LV-17-006 -- Deep Energy Retrofits in Federal Buildings: The Value, Funding Models, and Best Practices ✓ Most Recent

Deep energy retrofits (DERs) can accelerate our transitionto a clean-energy future. DERs directly address thegargantuan energy consumption of existing buildings and canbe implemented today without relying on radical technologiesor untested methods. In the United States, buildings consumealmost 50% of all energy and account for about 45% of carbondioxide (CO2) emissions, making buildings the largest end-useenergy sector, followed by industry and transportation (Architecture2030 2013). Buildings' enormous appetite for electricity—most of which is produced by fossil fuels—threatens ourclimate, our security, our economy, and our health. More than80% of existing buildings today are at least 15 years old (EIA2012), indicating that existing building retrofits represent asignificant opportunity in the transition to a low-carbon future.Because saving energy is typically far cheaper than generatingit, eliminating buildings' energy waste by aggressivelydeploying energy efficiency is one of the most cost-effectivepaths to a resilient and clean-energy future. Deploying DERs,which typically achieve at least 50% savings beyond baselineenergy consumption using integrative, whole-building designprinciples, is a key part of the solution.In the United States, the federal government is the single largestlandlord, controlling over 400,000 owned or leased buildings,which comprise over 3 billion square feet of space (GSA 2016a).Federal agencies are currently driven to comply with severalenergy policies, primarily Executive Order 13693, a directive thatoutlines energy and water efficiency goals, including net zeroenergy targets (White House 2015). Despite the call for buildingenergy reductions, federal funding for building upgrade projects(including energy projects) is insufficient to meet these needs, andthis trend is expected to continue. Federal agencies must carefullyconsider alternative financing options and effectively use appropriatedfunding that may be available.

Alternative financing mechanisms, such as energy savingsperformance contracts (ESPCs, the alternative financing mechanismfocused on in this paper) and utility energy savingscontracts (UESCs), are critical to agencies' abilities to achievecomprehensive energy savings with limited funding. At their core,ESPCs allow agencies, in partnership with energy servicecompanies (ESCOs), to finance the up-front costs of energysavingsand facility-improvement projects through their energysavings. This approach requires no up-front capital costs orspecial appropriations from congress (DOE 2016a). The energy(and sometimes maintenance) cost savings from these measuresare captured by the ESCO and used to pay back the initial costof implementing the measures. When appropriated funding isavailable, it can pay for energy projects directly but can oftendrive greater value by being incorporated into existing ESPCprojects.

Several pioneering agencies, including the U.S. GeneralServices Administration (GSA), the U.S Army (within the U.S.Department of Defense), and the National Aeronautics andSpace Administration (NASA) have led the federal governmenttoward deep retrofits using ESPCs. To maximize energy andcarbon reductions from federal energy efficiency projects,lessons from leading agencies need to be adopted broadly, along-term approach needs to be taken toward building energymanagement, and agencies need to explore blending different funding methods in a way that can increase and enhance thevalue of planned retrofit projects.

This paper aims to guide federal energy managers anddecision makers, contractors (including ESCOs), engineers,and other stakeholders in federal energy projects toward a setof solutions, including DER best practices and guidance tomaximize combined funding that will allow federal agencies toachieve federal energy mandates and support their missions ina cost- and resource-efficient manner using DERs. This papermay also be of interest to building owners; general contractors;design, architectural, and engineering firms; and manufacturersof energy-efficient products and systems. The paperassumes familiarity with federal ESPCs; those who are unfamiliarwith federal ESPCs can learn more at the page onenergy savings performance contracts for federal facilities onthe energy.gov website (EERE 2016).