PERSPECTIVE: An Innovative Financial Equation for Building Energy Resilience

In today’s federal landscape, governing bodies are bolstering their energy resilience to ensure the health of energy security plans protecting the safety and security of critical infrastructures.

Resilience directly impacts the ability of any government agency, especially the U.S. Department of Defense (DoD) and its military departments, to fulfills its missions. Without a plan in place, security and operational risks increase with expensive economic ramifications to boot.

It is a monumental task for these entities to ensure mission readiness in a climate where anticipation of man-made disruptions or acts of nature could occur at a moment’s notice. For this reason, energy resilience must be considered essential to the success of an energy security plan. However, this objective is often stymied by the lack of appropriated funds. But there is a solution. In fact, several approaches now exist to supplement appropriated funds that government agencies can use to achieve energy resilience. The ability to offset costly burdens provides more direct funds to an energy resilience program that is necessary to ensure the security of critical infrastructures like facilities and utilities.

By considering the following three steps, federal entities can establish an innovative equation that combines energy management, incentives and financing contracts to discover new and improved ways to fund energy security programs and achieve energy resilience.

Step #1: Start with savings from cost-effective energy management

According to research organization Noblis, the DoD can reduce its energy consumption up to 35 percent by implementing better energy efficiency measures. Energy management projects uncover savings that then contribute to funding energy resilience programs. There are several programs available for better energy management and savings:

  • Building retrofits: Upgraded lighting, heating and cooling systems, installing automation systems and other building improvements can result in energy credits, utility rebates and reduced utility bills.
  • Load management: Load management has a variety of options to improve energy usage. Load shifting and distributed energy resources (DERs), as examples, are a couple offerings that shift or redistribute power to less costly or backup systems cutting back on the amount of energy consumed and costs.
  • Operations and maintenance (O&M): O&M is another cost-saving measure with economic benefits that promote energy efficiency and extend the life cycle of energy systems. In fact, according to the U.S. Department of Energy’s guide on O&M best practices, functions like improved equipment status control and work control systems help reduce downtime up to 45 percent and eliminate breakdowns up to 75 percent.
  • Renewable energy: The unpredictable price of today’s fossil fuels markets cost the government substantially more than alternatives like solar or wind. Renewable energy sources also benefit from rapidly evolving technological, manufacturing and installation advances making these options more viable and affordable.
  • Microgrids: A microgrid can save a single military installation between $8 million to $20 million over the 20-year life of the system. Its control system collectively manages all the energy management, DERs, storage and renewable resource initiatives, providing this as a model for more predictive energy costs.

Any combination of these energy savings tactics can unlock the funding you need for critical improvements in energy resilience and overall energy security plans.

Step #2: Add in federal state, and local incentives

Tax credits, rebates and incentive savings offered by government agencies can add more funds to an energy resilience budget. The Database of State Incentives for Renewables & Efficiency (DSIRE) is one resource where renewable energy credits or certificates (RECs) are available. Utility companies are another option for cost-saving incentives for the installation of energy-efficiency equipment and conversation projects.

Other incentive opportunities like the Production Tax Credit (PTC) and Investment Tax Credit (ITC) also allow the government to bring the price of wind and solar energy below the projected market cost of traditional energy.

Step #3: Support these initiatives with alternative funding sources

There are several options for energy-related contracts that provide alternative funding avenues for federal entities.

  • Energy Savings Performance Contracts (ESPC): ESPCs finance energy and operational efficiency upgrades and O&M projects where new programs are funded by the savings generated by the project. With an ESPC, the energy services company provides financing, assumes performance risk and maintains ongoing partnership to ensure savings.
  • Utility Energy Service Contracts (UESCs): Utility companies offer energy management services like project assessment, design, financing, installation and performance assurance that can be implemented without any capital investment or use of appropriated funds.
  • Enhanced Use Leases (UEL): UELs may include long-term leases of 25-50 years to private developers for the installation of renewable energy systems in exchange for cash or in-kind services.
  • Power Purchase Agreements (PPA): PPAs help the government fund onsite renewable energy projects without any upfront capital costs. Energy service agreements, which are like PPAs, can be used with ESPCs where, in exchange, agencies agree to purchase the power generated by the system.
  • Energy-as-a-Service (EaaS): In this model, third-party vendors or utility services companies deploy technical, financing or procurement solutions. Federal agencies then contract with these EaaS vendors for energy procurement, onsite generation, energy efficiency and energy infrastructure O&M services.

Find the Funding to Achieve Resilience

Achieving energy resilience is a major task in any energy security plan, even with adequate funding. But too often funding is a major barrier for federal agencies, leaving a major gap in resilience strategies. After examining the various options, agencies can determine which contractual and financing vehicles best fit their needs to meet energy security goals. The right combination across these variables reduce dependency on appropriated funds and advance energy security initiatives to protect the government’s most mission-critical installations.

 

The views expressed here are the writer’s and are not necessarily endorsed by Homeland Security Today, which welcomes a broad range of viewpoints in support of securing our homeland. To submit a piece for consideration, email HSTodayMag@gtscoalition.com. Our editorial guidelines can be found here.

Kevin Vaughn has nearly 30 years of experience working in the energy conservation industry and has worked on over 45 comprehensive federal Energy Savings Performance Contracts in his career. He has been with Schneider Electric since 2002 and has served as the Task Order Manager for many of Schneider Electric’s recent federal ESPC projects, including the first-ever Net Zero ESPC project for the GSA. Mr. Vaughn’s current responsibilities include developing customer relations and serving as the main contact for federal ESPC customers to ensure the proper implementation of comprehensive solutions and adherence to federal regulations and procurement methods. He is also responsible for leading negotiations and arranging financing for ESPC projects. Mr. Vaughn represents Schneider Electric with federal agencies and trade group relations in Washington, D.C. Mr. Vaughn received an M.B.A. in Finance and Marketing from the University of Chicago, a professional degree in Mechanical Engineering from North Carolina State University, and a B.A. in Physics with a minor in Philosophy from DePauw University.

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