Facilitating Sound Energy Management and Investment Practices

Richard Kidd is the Program Manager for the U.S. Department of Energy’s Federal Energy Management Program (FEMP), an initiative that facilitates the federal government’s implementation of cost-effective energy management and investment practices through project transaction services, applied technology services and decision support services.

FEMP plays a pivotal role in helping the federal government to meet its responsibility to lead by example. Kidd spoke with Government by Example to explain and illustrate how the organization is fulfilling this role through providing assistance to federal agencies as they work to implement and reach their energy-efficiency and sustainability goals.

Government by Example: The Winter 2010 edition of FEMP FOCUS introduced EO 13514, signed by President Barack Obama, and stated that the “order links deliberative planning to budget processes, which represents a transformative shift in the way government operates.” What does this shift mean for federal agencies?

Richard Kidd: Successful implementation of the Executive Order is focused on management and cost-effective investment. The centerpiece of this implementation is each agency’s Strategic Sustainability Performance Plan, which prioritizes the agency’s actions toward the goals of the Executive Order, based on lifecycle returns on investment.

Over time, agencies will be required to obtain more accurate lifecycle cost and savings data from energy and sustainability projects, to be reported in their Performance Plan and linked to the budgeting and scorecards used by the Office of Management and Budget.

GBE:In the Introduction to FEMP’s Year in Review 2009, you state that FEMP “undertook an ambitious reorganization of its program structure to be more responsive to the needs of to its federal agency customers.” Please highlight some of the key changes and how they will help federal agencies in meeting the requirements of EO 13514.

RK: Based on a review of published FEMP literature, which by the way included three separate mission statements and an analysis of FEMP’s product mix, I initiated a deliberative process to identify FEMP’s key processes and value proposition and to make sure these were reflected in our mission and structure. The reorganization process began when I met one-on-one with agency representatives and other stakeholders. These meetings provided insight into agency energy management goals and views about the effectiveness of FEMP’s previous structure and services. Then, we used this information to realign our mission and organizational structure. This took effect in January 2009.

Our new mission statement clearly reflects FEMP’s role as a facilitator of sound energy management and investment practices, while emphasizing that we are a customer service organization. We also clarified our organizational structure by creating three new service areas and instituted a customer service matrix, all in an effort to better assist federal agency customers. Through the customer service matrix, each federal agency now has a designated customer service representative within FEMP. The customer service representatives assist agencies in identifying and prioritizing project and investment opportunities, while facilitating access to FEMP and private-sector resources.

GBE: And what are the three new service areas FEMP has created?

RK: The three areas are Project Transaction, Applied Technology and Decision Support Services. Project Transaction Services principally focuses on assisting Federal agencies in the use of complex alternate financing methodologies such as energy saving performance contracts or enhanced use leases as a means to finance federal efficiency, renewable energy, water and other sustainability projects.

Applied Technology Services provides technical support services across the federal government, enabling agencies to meet their energy-efficiency and renewable energy goals in numerous areas, including fleet, sustainable design, renewable energy, water conservation, operations and maintenance, efficient products and emerging technologies. It also helps these agencies to find ways to use ongoing activities as a means to accelerate deployment of EERE technologies.

Decision Support Services is working continuously to improve the quality of the Department of Energy (DOE) and interagency planning, reporting and communication processes through measures such as interagency coordination, rule-making and regulations, strategic planning, annual reporting, energy awareness and public engagement, budget planning and customer service management.

GBE: FEMP’s myriad roles include helping federal agencies and partner organizations coordinate efforts to meet federal energy management mandates. Please discuss a recent example in which FEMP aided with interagency coordination to help agencies meet specific energy management requirements.

RK: Yes, FEMP does work closely with federal agencies and partner organizations to help them coordinate interagency efforts aimed at federal energy management planning and legislation compliance. This is done through FEMP-led inter-agency committees and working groups, each of which focuses on specific energy management requirements.

These committees and working groups can serve as a forum to help promote interagency opportunities.
For example, the federal Interagency Energy Management Task Force, created by the Federal Energy Management Improvement Act of 1988, includes federal energy managers, members of FEMP and industry participants. The task force provides analysis and recommendations surrounding legislation, technical issues and the implementation of federal energy management activities, and also establishes working groups to resolve specific technical or programmatic issues, as well as to develop new initiatives. It further serves as a forum for sharing lessons learned across federal agencies.

At its February 2010 meeting, a representative of the General Services Administration provided the task force with an overview of GSA’s Comprehensive Professional Energy Services Blanket Purchase Agreement (BPA), including details about the BPA structure. The BPA was set up to support the American Recovery and Reinvestment Act, the Energy Independence and Security Act, Executive Orders 13423 and 13514, and other legislative drivers for implementing federal “green” projects. It gives all government agencies access to innovative solutions and a pool of vendors, and allows tasks to be put in place quickly.

GBE: According to recent reports, federal agencies are having trouble meeting renewable energy mandates and are calling for legislation to lift the current 10-year contract limit for Power Purchase Agreements to 30 years. Why is PPA reform so critical to the government’s sustainability goals?

RK: As required by Executive Order 13514, the individual agencies have now established greenhouse gas reduction goals. A key component of compliance strategy is the use of on-site renewable energy projects. The Energy Policy Act of 2005 set a federal renewable goal of 7.5 percent by 2013. It encourages agencies to develop renewables on federal property by allowing agencies to count these on-site projects twice toward the federal renewable goal.

Many agencies have limited appropriations to implement such projects, so they seek alternative financing methodologies. Energy Savings Performance Contracts and Utility Energy Service Contracts - the typical methodologies that are used for energy-efficiency, and in some cases small renewables - are not the ideal contracting mechanisms for large renewable projects.

Power Purchase Agreements help alleviate these issues because the prime contractor is the renewable developer, reducing overhead/profit costs, and the renewable developer maintains equipment ownership, allowing them to take advantage of the tax incentives. Longer-term PPAs help to reduce the electricity price to the government because they provide more time for the renewable developer to recoup their investment.

Without the ability to develop and use on-site renewable energy, the agencies will not be successful in meeting their reduction goals. This is why legislation to lift the current 10-year contract limit for PPAs to 30 years is imperative.

GBE: How does FEMP help federal agencies to finance their energy-efficiency and renewable energy projects?

RK: FEMP supports federal agencies in identifying, obtaining and implementing alternative financing to fund energy projects, including mechanisms such as Energy Savings Performance Contracts, Utility Energy Services Contracts, Power Purchase Agreements and Energy Incentive Programs.

Federal agencies can take advantage of these alternative financing mechanisms, choosing the best fit for their project needs. Agencies may even opt to incorporate a combination of financing mechanisms and agency appropriations. From an agency’s initial expression of interest through selection of the appropriate mechanism, selection of a project facilitator, to development and award of a task order, FEMP’s federal financing specialists provide an agency with assistance, guidance and access to Department of Energy and FEMP resources.

GBE: In 2009, FEMP selected 104 (now increased to 126) projects out of 300 applications to receive American Recovery and Reinvestment Act (ARRA) funding. What criteria does FEMP use in determining the projects to which it will award funding?

RK: FEMP uses a certain set of criteria to evaluate technical assistance applications, including financial and technical merit, agency support and project implementation plan, ability to replicate and demonstrate potential, and project description and scope.

To receive funding, projects must use technology that has energy and cost savings potential, and is consistent with current legislation and goals. Agencies should use a comprehensive approach and incorporate whole-building design principles. Applicants for funding must demonstrate a commitment to follow through with project implementation; must show that the success of their project is significant to their agency/facility; and must provide a list of project team members committed to making the project a success. Also, applicants must clearly describe the project and its expected impacts, including describing the facilities, processes, functions or operations, along with major impacted equipment.

FEMP gives priority to projects that show a well-defined and realistic implementation schedule, and projects with evidence of a secured source of financing for their implementation, including alternative financing, e.g., Energy Saving Performance Contracting, Utility Energy Savings Contracting, and Enhanced Use Lease. Project proposals that show how the project could be replicated in other facilities within the agency, and offer opportunities for other federal agencies to learn from the experience, are also given priority.

GBE: Part of Executive Order 13514 specifies that 15 percent of existing agency buildings and leases meet the Guiding Principles for Sustainable Buildings by fiscal year (FY) 2015. FEMP helps agencies to implement sustainable design practices in designing, operating and maintaining high-performance buildings. What are some of the challenges federal agencies face when implementing sustainable design practices? How feasible is the goal of 15 percent by FY 2015?

RK: The goal of 15 percent by 2015 should be achievable for the vast majority of agencies, but it will require a commitment to green building and integrated design, management and operations, from headquarters to the field level.

Some of the major challenges to implementation include making sustainability the standard practice, and transforming the existing built environment. But these challenges can be overcome with the right strategies. Making sustainability practices the standard at federal agencies can be successfully accomplished through incorporating sustainability into new construction and retrofit projects, taking advantage of green building incentives, more closely aligning sustainability goals with budget examination, and reducing the budgeting and planning gap between design and delivery, and operations and maintenance.

Overcoming the challenge of transforming the existing built environment to reach agency sustainability goals involves providing training for facilities management staff that cultivates the core competencies necessary to effectively operate increasingly complex building systems. Establishing and exchanging best practices is vital. Other important steps for success include eliminating the barriers that make it difficult to incorporate sustainability into real property reporting and environmental management systems, and sustainable design into historic buildings, medical facilities and other challenging building types.

GBE: Please give a recent example of a successful or ongoing project for which FEMP has provided support.

FEMP is currently providing funding and technical assistance to the U.S. Pacific Command (PACOM), a Combatant Command of the Department of Defense which includes components of all four military services.  PACOM wishes to aggressively address significant energy challenges at military installations within its area of responsibility. These energy challenges are diverse, sizable and costly. To help PACOM meet these significant energy challenges, a multi-laboratory team has been organized through FEMP. Six different DOE national laboratories are contributing needed capabilities based upon each laboratory’s core competencies. FEMP is helping PACOM with various energy-efficiency assessments, including the areas of comprehensive building, data center and industrial. We are also providing assistance with Renewable Energy Optimization modeling, new-construction EERE optimization modeling, Energy Security and Micro Gird analysis, net-zero facility planning, and energy manager training on building commissioning, efficiency assessments and data-center efficiency.

These projects will help the Department of Defense meet its energy mandates and goals. Moreover, PACOM will serve as an example of integrated, systems-wide thinking on energy across various military installations. Instead of implementing separate individual projects, a systems approach maximizes energy savings by providing a framework for integrating the individual components into a logical whole.

In addition, with the military being the largest single user of electricity in Hawaii, U.S. PACOM is working in partnership with the state to help accomplish the DOE–Hawaii Clean Energy Initiative goal of 70 percent clean energy by 2030.

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