Fax (202) 331-9588E-mail: [email protected]: www.ase.org

The Alliance to Save Energy is a coalition of prominent business, government, environ-mental, and consumer leaders who promote the efficient and clean use of energy world-wide to benefit consumers, the environment, the economy, and national security.

Leading by Example: Improving Energy Productivity in Federal Government Facilities

iv

TABLES AND FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viPREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viiACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viiiAUTHORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ixFOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xEXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

We’ve Come a Long Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9But There’s Still a Long Way to Go . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Why Energy-Saving Projects Get Stalled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

FEDERAL ENERGY GOALS AND REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . 13Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Compliance With Energy Reduction Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Changing the Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Energy-Intensive Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Adding It Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Energy Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Equipment Purchasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Carbon Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20In-House Management Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Recommendations: Federal Energy Goals and Requirements . . . . . . . . . . . . . . . . . . 20

PROJECT FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Energy-Saving Performance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Area-Wide Agreements With Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Revolving Fund for Energy-Saving Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Utility Restructuring and Energy Price Reductions . . . . . . . . . . . . . . . . . . . . . . . . . 29Recommendations: Project Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ENERGY EDUCATION AND TECHNICAL ASSISTANCE . . . . . . . . . . . . . . . . . . . 31Federal Energy Management Program (FEMP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31General Services Administration (GSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Department of Defense (DOD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32More Needs to Be Done . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Recommendations: Energy Education and Technical Assistance . . . . . . . . . . . . . . . 33

APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

Contents

v

TABLE 1 Federal Agencies That Failed to Meet the 1995 Energy Reduction Target . . . 14TABLE 2 Federal Agencies’ Progress Toward Meeting the 2000 Energy

Reduction Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14TABLE 3 Super ESCO Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

FIGURE S1 Comparing Different Measures of Energy Use . . . . . . . . . . . . . . . . . . . . . . 2FIGURE S2 Meeting Federal Energy-Efficiency Needs From 1998 Through 2005 . . . . 4

FIGURE 1 Comparing Different Measures of Energy Use . . . . . . . . . . . . . . . . . . . . . . 16FIGURE 2 Agency Expenditures for Energy Conservation Retrofits and

Capital Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23FIGURE 3 Meeting Federal Energy-Efficiency Needs From 1998 Through 2005 . . . . 24FIGURE 4 Status of State Electric Utility Deregulation Activity as of

March 2, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Tables and Figures


vi

Preface

vii

The Alliance to Save Energy is proud to publish Leading by Example: Improving Energy Pro-ductivity in Federal Government Facilities. This report is the product of a two-year coopera-tive effort between the Alliance to Save Energy and more than 50 suppliers of energy-savingproducts and services.

Although the report shows that the federal government has come a long way over the lastdecade to manage energy more effectively, it also points out that there’s still a long way togo before the federal government is an example of energy productivity for others. The rec-ommendations, if adopted, will place the federal government on that path of leadership. Inthe process, it will save billions of dollars for American taxpayers and contribute to meetingthe nation’s greenhouse gas emissions reduction targets.

We would like to thank the members of the Federal Energy Productivity Task Force fortheir time and perseverance in developing these recommendations. The federal governmenthas much to learn from the private sector. We hope that the report will receive thoughtfulconsideration and action from the president, Congress, and other decision-makers in thefederal government.

Honorable Jeff Bingaman Dean T. LangfordChair Co-Chair

Many people contributed to this report.Through their guidance and support, thequality and relevance of this report weregreatly enhanced. Of course, the viewsexpressed in this report do not necessarilyreflect their views and any errors or omis-sions should be credited to the authors.

Over the last two years, a number of peoplehave made presentations at Federal EnergyProductivity Task Force meetings outliningtheir concerns. Many of the ideas in thisreport were gleaned from those discussions.Thanks to John Archibald (Acting Directorof the Federal Energy Management Pro-gram, Department of Energy), Millard Carr(Director of Energy Management Solutions,former Director of Engineering for theOffice of the Secretary of Defense), BrianCastelli (former Chief of Staff to the Honor-able Christine Ervin, Assistant Secretary ofEnergy for Energy Efficiency and RenewableEnergy), Mark Ginsberg (Deputy AssistantSecretary for Building Technologies, U.S.Department of Energy), Sarah Horsey-Barr(Director of Regional Activities, Oceans,Environment, and Science Bureau, U.S.Department of State), Joe Price (Energy Pro-gram Manager for the U.S. Air Force), BethShearer (National Energy Program Repre-sentative, General Services Administration),and Randy Steer (Federal Energy Manage-

ment Budget Examiner, Office of Manage-ment and Budget).

We would also like to thank the people whoprovided comments on earlier drafts of thisreport. They are John Archibald, Jerry Dion,and Rick Klimkos (Federal Energy Manage-ment Program, U.S. Department ofEnergy); Jeff Harris and Philip Coleman(Lawrence Berkeley National Laboratory);Edward Murtagh (U.S. Department of Agri-culture); Mahlon White (U.S. Departmentof Defense); Beth Shearer and Virgil Ostran-der (General Services Administration); andChris Tremper (McNeil Technologies).

Many Alliance staff also contributed valuableinsights, editorial comments, and adminis-trative support for the report. In particular,thanks to Randy Lynch, Gene Foley, Mal-colm Verdict, Michelle Perez, Swarupa Gan-guli, David Hamilton, Douglas Norland,Robert Gluck, and David Nemtzow.

Finally, the report would not have been pos-sible without financial support from theU.S. Department of Energy’s FederalEnergy Management Program, the Honey-well Foundation, and the many corporatecontributors to the Alliance.

Joe William Loper, Katie L. Miller, and Mark HopkinsAuthors

Acknowledgments


viii

Joe William LoperMr. Loper, Program Manager for MarketDevelopment, works with energy-efficiencycompanies to educate energy consumers inindustry, government, and buildings aboutenergy-saving opportunities in their facilities.He manages the Alliance’s Federal EnergyManagement and Procurement Program andthe Trade and Investment Program. Loper hasauthored several reports and articles on energy,the environment, and economic policy. Heholds a master’s degree in economics fromRensselaer Polytechnic Institute and a bache-lor’s degree in economics and political sciencefrom the State University of New York.

Katie L. MillerMs. Miller, a former Research Associate atthe Alliance, worked on federal energy issuesfor two years, focusing on energy consump-tion analysis, federal energy policy, and pro-

curement. She worked closely with FederalEnergy Productivity Task Force members onfederal energy management and was a prin-cipal planner for a training workshop ongovernment energy efficiency. Miller alsoworked as a core liaison and planner for theAlliance’s Green Schools Project. She holds abachelor’s degree in environmental policyfrom the University of Michigan.

Mark HopkinsMr. Hopkins organized the Federal EnergyProductivity Task Force in 1996. Withmore than 20 years of experience workingon energy-efficiency issues, he has beeninstrumental in raising awareness of energywaste in the federal government. Heauthored the groundbreaking report, EnergyUse in Federal Facilities: Squandering Tax-payer Dollars and Needlessly Polluting OurEnvironment, in 1991.

ix

Authors

Improving the way the federal govern-ment manages its enormous energy usehas been a major priority for the

Alliance to Save Energy for more than adecade. In 1991, the Alliance published agroundbreaking policy analysis, Energy Usein Federal Facilities: Squandering TaxpayerDollars and Needlessly Polluting Our Envi-ronment. The policy recommendations inthat report led to several important provi-sions to improve federal energy manage-ment in the Energy Policy Act (EPAct) of1992.1

In 1995, the Alliance began to reexaminethe current state of federal energy manage-ment to determine how agencies were per-forming since EPAct was passed. To help inthis effort and to give us the viewpoint ofprivate sector experts, the Alliance organ-ized the Federal Energy Productivity TaskForce, a group of 50 companies that marketenergy-efficient products and services. TheTask Force is co-chaired by Glen Skovholtof Honeywell Inc. and Jared Blum of thePolyisocyanurate Insulation ManufacturersAssociation. The term “productivity” in thename emphasizes the productivity benefitsderived from energy-efficiency improve-ments in federal facilities.

The Task Force met quarterly for almosttwo years to examine the federal govern-ment’s progress and outline new policy rec-ommendations to enhance it. This report isthe product of those efforts. Jointly issuedby the Alliance and the Task Force, it is aconsensus document—hence, while mostparticipants agree with most of the points

in the report, some points receive differinglevels of support from particular Task Forcemembers. A list of Task Force companiessupporting the report appears on the insidecover.

The Task Force appreciates the kind andhelpful cooperation of federal energy man-agement officials at the U.S. Department ofEnergy (DOE), the U.S. Department ofDefense (DOD), and the General ServicesAdministration (GSA) in briefing the TaskForce and providing other information andassistance. The Task Force found those officials highly dedicated, hardworking, and committed to the success of their pro-grams. To the extent this report is critical of federal energy management, that criti-cism is directed towards the “system,” notthe people trying to make the system work.

This report reaffirms the importance ofenergy efficiency and how it can reduce fed-eral budget deficits, improve the nation’s airquality, and reduce greenhouse gas emis-sions.

This report discusses the need for continuedand expanded efforts to improve federalenergy productivity and offers recommen-dations on how to more effectively reduceenergy consumption in federal buildingsand facilities. It provides an agenda for con-gressional and federal agency policy-makersworking to overcome barriers to improvingthe federal government’s energy productiv-ity, and it identifies strategies to tap into theenormous energy savings potential of thelargest energy consumer in the UnitedStates—the federal government.

Foreword


x

Reducing the federal government’smassive energy waste throughimproved energy productivity offers

enormous opportunities to save taxpayersbillions of dollars and improve the environ-ment. For example, energy-efficiencyimprovements in federal facilities madefrom 1985 through 1995 resulted in:

■ Energy savings—Enough energy (138trillion Btus) was saved annually to fuelall of the cars, buildings, and factories inVermont.

■ Tax savings—Taxpayers saved $687 mil-lion annually—$3.78 billion between1985 and 1995—and received a returnon investment of more than 34 percentper year.

■ Cleaner environment—Carbon emis-sions were reduced by 1.7 million metrictons annually.

Federal agencies have already made greatprogress, but with an investment over the nexteight years of $4.7 billion, taxpayers wouldsave an additional $1 billion annually.

Federal Energy Goals andRequirementsOver the last two decades, presidents andCongress have proclaimed numerous goalsand requirements to reduce federal energywaste through improved energy manage-ment. The Federal Energy ManagementImprovement Act of 1988 (FEMIA) subse-quently ordered agencies to reduce energy

use per gross square foot (GSF) by 10 per-cent from 1985 levels by 1995. The currentgoal, issued by President Clinton in 1994through an executive order, requires agenciesto reduce their energy use per GSF by 30percent by 2005, based on 1985 consump-tion. Agencies must also, “to the maximumextent practicable,” install all energy-efficiency measures with payback periods ofless than 10 years and purchase energy-consuming equipment in the top 25 per-cent of efficiency or at least 10 percenthigher than the Department of Energy(DOE) minimum efficiency standard.

Energy Reduction TargetsIt is debatable whether the federal govern-ment is meeting its energy reduction goals.While the government as a whole achieveda 14.2 percent reduction between 1985 and1995, at least eight agencies failed to saveeven 10 percent.

More importantly, the government hasemployed two tactics that distort the energysavings it reports.

In 1991, President Bush’s executive orderchanged the measure of energy consump-tion that is used by agencies from primaryenergy to site energy, effectively loweringthe goalpost for the 1995 targets. Siteenergy is the number of Btus that are actu-ally consumed at a building or facility. Pri-mary energy is the total amount of Btusused to produce the energy consumed in a building or facility. Unlike site energy,

Executive Summary

Section Title

1

Executive Summary

primary energy includes energy lost in thegeneration, transmission, and distributionof electricity that is delivered to a building.

Basing the measure on site energy instead ofprimary energy is an important difference,because approximately two-thirds of theenergy consumed at the power plant is lostin the conversion and transmission of theelectricity to the building site. The siteenergy measure ignores this “lost” energy.Electric power conversion losses are nowequal to the total site energy used in federalfacilities, yet are not counted in the federalenergy accounting system.2

Changing the measure from primary to siteenergy helped the federal government meetits energy consumption targets in 1995. Ifprimary energy were still being used as themeasure of energy consumption, the federalgovernment would not have met the EPActgoals for 1995. Using primary energy as themeasure, GSF energy use fell by only 1 per-cent, not 14.2 percent.

The second way the federal government dis-torts its energy savings is by excluding facili-ties deemed “energy-intensive.” These

energy-intensive facilities account for morethan 17 percent of total energy use. Becauseenergy-intensive facilities are not clearlydefined for reporting, agencies move build-ings in and out of the category each year.Some of the energy-intensive operationsreported by agencies are suspect: for exam-ple, day-care centers, libraries, office build-ings, entire residential neighborhoods,chillers, and on-site steam and electric gen-eration plants.3 To the best of our knowl-edge, DOE has never challenged an agency’sclassification of a facility as an “energy-intensive operation.”

If primary energy accounting is used andenergy-intensive facilities are included, fed-eral government energy consumption perGSF increased by 2.7 percent since 1985!

Figure S1 illustrates how different measuresof federal energy use can lead to differentconclusions. The first bar on the left is thepercentage change in energy use per GSFwhen site accounting is used and buildingswith “energy-intensive operations” are notincluded. This is the way that the federalgovernment currently measures progress


2

-14.2

-1.1

2.7

Site Energy Accounting Primary Energy Accounting

% C

hange F

Y8

5–FY9

5

-9.1

-15

-12

-9

-6

-3

0

3

Standard Buildings Standard Buildings plus “Energy-Intensive” Facilities

Figure S1Comparing DifferentMeasures of EnergyUse

toward its energy reduction goals. By thismeasure, the federal government hasreduced energy consumption from 1985 to1995 by 14.2 percent and is nearly on trackto meet the energy reduction target for theyear 2005.

By other measures, the federal governmentdid not meet the 1995 target and is not ontrack to meet the 2005 goal of a 30-percentreduction. The second bar shows the per-centage change in energy use per GSF whensite accounting is used and energy-intensiveoperations are included. By this measure,energy consumption fell by 9.1 percent.The third bar shows the percentage changein energy use per GSF when energy use ismeasured at the source and energy-intensiveoperations are excluded. By this measure,energy use fell by only 1.1 percent.

The fourth bar shows the percentagechange in energy use per GSF when energyuse is measured at the source and energyintensive operations are included. By thismeasure, energy use per GSF actuallyincreased by 2.7 percent.

To be fair, energy use would have risen evenmore if not for agencies’ energy-efficiencyefforts. Many energy-efficiency gains wereoffset by the energy consumed through theincreased use of computers, fax machines,and printers in government offices. We esti-mate that from 1985 to 1995, electronicoffice equipment increased primary energyuse by more than 20 trillion Btus fromwhat it would have been otherwise.

Also, the use of an “energy-per-square-foot-basis metric” may mask non-energy-relatedproductivity improvements. For example,the Postal Service claims that facility energyintensity has increased as mail sorting isconcentrated into smaller spaces. While thisincreases the Postal Service’s operationalproductivity, it also increases the energyused per square foot.

Equipment PurchasingAssessing whether agencies purchase energy-efficient equipment is difficult because of alack of data. However, based on our conver-sations with facility managers, it appearsthat compliance is minimal at best. This isbecause agency personnel have little incen-tive to purchase high-efficiency equipmentand no way to finance the incremental costsof higher-efficiency equipment. There isalso a general lack of enforcement and over-sight. Usually it is more convenient to buythe lowest-priced equipment (often lessenergy-efficient), since the burden of proofis on the purchaser of high-efficiency equip-ment, not low-efficiency equipment. Eventhe General Services Administration (GSA)and Defense Logistics Agency (DLA) catalogsthat government employees use to purchasemuch of their equipment needs still listinefficient equipment!

Carbon Emissions TargetsIn December 1997, the Clinton administra-tion committed itself to reducing U.S. car-bon dioxide emissions to 7 percent below1990 levels by 2012. There is no congres-sional or executive branch mandate thatrequires federal agencies to reduce their car-bon emissions. Site energy, which is cur-rently used to track federal energy use, is apoor proxy for carbon emissions.

Project FundingIn order to meet the president’s 30-percentenergy reduction goal by 2005, we estimatethat federal agencies will need to investabout $4.7 billion over the next eight yearsin energy-saving projects (see Figure S2 onnext page). Given past levels of congressionalappropriations for federal energy-savingefforts, agencies will likely face a $2 billionfunding shortfall. Consequently, agenciesare increasingly turning to energy servicescompanies (ESCOs) and electric and gasutilities to finance their energy-efficiencyimprovements.

Executive Summary

3

Energy-Saving PerformanceContracts (ESPCs)Over the last decade, agencies have enteredinto 72 ESPCs, in which ESCOs pay for aproject’s capital and operating costs and arethen paid back from the energy cost sav-ings. However, while the potential is enor-mous, ESPCs have been used in only ahandful of the 500,000 federal buildings.ESCO investments to date have been just$138 million. This pales in comparison tothe $900 million in investment capital thatthe Federal Energy Management Program(FEMP) estimates could come from ESPCsbetween 1996 and 2005.

One of the biggest challenges to imple-menting ESPCs has been the difficulty inqualifying ESCOs and then negotiatingcontractual elements, including allowableoverhead and profits. To simplify thisprocess, FEMP and the Department ofDefense (DOD) have each issued regionalindefinite-delivery indefinite-quantity con-tracts (IDIQs) that prequalify about a halfdozen ESCOs and allow agencies to enterinto simple task order agreements withthem. The IDIQs eliminate the need foragencies to qualify ESCOs on a project-

by-project basis. The IDIQs will potentiallyreduce the time it takes to award an ESCOdelivery order to six months, whereas in thepast it has taken from one to three years.

Several problems need to be taken if ESPCsare to be used widely in the federal govern-ment:

■ Education—The lack of understandingand expertise regarding ESPCs on thepart of both senior management andproject management staff at agencies.

■ Resources—The large amount of gov-ernment staff time and cost that is oftenneeded to identify and prepare projectsprior to involving ESCOs.

■ Perceptions—The perception thatESPCs are too expensive.

■ Approach—The tendency for agenciesto implement short-term payback meas-ures in-house, thus leaving only long-term measures for ESPCs.

Area-Wide AgreementsWith UtilitiesMany utilities now offer an array of energyservices, including equipment sales andfinancing, service agreements, and perform-


4

$420

$1,325

$2,033

$900 FundingShortfall

ESPCs

UtilityServices

Appropriations

Figure S2Meeting FederalEnergy-EfficiencyNeeds From 1998Through 2005

Estimate of TotalNeed: $4.7 Billion

Alliance calculations based on data from McNeil Technologies, Federal Energy ManagementProgram; Annual Report to Congress; Federal Energy Management Program, Federal EnergyEfficiency and Water Conservation Funding Study.

In millions

ance contracts. To tap these resources, GSAhas implemented what are known as area-wide agreements with electric and gas utili-ties. These agreements allow federal facili-ties to enter into long-term contracts withtheir local utility for “energy services,” thusavoiding time-consuming, competitive pro-curement procedures they would normallyhave to use to implement energy-savingprojects. There are currently 136 utilityarea-wide agreements in place, with 80specifically allowing demand-side manage-ment options.

Revolving Fund for Energy-Saving ProjectsUncertain funding makes it difficult foragencies to implement a comprehensivelong-term energy management strategy.Agencies are forced to look only as far as thenext budget cycle and to restrict theirinvestments to simple measures with quickpaybacks. Legislation has been introduced tocreate a Federal Energy Bank that agenciescould tap to pay for energy-efficiency projects.The Bank would be capitalized by taking 5percent of each agencies’ annual energybudget—an annual contribution of $225million—over a three-year period. FEMPwould administer the funds, and agencieswould repay the loan with interest.

The Congressional Budget Office (CBO)recently scored the Bank proposal and rec-ommended that loans be limited to projectswith paybacks of three years or less. CBO’sanalysis failed to take into account that theFederal Energy Bank is a revolving fund(i.e., that as loans are paid off the money canbe re-lent) and assumed that the average

payback for the loan portfolio is the same asthe payback for the loan with the slowestpayback. In sum, the fund would achievepositive financial benefits with an averagepayback for the loan portfolio of four yearsor less.

Utility Reform and Energy Price ReductionsMany states are reforming their electric util-ity industry to allow utilities and others tocompete for individual customers, whichwill likely lead to lower electricity prices,especially for large consumers. As of March2, 1998, 16 states have enacted restructur-ing legislation or issued comprehensive reg-ulatory orders. The General AccountingOffice (GAO) projects that lower electricityprices will enable the federal government tosave from $1 billion to $8 billion over thenext 18 years; however, up to 40 percent ofthese savings could be lost if agencies increasetheir energy use as a result of lower prices.

Energy Education and Technical AssistanceOne major barrier to federal energy produc-tivity is the lack of energy-efficiency knowl-edge on the part of government facility man-agers, procurement officials, and otherrelevant personnel, which is exacerbated bythe general decrease in the number of govern-ment energy managers. In order to meetenergy reduction targets and purchaseenergy-efficient equipment, federal man-agers need to increase their knowledgeabout energy-saving technologies and learnhow to evaluate, finance, and implementthem.

Executive Summary

5

RecommendationsFederal Energy Goals andRequirements■ Impose greater agency accountability—

Congress should hold annual oversighthearings on agencies’ energy use, and theOffice of Management and Budgetshould do more to assess agency per-formance and compliance.

■ Raise burden of proof to purchaselow-efficiency equipment and providefinancing to purchase energy-efficientequipment—Purchasers of equipmentthat does not comply with the energy-efficiency language in Executive Order12902 should be required to justify theirpurchases in writing. All equipmentlisted in the GSA and DLA catalogsshould be made to comply with this lan-guage, too. FEMP should create “BasicFinancing Agreements” to provide pri-vate sector financing for the incrementalor total cost of widely purchased energy-using equipment to ensure that it isenergy-efficient.

■ Create basic financing agreementsto cover incremental costs of high-efficiency equipment—FEMP shouldexplore with agencies the creation ofBasic Financing Agreements for energy-efficient equipment based on FEMP’sproduct recommendations.

■ Eliminate the energy-intensive opera-tions exclusion—The excluded-build-ings provision should be eliminated, orat a minimum, DOE should clearlydefine the category and closely monitoragencies’ use of the category.

■ Create a federal agency carbon emissionreduction target—To demonstrate thenation’s commitment to reduce carbonemissions, the president should establisha federal agency carbon emission reduc-tion target similar to those called for inKyoto, Japan, in December 1997. FEMPshould begin tracking and reporting car-

bon emissions per GSF, includingenergy-intensive operations.

■ Create a joint public–private sectorcommittee to offer recommendationsfor energy-efficiency implementation—The committee should be created andmeet annually to review agency energymanagement efforts and to identify newmeans of expediting energy-efficiencyprojects and ways to increase private sec-tor financing.

■ Authorize additional audits by inspec-tors general—Agencies should conducteconomy and efficiency audits of theirin-house energy management programs.

Project Funding■ Provide sufficient and stable appropria-

tions for energy-efficiency projects toagencies—We estimate that agencies willneed $522 million annually through2005 for energy-efficiency improvementsin order to meet their energy-saving tar-gets. Congress should appropriate thislevel of funding, minus projected invest-ments by ESCOs and utilities and, ifimplemented, the Federal Energy Bank.

■ Continue implementing IDIQs andreauthorize the use of ESPCs—FEMPand DOD should accelerate their effortsto streamline ESPC development.FEMP should increase efforts to speedprojects through the IDIQ process anddevote more personnel to providingtechnical assistance to agencies develop-ing ESPCs; agencies should take advan-tage of these efforts. Congress shouldreauthorize the use of ESPCs as theauthorization under the Energy PolicyAct of 1992 terminates in 2000.

■ Establish a Federal Energy Bank tofund energy-efficiency improvements—The Bank should be authorized with atleast an average four-year payback, andfunds should be available to supportESPC project development as well as toimplement projects.


6

■ Use savings from lower electricity pricesfor energy-efficiency improvements—Congress should establish a mechanismfor agencies to use energy budget savingsfrom reduced electricity rates for energy-efficiency improvements. This wouldprovide more incentive for agencies toreduce their electricity consumption aswell as to negotiate reduced rates.

Energy Education and Technical Assistance■ Increase training and tap the expertise

of the private sector—Congress shouldincrease funding for energy managementeducation and training programs, andFEMP, DOD, and GSA should involveprivate sector energy-efficiency compa-nies in providing education and trainingabout their technologies free of charge.

■ Create centralized ESPC technical sup-port at each agency—Each agencyshould develop an infrastructure foracquiring and implementing ESPCs.The central offices should provide legal,financial, and technical support to per-sonnel in the field. Agencies should alsoassign an ESPC specialist to eachregional office to ensure that ESPCsare executed correctly.

■ Review the status of energy manage-ment personnel—FEMP should con-duct a government-wide review ofenergy management personnel require-ments to ensure that sufficient man-power is being devoted to meet thefederal energy reduction targets.

Executive Summary

7

The federal government annuallyconsumes 888 trillion Btus of pri-mary energy and spends $4.2 billion

to power and fuel half a million buildingsand facilities.4 Federal government build-ings alone are responsible for 1 percent ofthe United States’ 1.4 billion metric tons ofcarbon dioxide emissions.5

Effective federal energy managementdemonstrates the nation’s commitment toclean up the environment, reduce green-house gas emissions, improve economicproductivity, reduce reliance on importedenergy, and lower budget deficits. As thepresident calls on the nation’s industries andthe leaders of the world’s developed anddeveloping nations to reduce emissions ofclimate change gases, it is imperative thatthe federal government lead the way. 6

We’ve Come a Long WayEnergy-efficiency improvements made from1985 through 1995 reduced annual energyconsumption by 138 trillion Btus. In otherwords, energy consumption would havebeen nearly 16 percent higher in 1995 ifnot for efficiency measures implementedover the previous 11 years.7 That’s nearlyenough energy to fuel all of the cars, build-ings, and factories in Vermont.8

Federal energy-efficiency improvements aresaving taxpayers money. In 1995, the fed-eral government saved $687 million due toenergy productivity improvements madesince 1985. Cumulative savings over the

1985–1995 period were $3.78 billion.9

Improved federal energy management ishelping to reduce federal budget deficitsand free up scarce revenues to be used forother important federal programs.

Improvements in federal energy productiv-ity over the 1985–1995 period reducedannual carbon emissions from federal build-ings and facilities by 1.7 million metric tonsin 1995, an 11.7 percent reduction from1985. Cumulative carbon emissions reduc-tions over the 1985–1995 period totaled9.1 million metric tons.10

Investments to improve the energy effi-ciency of a facility frequently provide otherbenefits as well. Examples include improvedindoor air quality, occupancy comfort, andworker productivity. In some cases, thevalue of worker productivity exceeds that ofthe energy-efficiency improvement. Forexample, worker productivity reportedlyrose 6 percent as a result of renovations in1986 of the main post office in Reno,Nevada.11

Improved federal energy productivity is notfree. Over the 1985–1995 period, the fed-eral government, along with utilities andenergy services companies, invested approx-imately $2 billion in energy-efficiencyretrofits and improvements.12 On the otherhand, that investment has already paid foritself, along with an additional $1.8 billionfor our trouble. As of 1995, energy-efficiency improvements made between1985 and 1995 were giving American tax-

IntroductionThe federal government is the single largest energy consumer in theUnited States. The government’s energy use has a substantial impacton the nation’s economy, security, and environment.

Introduction

9

payers a return on investment of over 34percent a year.13 Any other government pro-gram—or private sector investment for thatmatter—would be hard-pressed to matchthis high rate of return.

But There’s Still a Long Way to GoFederal agencies have clearly made a lot ofprogress, but they have only started to tapthe opportunities. Federal governmentbuildings still consume about 32 percentmore energy per square foot than thenation’s building stock at large.14

A cumulative investment of $4.7 billionover the next eight years would save taxpay-ers an additional $1 billion annually. Thoseinvestments would pay for themselves injust four to five years, after which the annu-al energy cost savings could be given backto taxpayers, or used to reduce debt ormend Social Security.15

Why Energy-Saving Projects Get StalledThe enormous savings potential is notenough in itself to make energy-efficiencyimprovements happen in federal buildingsand facilities. Energy-efficiency investmentsare continually stalled or prevented for ahost of reasons.

■ Energy efficiency is not part of agen-cies’ core missions—Energy efficiency isgenerally not a priority within the agen-cies. It is often perceived as a distractionand an added burden. Very rarely dosenior officials within the agencies bringattention to the issue, leaving the re-sponsibility to federal workers whowould make the improvements unsup-ported and unguided. Especially whenagencies are forced to cut staff, personnelare pulled away from energy manage-ment to focus more on activities relatedto agencies’ core missions.

■ Agencies don’t have enough money—Agencies have not received adequate

funding from Congress to permit themto invest in the many remaining cost-effective energy-efficiency projects.Agencies are caught in a double-bind inthat they are required by law and execu-tive order (as discussed below) to reduceenergy use and purchase energy-efficientequipment, but they are not given suffi-cient resources to meet those require-ments. Simply put, they face unfundedmandates. Due to constraints in otherareas of their budgets, agencies some-times reallocate energy-efficiency moniesfor other activities or don’t requestenergy-efficiency funding at all.

■ Agencies receive little oversight and aregiven few incentives—While agenciesare required by law and executive orderto reduce energy use and purchaseenergy-efficient equipment, there is little(if any) pressure from Congress and thepresident to do so. Agencies also recog-nize that reducing energy costs will sim-ply result in reductions in their energybudgets.

■ Lack of awareness and knowledge—Implementing energy-efficiency projectsrequires knowledge of the opportunitiesand technologies that are currently avail-able and the cost and performance ofthose technologies in similar applica-tions. It also requires that facility man-agers consider the life-cycle cost of oper-ating a facility rather than just the firstcost of a building system or a piece ofequipment. More training and educationof federal government personnel aboutenergy-efficiency opportunities andimplementation are needed.

Over the last two decades, a considerableamount of legislation, executive orders, rulemaking, and programs have been developedand implemented to encourage investmentsin energy efficiency. Congress and presi-dents have established various goals andrequirements related to federal energy man-agement. Billions of dollars have been spent


10

Introduction

11

to support agencies’ efforts to reduce theirenergy use. Federal personnel have spentcountless hours in classrooms learningabout energy-efficiency opportunities.

Efforts made over the last two decades haveresulted in heightened awareness of energy-efficiency opportunities, greater incentives

to implement energy-saving measures, andincreased investment resources. Neverthe-less, many obstacles still need to be over-come if the federal government is to maxi-mize the productivity of its energy use. Thefollowing chapters describe various effortscurrently under way, discuss problems, andsuggest solutions.

One way Congress and the presidentencourage agencies to reduce theirenergy consumption is by declar-

ing in policy statements that energy effi-ciency is a priority and that agencies mustmake the necessary improvements. Sincethe mid-1970s, mandates to reduce energyuse and purchase high-efficiency equipmenthave been at the center of efforts to improveenergy efficiency in federal buildings. Thechallenges have been, and still are, to ensurethat the mandates are funded, to maintainconsistency and accuracy of reporting, andto ensure that agencies and their staffs areheld accountable for meeting the mandates.

BackgroundThe first executive order related to federalenergy management was issued by PresidentFord in 1976 and called for a 20-percentreduction in energy use by 1985.16 TheFederal Energy Management ImprovementAct of 1988 (FEMIA) subsequently orderedagencies to reduce energy use per grosssquare foot (GSF) by 10 percent from 1985levels by 1995. The Energy Policy Act of1992 (EPAct) and executive orders fromPresidents Bush and Clinton required fed-eral agencies to reduce building energy con-sumption (measured in Btus per GSF) by20 percent from 1985 levels by 2000, andby 30 percent from 1985 levels by 2005.17

EPAct mandated that by January 1, 2005,each agency shall install “to the maximumextent practicable” all energy-efficiency

measures with payback periods of less than10 years. President Clinton’s executive orderfurther required that where practical andcost-effective, agencies purchase equipmentin the top 25 percent of the efficiency rangeor equipment with efficiencies at least 10percent higher than the DOE minimumefficiency standard. The equipment man-dates were intended to provide guidance tofacility managers trying to determine whatequipment makes the most economic senseand to encourage comprehensive upgrades,as opposed to what is called “cream-skim-ming,” wherein only measures with thequickest paybacks are implemented.

To monitor agencies’ compliance with theenergy reduction targets, agencies mustreport their energy usage along with plansto reduce it to DOE’s Federal Energy Man-agement Program (FEMP). Each year, 28agencies submit reports to FEMP, which arethen compiled in the Annual Report to Con-gress on Federal Government Energy Manage-ment and Conservation Programs.18 TheAnnual Report contains information on federal energy management policy andmandates, funding for energy-efficiencyimprovements and technical support,energy use for each agency, and activitiesthat each agency is undertaking to useenergy more efficiently. While energy con-sumption is being tracked, there has beenlittle attempt to document which agencies,if any, are complying with the purchasingrequirements.

Federal Energy Goals and Requirements


13

Compliance With EnergyReduction TargetsWhile agencies are bound by law to complywith the energy reduction targets, there areno real sanctions in place for agencies thatdon’t comply. Agencies seldom are requiredto appear before Congress or the presidentto answer questions about why they failedto meet the mandates or how they suc-ceeded. Energy and maintenance budgetsare not threatened.

It is perhaps not surprising then that compli-ance with the executive orders is mixed.Agencies as a whole failed to comply withPresident Ford’s executive order, reducingenergy use by just under 17 percent, ratherthan 20 percent. The response to FEMIA hasnot been stellar either. While the federal gov-ernment as a whole achieved a 14.2-percentreduction in 1995 from 1985 levels, at leasteight agencies failed to meet the 10-percenttarget (see Table 1).19

At the close of fiscal year 1995, the federalgovernment was on target to meet the20-percent reduction by 2000, based on siteenergy consumption. But again, there wassignificant variation in individual agencyperformance. Of the 21 major federal agen-cies, six have already met or exceeded thegoal, five are on target to meet the goal, sixare not reducing consumption at a fast-enough pace, and five agencies haveincreased their energy consumption (seeTable 2). In total, agencies representingmore than 90 percent of federal-buildingenergy use are on track to meet the year2000 goal.

Changing the RulesIn 1991, President Bush’s executive orderchanged the measure of energy consump-tion that is used by agencies from primaryenergy to site energy, effectively loweringthe goalpost for the 1995 targets. Site


14

Postal Service State Department

Health and Human Services Office of Personnel Management

Labor Panama Canal Commission

Housing and Urban Development Federal Communications Commission

Table 1Federal Agencies That Failed to Meetthe 1995 EnergyReduction Target

Have already Are on track Not on track Have increased met goal to meet goal to meet goal consumption

Energy Defense Postal Service State Department

Agriculture Interior Labor Treasury

Commerce Veterans Health and Human Federal Administration Services Communications

Commission

Justice General Services Housing and Urban Panama CanalAdministration Development Commission

Transportation National Aeronautics Environmental Office of Personneland Space Protection Agency ManagementAdministration

Federal Emergency Tennessee ValleyManagement Agency Authority

Table 2Federal Agencies’Progress TowardMeeting the 2000Energy ReductionTarget*

* Assumes that reducton should be at least 1.3 percent per year.

energy is the number of Btus that are actu-ally consumed at a building or facility. Pri-mary energy is the total amount of Btusused to produce the energy consumed in abuilding or facility. Unlike site energy, pri-mary energy includes energy lost in the gen-eration, transmission, and distribution ofelectricity that is delivered to a building.

This is an important difference becauseapproximately two-thirds of the energy con-sumed at the power plant is lost in the con-version and transmission of the electricityto the building site. The site energy measureignores this “lost” energy. Electric powerconversion losses are now equal to the totalsite energy used in federal facilities, yet arenot counted in the federal energy account-ing system.20

In sum, changing the measure from pri-mary energy to site energy helped the fed-eral government meet its energy consump-tion targets in 1995. If primary energy werestill being used as the measure of energyconsumption, the federal governmentwould not have met the EPAct goals for1995. Only six agencies would have met thetarget using primary energy accounting:DOE, the General Services Administration(GSA), the Environmental ProtectionAgency (EPA), the Department of Com-merce (DOC), the Department of Justice(DOJ), and the Tennessee Valley Authority(TVA). Using primary energy as the meas-ure, GSF energy use fell by only 1 percent,not 14.2 percent.

Perhaps more important, the use of siteenergy measures creates a bias against on-site generation (and cogeneration) of power,heat, and steam. These systems may con-sume two to four times the amount of siteenergy, but reduce the total primary-energyrequirements. This issue becomes more andmore important as agency managers, likemanagers in the private sector, consider dis-tributed generation and other alternatives topurchased power.

Energy-Intensive OperationsTo provide agencies flexibility with respect tospecial-use facilities, EPAct allowed agenciesto exclude certain “energy-intensive” build-ings from the 30-percent reduction target.Energy-intensive operations were not welldefined, however; thus each agency mustdetermine if and what activities are excluded.


15

How energy is measured affects investment decisionsThe amount of energy lost in transportation,transmission, and distribution varies. For example,only about 30 percent of the energy consumed togenerate electricity will reach the building where the electricity is used. For natural gas, 91 percent of the energy will reach the site where it isconsumed. Once the gas or electricity reaches thesite, however, electricity is generally more efficient.For example, a standard electric water heater has an efficiency of 93 percent, whereas a standard gas water heater has an efficiency of 62 percent.Therefore, taking both transmission and efficiencyinto account, the overall efficiency of an electricwater heater is 28 percent, compared to a gaswater heater’s 56 percent.21

Assume that the site energy required to heatwater for a military family for a year, at an efficiencyof 100 percent, is 20 million Btus. If a 10-year-oldminimum efficiency gas water heater (with anaverage efficiency of 50 percent) is replaced by anew minimum-efficiency electric water heater (withan average efficiency of 92 percent), site energyconsumption will be reduced by 18.26 million Btus,but resource energy consumption will be increasedby 43 million Btus.22 Based on the current U.S.electric power generation fuel mix, carbonemissions would increase by a factor of 3, sulfurdioxide emissions by a factor of 3,000, nitrogenoxide emissions by a factor of 20, and particulateemissions by a factor of 600.

Excluded buildings now consume morethan 17 percent of federal building energy.Excluded-building energy consumptionincreased by more than 89 percent from1985 to 1995. Energy use per GSF—usingsite energy as the measure—increased by 7percent or more.23

Because energy-intensive operations are notclearly defined for reporting, agencies movebuildings in and out of the excluded cate-gory each year. Some of the energy-inten-sive operations reported by agencies are suspect: for example, day-care centers,libraries, office buildings, entire residentialneighborhoods, chillers, and on-site steamand electric generation plants.24 To the bestof our knowledge, DOE has never chal-lenged an agency’s classification of a facilityas an “energy-intensive operation.”

The federal government would not havemet the 1995 target without the provisionallowing agencies to exclude energy-inten-sive operations. One-third of the 14.2 per-cent reduction in site energy was achievedby means of this exclusion. If the exclusion

didn’t exist, the federal government wouldhave achieved only a 9-percent reduction insite energy use in 199525 (see Figure 1).

It is not clear on what basis “energy-intensive operations” are being separatedout from other buildings. If agencies wererequired to reduce their energy consump-tion per GSF to some absolute level (say100,000 Btus), the exclusion would perhapsmake sense. The mandate, however, calls fora percentage reduction in energy consump-tion. Why should we expect that on asquare-foot basis it is more difficult toachieve reductions for energy-intensiveoperations than for other facilities?

Executive Order 12902 took a small steptoward addressing this issue, calling foragencies to reduce energy consumption inenergy-intensive buildings by 20 percent(where practical) from 1990 levels by 2005.The target is, however, not mandatory. Likethe executive order provisions related toequipment purchasing, agencies can cite the“where practical” clause and ignore this partof the executive order altogether. Apparently,


16

–14.2

–9.1

–1.1

2.7

Site Energy Accounting Primary Energy Accounting

% C

hange F

Y8

5–FY9

5

–15

–12

–9

–6

–3

0

3

Standard Buildings Standard Buildings plus “Energy Intensive” Facilities

Figure 1Comparing DifferentMeasures of EnergyUse

agencies have been ignoring the target, sinceenergy use per GSF actually went up by 15percent between 1990 and 1995.

Furthermore, it will be a major challenge tomeasure progress toward the 20-percentreduction. The energy-intensive operationstarget left it to agencies to determine themost appropriate measure of energy use. Forexample, the National Aeronautics and SpaceAdministration (NASA) reports energy con-sumed per “external tank” produced for thespace shuttle. Compounding the difficulty oftrying to reconcile multiple measures ofenergy consumption, the Department ofDefense (DOD) (the largest agency by far)failed to report energy consumption for itsenergy-intensive operations in the years 1989through 1991. In other words, there is no1990 baseline from which to measure DODenergy increases or decreases.

Adding It UpThese are not just academic issues. Energyand cost reductions are used to argue thatsufficient progress is being made in reduc-ing the federal government’s energy use. Infact, progress has not been nearly as great aspurported. If agencies were not allowed toexclude energy-intensive facilities and wererequired to use source energy as theiraccounting measure, energy consumptionper square foot between 1985 and 1995would have increased, not decreased.

Figure 1 illustrates how different measuresof federal energy use can lead to differentconclusions. The first bar on the left is thepercentage change in energy use per GSFwhen site accounting is used and buildingswith “energy-intensive operations” areexcluded. By this measure, the federal gov-ernment has reduced energy consumptionby 14.2 percent and is on track to meet theenergy reduction target for the year 2005.

By other measures, the federal governmentis behind. The second bar shows the per-centage change in energy use per GSF when

site accounting is used and energy-intensiveoperations are included. By this measure,energy consumption fell by 9.1 percent.

The third bar shows the percentage changein energy use per GSF when energy use ismeasured at the source and energy-intensiveoperations are excluded. By this measure,energy use fell by only 1.1 percent.

The fourth bar shows the percentagechange in energy use per GSF when energyuse is measured at the source and energy-intensive operations are included. By thismeasure, energy use actually increased by2.7 percent.

It should also be pointed out, however, thatif not for agencies’ efforts to improve theirbuilding energy efficiency, energy use wouldhave risen even more. Many of the effi-ciency gains made in lighting and otherbuilding systems have been offset by theincreased use of electronic office equip-ment, e.g., computers, fax machines, andprinters. From 1985 to 1995, electronicoffice equipment in the federal governmentincreased primary energy use by 21.7 tril-lion Btus from what it otherwise wouldhave been.26

Also, the measurement of energy on asquare-foot basis may mask non-energy-related productivity improvements. Forexample, the Postal Service claims that theenergy intensity of its building space hasincreased as mail-sorting activities havebeen concentrated into smaller buildingareas. This increased the productivity of thePostal Service’s operations and reduced thecosts of its sorting operations, and at thesame time increased the energy intensity ofthe agency’s building space.

Although energy per GSF of building spaceis not perfect as a measure for tracking fed-eral energy use, it is the best measure avail-able. Other measures that are sometimessuggested have as many if not more flaws.For example, using energy per dollar of


17

budget outlay as a measure would ignoreenergy consumed by federal contractors andoutsourcing of various activities.

The challenge we face is to improve the cur-rent federal energy tracking system so thatthe information provided is more reliableand consistent, thus maximizing our abilityto make reasonable, effective, and forward-looking policies related to federal energymanagement.

Energy ReportingAgencies are required to report their energyuse each year so that FEMP can monitorthe progress agencies are making in meetingtheir energy targets. The numbers reportedby agencies often do not appear very reli-able, however. From year to year, someagencies have reported incredibly largeswings in energy use and square footage.

■ Revising previously reported data—Between 1994 and 1995, one agency’senergy consumption trends for all yearsback through 1985 suddenly reversedcourse. The agency’s explanation wasthat they had hired an outside consultantwho determined that their energy con-sumption was not rising, as reported inprevious annual reports, but in fact wasfalling in line with the energy reductiontarget.

■ Dramatic decrease in consumption—In1986, another agency’s energy-use num-bers increased 125 percent over the base-line set in the previous year. From thenon, this agency consistently reportedenergy use far higher than 1985 levels—until FY92, when consumption sud-denly fell to a level 10 percent below1985 consumption levels.27

■ Erratic changes relative to baseline—One agency has consistently been abovethe baseline by 15–20 percent every yearexcept 1993, when its energy use sud-denly fell to 10 percent below the base-line. In addition, a different agency

reported that they consumed 290 per-cent more energy in 1988 than in 1985.By 1995, they had reduced energy use tojust 16.5 percent over the 1985 baseline,an extraordinary improvement in energyuse.

To be fair, it is no simple task for agenciesto assemble accurate information on theirenergy use. Energy use data are typicallycollected from multiple locations andinvolve many people with varying degreesof knowledge about how to measure energyuse and how the numbers will be used. Insome cases, energy consumption and costdata may not be available—for example,where an agency leases a portion of itsbuilding space.28

On the other hand, the quality of reporteddata would probably improve greatly if topagency officials expressed (and enforced)greater commitment to monitoring andreducing energy use in their agencies’ build-ings. Also, the reporting system would beless complicated if the excluded-buildingsprovision was eliminated. As it stands now,the burden is left to FEMP and others toidentify and attempt to resolve major dis-crepancies in the agencies’ numbers.

Equipment PurchasingFederal agencies spend approximately $10billion to $20 billion on energy-consumingproducts each year, offering literally thou-sands of opportunities to reduce federalenergy use through the purchase of high-efficiency equipment.29 Recognizing thisopportunity, Executive Order 12902requires that where practicable and cost-effective, agencies must purchase equip-ment ranked in the top 25 percent for efficiency or at least 10 percent more effi-cient than the minimum federal energystandards, where applicable. FEMP sub-sequently has issued a “Procurement Challenge” to agencies and obtained com-mitments from the heads of 21 agencies topurchase energy-efficient equipment.


18

Assessing whether agencies are actually pur-chasing energy-efficient equipment is diffi-cult, however. Many people in a facilityhave decision-making authority, and theypurchase from a wide range of sources. Per-haps one-third of government employeesnow carry government-issued VISA creditcards for purchases, and charged $4 billionworth of equipment and supplies in 1996.These purchasing cards allow federalemployees to avoid the traditional procure-ment process for purchases ranging from afew hundred dollars up to $2,500.30

From conversations with agency facilitymanagers, it appears that compliance withthe purchasing requirements is minimal atbest. We have yet to talk to a facility man-ager that takes these requirements seriously,and several have stated that nobody in thefederal government pays any attention tothem.

Several reasons have been given for this lackof compliance:

■ No enforcement—Agencies are not heldaccountable for their failure to complywith the equipment mandates.

■ No consideration of long-term savings—To the extent that agencies are given lim-ited budgets for energy-efficiency pro-jects, it is perfectly rational for them topursue only projects with very quickpaybacks, rather than projects that havea positive life-cycle benefit.

■ No requirement to justify inefficientpurchases—Purchasers of equipmentthat does not comply with the executiveorder are currently not required toexplain why.

■ Too many requirements—Agencies areinundated by environmental, health, andsafety requirements.

There appears to have been little effort byagency heads to filter the ProcurementChallenge commitments down throughtheir agencies, and there is little incentive

for agency personnel to purchase high-efficiency equipment. Indeed, it is moreconvenient to buy the lowest-priced equip-ment since the burden of proof is on thepurchaser of high-efficiency equipment, notlow-efficiency equipment. Even the GSAand Defense Logistics Agency (DLA) cata-logs, which agencies use for many of theirequipment purchases, still list equipmentthat is not in compliance with the executiveorder.31 FEMP has established a labelingsystem for equipment that complies withthe purchasing targets, but currently thesystem is sparsely used in the GSA andDLA catalogs.

Furthermore, government employees wishingto purchase high-efficiency equipment mustfigure out how to pay for it. It is difficult tofinance the incremental costs of higher-effi-ciency equipment. Money must be drawnfrom operating and capital budgets alreadystrapped for cash, and employees must go toprocurement officers to get approvals. Oneway to address this problem would be the cre-ation of a basic financing agreement withsuppliers of prequalified equipment whoagree to finance the incremental costs of themore-efficient equipment.

It is also important that agency personnelrecognize the effect of a piece of equipmenton the building system as a whole. Energy-efficiency improvements in, for example,lighting or motors can result in substantiallylower air-conditioning load requirements ina facility, thus permitting the downsizing ofair conditioners and chillers. Unfortunately,most equipment purchasers lack either theexpertise or inclination to consider the inter-actions between various equipment and sys-tems in a building. The focus on procure-ment of high-efficiency equipment withoutlooking at the entire building system is notideal, but it is preferable to the traditionalthinking, which is to purchase the cheapest(and often least-efficient) equipment with-out regard to its impact on other parts of thebuilding system.


19

Carbon EmissionsIn December 1997, at the Third Confer-ence of the Parties of the UN FrameworkConvention on Climate Change in Kyoto,Japan, the U.S. along with 37 other indus-trialized nations, committed to bindingemissions targets for greenhouse gases. TheUnited States agreed to reduce its emissionsof six major greenhouse gases by 7 percentbelow 1990 levels during the first budgetperiod 2008-2012. U.S. ratification of theKyoto Protocol will require the advice andconsent of the U.S. Senate. Although theProtocol’s provisions are not sufficient tolimit the buildup of greenhouse gases in theatmosphere, it is widely recognized as a crit-ical first step.

There is currently no official congressionalor executive branch mandate that makes thereduction of carbon emissions a policythrust of federal energy management. Theprimary policy drivers behind the mandateshave been cost-effective operations, energysecurity, resource conservation, and newtechnology development. Therefore, it isnot surprising that FEMP does not rou-tinely report carbon emissions related tofederal agency energy use.

Site energy is a poor proxy for carbon emis-sions. While site energy consumption perGSF in non-energy-intensive facilities fell14.2 percent between 1985 and 1995, car-bon emissions per square foot in thosebuildings fell only 4.1 percent. For build-ings and energy-intensive operations com-bined, site energy use per GSF fell by 9.1percent, while carbon emissions were stable,falling by just 0.65 percent. In other words,the carbon intensity of site energy in federalfacilities has increased by 9.3 percent in the1985–1995 period.32

In short, federal policy-makers cannot relyon the energy measure currently in use toindicate changes in the federal government’scarbon emissions.

In-House Management AuditsEPAct required inspectors general at eachagency to audit their in-house energy man-agement programs. The audits wereintended to evaluate each agency’s ability tomeet their energy reduction goals and theadequacy of their internal energy account-ing systems. Agencies were encouraged toperform additional energy managementaudits as they are deemed necessary.

In 1993, the President’s Council onIntegrity and Efficiency (PCIE) reportedmixed results from the audits for the gov-ernment as a whole. Only 11 agenciesreported they had adequate internal con-trols to reliably assess energy consumptionand cost data. The PCIE found that theaudits raised awareness among top officialsand forced agencies to review their compli-ance with EPAct and executive ordersrelated to energy management.33

However, no similar audits have been donesince the initial audits. Given their ability toidentify problem areas and noncompliance,future audits could assist agencies in manag-ing their energy consumption and budgets.

Recommendations: Federal Energy Goals and Requirements

1. Impose greater agency accountability—Congress should hold annual hearingson agencies’ energy use and equipmentpurchasing to hear firsthand how agen-cies are doing and what additionalresources they need in order to meet therequirements. The Office of Manage-ment and Budget (OMB) should take amore active role in assessing agency com-pliance with the reduction goals. Theresults should be published in the formof an annual report card and madewidely available to Congress and thepress.


20

2. Shift burden of proof to purchasers oflow-efficiency equipment and providefinancing to purchase energy-efficientequipment—Agencies should requirepurchasers of equipment that does notcomply with the purchasing language inExecutive Order 12902 to justify theirpurchases in writing. In addition, thepresident or Congress should insist thatall equipment listed in the GSA andDLA catalogs comply with the purchas-ing requirements of Executive Order12902.

3. Create basic financing agreementsto cover incremental costs of high-efficiency equipment—FEMP shouldexplore with agencies the creation ofBasic Financing Agreements for energy-efficient equipment based on FEMP’sproduct recommendations. The agree-ments would create a vehicle for private-sector financing of the incremental costof equipment that complies with Execu-tive Order 12902. OMB should not dis-courage these transactions just becausethey require multiyear financial commit-ments. This is an important “reinven-tion” opportunity that could yield long-term energy and cost savings for thefederal government.

4. Eliminate the energy-intensive opera-tions exclusion—The excluded-buildingsprovision should be eliminated. Short ofthis, DOE should more clearly definethe excluded-buildings category andmore closely monitor the types of facili-ties that agencies place in this category.Greater oversight by DOE is needed toensure that this provision is not abused.Also, agencies’ progress toward meetingthe excluded-buildings energy reductiontargets called for in Executive Order12902 should be closely monitored by

DOE, Congress, and OMB to ensurethat agencies don’t use the “where practi-cal” provision as justification for notachieving the targets.

5. Create a carbon emission reduction tar-get for federal agencies—To demon-strate the nation’s commitment to reducecarbon emissions, the president shouldestablish a carbon emissions reductiontarget for the federal government similarto targets called for in Kyoto in Decem-ber 1997. The carbon emissions targetsshould be based on carbon per GSF andinclude energy-intensive operations aswell as standard buildings. FEMP shouldbegin reporting carbon emissions in itsannual report to Congress.

6. Create a joint public-private sectorcommittee to offer recommendationsfor energy efficiency implementation—Private sector executives and agency offi-cials could meet annually to reviewagency energy management efforts andidentify new means for expeditingenergy-efficiency projects. The commit-tee could also identify measures neededto increase the involvement of the pri-vate sector in financing governmentenergy-saving projects. The committeecould be established by a presidentialexecutive order or by Congress.

7. Authorize additional audits by inspec-tors general—Congress should requireinspectors general to conduct anotherround of economy and efficiency auditsof their in-house energy managementprograms. Agencies should completethese audits and report their findings totheir agency heads and the PCIE. ThePCIE should report summary recom-mendations to Congress concerning fed-eral agencies’ progress with the 2005goals.


21

Appropriations

Congress appropriated $1.8 billionfor energy-efficiency improvementsby federal agencies from 1985

through 1995. Appropriations rangedwidely from year to year, reaching a highof $350 million in 1985, dropping to $75million two years later, and rising again toabout $300 million in 1995. Since 1995,appropriations have fallen again to half thatamount (see Figure 2).

Approximately $4.7 billion will have to beinvested in energy-saving equipment andservices between 1998 and 2005 to meet the

federal government’s energy reduction targets(see Figure 3). Given recent levels of appro-priations and alternative financing (totalingabout $245 million per year), agencies willface a cumulative funding shortfall of about$2 billion over the next eight years.34, 35

A question emerges: If an investment of$2 billion (in constant 1995 dollars) in theyears 1985–1995 reduced site energy use by 14.2 percent, then why will it require$4.7 billion to achieve an additional 15-percent reduction? Based on energy savingsachieved in the 1985–1995 period, itshould cost only about $2.25 billion moreto achieve the year 2005 goal.

Project Funding

Project Funding

23

0

50

100

150

200

250

300

350

400

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

Pro

ject

ed

1997

Millions o

f D

ollars

35

5

25

9

75 82

63 68

12

6 15

6

12

7

23

6

28

8

17

3

13

7

Sources: Federal Energy Management Program, Annual Report to Congress, and conversation with ChrisTremper, McNeil Technologies, January 30, 1998.

Figure 2Agency Expendituresfor EnergyConservationRetrofits and CapitalEquipment

In constant 1995 dollars

The answer to this is twofold. First, muchof the energy savings to date have comefrom relatively easy and quick paybackmeasures: for example, shutting down oldenergy-wasting facilities, retrofitting light-ing, and replacing broken-down equip-ment. In short, the first savings are alwaysthe easiest. Assuming the average simplepaybacks for energy-saving measuresincrease from 2.9 years to 4.5 years, therequired investment will increase by half to$3.5 billion.

Second, a large portion of the 14.2 percentreduction was achieved by excludingenergy-intensive operations from the tar-gets. If not for the excluded-buildings pro-vision, federal site energy use per GSFwould have decreased by only 9 percentover the 1985–1995 period. Additionalcosts will be incurred as agencies attempt toachieve a 20-percent reduction in energyuse in energy-intensive operations by 2005compared to 1990 levels, as prescribed inExecutive Order 12902. To achieve the tar-get for energy-intensive operations willrequire an additional investment of $1.2billion.

In sum, the next round of savings will likelyrequire more than twice the investmentmade in the 1985–1995 period.

Energy-Saving PerformanceContractsAs energy-efficiency budgets have wavered,agencies increasingly have turned to energyservices companies (ESCOs) and local utili-ties (discussed in the next section) tofinance energy-efficiency improvements.Over the last decade, federal agencies haveentered into at least 72 energy-saving per-formance contracts (ESPCs), in whichESCOs pay the capital and operating costsassociated with a project and are paid backbased on the energy savings.36

ESPCs provide at least four major benefitsto agencies:

1. Financing—ESCOs typically arrangefinancing for a project; therefore, fewerappropriated funds are needed.

2. Guarantee—The law authorizing federalagencies to enter into ESPCs requires aguarantee that the energy cost savingsexceed the costs of debt service.


24

$420

$1,325

$2,033

$900 FundingShortfall

ESPCs

UtilityServices

Appropriations

Figure 3Meeting FederalEnergy-EfficiencyNeeds From 1998Through 2005

Estimate of TotalNeed: $4.7 Billion

Alliance calculations based on data from McNeil Technologies, Federal Energy Management Program, AnnualReport to Congress; Federal Energy Management Program, Federal Energy Efficiency and Water ConservationFunding Study.

In millions

3. Risk transfer—The ESCO shares (orbears) the risk that the equipment won’tperform as specified; in order to maxi-mize the energy savings, the ESCO hasan incentive to commission and main-tain equipment so that it is in peak oper-ating condition.37

4. Freeing up of staff—Agencies enteringinto ESPCs are essentially outsourcing aportion of their energy and facilitiesmanagement functions (including main-tenance), which is important to agenciesfacing severe cuts in staffing since it freesup remaining staff to do other work.

The extent to which ESPCs will fill thefunding gap for energy-efficiency projects,remains to be seen. The potential is cer-tainly great. The 72 ESPCs let so far havebeen applied in only a handful of the500,000 federal buildings. The $138 mil-lion that the private sector has so farinvested pales in comparison to $900 mil-lion in investment capital that FEMP esti-mates could come from ESPCs between1996 and 2005.38 Moreover, the vast major-ity of contracts entered into to date havenot looked comprehensively at all the sys-tems in the facilities.39

Prequalifying ESCOsOne of the biggest challenges to gettingESPCs in place has been the qualification ofESCOs and negotiating allowable overhead,profits, and contractual elements. To aid instreamlining the contracting process foragencies, FEMP and the Army have eachissued regional indefinite-delivery indefi-nite-quantity contracts (IDIQs)40 that pre-qualify a half dozen or so ESCOs to enterinto project agreements with agencies undera simple task order. The IDIQs let agenciesavoid qualifying companies on a project-by-project basis. The IDIQs are intended toreduce the time it takes to award a deliveryorder for an energy-efficiency project to sixmonths, whereas in the past it has takenanywhere from one to three years.41

The IDIQs also provide agencies with amodel performance contract. In the past,various agencies have developed contractsindependently; thus the procedures andprotocols varied among different agencies.This limited the mobility of ESPCsbetween federal agencies and added to thedevelopment costs of an ESPC, sinceESCOs had to learn the specific ESPC-related requirements and procedures foreach agency.

The first two FEMP IDIQs were awardedin May 1997 and January 1998 for DOE’sWestern and Southeastern regions, respec-tively. Table 3, Part A, lists the states cov-ered by these two IDIQs and the companiesthat can do projects under them.42

Since May 1997, when the Western regioncontracts were announced, 23 agencies haveagreed to use these contracts and several com-prehensive audits have been completed at var-ious facilities. DOE has already announcedseveral project delivery orders.43 FEMP plansto issue additional IDIQs for the four otherregions within the next two years.

The Huntsville (Alabama) Engineering andSupport Office of the U.S. Army Corps ofEngineers developed and bid their ownSuper ESPC for Georgia, North Carolina,South Carolina, and Virginia. This contractcovers up to $355 million in energy servicesand is targeted at Army facilities in theSoutheast. The winners, selected in Febru-ary 1997, are listed in Table 3, Part B. InMarch 1997, Huntsville announced anationwide $1.2 billion Super ESPC thatwould apply to Puerto Rico and the 46states not covered by the Southeast SuperESPC. Huntsville will allow other federaland state agencies in these regions to usethis Super ESPC for their projects.

Remaining ChallengesWhile much progress has been made, severalhurdles still have to be overcome if ESPCs areto be used widely in the federal government.

Project Funding

25


26

■ Individual projects still need to be iden-tified and developed—Under the FEMPand Army Corps IDIQs, ESCOs willidentify and propose projects in variousfacilities. Nevertheless, technical andeconomic evaluations of individual proj-ects are still required and task ordershave to be negotiated on a project-by-project basis.

There is concern among the ESCOs thatsome agencies will bid out projects pro-posed by an individual ESCO to all of theIDIQ awardees. While agencies are notrequired to bid those projects out, agencyprocurement officials are generally cautiousand may choose to do so unless they aregiven specific language in the FederalAcquisition Regulations saying that they donot need to. To the extent that proposed

Western Region StatesAlaska NevadaArizona OregonCalifornia U.S. Pacific Hawaii TerritoriesIdaho Washington

Southeastern Region StatesAlabama North CarolinaArkansas Puerto RicoFlorida South CarolinaGeorgia TennesseeKentucky Virgin IslandsMississippi

Southeastern Region StatesGeorgiaNorth CarolinaSouth CarolinaVirginia

Puerto Rico and Remaining 46 States

ESCOs Awarded ContractsERI ServicesHoneywell, Inc.Johnson Controls, Inc.Energy Pacific (a joint venture of Enova and Pacific Enterprises)

A joint venture of The Bentley Company/BM,Puget Sound Energy, and MacDonald MillerCompany

ESCOs Awarded ContractsCES/Way International Inc.Duke Engineering and ServicesEnergy Masters CorporationERI Services, Inc.Honeywell, Inc.Johnson Controls, Inc.

ESCOs Awarded ContractsCo-Energy GroupDuke Engineering & ServicesEquitable Resources, Inc.HEC, Inc.Honeywell, Inc.Northeast Energy Services Company(NORESCO)

Systems Corporation

ESCOs Awarded ContractsAbacus Engineered SystemsCES/Way International, Inc.Duke Engineering & ServicesEquitable Resources, Inc.HEC, Inc.Honeywell, Inc.Johnson Controls, Inc.NORESCOViron CorporationXENERGY, Inc.A joint venture of Cenerprise and EnergyPerformance Services

Table 3Super ESCO Awards

A. Department of Energy

B. U.S. Army Corps of Engineers

projects are bid out, the ESCOs may be lessinclined to invest resources to identify proj-ects, since they can wait for the otherESCOs to identify the projects and thensimply bid on them.

■ The perception that ESPCs are tooexpensive must be overcome—Someagencies think of ESPCs as providingfinancing only. They fail to recognizethat ESPCs provide other benefits.ESPCs transfer various degrees of man-agement and project risk (e.g., risk thatequipment will not perform as specifiedor that a contract will end up in litiga-tion) from the agency to the ESCO.Through ESPCs, agencies reduce risksassociated with faulty engineering,equipment failure, and poor equipmentinstallation.

A typical ESPC contract costs about$50,000 to develop, including feasibilitystudies and legal, financial, and technicalconsultation.44 At the same time, ESPCsreduce the amount of in-house staff timeand other resources that must be devoted toa project if all of the work to identify,implement, and maintain the energy-savingmeasures was performed by agency staff.

Perhaps most important, the decisionwhether to enter into an ESPC is usually notbetween financing through ESPCs or financ-ing out of appropriated budgets. The choiceis more often between financing throughESPCs and doing nothing. Doing nothing isoften the most expensive option of all. Asnoted earlier, investments in energy effi-ciency made between 1985 and 1995 arereturning 34 percent annually on average.That’s how much agencies stand to loseevery year they don’t make the investment.

■ Agencies tend to use ESPCs to financelong-term paybacks—Agencies oftenfinance quick-payback projects out ofappropriated funds or through utilityarea-wide agreements. They call onESCOs to finance the longer-term pay-

backs. Consequently, ESCOs get blamedfor offering only long-term paybackprojects.45 If energy-efficiency improve-ments are to be implemented compre-hensively, quick-payback measures (e.g.,lighting, steam traps, variable-speeddrives, and energy management systems)will need to be mixed with longer pay-back measures (e.g., chillers and win-dows) to develop ESPC projects that areattractive to agencies and ESCOs alike.

■ Lack of ESPC understanding andexpertise within agencies—Develop-ment of an ESPC requires the involve-ment and coordination of a diversegroup of agency personnel, includingfacility managers, energy managers, pro-curement officials, legal counsel, bothwithin a facility or region and at centralheadquarters. Someone in each agencyneeds to be tasked with making sure thatagency staff understands the elements ofan ESPC and how to coordinate effortsto implement them.

Project Funding

27

ESPC Authorization Needs ExtensionThe authorization under the Energy Policy Act of 1992 thatallows agencies to enter into new ESPCs is scheduled toexpire in 2000. At the time ESPCs were authorized, thefederal government had little experience in using theseinnovative agreements. House legislators felt it would beprudent to initially give only temporary approval of the ESPCauthorization—hence the year 2000 expiration date.However, there are now 72 ESPC contracts in place andworking successfully. It is important for Congress to makethe ESPC authorization permanent or, at a minimum,extend the sunset date to enable agencies to have thelegal authority and ability to take advantage of these privatesector energy-saving contracts.

Area-Wide Agreements With Utilities

When EPAct was written, many electricand gas utilities offered incentives, typicallyrebates, to end-users who installed energy-efficient equipment. EPAct authorized andencouraged federal facilities to take advan-tage of these incentives. Since then, the util-ity industry has significantly reduced theseincentives in response to industry restruc-turing and increased competition. At thesame time, increased competition has madeutilities more anxious about retaining largecustomers, including federal facilities. Con-sequently, many utilities now offer an arrayof energy services, including equipmentsales and financing, service agreements, andperformance contracts.

GSA has put in place what are known asarea-wide agreements with utilities. Theseallow federal facilities to enter into long-term (up to 10 years) contracts with theirlocal utility for “energy services” and thusavoid going through competitive procure-ment procedures to implement energy-saving projects. Area-wide agreements alsoallow federal facilities to negotiate lowerpower rates and long-term purchase con-tracts with their local utility.

GSA currently has at least 136 area-wideagreements in place, about 80 of whichspecifically incorporate demand-side man-agement as part of the agreement.46 Financ-ing of energy-saving projects by utilitiesunder area-wide agreements typically is notperformance-based. Rather, measures arefinanced over time through electric bills,based on estimated energy savings, withutilities providing some sort of guaranteethat equipment will perform as specified.47

GSA uses both ESPCs and area-wide agree-ments and does not want to lose eithermechanism for improving energy efficiencyin their buildings.48

Revolving Fund for Energy-Saving ProjectsVolatile funding levels make it difficult foragencies trying to map out a comprehensivelong-term energy management strategy.Agencies are forced to look only as far as thenext budget cycle and to restrict theirinvestments to simple measures with quickpaybacks.

When EPAct was written, many wereconcerned that congressional funding forenergy-saving projects would be sacrificedbecause of emerging budget pressures. Fur-ther concerns were expressed that agencieswould be slow in implementing ESPCsbecause of complex and difficult govern-ment contracting and procurement rules.

EPAct therefore authorized a FederalEnergy Efficiency Fund to help financeenergy-efficiency improvements. Whilehigher levels of investment were authorizedin 1994 and 1995, only $6 million and $8million were appropriated, respectively.Since then, no money has been appropri-ated for the fund.

In the spring of 1998, Sen. Herbert Kohl(D-Wis.) and six other senators introducedlegislation calling for the formation of a Fed-eral Energy Bank. The Bank would be fun-ded by taking 5 percent of each agency’sannual energy budget—$225 million eachyear—over a three-year period. FEMP wouldbe authorized to make loans to agencies forcost-effective (three-year payback or less)energy-saving projects. Agencies would berequired to repay the account with interest.

A revolving fund for energy-efficiency projects is not a new idea. Similar funds in Texas and Michigan have demonstratedthe potential for savings from a one-timeinvestment. The Texas Loan STAR programhas saved more than $52 million in statebuildings in the last 10 years, with pro-jected savings of another $250 million overthe next 20 years. Projects for this fund


28

must have a payback of four years or less.49

Similarly, the University of Michigan’sEnergy Conservation Measures Fund hassupported approximately 80 projects withpaybacks of five years or less since 1988.This has resulted in savings of 2.5 trillionBtus and $8.12 million.50

The Congressional Budget Office (CBO)recently scored the Kohl Bill and deter-mined that the revolving fund would have apositive financial benefit—defined by CBOas paying for itself in five years—for thegovernment if the fund is restricted to loansfor projects with maximum paybacks ofthree years.

CBO’s analysis was, however, overly conser-vative and static. CBO failed to take intoaccount that the Federal Energy Bank is arevolving fund and that as loans are paidoff, the money can be re-lent. Also, CBO’sanalysis assumes that every project will havea three-year payback. However, an actualloan portfolio will contain loans with acombination of payback periods.

According to more realistic assumptions,the fund will achieve positive financial ben-efits with an average payback for the loanportfolio of four years or less. This changewould greatly expand the number of proj-ects eligible for this funding. In sum, thefund would provide a stable and muchneeded source of funding for energy-efficiency projects in federal facilities.

Utility Restructuring andEnergy Price ReductionsMany states are in the process of reformingtheir electric utility industries to allow utili-ties and others to compete for individualcustomers. As of March 2, 1998, sixteenstates had enacted restructuring legislationor issued comprehensive regulatory orders.Only two states—Florida and South Da-kota—had no ongoing activity related torestructuring (see Figure 4 on next page).51

The General Accounting Office (GAO)projects that as a result of lower electricityprices, the federal government could cumu-latively save from $1 billion to $8 billionover the 18-year period from 1998 through2015.52 This estimate is based on the as-sumption, however, that the amount ofelectricity purchased remains stable. GAOwarns that up to 40 percent of these savingscould be lost if agencies increase their en-ergy use as a result of lower prices.53 Thiswould not only be a waste of taxpayer dol-lars but would threaten agencies’ ability tomeet their energy reduction targets. Therecould also be negative environmental conse-quences if agencies purchase more powerfrom utilities that rely on cheaper but dirt-ier and more carbon-intensive fuels.

Recommendations: Project Funding

1. Provide sufficient and stable appropria-tions for energy efficiency projects toagencies—Agencies should request andreceive, at a minimum, appropriations of$522 million annually through 2005 tobe used for energy-efficiency improve-ments in buildings and facilities (includ-ing energy-intensive operations). OMBshould have oversight to ensure that inaggregate, agencies have requested thisamount for energy-efficiency projects.The figure would of course be adjustedto reflect higher- or lower-than-projectedinvestments by the private sector in fed-eral facilities, as well as funds made avail-able from other sources like the FederalEnergy Bank.

2. Continue implementing IDIQs andreauthorize the use of ESPCs—By pre-qualifying a half dozen or so ESCOs,IDIQs issued by both FEMP and theArmy should reduce by 50 percent thetime it takes to award a delivery orderfor an energy-efficiency project. FEMPand the Army should continue and

Project Funding

29

expand efforts to speed projects throughthe IDIQ process. ESPCs are onlyauthorized by EPAct through 2000.54

Given the anticipated shortfall in appro-priations for energy-efficiency projects infederal facilities, Congress and the presi-dent should extend authorization forESPCs and continue to support FEMP’sdevelopment and training activitiesrelated to ESPCs. In short, Congress andthe president should continue to supportthese financing vehicles, and agenciesshould take advantage of them.

3. Establish a Federal Energy Bank tofund energy-efficiency improvements—Creation of a Federal Energy Bank couldprovide hundreds of millions of dollarsto federal agencies for energy-efficiencyinvestments. Because the Bank will fundfuture investments out of energy savings

generated by current investments, it willoffer a long-term source of funding, sav-ing taxpayer dollars year after year. Theaverage loan in the Bank’s portfolioshould have a four-year payback toensure a positive financial benefit. Bankfunds should be available to supportproject development for ESPCs as wellas to implement projects.

4. Use savings from lower electricity pricesfor energy-efficiency improvements—Agencies should be authorized andencouraged to use a portion of theirenergy budget savings from reducedelectricity rates for energy-efficiencyimprovements. This would provide agreater incentive for agencies to reducetheir electricity consumption as well asto negotiate reduced rates.


30

Restructuring Legislation Enacted (a) Comprehensive Regulatory Order Issued (b)

Legislation/Orders Pending (c) Commission or Legislative Investigation Ongoing (d)

No Ongoing Significant Activity (e)

a) CA, IL, ME, MA, MT, NV, NH, OK, PA, and RI.b) AZ, MD, MI, NJ, NY, and VT.c) AK, CO, CT, KS, SC, VA, and WV.d) AL, AR, DC, DE, GA, HI, ID, IN, IA, KY, LA, MN, MS, MO, NE, NM, NC, ND, OH, OR, TN, TX, UT, WA, WI, and WY.e) FL and SD.Source: Energy Information Administration, U.S. DOE, March 12, 1998,

http://www.eia.doe.gov/cneaf/electricity/chg_str/tab5rev.html.

Figure 4Status of StateElectric UtilityDeregulation Activityas of March 2, 1998

One of the greatest barriers facingfederal energy-saving efforts is thegeneral lack of energy-efficiency

knowledge on the part of facility managers,procurement officials, and other relevantgovernment personnel. The problem hasbeen exacerbated by the overall decrease inpersonnel who handle energy issues. Ifagencies are to meet the energy reductiontargets and if energy efficiency is going tobe a criteria in their purchasing decisions,more agency personnel need knowledge ofwhat energy-saving technologies are cur-rently available, how to evaluate those tech-nologies, how to finance them, and how toimplement them.

Recognizing this need, EPAct required thatall facility energy managers be trained in sixareas: building energy systems; buildingenergy codes and applicable professionalstandards; energy accounting and analysis;life-cycle costing; fuel supply and pricing;and instrumentation for energy surveys andaudits. FEMP, GSA, and DOD haveresponded to this call, providing training topeople in their own and other agenciesthrough workshops and other educationalvenues. While this training has madeadvances in recent years, the programsremain limited due to a lack of funding.

Federal Energy ManagementProgram (FEMP)DOE’s FEMP has been at the center ofefforts to improve energy management in

federal facilities through training and edu-cation. Since 1994, over 8,000 federalworkers, including both technical and pro-curement personnel, have participated inFEMP workshops and seminars on a varietyof topics, including buying energy-efficientproducts; project financing; EPAct goals;operations and maintenance opportunities;integrated design; life-cycle costing; ESPCs;and various technologies.55 The trainingprogram is updated annually.

FEMP also organizes seminars at nationaland regional energy and water managementconferences. The seminars allow representa-tives from federal agencies, state and localgovernments, private companies, utilities,and nonprofit organizations to share ideasabout a variety of energy and water man-agement issues. FEMP will participate innumerous conferences throughout 1998with a wide range of government agenciesand nongovernmental organizations.56

As part of the Procurement Challenge,FEMP completed 22 of 63 technology rec-ommendations by the end of 1997. Thesetechnologies must be within the top 25 per-cent of efficiencies for like products. Therecommendations include fluorescent tubelamps and ballasts; residential air sourceheat pumps; and office equipment such asfax machines, copiers, computers, monitors,and printers.

FEMP has also issued a series of TechnologyAlerts to support the Procurement Chal-lenge. The Technology Alerts disseminate

Energy Education andTechnical Assistance

Energy Education and Technical Assistance

31

results about the performance of newenergy-saving technologies in the hope thatfederal decision-makers will be able to usethe technology in their facilities. The ArmyCorps of Engineers and the Navy report-edly have incorporated recommendationsfrom the Technology Alerts into their guidespecifications for new construction. How-ever, it is unclear the extent to which theAlerts are being used elsewhere in the fed-eral government.

FEMP has also conducted at least fiveenergy-saving technology demonstrations at federal facilities, including demonstra-tions of gas-engine-driven chillers and anice storage system for rooftop air condi-tioning. FEMP has had various levels ofinvolvement in a number of whole-buildingdemonstrations, including the Presidio andGolden Gate buildings in San Francisco(funded by GSA) and DOE’s Forrestalbuilding in Washington, D.C. Six moretechnology demonstration projects are invarious stages of completion.

General Services Administration(GSA)GSA has been fairly aggressive on the train-ing front as well, organizing at least fiveregional workshops each year and a largernational conference approximately everyother year. For the regional conferences,GSA partners with state and local govern-ments and tribal communities to designtraining workshops that will fit the needs ofthe 50 to 100 regional government employ-ees attending.

The Alliance to Save Energy and the D.C.Council of Governments cosponsored aWashington, D.C., regional workshop withGSA in April 1997, in which 16 energy-saving equipment and service providersshared their expertise with federal energymanagers. The conference was well receivedby the 125 attendees, and it cost a fractionof the normal cost of a workshop this size.

For these reasons, GSA has expressed inter-est in convening more meetings like thisone in other regions of the country.

GSA’s central office surveyed regional pro-curement officials, who then requested thatthe central office provide greater legal andfinancial support, including determinationsof specific outstanding questions aboutESPC contracting. One official suggestedthat DOE assign an ESPC specialist to eachregional energy coordinator to ensure thatESPCs are executed correctly.57 In response,GSA’s central office organized a teleconfer-ence. It opened with a message from GSA’sCommissioner of Public Building Services,who stated the importance of ESPCs as afunding vehicle for energy-saving projects.This is the kind of high-level involvementthat is needed to encourage facility man-agers to take a close look at the viability ofESPCs. GSA followed up with a “train-the-trainers” workshop to discuss contractingand other issues associated with the execu-tion of ESPCs. GSA is encouraging theregional offices to conduct their own train-ing to familiarize personnel in the fieldabout ESPCs.

GSA also took the lead in organizing theEnergy and Environmental Meetings in1994 and 1996. About 600 people attendedeach of these three-day conferences, whichincluded technology demonstrations andseminars. In August 1998, GSA and DOEhosted Energy ’98, a conference and exhibi-tion in Bellevue, Washington. Recognizingthe benefits of working with suppliers ofenergy-efficiency equipment and services,GSA and DOE worked closely with theNorthwest Energy Efficiency Council toidentify speakers and develop the confer-ence agenda. Approximately 1,000 peopleattended this conference.

Department of Defense (DOD)Over the past several years, DOD has held anumber of educational and training activities


32

aimed at energy managers at DOD facilities.As instructed by EPAct, DOD energy man-agers are educated on the same six topicsthat FEMP’s training focuses on. DOD alsoprovides energy managers and new construc-tion divisions with a manual on pertinentlaws, regulations, and design criteria specifi-cations related to construction.58

DOD has continually brought energy man-agers together for a two-day training ses-sion. The feedback was very positive, andparticipants felt they learned a great dealfrom one another. But because of budgetcuts, DOD is skeptical that such events willbe held in the future. Similarly, Congressdirected DOD to create a CD-ROM train-ing package. This interactive package hasthe potential to be a valuable learning tool,but it reportedly cannot be completed dueto a lack of funding.

To assess staff training needs, DODcontracted with the Rand Corporation toconduct a study, including interviews andsurveys, of energy managers’ needs. Thefindings show that energy managers are inmuch greater need of training in energy-efficiency practices.59

Unfortunately, due to both congressionaland DOD-directed budget cuts, the DODenergy management program will suffer infiscal year 1999. Funding will not even beavailable to provide policy direction andotherwise guide military decisions regardingenergy use and management. Our concernis that DOD energy managers and procure-ment personnel will no longer be encour-aged, instructed, or required to make intel-ligent energy choices.

More Needs to Be DoneSome of the education gains are being offsetby personnel cuts that force agencies torefocus manpower on core mission activi-ties. GSA has suffered significant cuts inmanpower for energy management. DOE,due to budget cuts, has disbanded its

well-regarded In-House Energy Manage-ment Program. Rather than save money,these cuts will result in wasted energy andtaxpayer dollars. If energy improvements areto be sustained over the long run, this trendneeds to be reversed.

Although FEMP, GSA, and DOD havemade great strides in teaching agency per-sonnel about the obligations and opportu-nities related to federal energy management,many facility managers and procurementpersonnel still lack the understandingneeded to evaluate different types of equip-ment and finance projects.

Even when an individual facility manager issufficiently knowledgeable and motivated,he usually has to obtain approvals from oth-ers in the agency who lack his experienceand understanding of the benefits of energyefficiency.60 This problem will be com-pounded as agencies wrestle with the com-plexities of performance contracting. Thelesson here is that education must be tar-geted not only at the people who controlthe boilers, but also at the people whocontrol the purses.

Recommendations: Energy Education andTechnical Assistance

1. Increase training and tap the expertise ofthe private sector—DOE, DOD, andGSA are doing a good job educating gov-ernment personnel about energy-efficiency opportunities, but funding lim-itations restrict their efforts. Congressshould increase funding levels so thateducation and training programs canreach more people. Energy-efficiencycompanies often will provide educationand training free of charge in order tomake contacts with potential customers.Agencies should exploit this largelyunused training and education resource.Suppliers of energy-saving equipment can

Energy Education and Technical Assistance

33


34

provide pricing and technical specifica-tions for specific applications that wouldnot be available immediately from expertsat the national laboratories or universities.Suppliers also have the incentive andresources to follow up with end usersabout the applicability of various equip-ment and services in their facilities.

2. Create centralized ESPC technical sup-port at each agency—Each agencyshould develop an infrastructure foracquiring and implementing ESPCs.Agencies’ central offices should providegreater legal, financial, and technical sup-port to personnel in the field, includingdeterminations of specific outstandingquestions related to ESPC contracting.Agencies should assign an ESPC special-

ist to each regional energy coordinator toensure that ESPCs are executed correctly.Congress should authorize and fundagencies to develop this capacity.

3. Review the status of energy manage-ment personnel—FEMP should enlist agroup of experts to conduct a govern-ment-wide review of energy manage-ment personnel requirements to ensurethat sufficient manpower is beingdevoted to meet the year 2005 energyreduction targets. This effort should notduplicate, but rather expand on, thestudy now being conducted for DOE.The Interagency Energy ManagementTask Force should provide oversight onthis study and report back to Congresson the findings.

A. Federal EnergyProductivity Task ForceMembersAlliedSignal

Joseph McGuire, Director of Legislativeand Regulatory Affairs

D. Christian Pruess, Manager, IndustrialTransformer Products

American Gas Cooling CenterEd Reid, Executive Director

Andersen CorporationMike Koenig, Advanced Research ManagerGarrett A. Stone, Attorney-at-Law

Armstrong InternationalNorman J. Rivers, Manager, Energy

Management ServicesThomas J. Henry, Director of Marketing

Calmac Manufacturing CorporationMark MacCracken, President

Cascade AssociatesJennifer Schafer, Legislative Consultant

CertainTeed CorporationThomas A. Newton, Manager of

CommunicationsConservation Management Corporation

Doris Ikle, PresidentD & R International

John Rivera, PresidentEdison Electric Institute

Richard F. McMahon, Jr., DirectorE-Mon Corporation

Donald P. Millstein, PresidentEMR

Naresh Khosla, President

Energy Performance ServicesThomas K. Dreessen, CEORobert A. Robertson, President

Energy Systems LaboratoryTexas A & M UniversityDan Turner, Director

ERI ServicesMarilyn L. Arnold, Government Business

LiaisonFannie Mae

David S. Carey, Director of CorporateDevelopment/Energy Finance

Florida Solar Energy CenterPhilip W. Fairey, Deputy Director

Geothermal Heat Pump ConsortiumPaul Liepe, Executive DirectorMichael L’Ecuyer, Senior Project Director

GPUCynthia Mansfield, Vice President,

Government AffairsHoneywell

Glen Skovholt, Vice President of CorporateGovernment & Community Affairs

Paula Prahl, Director of Public PolicyRip Jackson, Vice President, Government

Markets, North American RegionHouston Industries Incorporated

Howard Pyle, Director of FederalRelations

Houston Lighting and Power CompanySteve Gonzalez, Manager, Corporate

CommunicationsIowa Energy Center

Floyd Barwig, Director

Appendices

Appendices

35

Jacwill IndustriesWilliam Fleming, President

Johns ManvilleJohn Clinton, Manager,

Technical MarketingJohnson Controls

Rick Spees, Legislative ConsultantMark Wagner, Manager, Government Affairs

Knauf Fiber GlassJeffrey R. Brisley, Director of

Residential SalesLawrence Berkeley National Laboratory

Jeffrey P. Harris, Deputy DirectorLibbey-Owens-Ford

Stephen F. Kalosis, Vice PresidentMagneTek

Anthony Thompson, Director ofGovernment Utility Business

Marc Turner, Federal ManagerNational Insulation Association

William W. Pitkin, Executive Vice PresidentNational Renewable Energy Laboratory

Katherine H. Hamilton,Senior Management Advisor

North American InsulationManufacturers AssociationCharles Cottrell, Manager,

Standards & Industries AffairsNorthern States Power Company

Michael J. Hanson, General Manager &Chief Executor

OSRAM SYLVANIAPeter Bleasby, Director,

Industry Relations & StandardsOwens Corning

Brad Oelman, Senior Vice President,Government & Public Affairs

Pacific Gas & Electric CompanyPaulette Pidcock, Manager,

Federal Government RelationsPacific Northwest National Laboratory

Carol C. Jones, Senior Research ScientistJim Dooley, Senior Research Engineer

Polyisocyanurate Insulation ManufacturersAssociationJared Blum, President

Public Service Company of New MexicoJacqueline Howells, Legislative Consultant

Sensor SwitchBrian Platner, President

Solar Energy Industries AssociationScott Sklar, Executive Director

Southern California EdisonSusan Heard, Energy Efficiency Business Line

Southern California Gas CompanyDavid W. Freer, Manager,

Federal Government AffairsSusan Maxman Architects

Susan Maxman, Principal ArchitectThe Society of the Plastics Industry

Brenda Goldblatt, Coordinator,Industry Growth Issues

Fran W. Lichtenberg, Executive Director,Polyurethane Division

Volt VIEWtechEd Thomas, Director of Sales and Marketing

Watt StopperStan Lynch, Vice President of Sales

and Technical SupportWhirlpool Corporation

Michael Thompson, Director ofGovernment Relations

XenergyMike Selig, Manager,

Federal Government Relations


36

Appendices

37

B. Background Data

APPENDIXEnergy Cost Avoidance Calculations

Building Energy Cost Avoidance Adjusted for Gross Square Footage and Degree DaysAnnual Site Annual Gross Average Annual GSF Adj D.D. Adj Energy Use Annual Energy CumulativeEnergy Use Energy Cost Square Energy Cost Energy Use Energy Use Reduction Cost Avoidance Cost Avoidance

Year (Bbtu) ($ Million) Footage ($/MMBtu) (Bbtu) (Bbtu) (Bbtu) ($ Thousand) ($ Thousand)1985 471,230.6 5,455.6 3,371,557 11.577 471,231 471,231 0.0 0 01986 446,690.8 4,938.1 3,456,275 11.055 483,071 468,811 22,120.1 244,535 244,5351987 468,279.0 4,937.8 3,471,893 10.544 485,254 473,824 5,544.7 58,466 303,0021988 443,573.3 4,487.0 3,322,610 10.116 464,389 469,084 25,510.9 258,059 561,0611989 440,499.0 4,105.2 3,342,630 9.320 467,188 469,360 28,861.1 268,972 830,0331990 441,023.0 4,560.9 3,381,227 10.342 472,582 445,827 4,804.4 49,685 879,7181991 403,989.5 4,141.5 3,198,165 10.251 446,996 433,213 29,223.9 299,586 1,179,3041992 412,437.6 3,922.0 3,196,663 9.509 446,786 430,751 18,313.8 174,152 1,353,4561993 403,066.1 4,101.6 3,200,158 10.176 447,275 448,044 44,977.4 457,695 1,811,1501994 385,124.9 3,911.4 3,106,602 10.156 434,199 428,361 43,235.8 439,110 2,250,2611995 364,483.3 3,627.1 3,038,961 9.951 424,745 424,230 59,746.2 594,556 2,844,817

Change in Energy per GSF 1985-95 -14.19% Change in Energy per GSF 1985-95 -16.73%Energy per GSF 1995 11.99% w/computers

Energy Intensive Operations Cost Avoidance Adjusted for Gross Square Footage and Degree DaysAnnual Annual Gross Average Annual GSF Adj D.D. Adj Energy Use Annual Energy CumulativeEnergy Use Energy Cost Square Energy Cost Energy Use Energy Use Reduction Cost Avoidance Cost Avoidance

Year (Bbtu) ($ Million) Footage ($/MMBtu) (Bbtu) (Bbtu) (Bbtu) ($ Thousand) ($ Thousand)1985 40,098.5 558.4 189,786 13.926 40,099 40,099 0.0 0 01986 38,124.6 513.8 181,526 13.478 38,353 37,221 -903.4 -12,176 -12,1761987 38,669.1 506.8 172,758 13.106 36,501 35,641 -3,028.0 -39,685 -51,8611988 69,664.3 833.2 402,452 11.961 85,031 85,891 16,226.7 194,079 142,2191989 63,593.2 676.8 332,931 10.643 70,343 70,670 7,076.7 75,314 217,5321990 65,303.7 757.6 333,830 11.601 70,533 66,539 1,235.7 14,336 231,8681991 83,676.5 879.1 428,404 10.506 90,514 87,723 4,046.9 42,518 274,3871992 98,768.6 968.0 474,142 9.800 100,178 96,583 -2,185.8 -21,421 252,9661993 70,797.7 633.4 308,468 8.947 65,174 65,286 -5,511.6 -49,314 203,6521994 70,333.4 654.2 349,797 9.301 73,906 72,912 2,579.0 23,988 227,6391995 75,794.9 594.2 335,569 7.840 70,900 70,814 -4,980.8 -39,050 188,589

Change in Energy per GSF 1985-95 6.90% Change in Energy per GSF 1985-95 2.57%Energy per GSF 1995 22.59% w/computers

Combined Bldg & Energy Intensive Operation Cost Avoidance Adjusted for Gross Square Footage and Degree DaysAnnual Annual Gross Average Annual GSF Adj D.D. Adj Energy Use Annual Energy CumulativeEnergy Use Energy Cost Square Energy Cost Energy Use Energy Use Reduction Cost Avoidance Cost Avoidance

Year (Bbtu) ($ Million) Footage ($/MMBtu) (Bbtu) (Bbtu) (Bbtu) ($ Thousand) ($ Thousand)1985 511,329 6,014 3,561,343 na 511,329 511,329 0 0 01986 484,815 5,452 3,637,801 na 521,425 506,032 21,217 232,359 232,3591987 506,948 5,445 3,644,651 na 521,755 509,465 2,517 18,781 251,1411988 513,238 5,320 3,725,062 na 549,421 554,975 41,738 452,138 703,2791989 504,092 4,782 3,675,561 na 537,530 540,030 35,938 344,286 1,047,5651990 506,327 5,319 3,715,057 na 543,115 512,367 6,040 64,021 1,111,5861991 487,666 5,021 3,626,569 na 537,511 520,937 33,271 342,104 1,453,6901992 511,206 4,890 3,670,805 na 546,964 527,334 16,128 152,731 1,606,4211993 473,864 4,735 3,508,627 na 512,449 513,330 39,466 408,381 2,014,8021994 455,458 4,566 3,456,399 na 508,105 501,273 45,815 463,098 2,477,9001995 440,278 4,221 3,374,530 na 495,645 495,044 54,765 555,506 3,033,406

Change in Energy per GSF 1985-95 -9.13% Change in Energy per GSF 1985-95 -11.99%Energy per GSF 1995 13.05% w/computers

Notes: FEMP GSF data for energy-intensive operations does not include DOD for years 1989 through 1992. DOD GSF for those years is estimated by assuming the annual change in energy per GSF is constant from 1988 through 1993 and calculating based on reported energy use.

Sources: McNeil TechnologiesFEMP Annual Report


38

APPENDIXCarbon Emissions Reduction Calculations

Site Energy to Primary Energy Conversion Carbon CalculationsBuildings

Adj. Source Adj. Source DOE Ratio Reduction CumulativeSite Source Ratio of Annual Cumulative Carbon Carbon Carbon ReductionEnergy Use Energy Use Source Energy Energy Emissions to Energy Emissions in Carbon

Year (Bbtu) (Bbtu) to Site Reduction Reduction (metric ton) (metric ton) (metric ton) (metric ton)1985 471,230.6 821,028.8 1.74230791 0 0 13,327,093 16.23 01986 446,690.8 782,709.0 1.75223891 38,760 38,760 12,709,201 16.24 629,359 629,3591987 468,279.0 827,019.4 1.76608261 9,792 48,552 13,460,382 16.28 159,380 788,7391988 443,573.3 789,378.5 1.77958975 45,399 93,951 12,757,171 16.16 733,695 1,522,4341989 440,499.0 819,657.5 1.8607477 53,703 147,655 12,977,447 15.83 850,272 2,372,7071990 441,023.0 832,807.8 1.88835458 9,072 156,727 13,259,052 15.92 144,440 2,517,1461991 403,989.5 775,035.0 1.91845333 56,065 212,791 12,317,538 15.89 891,028 3,408,1741992 412,437.6 775,897.6 1.88124846 34,453 247,244 12,506,721 16.12 555,347 3,963,5221993 403,066.1 786,610.0 1.95156576 87,776 335,021 12,467,086 15.85 1,391,180 5,354,7011994 385,124.9 764,309.8 1.98457643 85,805 420,825 12,081,916 15.81 1,356,367 6,711,0691995 364,483.3 731,902.7 2.00805551 119,974 540,799 11,516,417 15.73 1,887,776 8,598,844

Percentage change in source energy per GSF 1985-95 -1.10% Percentage change 1985-95 in Carbon -14.16% Not adjusted for computers, etc. emissions adjusted for computers and degree days

Energy Intensive Operations Adj. Source Adj. Source DOE Ratio Reduction Cumulative

Site Source Ratio of Annual Cumulative Carbon Carbon Carbon ReductionEnergy Use Energy Use Source Energy Energy Emissions to Energy Emissions in Carbon

Year (Bbtu) (Bbtu) to Site Reduction Reduction (metric ton) (metric ton) (metric ton) (metric ton)1985 40,098.5 91,568.9 2.28359914 0 0 1,467,770 16.03 01986 38,124.6 87,213.2 2.28758335 -2,067 -2,067 1,396,806 16.02 -33,098 -33,0981987 38,669.1 91,240.1 2.35950927 -7,145 -9,211 1,443,118 15.82 -113,003 -146,1011988 69,664.3 143,496.2 2.05982404 33,424 24,213 2,367,971 16.50 551,564 405,4631989 63,593.2 140,791.4 2.21393797 15,667 39,880 2,193,331 15.58 244,075 649,5381990 65,303.7 142,455.5 2.18143076 2,696 42,576 2,290,915 16.08 43,350 692,8881991 83,676.5 175,595.7 2.09850675 8,493 51,069 2,815,461 16.03 136,167 829,0561992 98,768.6 203,499.0 2.06036129 -4,503 46,565 3,260,746 16.02 -72,161 756,8941993 70,797.7 155,847.5 2.20130739 -12,133 34,432 2,443,334 15.68 -190,213 566,6811994 70,333.4 155,676.3 2.21340501 5,708 40,141 2,405,215 15.45 88,196 654,8771995 75,794.9 156,020.0 2.05844984 -10,253 29,888 2,411,165 15.45 -158,447 496,430

Percentage change in source energy per GSF 1985-95 -3.64% Percentage change 1985-95 in Carbon 10.80% Not adjusted for computers, etc. emissions adjusted for computers and degree days

Combined Buildings & Energy Intensive OperationsAdj. Source Adj. Source DOE Ratio Reduction Cumulative

Site Source Ratio of Annual Cumulative Carbon Carbon Carbon ReductionEnergy Use Energy Use Source Energy Energy Emissions to Energy Emissions in Carbon

Year (Bbtu) (Bbtu) to Site Reduction Reduction (metric ton) (metric ton) (metric ton) (metric ton)1985 511,329 912,598 1.78475604 0 0 14,794,863 16.21 01986 484,815 869,922 1.79433698 38,070 38,070 14,106,007 16.22 617,315 617,3151987 506,948 918,260 1.81134814 4,559 42,629 14,903,500 16.23 73,989 691,3031988 513,238 932,875 1.81762735 75,863 118,492 15,125,142 16.21 1,230,010 1,921,3141989 504,092 960,449 1.90530403 68,472 186,965 15,170,778 15.80 1,081,558 3,002,8711990 506,327 975,263 1.9261542 11,634 198,599 15,549,967 15.94 185,499 3,188,3701991 487,666 950,631 1.94934791 64,856 263,455 15,132,999 15.92 1,032,442 4,220,8131992 511,206 979,397 1.91585431 30,899 294,354 15,767,467 16.10 497,448 4,718,2611993 473,864 942,458 1.98887845 78,493 372,847 14,910,420 15.82 1,241,817 5,960,0781994 455,458 919,986 2.01991291 92,542 465,389 14,487,131 15.75 1,457,268 7,417,3461995 440,278 887,923 2.01673101 110,447 575,836 13,927,582 15.69 1,732,428 9,149,775

Percentage change in source energy per GSF 1985-95 2.68% Percentage change 1985-95 in Carbon -11.71% Not adjusted for computers, etc. emissions adjusted for computers and degree days

Sources: McNeil TechnologiesFEMP Annual Report

Appendices

39

APPENDIXHeating and Cooling Degree Days Adjustments

Buildings

1985 4642 1194 5836 1.000 0.59 278,026 193,205 278,026 471,2311986 4295 1249 5544 0.950 0.59 285,012 198,059 270,752 468,8111987 4334 1269 5603 0.960 0.59 286,300 198,954 274,870 473,8241988 4653 1283 5936 1.017 0.59 273,990 190,400 278,685 469,0841989 4726 1156 5882 1.008 0.59 275,641 191,547 277,813 469,3601990 4016 1260 5276 0.904 0.59 278,823 193,759 252,069 445,8271991 4200 1331 5531 0.948 0.59 263,728 183,268 249,945 433,2131992 4441 1040 5481 0.939 0.59 263,604 183,182 247,569 430,7511993 4634 1219 5853 1.003 0.59 263,892 183,383 264,661 448,0441994 4483 1220 5703 0.977 0.59 256,177 178,022 250,339 428,3611995 4531 1293 5824 0.998 0.59 250,599 174,145 250,084 424,230

Energy Intensive OperationsHeating Cooling Combined Simple HVAC Non- D.D. Adj D.D. AdjDegree Degree Degree Degree percent of HVAC HVAC HVAC Total

Year Days Days Days Multiplier Energy Energy Energy Energy Energy1985 4642 1194 5836 1.000 0.59 23,658 16,440 23,658 40,0991986 4295 1249 5544 0.950 0.59 22,629 15,725 21,496 37,2211987 4334 1269 5603 0.960 0.59 21,536 14,965 20,676 35,6411988 4653 1283 5936 1.017 0.59 50,168 34,863 51,028 85,8911989 4726 1156 5882 1.008 0.59 41,502 28,841 41,829 70,6701990 4016 1260 5276 0.904 0.59 41,614 28,918 37,621 66,5391991 4200 1331 5531 0.948 0.59 53,404 37,111 50,613 87,7231992 4441 1040 5481 0.939 0.59 59,105 41,073 55,510 96,5831993 4634 1219 5853 1.003 0.59 38,453 26,721 38,565 65,2861994 4483 1220 5703 0.977 0.59 43,605 30,302 42,611 72,9121995 4531 1293 5824 0.998 0.59 41,831 29,069 41,745 70,814

Combined Buildings & Energy Intensive OperationsHeating Cooling Combined Simple HVAC Non- D.D. Adj D.D. AdjDegree Degree Degree Degree percent of HVAC HVAC HVAC Total

Year Days Days Days Multiplier Energy Energy Energy Energy Energy1985 4642 1194 5836 1.000 0.59 301,684 209,645 301,684 511,3291986 4295 1249 5544 0.950 0.59 307,641 213,784 292,248 506,0321987 4334 1269 5603 0.960 0.59 307,835 213,920 295,545 509,4651988 4653 1283 5936 1.017 0.59 324,158 225,263 329,713 554,9751989 4726 1156 5882 1.008 0.59 317,143 220,387 319,643 540,0301990 4016 1260 5276 0.904 0.59 320,438 222,677 289,690 512,3671991 4200 1331 5531 0.948 0.59 317,131 220,379 300,557 520,9371992 4441 1040 5481 0.939 0.59 322,709 224,255 303,079 527,3341993 4634 1219 5853 1.003 0.59 302,345 210,104 303,226 513,3301994 4483 1220 5703 0.977 0.59 299,782 208,323 292,950 501,2731995 4531 1293 5824 0.998 0.59 292,431 203,214 291,829 495,044

Sources: Annual Energy Review, 1996

McNeil Technologies

FEMP Annual Report

Heating Cooling Combined Simple HVAC Non- D.D. Adj D.D. AdjDegree Degree Degree Degree percent of HVAC HVAC HVAC Total

Year Days Days Days Multiplier Energy Energy Energy Energy Energy


40

APPENDIXIncreased Energy Costs Resulting from Increased Use of Electronic Office Equipment

BuildingsOffice Equipment Energy Office Equipment Change from Cumulative Change in Change inas Percent of Total Energy Energy Cost 1985 Energy Cost Change Site Energy Source Energy

Year Source Site ($ Thousand) ($ Thousand) ($ Thousand) (Bbtu) (Bbtu)1985 2.60% 1.94% 105,589 0 0 0 01986 3.06% 2.28% 112,440 6,851 6,851 620 1,0861987 3.47% 2.59% 127,707 22,118 28,968 2,098 3,7041988 3.85% 2.87% 128,680 23,091 52,060 2,283 4,0621989 4.20% 3.13% 128,292 22,703 74,762 2,436 4,5331990 4.79% 3.57% 162,692 57,103 131,865 5,522 10,4271991 5.40% 4.02% 166,686 61,097 192,962 5,960 11,4341992 6.04% 4.50% 176,454 70,865 263,827 7,452 14,0191993 6.64% 4.95% 202,881 97,292 361,118 9,561 18,6591994 7.25% 5.40% 211,320 105,731 466,849 10,410 20,6601995 7.88% 5.87% 212,981 107,392 574,241 10,792 21,670

Cumulative 1,735,724 574,241 ------------------ 57,133 110,255

Energy Intensive OperationsOffice Equipment Energy Office Equipment Change from Cumulative Change in Change inas Percent of Total Energy Energy Cost 1985 Energy Cost Change Site Energy Source Energy

Year Source Site ($ Thousand) ($ Thousand) ($ Thousand) (Bbtu) (Bbtu)1985 2.60% 1.94% 10,808 0 0 0 01986 3.06% 2.28% 11,700 893 893 66 1511987 3.47% 2.59% 13,108 2,300 3,193 175 4141988 3.85% 2.87% 23,895 13,088 16,280 1,094 2,2541989 4.20% 3.13% 21,150 10,343 26,623 972 2,1521990 4.79% 3.57% 27,025 16,217 42,840 1,398 3,0491991 5.40% 4.02% 35,383 24,575 67,416 2,339 4,9091992 6.04% 4.50% 43,549 32,742 100,157 3,341 6,8831993 6.64% 4.95% 31,332 20,525 120,682 2,294 5,0501994 7.25% 5.40% 35,343 24,535 145,217 2,638 5,8391995 7.88% 5.87% 34,894 24,086 169,303 3,072 6,324

Cumulative 288,187 169,303 ------------------ 17,390 37,025

Combined Bldg & Energy Intensive OperationsOffice Equipment Energy Office Equipment Change from Cumulative Change in Change inas Percent of Total Energy Energy Cost 1985 Energy Cost Change Site Energy Source Energy

Year Source Site ($ Thousand) ($ Thousand) ($ Thousand) (Bbtu) (Bbtu)1985 2.60% 1.94% 116,397 0 0 0 01986 3.06% 2.28% 124,140 7,743 7,743 686 1,2311987 3.47% 2.59% 140,815 24,418 32,161 2,273 4,1171988 3.85% 2.87% 152,576 36,179 68,340 3,377 6,1381989 4.20% 3.13% 149,443 33,046 101,386 3,408 6,4931990 4.79% 3.57% 189,717 73,320 174,705 6,919 13,3281991 5.40% 4.02% 202,069 85,672 260,377 8,299 16,1781992 6.04% 4.50% 220,003 103,607 363,984 10,793 20,6781993 6.64% 4.95% 234,213 117,817 481,800 11,855 23,5781994 7.25% 5.40% 246,663 130,266 612,067 13,048 26,3571995 7.88% 5.87% 247,875 131,478 743,545 13,864 27,960

Cumulative 2,023,911 743,545 ------------------ 74,522 146,057

Sources: E-Source Technology AtlasMcNeil Technologies

FEMP Annual Report

Alliance to Save Energy and AmericanCouncil for an Energy-EfficientEconomy, Missing the Mark: Five-YearReport Card on the Energy EfficiencyProvisions of the Energy Policy Act,Washington, DC, 1997.

Archibald, John, U.S. Department ofEnergy, Federal Energy ManagementProgram, Personal Communication,January 1998.

Borg, Mills, and Lawrence Martin, EnergyManagement in the Government Sector:An International Review, LawrenceBerkeley National Laboratory,Washington, DC, 1997.

Carr, Millard, formerly U.S. Department ofDefense, Office of the Secretary, PersonalCommunication, Arlington, VA,December 2, 1997.

Collins, Ted, U.S. Department of Energy,Federal Energy Management Program,Personal Communication, Washington,DC, October 1, 1997.

Dahle, Doug, National Renewable EnergyLaboratory, Personal Communication,Washington, DC, September 17, 1997.

Energy Management Services, University ofMichigan, www.energymanagement.umich.edu /NRGGD96.HTM, AnnArbor, MI, December 1, 1997.

Energy Systems Laboratory, Texas A&MUniversity, www.esl.tamu.edu/loanstar/aboutLoanSTAR.html, College Station,TX, March 27, 1998.

Gardner, Wendell, U.S. General ServicesAdministration, PersonalCommunication, Washington, DC,March 11, 1998.

Hopkins, Mark, Energy Use in FederalFacilities: Squandering Taxpayer Dollarsand Needlessly Polluting the Environment,Alliance to Save Energy, Washington,DC, January 1991.

National Marketplace for the EnvironmentConference and Trade Show, “How toDo Business With the FederalGovernment—Federal ProgramsSession,” Washington, DC, November20, 1997.

Ostrander, Virgil, U.S. GovernmentServices Administration, PersonalCommunications, Washington, DC,February 3, 1998, and March 5, 1998.

President’s Council on Integrity andEfficiency, Summary Report onCompliance with Section 160 of theEnergy Policy Act of 1992, Washington,DC, March 23, 1993.

Romm, Joseph, Lean and CleanManagement: How to Increase Profits andProductivity by Reducing Pollution,Kodansha America, New York, NY,1994.

Rosenstock, Steven, Edison ElectricInstitute, Personal Communication,February 27, 1998.

Shearer, Beth, U.S. Government ServicesAdministration, PersonalCommunication, March 5, 1998.

References

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Shepard, Michael, et al, State of the ArtTechnology Atlas: Space Heating, 1993edition with updates, E Source, Inc.,Boulder, CO, 1993, Table 8-12, p. 8.3.1.

____, State of the Art Technology Atlas:Appliances, 1990 edition with updates,E-Source, Inc., Boulder, CO, 1990.

Thumann, Albert, and Fred Wainwright,Financing Energy Projects Deskbook,Fairmont Press, Inc., Lilburn, GA, 1997.

Tremper, Chris, McNeil Technologies,Personal Communication, February 26,1998.

U.S. Code of Federal Regulations, 10 CFRSec. 430.32.

U.S. Department of Energy, “Status of StateElectric Utility Deregulation Activity asof March 2, 1998,” Energy InformationAdministration, Washington, DC,www.eia.doe.gov/cneaf/electricity,March 12, 1998.

____, Commercial Buildings Characteristics1995: Commercial Buildings EnergyConsumption Survey, Energy InformationAdministration, www.eia.doe.gov/emeu/cbecs, Washington, DC, January 29,1998.

____, Buying Energy-Efficient Products,Federal Energy Management Program,Washington, DC, 1997.

____, State Energy Data Report 1995,Energy Information Administration,Washington, DC, December 1997.

____, “Western Region Super ESPCUpdate,” FEMP Focus, Federal EnergyManagement Program, Washington,DC, August/September 1997, p. 5.

____, “Awarded Alternative FinancingContracts: Energy Savings PerformanceContracts and Utility Demand SideManagement Contracts, January 1997,”www.eren.doe.gov/femp/awdconts,Federal Energy Management Program,Washington, DC, August 22, 1997.

____, Annual Energy Review 1996, EnergyInformation Administration,Washington, DC, July 1997.

____, “$750 Million in Contracts Awardedfor Western Region,” FEMP Focus,Federal Energy Management Program,Washington, DC, June 1997, p. 1.

____, Annual Report to Congress on FederalGovernment Energy Management andConservation Programs, Fiscal Year 1995,Federal Energy Management Program,Washington, DC, February 14, 1997.

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____, Commercial Buildings Characteristics1989: Commercial Buildings EnergyConsumption Survey, Energy InformationAdministration, Washington, DC, June1991.

____, Characteristics of CommercialBuildings 1986: Commercial BuildingsEnergy Consumption Survey, EnergyInformation Administration,Washington, DC, October 1988.

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Warrick, Joby, “Reassessing KyotoAgreement, Scientists See LittleEnvironmental Advantage,” WashingtonPost, Washington, DC, February 13,1998, p. A14.

White, Mahlon, U.S. Department ofDefense, Office of Deputy Under Secretaryfor Industrial Affairs and Installations, Per-sonal Communication, Arlington, VA,December 11, 1997.

1 As recently as November 1997, theAlliance and the American Council foran Energy-Efficient Economy publishedMissing the Mark: Five-Year Report Cardon the Energy Efficiency Provisions of theEnergy Policy Act, which details how thefederal government has fallen short ofimplementing the required energy-efficiency improvements.

2 In 1995 nonelectric fuel consumption atfederal facilities was 213.8 trillion Btusand site electricity consumption was150.7 trillion, for a total of 364.5 trillionBtus. Meanwhile, conversion losses forelectricity used in federal facilities totaled361.7 trillion Btus. See Federal EnergyManagement Program, Annual Report toCongress, Figure 5, p. 44.

3 Annual Report to Congress, Appendix D,pp. D1–D17.

4 This is the total primary energy con-sumed in federal government buildingsand facilities. For discussion of the differ-ences between site and source energy, seep. 13.

5 Energy Information Administration,Emissions of Greenhouse Gases in theUnited States 1995, p. XI.

6 The U.S. federal government is a leaderamong nations in managing energy usein buildings that it owns and occupies.See Borg, Mills, Martin, and Lawrence,Energy Management in the GovernmentSector: An International Review, 1997, fora summary of efforts by other countriesto manage public sector energy use.

7 Alliance to Save Energy calculations basedon data provided by McNeil Technologiesand Federal Energy Management Pro-gram, Annual Report to Congress, adjustedto reflect changes in gross square footage,weather, and increased use of computersand to correct anomalies in the FEMPdata set. See Appendix B.

8 In 1995, Vermont consumed 149.9 trillion Btus. See Energy InformationAdministration, State Energy Data Report1995. Table 1, p. 9.

9 Alliance to Save Energy calculations. SeeAppendix B.


11 In his book, Lean and Clean Manage-ment, Joseph J. Romm, the PrincipalDeputy Assistant Secretary for the U.S.Department of Energy’s Office of EnergyEfficiency and Renewable Energy, dis-cusses how increased worker productivitymay be an unintended consequence ofimproved energy efficiency.

12 This figure does not include the approxi-mately $138 million invested by energyperformance contractors or money spentby utilities as part of their demand-sidemanagement programs. The latter couldeasily exceed $100 million over the1985–1995 period. According to per-sonal correspondence from StevenRosenstock, Potomac Electric PowerCompany gave $13.8 million in rebatesto federal facilities in the Washington,D.C., metropolitan area between 1990

Endnotes

Section Title

45

Endnotes

and 1997; Southern California Edisonprovided energy-efficiency incentivesworth more than $6 million in the1990–1996 period. Rosenstock, personalcommunication, February 27, 1998.


14 This is a major improvement comparedto 1986, when federal buildings con-sumed 48 percent more energy persquare foot than the general buildingstock. Alliance to Save Energy calcula-tions based on data from Energy Infor-mation Administration, CommercialBuildings Energy Consumption Surveyfrom survey of years 1986, 1989, 1992,and 1995.

15 Alliance to Save Energy calculationsbased on data provided from McNeilTechnologies; Annual Report to Congress1997; and Federal Energy ManagementProgram, Federal Energy ManagementProgram, Federal Energy Efficiency andWater Conservation Funding Study.

16 Executive Order 12003.17 President Bush issued Executive Order

12759. President Clinton issued Execu-tive Order 12902.

18 This report is the primary source forinformation on energy use in the federalgovernment.

19 Technically, this means that the Reagantarget was not met. The Reagan execu-tive order, like subsequent executiveorders, required “each agency” to meetthe target.

20 In 1995 nonelectric fuel consumption atfederal facilities was 213.8 trillion Btusand site electricity consumption was150.7 trillion, for a total of 364.5 trillionBtus. Meanwhile, conversion losses forelectricity used in federal facilities totaled361.7 trillion Btus. See Federal EnergyManagement Program, Annual Report toCongress, Figure 5, p. 44.

21 See Energy Information Administration,Annual Energy Review 1996, and U.S.Congress, 10 CFR Sec. 430.32.

22 Site energy consumption reduced by18,260,000 Btus = 20,000,000Btus/0.50EF – 20,000,000 Btus/0.92EF.Resource energy consumption isincreased by 43,000,000 Btus =20,000,000 Btus/(0.91 3 0.50EF) –20,000,000 Btus/(0.25 3 0.92EF).

23 Energy use per GSF—using sourceenergy as the measure—fell by 3.6 percent.

24 Federal Energy Management Program,Annual Report to Congress, Appendix D,pp. D1–D17.

25 Calculation by the Alliance based ondata provided by McNeil Technologiesand Federal Energy Management Report,Annual Report to Congress, pp. 48, 51.

26 When office equipment is factored in,the 1985–1995 GSF reduction in siteenergy would have been 16.7 percent ascompared to 14.1 percent. If energy-intensive facilities are accounted for, thesite energy use per GSF would havefallen by 12 percent rather than 9 per-cent. Alliance calculations based on datafrom Shepard, et al., pp. 285–299.

27 The agency has since not only met theyear 2000 target, but the year 2005 tar-get as well.

28 Federal Energy Management Program,Annual Report to Congress, p. 7.

29 Federal Energy Management Program,Buying Energy-Efficient Products. Thisamount does not even account for theadditional money that is spent on energy-saving products included in the buildingdesign. Such products include insulation,HVAC controls, and windows.

30 National Marketplace for the Environ-ment Conference and Trade Show. Fromremarks made by Debra Saunderman(head of Procurement Office of theDepartment of Interior) and Pat


46

Geisinger (GSA Small Business Advisor)in panel presentation. The one-third estimate is based on the Interior Depart-ment in which 19,000 employees—one-third of the agency’s staff—hold govern-ment-issued VISA credit cards.

31 The DLA catalog contains, for the mostpart, “military unique” equipment. Themost notable exception is lighting equip-ment. The GSA catalog contains every-thing from toilet paper to trucks. Infor-mation is not available on the percentageof total purchases made through thesecatalogs. However, one example is that in1996, federal agencies purchased $1.8billion of Automated Data ProcessingEquipment through the GSA catalog(Gardner, GSA, personal communica-tion, March 11, 1998). Efforts are cur-rently under way to introduce EnergyStar and “EE” labels into the GSA andDLA catalogs. These labels will help fed-eral purchasers easily identify equipmentthat complies with the order but doesnot in itself discourage them from buy-ing less efficient equipment.

32 In 1985, the federal government’s carbonintensity was 28.9 metric tons per billionBtus. In 1995, carbon intensity hadincreased to 31.6 metric tons per billionBtus. Alliance calculations based on dataprovided by McNeil Technologies andFederal Energy Management Program,Annual Report to Congress.

33 President’s Council on Integrity and Effi-ciency, Summary Report.

34 Alliance calculations based on data pro-vided by McNeil Technologies and Fed-eral Energy Management Program,Annual Report to Congress. We base pro-jected appropriations on the average for1985–1995, which is $164 million peryear. A year ago this would have seemedhigh, but given heightened concernsabout climate change and awareness ofFEMP by the Clinton Administration,the numbers could (and should) go even

higher. Currently, appropriations forenergy-saving projects are about $150million.

35 The required investment could bereduced somewhat if the rate of penetra-tion of electricity-using office equipmentslows in the 1998–2005 period relativeto the 1985–1995 period. The increaseduse of computers and other electricity-using office equipment drove the federalgovernment’s energy bill up by $131 mil-lion in 1995 relative to 1985. SeeAppendix B.

36 This number includes “shared savingsagreements” entered into prior to regula-tions being adopted in 1995 for “energy-saving performance contracts.” One difference is that ESPCs, as currentlydefined, must contain a guarantee to the agency that energy cost savings willexceed the debt service costs.

37 Thumann and Wainwright.38 FEMP Web site, “Awarded Alternative

Financing Contracts.”39 For an overview of some of the ESPCs

that are in place with federal facilities, seeFEMP’s homepage at www.eren.doe.gov/femp/cases.html.

40 IDIQs are often referred to as the DOE’sFinancing Renewable Energy and Effi-ciency (FREE) Savings and also SuperESPCs.

41 Federal Energy Management Program.“$750 Million in Contracts Awarded forWestern Region.”

42 Federal Energy Management Program.“750 Million in Contracts Awarded forWestern Region.”

43 ERI Services is conducting an invest-ment-grade audit for a project in Kodiak,Alaska, involving lighting, boilerupgrades, and controls for several build-ings. Johnson Controls is doing a projectinvolving lighting retrofits and HVACand chiller upgrades for the Federal Avia-tion Administration in Auburn, Wash-ington. The Bentley Company group is

Endnotes

47

doing a lighting and HVAC project forthe National Oceanic and AtmosphericAdministration in Seattle. Federal EnergyManagement Program. “Western RegionSuper ESPC Update,” p. 5; Doug Dahle,National Renewable Energy Laboratory,personal communication, September 17,1997.

44 Dahle.45 Ostrander, March 5, 1998.46 Ostrander, February 3, 1998.47 Ostrander, March 5, 1998.48 Ostrander, February 3, 1998; Ostrander,

March 5, 1998; Shearer.49 Energy Systems Laboratory, Texas A&M

University.50 Energy Management Services, University

of Michigan.51 For status updates on state restructuring

activities, see the Energy InformationAdministration’s homepage at http://www.eia.doe.gov/cneaf/electricity/chg_str/tab5rev.html.

52 U.S. General Accounting Office, FederalElectricity, p. 2.

53 U.S. General Accounting Office, p. 2.54 ESPCs were authorized by EPAct for five

years after DOE developed regulationsfor them. Those regulations were notestablished until 1995. Archibald, per-sonal communication, January 1998.

55 Collins, personal communication,October 1, 1997.

56 Over the next year, FEMP will partici-pate in at least the following conferences:the Association of Energy Engineers’World Energy Engineering Congress inAtlanta; GlobalCon in Dallas; EnergyManagement Congress in Anaheim,Calif.; International Energy and Envi-ronmental Congress in Chicago; and theNational Association of Energy ServicesCompanies Annual Conference in NewOrleans.

57 Note that survey respondents also saidthat area-wide agreements are muchmore easily executable and popular withregional energy and procurement people.

58 Carr, personal communication, Decem-ber 2, 1997.

59 White, personal communication,December 11, 1997.

60 A federal agency maintenance managerrecently told the Alliance how he hadconvinced his boss to approve installa-tion of a lighting retrofit project. Thefacility manager assured his superiorsthat the project would pay for itself intwo years. Over the next two years,building space and occupancy wereincreased; thus energy use increased. Themanager’s boss incorrectly concludedthat the project was a failure because heconsidered the energy increase separatelyfrom the building usage and conse-quently has stalled further energy-savingactivities.


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