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.
Yes, zero.
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.
#thanksobama!
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