Opinion: Leading by example: Lawmakers should step up performance contracts on federal buildings

As published in Utility Dive on August 8, 2019

The following is a contributed article by Charles Hernick, director of policy and advocacy at Citizens for Responsible Energy Solutions Forum.

Often overlooked and underestimated, the energy efficiency industry has been a star player in cleaning up the national energy market. Rather than developing new ways of energy generation, energy-efficiency technology improves the existing methods, helping them to be cleaner and more cost-effective during energy generation, storage and transportation.

In total, the U.S. spends $10-12 billion on energy-efficiency measures every year. This funding is dispersed throughout the nation to the benefit of energy consumers from all walks of life. It’s an essential part of our national infrastructure — and the technology should get top billing on any future infrastructure packages from Washington.

Specifically, we should look toward energy savings performance contracts as a way to pursue energy efficiency on a national scale. Performance contracting uses private sector financing and expertise to improve the energy use in the built environment, usually for public, commercial and industrial facilities.

Performance contracts are important for increasing the efficiency of buildings quickly and affordably. The concept offers an alternative financing model that accelerates energy-efficiency projects by making them possible without an upfront cost.

Through a partnership with a private company, federal, state and local governments have a powerful tool for energy savings in their arsenal.

Here’s how it works:

A government entity will contract a private company to make the energy-efficient building upgrade. The company will pay for the construction out of its own pocket. After the upgrade is complete, the company gets paid back through a portion of the money saved over time through the increased efficiency of the building or facility.

In an Energy Savings Performance Contract (ESPC) the company also provides measurement and verification of the energy savings and guarantees that they will accrue to the government.

A second type of performance contract, Utility Energy Saving Contracts (UESC), function in a similar way. Such contracts are a great tool for speeding up progress on energy-efficiency projects, and create new construction jobs without imposing costs on taxpayers.

In January, three organizations sent a letter to Congressional leaders on the importance of performance contracting, including Advanced Energy Economy, Alliance to Save Energy, and the National Association of State Energy Officials. The co-signers urged Congress to include spending for energy efficiency provisions in any infrastructure proposal they consider during the 116th Congress.

The letter speaks to the monumental role energy-efficiency technology has played in our economy.

If we remained at the same levels of energy efficiency that our nation was at in 1973, then our economy would need 60% more energy to function than it requires today. The letter also highlights the 2.25 million energy-efficiency jobs in the industry, and how that number could increase.

America’s crumbling infrastructure is undoubtedly in need of an upgrade. And when the spending for that infrastructure comes along, we should look at how energy efficiency can conserve money in the long run. But first, the leaders of our country should step up and show American voters that energy efficiency works.

The best way to do that is by increasing the use of performance contracts on their home turf.

Washington currently employs performance contracts for federal buildings, but there is no requirement for federal agencies to use performance contracts or UESCs when building out upgrades.

With a little luck, that might be changing soon. On June 6, four members of Congress introduced bills that would create a new federal policy on energy-efficiency upgrades.

The Energy Savings Through Public-Private Partnerships Act of 2019 would set a requirement for federal facilities that would see at least half of the projects found in existing mandated audits be paid for by performance contracts. A bipartisan effort, the Republican sponsors include U.S. Rep. Adam Kinzinger, R-Ill., in the House and Sen. Cory Gardner, R-Colo. in the Senate.

“More than 50% of the emissions reductions the United States has achieved since 2005 have been through gains in energy efficiency, and the federal government is the largest consumer of energy in America,” Gardner said. “Using performance contracts and UESCs to make the federal government more efficient while creating private sector jobs is the kind of commonsense solution that members of both parties can get behind.”

Passing the bill would send a powerful message across the country. Making lawmakers accountable for the way their facilities use energy shows Americans that our leaders are getting serious about making changes.

It shows us that they are willing to put real money behind talk of cleaning up the energy sector, and that they’re willing to start right at their own front door.

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