Improving Federal Energy Management

The federal government is the nation’s single largest energy consumer. In 2006, the federal government consumed about 1.5 quadrillion Btu’s of energy (1.5% of US energy consumption) at a cost of $17.7 billion. American taxpayers paid $6.5 billion annually just to heat, cool, and power the federal government’s more than 500,000 buildings and facilities.¹

Efforts over the last two decades to reduce energy use in federal buildings and facilities have resulted in significant energy and cost savings. Overall, federal primary energy use decreased by 18 percent from 1985 to 2006,² and in buildings, primary energy consumption decreased by eight percent.³ Federal building and facility energy bills decreased by 22 percent in real terms in that time period, considerably more than the 15 percent decrease in the cost of primary energy supplied to those facilities.⁴ These energy reductions resulted in carbon savings of 18 percent in 2006, compared to 1990.⁵

A range of policies and programs have been used to realize these savings, including most notably: energy intensity targets, alternative project financing, efficient procurement requirements, and a variety of training and technical assistance. Expanding, enhancing and fully implementing these policies and programs will help the federal government reap huge amounts of savings that still remain.

Federal Energy Goals

For the last two decades, federal agencies have been subject to energy intensity reduction goals or mandates. The current goals, originally required as part of the January 2007 Executive Order (EO) 13423 and codified in the Energy Independence and Security Act of 2007 (EISA), require federal agencies to reduce energy consumption per square foot of their buildings by three percent each year, or 30 percent by 2015 compared to 2003 energy intensity levels. In order to help federal agencies meet this requirement, EISA requires all federal agencies to identify facilities that combine to make up at least 75% of agency energy use, and appoint an energy manager at each of those facilities. Agencies also must perform comprehensive energy and water evaluations for 25% of their facilities each year.

Financing Federal Energy Savings

Although many energy-efficiency investments save money over time, appropriations for energy-efficiency projects have traditionally been lacking and the new energy intensity targets will exacerbate the funding gap. An investment of almost $11 billion through 2015, or about $1.3 billion per year over the next seven years, likely will be needed to meet the current energy targets and reap the associated energy and carbon savings.⁶ This investment is far greater than recent annual appropriations for energy efficiency, water conservation, and renewable energy projects in existing federal buildings, which have ranged from only about $100 million to $300 million. Through 2015, at existing appropriations, the federal government would therefore be facing a cumulative budget shortfall of up to about $8 billion.⁷

Since the mid-1990s, this funding gap has been filled with private sector financing from energy services companies (ESCOs) and energy utilities. ESCOs and utilities finance and help implement energy-saving projects through Energy Savings Performance Contracts(ESPCs) and Utility Energy Services Contracts (UESCs), in which the contractor is paid out of the resulting stream of energy bill savings. In FY 2006 direct appropriations provided $281 million for energy efficiency, water conservation, and renewable energy projects, while ESPCs provided $314 million and UESCs provided $70 million. Prior to a lapse in ESPC authority in 2003 and 2004, ESPCs provided an even greater share of overall funding for energy efficiency. With ESPCs now receiving permanent authorization through the passage of EISA, ESPCs increasingly can be used again by agencies to pay for and implement energy-efficiency projects.

Other Federal Energy-Efficiency Requirements

Since at least the early 1990s, federal agencies have been encouraged to purchase energy-efficient products wherever “practicable.” Agencies were first required to purchase energy-efficient products in EO 13123, issued in 1999. EPAct 2005 codified the existing directives into law, and directed supply agencies, including the General Services Administration (GSA) and the Defense Logistics Agency (DLA), to remove all non-compliant products from their shopping websites. EISA section 525 specified that non-compliant products must be removed from the GSA and DLA shopping sites by August 19, 2008. EPAct 2005 also required agencies to provide written justification for non-compliant purchases.

The Alliance recently conducted research suggesting that compliance with the procurement requirements has been uneven at best. Of the 164 government solicitations we examined that included requests for products covered by this legislation, only seven percent appeared to be fully compliant. Most procurement agents we talked to were unfamiliar with the energy-efficiency purchasing requirements or did not realize that they were responsible for ensuring they were carried out. Moreover, GSA and DLA’s purchasing websites still list primarily non-compliant products on their web sites and frequently do not offer shoppers the option to purchase compliant products.

Section 103 required agencies to install advanced electricity meters in all federal buildings and facilities (where practicable) by 2012. Currently, it is unknown if agencies are on pace to meet their metering requirements. Agencies were required to submit their electric meter implementation plans to DOE in August of 2006, and most have reportedly done so, but no agency plans have been made available for the general public, and their quality is reportedly mixed. EISA added a requirement for agencies to meter natural gas, steam and water usage in their facilities.

Section 109 of EPAct 2005 required new federal buildings to use 30 percent less energy than required by national model energy codes, if cost-effective. EO 13423, signed by President Bush in January 2007, established additional purchasing requirements, directing agencies to:

• Procure energy-efficient electronic products and enable ENERGY STAR features on all computers and monitors in federal facilities;
• Incorporate sustainable building principles in new construction and major renovation of agency buildings, and achieve 15 percent implementation of these principles by 2015; and
• Reduce agency fleet vehicle petroleum use by 2 percent annually from now to 2015 and purchase plug-in hybrid vehicles once they are commercially available and cost-effective.

EISA codified the agency fleet vehicle petroleum reduction requirement into law in Section 142.⁸ Section 433 requires new federal buildings to reduce fossil fuel consumption by 55 percent by 2010 and by 100 percent by 2030 compared to similar buildings’ 2003 fossil fuel consumption.

DOE’s Help Necessary for Agencies to Meet These Goals
Reducing federal building and facility energy intensity by three percent annually is achievable, but will be challenging even if agencies have access to all the necessary technical and financial resources the Department of Energy has historically provided. Over the last couple of years, DOE’s support capability has been allowed to erode as the regional offices have been closed and national lab resources for technical support of ESPCs and UESCs has declined dramatically. DOE’s major responsibilities should include helping other agencies meet the energy program goals and rebuilding FEMP’s technical support capacity. FEMP’s budget should be increased in proportion to the stringency of federal energy management requirements to reflect the importance of FEMP’s technical assistance role.

1. Federal Energy Management Program, U.S. Department of Energy, Annual Report to Congress on Federal Government Energy Management and Conservation Programs Fiscal Year 2006 (Draft), , (November 2007).
2. FEMP, Annual Report to Congress 2006, Table 7, pg. 23.
3. Calculated from the supporting data for FEMP, Annual Report to Congress 2006.
4. Alliance to Save Energy calculations from supporting data to FEMP, Annual Report to Congress 2006,
5. Alliance to Save Energy calculations from supporting data to FEMP, Annual Report to Congress 2006, Some of the reductions in energy (and carbon) intensity are the product of privatization of buildings, most notable DOD housing, which are not subject to government intensity reduction requirements.
6. Site energy savings in 2015 from the energy intensity reduction requirements would equal about .098 quads. Investment costs in energy efficiency projects are roughly $1 per almost 9,000 Btus saved. This works out to almost $11 billion cumulatively and about $1.3 billion per year over the next 7 years. “Super ESPC Awarded Delivery Orders Summary,” provided by Chris Tremper, McNeil Technologies, 4/12/2007; Supporting data to FEMP, Annual Report to Congress 2006.
7. Cumulative shortfall is calculated by assuming appropriated funds for energy efficiency will remain around $300 million annually, about $1 billion short of the needed investment. $1 billion for eight years is about $8 billion.
8. Section 142 actually requires federal fleets to reduce petroleum use by 20% annually, but this is an error which is likely to be corrected in a technical correction bill later in 2008.

For more information please contact Alliance policy staff at (202) 857-0566 or policyinfo@ase.org.

The Alliance to Save Energy is a coalition of prominent business, government, environmental and consumer leaders who promote the efficient use of energy worldwide to benefit consumers, the environment, the economy, and national security.

Updated April 2008