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Energy Savings Performance Contracts (ESPCs), also known as Energy Performance Contracts, are an alternative financing mechanism authorized by the United States Congress designed to accelerate investment in cost effective energy conservation measures in existing Federal buildings. [1] ESPCs allow Federal agencies to accomplish energy savings projects without up-front capital costs and without special Congressional appropriations. The Energy Policy Act of 1992 (EPACT 1992) authorized Federal agencies to use private sector financing to implement energy conservation methods and energy efficiency technologies.
An ESPC is a partnership between a Federal agency and an energy service company (ESCO). The ESCO conducts a comprehensive energy audit for the Federal facility and identifies improvements to save energy. In consultation with the Federal agency, the ESCO designs and constructs a project that meets the agency's needs and arranges the necessary financing. The ESCO guarantees that the improvements will generate energy cost savings sufficient to pay for the project over the term of the contract. After the contract ends, all additional cost savings accrue to the agency. [2] The savings must be guaranteed and the Federal agencies may enter into a multiyear contract for a period not to exceed 25 years.
Energy Savings Performance Contracts are regulations created by the Federal Energy Management Program (FEMP) of the United States Department of Energy (DOE) as required by the Energy Policy Act of 1992. The final DOE ruling came into effect on May 10, 1995. The use of ESPCs by Federal agencies was reauthorized in the Energy Policy Act of 2005 (EPACT 2005) through the end of Fiscal Year (FY) 2016 and permanently reauthorized in The Energy Independence and Security Act of 2007 (EISA). [3]
Energy Performance Contracts are also used extensively in the US Department of Housing & Urban Development's (HUD's) Public Housing Program as a means of reducing utility costs. Unlike federal ESPCs, Public Housing ESPCs are projects approved by HUD and implemented by state-chartered Public Housing Authorities (PHAs) with or without the assistance of an ESCo. Because PHAs are legally authorized to carry debt, ESCos involved in the Public Housing EPC process typically do not need to provide financing to the project, but rather are simply providers of architectural/engineering services.
As of March 2010 more than 550 ESPC projects worth $3.6 billion were awarded to 25 Federal Agencies and organizations in 49 states and the District of Columbia (D.C.). These projects saved an estimated 30.2 trillion BTU annually, equivalent to the energy consumed by 318,300, and $11 billion in energy costs, $9.6 billion goes to fund energy efficiency projects and $1.4 billion is reduced Federal Government spending. [4] [ citation needed ]
The initial program was started by John Rogers working for the Naval Facilities Engineering Command. The actual implementation was not started until congress passed the required legislation.
United States Department of Energy (DOE) energy savings performance contracts are indefinite delivery/indefinite quantity (IDIQ) contracts designed to make ESPCs as practical and cost-effective as possible for Federal agencies. The Department of Energy awarded these "umbrella" contracts to ESCOs based on their ability to meet terms and conditions established in IDIQ contracts. DOE ESPCs can be used for any federally owned facility worldwide. [5] [ citation needed ]
DOE energy savings performance contracts help Federal agencies meet energy efficiency, renewable energy, water conservation, and emissions reduction goals by streamlining contract funding for energy management projects. The streamlined financing provides multiple benefits, including:
The FEMP ESPC program costs about $10 million annually to administer and an additional $1 million annually to monitor contract performance. On average, FEMP spends about $500,000 to develop each contract, essentially providing a very generous boost to the ESCOs for project development. Additionally, with interest charges over as many as 25 years per contract, the projects are actually costing a lot more than if Congress would just appropriate funding for them rather than financing them over long periods of time.
FEMP has identified a number of ways to monitor the performance of ESPCs during the life of the contracts. Initially, The vast majority of contracts were based on "stipulated" rather the actual measured savings. This means that the parties agree on engineering calculations at the beginning of the contract and never have to measure actual performance after that. A DOE internal study found that with many contracts, it was impossible to tell if performance goals, and thus, dollar savings, were actually being achieved. After just a few years in operation, with staff turnover and other operational issues taking precedence, many of those projects were no longer being monitored.
These days, the Federal Energy Management Program (FEMP) Has implemented a number of strategies to improve the performance of these projects and reduce risk to US Federal Agencies. The current FEMP M&V Guidelines (version 4.0 as of 2024) require contractors to provide IMPVP compliant measurement and verification activities with limited or no stipulated savings. [7]
The United States Department of the Army (DOA) use of ESPCs is focused on the reduction of energy and water consumption, with ancillary benefits of achieving facility improvements, improving the quality of life in the Army, and ultimately reducing the overall energy costs of the Installations. ESPCs do not apply to the town of Willington, CT [ citation needed ].
In Switzerland, the swissesco [8] business association is promoting and developing EPC. The business model does support the goals of the Swiss Federal Energy Strategy 2050 by promoting energy efficiency. swissesco was established in September 2015. Its members are energy companies, engineers, financial institutions as well as Cantons, cities and municipalities. The association is supported by the Swiss Federal Office of Energy SFOE and several of the Cantons. swissesco works on the following strategic priorities:
In 2016, swissesco developed the Swiss Guide for Energy Performance Contracting with the support of the Swiss Federal Office of Energy SFOE. [9] It is available in German and French. It explains in detail the planning, development and implementation of EPC projects in Switzerland. In other countries there have been similar efforts in the past, but they did not include the particular legel environment for tendering procedures in Switzerland. The Swiss Guide is comparable to the German document of the Deutschen Energieagentur DENA or the German federal state Hessen as well as to the efforts by the European Energy Service Initiative EESI. The Swiss Guide is free for download and explains how EPC works and what the do's and don'ts are. The public tender procedure is explained step-by-step and illustrated by useful infographics. The Guide also includes useful tools for the analysis and implementation of EPC projects, such as templates for contracts.
The United States Department of Energy (DOE) is an executive department of the U.S. federal government that oversees U.S. national energy policy and energy production, the research and development of nuclear power, the military's nuclear weapons program, nuclear reactor production for the United States Navy, energy-related research, and energy conservation.
Energy conservation is the effort to reduce wasteful energy consumption by using fewer energy services. This can be done by using energy more effectively or changing one's behavior to use less and better source of service. Energy conservation can be achieved through efficient energy use, which has some advantages, including a reduction in greenhouse gas emissions and a smaller carbon footprint, as well as cost, water, and energy savings.
The National Energy Technology Laboratory (NETL) is a U.S. national laboratory under the Department of Energy Office of Fossil Energy. NETL focuses on applied research for the clean production and use of domestic energy resources. It performs research and development on the supply, efficiency, and environmental constraints of producing and using fossil energy resources while maintaining affordability.
An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. In commercial and industrial real estate, an energy audit is the first step in identifying opportunities to reduce energy expense and carbon footprint.
The Office of Energy Efficiency and Renewable Energy (EERE) is an office within the United States Department of Energy. Formed from other energy agencies after the 1973 energy crisis, EERE is led by the Assistant Secretary of Energy Efficiency and Renewable Energy, who is appointed by the president of the United States and confirmed by the U.S. Senate. Alejandro Moreno currently leads the office as the Acting Assistant Secretary.
An energy service company (ESCO) is a company that provides a broad range of energy solutions including designs and implementation of energy savings projects, retrofitting, energy conservation, energy infrastructure outsourcing, power generation, energy supply, and risk management.
The United States Federal Energy Management Program (FEMP) promotes energy efficiency and the use of renewable energy resources at federal sites, helping agencies save energy, save taxpayer dollars, and demonstrate leadership with responsible, cleaner energy choices, because as the largest energy consumer in the United States, the federal government has both a tremendous opportunity and a clear responsibility to lead by example with smart energy management.
New Energy for America was a plan led by President Barack Obama and Vice President Joe Biden beginning in 2008 to invest in renewable energy sources, reduce reliance on foreign oil, address global warming issues, and create jobs for Americans. The main objective of the New Energy for America plan was to implement clean energy sources in the United States to switch from nonrenewable resources to renewable resources. The plan led by the Obama Administration aimed to implement short-term solutions to provide immediate relief from pain at the pump, and mid- to- long-term solutions to provide a New Energy for America plan. The goals of the clean energy plan hoped to: invest in renewable technologies that will boost domestic manufacturing and increase homegrown energy, invest in training for workers of clean technologies, strengthen the middle class, and help the economy.
The Energy Efficiency and Conservation Block Grant (EECBG) is a program in the United States, which provides federal grants to units of local government, Indian tribes, states, and territories to reduce energy use and fossil fuel emissions, and for improvements in energy efficiency.
The United States Department of Energy's State Energy Program (SEP) provides grants to states and directs funding to state energy offices from technology programs in Office of Energy Efficiency and Renewable Energy. States use grants to address their energy priorities and program funding to adopt emerging renewable energy and energy efficiency technologies. Started in 2010, the program "is the only program administered by the U.S. Department of Energy (DOE) that provides cost-shared resources directly to the states for allocation by the governor-designated State Energy Office for use in energy efficiency and clean energy innovation, development, and demonstration activities.”
The GovEnergy Workshop and Trade Show is an annual training event in the United States for federal facility energy professionals. The event is also attended by private industry professionals who help to monitor and control energy use in federal facilities.
The International Performance Measurement and Verification Protocol (IPMVP®) defines standard terms and suggests best practise for quantifying the results of energy efficiency investments and increase investment in energy and water efficiency, demand management and renewable energy projects. The IPMVP was developed by a coalition of international organizations starting in 1994–1995. The Protocol has become the national measurement and verification standard in the United States and many other countries, and has been translated into 10 languages. IPMVP is published in three volumes, most widely downloaded and translated is IPMVP Volume 1 Concepts and Options for Determining Energy and Water Savings. A major driving force was the need for a common protocol to verify savings claimed by Energy Service Companies (ESCOs) implementing Energy Conservation Measures (ECM). The protocol is a framework to determine water and energy savings associated with ECMs.
A Deep Energy Retrofit is an energy conservation project in an existing building that leads to an overall improvement in building performance. While there is no exact definition for a deep energy retrofit, it can be characterized as a whole-building analysis and construction process that aims to reduce on-site energy use by 50% or more using existing technologies, materials and construction practices. Reductions are calculated against baseline energy use using data from utility bills. Such a retrofit reaps multifold benefits beyond energy cost savings, unlike conventional energy retrofit. It may also involve remodeling the building to achieve a harmony in energy, indoor air quality, durability, and thermal comfort. An integrated project delivery method is recommended for a deep energy retrofit project. An over-time approach in a deep energy retrofitting project provides a solution to the large upfront costs problem in all-at-once execution of the project.
Modern United States wind energy policy coincided with the beginning of modern wind industry of the United States, which began in the early 1980s with the arrival of utility-scale wind turbines in California at the Altamont Pass wind farm. Since then, the industry has had to endure the financial uncertainties caused by a highly fluctuating tax incentive program. Because these early wind projects were fueled by investment tax credits based on installation rather than performance, they were plagued with issues of low productivity and equipment reliability. Those investment tax credits expired in 1986, which forced investors to focus on improving the reliability and efficiency of their turbines. The 1990s saw rise to a new type of tax credit, the production tax credit, which propelled technological improvements to the wind turbine even further by encouraging investors to focus on electricity output rather than installation.
Hydropower policy in the United States includes all the laws, rules, regulations, programs and agencies that govern the national hydroelectric industry. Federal policy concerning waterpower developed over considerable time before the advent of electricity, and at times, has changed considerably, as water uses, available scientific technologies and considerations developed to the present day; over this period the priority of different, pre-existing and competing uses for water, flowing water and its energy, as well as for the water itself and competing available sources of energy have changed. Increased population and commercial demands spurred this developmental growth and many of the changes since, and these affect the technology's use today.
United States Lighting Energy Policy is moving towards increased efficiency in order to lower greenhouse gas emissions and energy use. Lighting efficiency improvements in the United States can be seen through different standards and acts. The Energy Independence and Security Act of 2007 laid out changes in lighting legislation for the United States. This set up performance standards and the phase-out of incandescent light bulbs in order to require the use of more efficient fluorescent lighting. EISA 2007 is an effort to increase lighting efficiency by 25-30%. Opposition to EISA 2007 is demonstrated by the Better Use of Light Bulbs Act and the Light Bulb Freedom of Choice Act. The efforts to increase lighting efficiency are also demonstrated by the Energy Star program and the increase efficiency goals by 2011 and 2013. A ban on the manufacture and sale of most general purpose incandescent bulbs in the U.S. took effect on August 1, 2023.
Executive Order 13514 was an Executive Order, entitled Federal Leadership in Environmental, Energy, and Economic Performance, which U.S. President Barack Obama issued on October 5, 2009. EO 13514 was replaced by Executive Order 13693, titled Planning for Federal Sustainability in the Next Decade, issued by Obama on March 19, 2015. The Office of the Federal Environmental Executive, whose name was changed to the Office of Federal Sustainability by Executive Order 13693, is housed at the Council on Environmental Quality within the Executive Office of the President of the United States. Its role is to oversee policy, guidance, and implementation of the sustainability Executive Order.
The Green Deal was a UK government policy initiative that gave homeowners, landlords and tenants the opportunity to pay for energy efficient home improvements through the savings on their energy bills from 2012 to 2015. At the heart of the Green Deal was the rule that savings on bills would exceed the cost of the work. By meeting this 'Golden Rule', consumers were able to receive energy savings without direct cost. Consumers then paid back the cost of such improvements through the expected savings in their energy bills. However, there is no guarantee that the eventual savings made by consumers will match the cost of the loans they take out to make the improvements and industry bodies recognised there was a risk consumers could end up out of pocket.
The Energy Conservation Program for Consumer Products Other Than Automobiles is a regulatory program that enforces minimum energy conservation standards for appliances and equipment in the United States. The program was established under Part B of Title III of the Energy Policy and Conservation Act of 1975 and gives the Department of Energy (DOE) the authority to develop and implement test procedures and minimum standards for more than 60 products covering residential, commercial and industrial, lighting, and plumbing applications. The Department of Energy is required to set standards that are "technologically feasible and economically justified."
Public plans for energy efficient refurbishment are put in place by states to encourage building owners to renovate their properties in a way that increases their energy performance. As financing represents the most important obstacle to this type of renovation, the plans favour financial incentives in the form of loans or grants. Various institutions can be involved in the process, such as ministries, banks, firms, or energy services companies (ESCOs).