Last week a multiplicity of federal agencies received accolades from the Obama Administration, for awarding 340 energy contracts since 2011 involving everything from new heating and cooling equipment to LED bulbs, “smart” building systems, and renewables.
If you guessed those 340 energy contracts add up to big bucks, they do. The estimated cost savings is $8 billion spread out over the next 18 years. That’s savings, not spendings — so, is there really such thing as a free lunch?
Maybe There Is Such Thing As A Free Lunch
The $8 billion reflects what taxpayers would have shelled out in energy costs without the upgrades. As for the up-front cost of the work, all together the 340 contracts are valued at $4.2 billion.
However, taxpayers are footing zero of that bill.
If you know what a power purchase agreement is, you can see how that works.
Power purchase agreements have become familiar ground in the solar industry. They enable a property owner to have solar panels installed without any up-front cost or take on a conventional loan. Instead, the cost of the installation is paid off through the property owner’s utility bill.
The property owner typically gets credit for the solar power they generate, so the end result is a lower bill for the consumer. Meanwhile, the solar developer does not have to invest in real estate upon which to place their solar panels. In other words, it’s a win-win.
Under the Obama Administration, federal agencies have become huge fans of PPAs for renewable energy. The US Army has even set up a permanent bureau to streamline solar installations at its facilities, and last year it partnered with the US Air Force to draw more renewables into the federal PPA club.
Energy efficiency upgrades are beginning to adopt a similar financing model, called energy savings performance contracting. Instead of paying up front for new energy efficient equipment and other modifications, property owners pay for the improvements in installments, based on the value of the energy saved.
Typically, after the contract ends the full amount of the savings reverts to the property owner.
Don’t just take our word for it. Here’s the Energy Department enthusing over the taxpayer-friendly financial arrangement:
Innovative financing tools, such as performance contracting, allow the federal government to make much-needed upgrades to federal buildings that cut energy use and utility bills. And by partnering with the private sector to pay for up-front costs, these improvements come at no new cost to taxpayers.
Oklahoma can claim fame for hosting the largest single performance contract so far, for Tinker Air Force Base. It clocks in at $262 million and involves 50 different buildings at the complex. The Air Force expects the upgrades to reduce energy consumption by 44%, for an annual savings of $3.5 million.
Look Ma, New Jobs!
Among the many things that President-elect Donald Trump has become famous for, one is his habit of claiming credit for creating new jobs practically every time a major company announces that it is hiring more people (See: Ford, Carrier, Amazon, etc.).
The Obama Administration credits those 340 energy contracts with creating 30,000 new jobs over the next 18 years, so don’t be surprised if Mr. Trump decides to claim a piece of that job creation pie or, for that matter, the whole pie.
There’s still more to come, too.
The upgrades were conducted under the President’s Performance Contracting Challenge, which first launched in 2011 with the relatively modest goal of partnering federal agencies with private sector energy companies to leverage $2 billion in performance contracts.
Based on the success of that initiative, the Administration doubled the challenge to boost the challenge to $4 billion.
The program surpassed the $4 billion mark last fall, so the Administration tacked on yet another $2 billion.
The new round is dubbed the “Next Generation Performance Contracting Challenge,” and in this new iteration it also features a goal of two billion gallons in water savings.
It looks like plenty more jobs are in store for plumbers and water systems engineers, regardless of who takes credit for them.
Got property? Check out energy.gov for a primer on energy savings performance contracts.
Photo: Solar canopies installed under an energy savings performance contract at an FAA compound in California via Whitehouse.gov, by Joe Garrido.
Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.
Latest CleanTechnica TV Video
CleanTechnica uses affiliate links. See our policy here.