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Energy spending expected to skyrocket in 2010

Jan. 8, 2010 - 06:00AM   |  
By TIM KAUFFMAN   |   Comments
An airman drives a fuels truck to refuel a plane during operations at Bagram Air Field, Afghanistan, Dec. 25, 2009.
An airman drives a fuels truck to refuel a plane during operations at Bagram Air Field, Afghanistan, Dec. 25, 2009. (Tech. Sgt. Scott T. Sturkol / Air Force)

Despite the federal government's efforts to curb its consumption, contract spending on energy is projected to skyrocket this year. The rise is attributed largely to increased demands from the ongoing wars in Iraq and Afghanistan.

Agencies will spend $28.8 billion in fiscal 2010 on electricity, fuel and all other energy, according to an analysis by FedSources, a marketing and consulting firm based in McLean, Va. That's an astounding 36 percent increase from 2009.

The increase is "driven heavily by military operations and the cost of providing all of the infrastructure, particularly logistics infrastructure," said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources, in an interview.

Besides the Defense Department, agencies spending the most to power their facilities, fleets and operations are the Veterans Affairs Department, the U.S. Postal Service and the Homeland Security Department.

Under the 2005 Energy Policy Act, agencies must cut energy consumption by 30 percent by 2015 compared with 2003. Agencies overall used 12.3 percent less energy in 2008 than they did in 2003, although half of the 22 agencies tracked by the Energy Department reported higher consumption in 2008 than in 2007.

Some agencies are using more energy because their operational needs are growing, and that puts the government at risk of failing to meet the 30 percent overall reduction by 2015, said Chris Tremper, an analyst at the Energy Department's Federal Energy Management Program.

"We really need to pick up the pace if we're going to meet the underlying goal," Tremper said in a March presentation to the National Academies' Federal Facilities Council.

The pressure intensified in October when President Barack Obama issued an executive order that requires agencies for the first time to measure their greenhouse gas emissions and set targets for reducing them. Agencies had until Jan. 4 to submit to the administration their proposed targets. By June, they must complete multiyear plans for how they will achieve the reductions.

The executive order also extended or expanded requirements to cut energy and water consumption and purchase products that are made from green or renewable sources.

More agencies are reaching out to the private sector to help them comply with the new requirements, Bjorklund said. FedSources projects agencies will spend $4.2 billion this year on contracts to help manage energy requirements, up from the $601 million in 2008.

Energy management is the smallest of three categories of government spending on energy contractors that FedSources tracks, but it represents the largest percentage increase in spending.

"Energy management, at least for the next two or three years, is going to be a very significant growth area," Bjorklund said. "If you've got to manage your energy consumption and increase your sustainability and reduce your dependence on hydrocarbons and other kinds of sources, you're going to have to put human energy into managing it and will need the right tools," he said.

The largest spending category, energy consumption, accounts for nearly half of the $58.6 billion agencies will spend on energy needs overall in fiscal 2010, according to the FedSources analysis.

The rest of the spending is for energy production, including money spent running power plants and researching and introducing new technologies such as alternative fuel vehicles and renewable energy sources. Projected spending on energy is $25.6 billion in fiscal 2010, up 32 percent from 2008.

Aside from increased war spending, much of the projected increase is due to large plus-ups agencies received from the Recovery Act passed early in 2009.

The Energy Department's Office of Electricity Delivery and Energy Reliability, for instance, received $4.5 billion to invest in a new smart grid that will provide the country with more reliable power service. The office usually received $160 million annually, so it's had to hire contractors just to determine how to spend the stimulus money, Bjorklund said.

The biggest growth area for federal contractors looking to tap into the federal energy market will be professional services, which includes research and development into new energy sources. Another large growth area is for real property improvements, which is driven largely by the Recovery Act investments for green construction at the General Services Administration and other agencies.

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