GSA Uses Alternative Financing to Achieve Significant Energy and Cost Savings
GSA used alternative financing known as an Energy Savings Performance Contract (ESPC) to recently complete nearly $2.2 million in energy and water saving upgrades at the George H. Fallon Federal Building in Baltimore, MD. This alternative financing method allows a building owner (including the federal government) to obtain energy-efficient technologies without having to commit their own capital funds. ESPCs allow federal agencies to procure facility improvements with no up-front capital cost or special appropriations from Congress. ESPCs are a viable solution for building owners that don’t have the necessary capital to pay for their energy improvements themselves.
An ESPC, a partnership between a building owner and an energy service company (ESCO), is a third-party financing mechanism that enables building owners to fund energy-saving upgrades by leveraging savings from future utility bills and avoided operational expenses created by those energy-saving upgrades. The ESCO conducts a comprehensive energy audit of a facility, identifies energy-saving improvements, and consults with the building owner to design and construct a project that meets the owner’s needs. The ESCO funds, installs, operates, and maintains the energy-efficient upgrade projects.
The ESCO guarantees that the improvements will generate energy cost savings to pay for the project over the term of the contract (up to 25 years), or the ESCO will pay any shortfalls out of their own pocket. Based on the contractual agreement, the building owner pays a portion of its annual energy cost savings to the contractor for the duration of the contract. After the contract ends, all additional cost savings accrue to the owner.
The U.S. Department of Energy manages indefinite-delivery, indefinite quantity (IDIQ) contracts for ESPCs that are available to any federally owned facility worldwide. These IDIQs help federal agencies meet energy efficiency, renewable energy, water conservation, and emissions reduction goals by streamlining contract funding for energy management projects.
GSA used one of these ESPC IDIQ contracts to accomplish the recent upgrades at the Fallon Federal Building, awarding a Task Order to NORESCO in April 2014. NORESCO completed energy efficient lighting upgrades, retro-commissioning of air handlers, and upgrades to the Building Automation System for Fallon. The building improvements were completed in April 2015, and are guaranteed to save the federal government nearly $2.7 million.
Through this partnership, GSA successfully harnessed private-sector innovation and investments to achieve greater levels of energy and cost savings. The federal government and American taxpayers are then left with a more energy efficient building with lower utility bills.
For more information on ESPCs, please visit the Energy Savings Performance Contracts section of Energy.gov.