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Proponents eye expansion of energy-savings contracts to cars

Jun. 26, 2013 - 12:40PM   |  
By ANDY MEDICI   |   Comments

A contracting model that has helped agencies pay for energy-efficiency projects — such as lighting system retrofits and solar field construction — should be expanded to cars, energy contractors and some lawmakers say.

Under an energy savings performance contract (ESPC), the vendor pays the upfront costs of such retrofits in exchange for payments from energy cost savings over time. The contractor guarantees the energy savings for the life of the contract or has to pay the balance.

The Energy Savings and Industrial Competitiveness Act, introduced by Sens. Jeanne Shaheen, D-N.H., and Rob Portman, R-Ohio, and passed by the Energy and Natural Resources Committee on May 8, would expand ESPCs to include electric vehicles and charging stations.

“If agencies can use private financing as a tool to implement a vehicle change toward electric vehicles, there would be a lot of interest from the government,” said Jeff Sherman, director of federal professional services for energy contractor Schneider Electric. The company has been working with lawmakers to include electric vehicles and vehicle charging stations in energy savings performance contracts.

Under such an arrangement, a contractor would provide to agencies electric vehicles and charging equipment at no upfront costs and then would be paid back from the savings achieved through lower fuel costs.

But opinions on expanding the program to include cars are mixed.

Richard Kidd, the Army’s deputy assistant secretary for energy and sustainability, said it would be difficult to include vehicles as part of a payback scheme.

While buildings have specific and defined electricity costs on which to determine the savings an ESPC project could provide, a car’s cost varies depending on its overall use. That means it would be hard to establish a baseline cost and to determine the savings possible from entering an ESPC.

“I don’t think the numbers work right now,” Kidd said.

While switching to an all-hybrid or electric fleet would allow the Army to save on fuel costs and possibly generate money by plugging electric vehicles into the grid to provide low-cost power to utilities at peak usage times, vehicles and charging infrastructure come out of different budgets, complicating the process, Kidd said.

Obama directed in December 2011 that agencies enter into $2 billion in energy savings performance contracts before the end of this year.

Dave Myers, president of building efficiency at energy and technology contractor Johnson Controls Inc., said he believes ESPCs can be expanded to fit a number of categories, including cars.

Agencies and contractors would have to determine a reasonable timeframe for payback on the contracts and would need to work harder to determine savings from such a program. He said Congress would have to work out the particulars of any expansion in order to make sure they passed financial muster.

“It’s possible you can achieve substantial savings by expanding ESPCs,” Myers said.

John Saams, business development director for energy at Siemens Government Technologies Inc., said agencies will need to figure how to control for variables, such as usage and the fluctuating price of fuel.

“Ultimately, the model fits. It just fits slightly differently than the original ESPC,” Saams said.

If Congress continues to cut budgets while pushing agencies to become more efficient, agencies will need a way to finance projects without using appropriated funding, and ESPCs are well established, he said.

But Rep. Peter Welch, D-Vt., one of the founders of the energy efficiency caucus in the House, said Congress should hold off on authorizing an expansion of the ESPC program until it’s solidly established.

Congress instead should make it easier for agencies to enter into ESPCs for their buildings and cut down on the time it takes to award a contract, he said.

Agencies sometimes take up to 18 months to award an ESPC, but some agencies such as the Army have cut that time down to less than a year. ■

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