Increase Energy and Water Efficiency

Increase Energy and Water Efficiency

Background

Energy

The federal government is the nation's largest energy consumer, with an
energy bill of nearly $3.75 billion in fiscal year 1991 in its own
buildings.[1] The General Services Administration (GSA) estimates that
federal energy costs to operate office equipment alone are $115 to $150
million a year.[2] As part of Earth Day 1993 activities, President
Clinton signed an Executive Order requiring the purchase of energy
efficient computers and printers, which is estimated to save the
American taxpayers $40 million per year.[3] Other commercially
available, cost-effective measures, including high-efficiency lighting,
heating, ventilation, and air conditioning systems could likely
conserve 25 to 40 percent of the energy used in federal buildings
without loss of comfort or productivity.[4]

Water

The actual annual water consumption of the federal government is
unmeasured, but the known magnitude of the use offers major, cost-
effective opportunities for elimination of waste and improved
efficiency. A recent survey showed that the federal government annually
consumes a minimum of 23 billion gallons of water -- a figure that does
not even include such major federal water users as the GSA, the
Department of Defense (DOD), the Department of Veterans Affairs, and the
U.S. Postal Service.[5] Annual expenditures for water at federal
agencies are also quite significant. In 1989, for example, the Army's
global water and sewer costs were almost $247 million.[6]
 
The federal government owns and leases approximately 500,000 buildings,
including 422,000 housing units.[7] In the past two years, GSA has
installed approximately 4,675 water efficiency upgrades, saving 4.1
million gallons of water per year.[8] Indoors is not the only place
where water conservation measures are needed. They are needed outdoors
as well. A large percentage of the water used in federal facility garden
and landscape irrigation is lost to evaporation, runoff, and spillover
to paved areas.[9]

The Energy Policy Act of 1992

The magnitude of federal energy consumption and the potential for
conservation and cost savings it represents have formed the basis for
numerous legislative efforts and Executive Orders.[10] Water
conservation, meanwhile, has been almost an afterthought for government.
Some of the past federal legislation set goals for reductions and some
provided funding and cost-sharing mechanisms to help realize these
goals. But there was little incentive for facility managers to pursue
efficiency measures.  Federal agencies have been offered a number of
avenues for achieving energy and water conservation. They have produced
mixed results.

Since 1986, the federal government has had the authority to participate
in Shared Energy savings contracts, which allow agencies to share energy
savings with contractors who finance and implement energy efficiency
upgrades. Despite the savings sharing incentive, only 15 shared savings
contracts have been negotiated in the past seven years. There are
several reasons why the program has been so underused.  The first is the
slow and complex nature of federal procurement, which increases costs
and delays savings. The second is the complicated calculations used to
determine savings in the shared savings process.  The third reason is
the lack of high-level encouragement to pursue energy efficiency.
Finally, there has also been a shortage of staff dedicated to such
projects, which means that there is currently a lack of engineers,
contracting officers, and project managers experienced in savings
sharing contracts.[11]

The enactment of the Energy Policy Act of 1992 (EPACT) was the first
time that water conservation efforts were recognized as equally
important as energy conservation efforts.[12] EPACT requires each agency
to install all energy efficiency and water conservation measures with a
payback of 10 years or less by 2005 and to reduce energy use in federal
buildings by 20 percent by the year 2000. The Department of Energy (DOE)
estimated that each week the federal government did not meet the 20
percent goal in 1991 was equivalent to $20 million in lost
opportunity.[13]

Since 1975, federal energy efficiency efforts have been coordinated by
the DOE's Federal Energy Management Program.[14] Under EPACT, the
Federal Energy Management Program was given responsibility for
coordination of some water efforts in addition to its energy efficiency
responsibilities. Key provisions in the EPACT are highlighted below.
Funding for Efficiency Measures.

The EPACT established a fund in DOE to provide grants to help agencies
meet the statutory requirements. The fund was authorized at $10 million
for fiscal year 1994 and $50 million for fiscal year 1995 and such sums
as necessary thereafter. The federal budget for fiscal year 1994
provides $6 million for the fund and the President's budget calls for
overall expenditures of $2.2 billion for implementation of energy
efficiency retrofits between fiscal years 1994 and 1998. Use of federal
funds for direct contracting for efficiency upgrades can provide
taxpayers with the greatest benefit because all of the savings are kept
by the government.15 Energy Savings Performance Contracts.  EPACT allows
agencies to enter into Energy Savings Performance (ESP) contracts which
require the contractor to pay the government if the project does not
achieve estimated energy savings. It is anticipated that the ESP
contracts will be easier to negotiate and implement than the older
Shared Energy Savings contracts.

Savings Retention.

-- Civilian Agencies. EPACT allows civilian agencies to retain 50
percent of energy and water cost savings for additional energy
efficiency measures and employee incentive programs.

-- Department of Defense. In 1990, DOD was authorized to keep two-thirds
of the government's share of the energy cost savings for future
efficiency projects and for base welfare and recreation funds.[16] This
DOD authority does not allow retention of water-related cost savings
through projects or participation in water utility conservation
programs.[17] Since DOD was permitted to retain a larger portion of its
savings under the earlier legislation, it was excluded from EPACT.

Bonus Program.

EPACT creates a bonus program to reward outstanding federal facility
energy managers. The bonus program was authorized for $250,000 in each
fiscal year -- 1993, 1994, and 1995.

Need for Change

New approaches are needed to jump start federal initiatives, create
early progress, and achieve success. While EPACT recognizes the
importance of water conservation, it does not contain comprehensive
water efficiency language. However, EPACT still represents a significant
opportunity to reduce both energy and water waste, if fully implemented.
The awards for federal facility managers in EPACT will provide
incentives if they are funded, but they are likely not enough to
catalyze the widespread actions necessary in the energy and water
efficiency area to meet the EPACT's statutory goals or to reap all of
the potential savings available to the federal government.  Other
fundamental changes are needed. For example, agencies should revise
position descriptions and performance evaluations for facility managers
so that conservation is an evaluation criterion, in order both to hold
them accountable for results and to reward them for implementation.
Leadership is also needed. For example, the Executive Order requiring
the purchase of energy- efficient Energy Star computers fosters
excellence in energy efficiency in new ways; nevertheless, many
additional opportunities exist for energy and water conservation.

Many water utilities are planning price increases over the next several
years, which will influence the cost of water at federal facilities.
For example, Southern California's Metropolitan Water District will
increase its water rates an average of 22 percent per year over the next
two years, then increase them between 8 and 12 percent per year until
2000.[18] Since 1985, the Massachusetts Water Resources Authority, which
supplies water and wastewater treatment services to communities in the
Boston area, has increased its water and sewer charges 428 percent. The
Authority now expects retail water and sewer bills to triple by
2000.[19] There are hundreds of federal buildings in these two water
districts which have been and will be hit by price increases. These are
not the only places where water and sewer rates will climb. In order to
decrease demand for water and energy at federal buildings and lessen the
fiscal impact of spiraling prices, the federal government will have to
develop and promote innovative ways of achieving maximum energy and
water use efficiency.

In fact, water conservation is essential to economic health in some
parts of the nation. Estimates of future water demand in Southern
California's Metropolitan Water District show that by 2010, the average
annual water demand in Metropolitan's service area is expected to exceed
the water supply, creating a water shortfall of 30 percent.[20] In 1990,
the California Urban Water Agencies sponsored research that indicates
that a one-year, 30 percent industrial water shortage in California
would translate into an estimated $20 billion in losses and 160,000
lay-offs due to reduced production.[21] The federal government has a
number of facilities in Southern California and in other areas
experiencing or anticipating water shortages. To lead by example and
help local governments solve pressing problems, the federal government
needs to fully participate in conservation efforts.

Using less water will not only save tax dollars, but will also help
postpone or eliminate the need for building new or expanded water or
wastewater treatment facilities and reduce energy use.  The California
Energy Commission estimates that 56 percent of the state's municipal
electricity use is applied to the pumping of water and the removal and
treatment of wastewater.[22] Of course, using less water can also
significantly reduce the adverse effects of water withdrawals from
fragile aquatic ecological systems.

EPACT requires each agency to reduce energy and water use in its
buildings. Although the act sets specific goals, a commitment to meet
these goals is necessary. The Office of Technology Assessment estimated
that it would take $2 to $3 billion to retrofit all government buildings
for energy efficiency.[23] EPACT does not provide agencies with the
necessary funds for achieving their resource use goals. The Department
of Defense, for example, has programmed $1.1 billion for accomplishing
EPACT goals, but it is believed this will not fully satisfy the
requirement. The remaining funds and audits necessary to achieve the
efficiency goals of the EPACT will probably need to come from the
private sector, possibly through utility conservation programs and ESP
contracting.

Streamlining Contracting Methods.

Despite improvements the EPACT made in the energy efficiency
contracting process, the new ESP contracts still contain many of the
complexities of the old Shared Energy Savings contracts. A new
streamlined contracting method is currently being tested in Southern
California where two federal agencies are working with state and local
utilities to integrate water and energy efficiency upgrades through
energy utilities' rebate and incentive programs.[24] All of the upgrades
will be accomplished by modifying the existing energy utility contracts
with the federal government. Working through existing contracts saves
time and administrative costs, clears the red tape involved with new
contracts, and gives federal facilities the opportunity to participate
in more of the water and energy utility incentive/rebate programs.

This new streamlined method requires utilities to finance all of the
parts and labor costs for the efficiency upgrades. The federal
government will repay utilities through an agreed-upon conservation
service charge for a set period of time. Utilities guarantee that the
federal government's bill will never exceed the agreed-upon rate, which
will generally be 20 to 30 percent lower than its current average bill.

Savings Retention and Bonus Programs.

Under EPACT, civilian agencies are allowed to retain 50 percent of the
energy and water cost savings for additional energy efficiency measures
and employee incentive programs. As stated earlier, however, since DOD
was permitted to retain a larger portion of its savings under earlier
legislation, it was excluded from EPACT. DOD interprets the exclusion to
mean that it may not keep any savings from water projects, but still may
keep the two-thirds allowed for energy efficiency projects under its
previous legislation.

In addition to its inability to retain water savings, there are other
barriers to the widespread implementation of conservation projects. For
example, under the DOD conservation legislation, military installations
are allowed to accept any financial incentive offered by utilities.
However, those incentives cannot always be used to offset the costs of
the project that triggered them. The incentive payment may be put into
another fund and perhaps then become unavailable to the installation and
DOD when that fund's appropriation expires. Some civilian agencies
experience the same problem.

The DOE bonus program was not appropriated any funds in fiscal year
1993. Some, but by no means all, agencies have bonus programs of their
own; however, most provide awards for energy projects but not water
projects. The continued exclusion of water projects perpetuates the
belief that water conservation measures are secondary and unrelated to
energy efficiency. The intent of the bonus program and savings retention
provisions is to encourage a change in "corporate culture" regarding
conservation; however, with the immediate need for deficit reduction,
some believe that the savings are likely to be turned back to the
Treasury. There is, for the same reason, pressure to slash the
relatively small bonus program budgets. It is a move that would
eliminate a strong incentive for managers to save the government and the
taxpayers significant amounts of money and meet statutory goals.

Renewable Energy.

Using less energy is only one part of the culture change the federal
government needs to undergo. Another important element is to switch to
less environmentally damaging forms of energy.  Fossil fuel fired power
plants produce acid rain and greenhouse gases. Petroleum use makes our
nation vulnerable to dependency on foreign oil. Nuclear power plants
generate hazardous nuclear waste. Hydropower dams destroy natural stream
flows, degrading terrestrial and aquatic ecosystems.
 
In this vein, some utilities are experimenting with solar retrofits in
customer facilities to manage their power demand.  Solar generated power
can reduce long-term energy costs and produce literally tons less
pollution. For example, a water heater powered through solar technology
instead of petroleum-based energy can avoid as much as one ton of carbon
dioxide (CO2) emissions per year.[25]

Examples of Benefits

Aliamanu Military Reservation.

Despite the barriers to energy efficiency and water conservation
detailed above, there are examples in the federal government which
demonstrate savings, though they did not come easily. For example, the
U.S. Army Corps of Engineers selected the Aliamanu Military Reservation
at Honolulu, Hawaii, for a Shared Energy Savings contract to upgrade
2,600 housing units and support facilities. The contract was advertised
in 1989, and after two years of bureaucratic wrangling and negotiating,
a contract was awarded. The contractor will receive a share of the
energy savings and maintenance savings generated for 15 years. The
government expects to receive an estimated $7.8 million over the
contract period.[26] The implementation of the proposed energy and water
measures are expected to result in an annual reduction of over 24
million kilowatt hours and over 8.5 million gallons of water.  This
results in a reduction in annual pollution emissions of 23,655 tons of
CO2, 107 tons of sulfur dioxide, and 64 tons of nitrous oxides.[27]

Tonto National Forest.

The federal government is demonstrating the energy and cost-efficiency
of solar energy systems. The Department of the Interior funded a model
solar project at the Cholla Recreation Site in Tonto National Forest.
The solar energy system costs about one-third as much as extending the
power lines to the site and does not entail a monthly service
charge.[28] It provides energy to pump water from the facility's
165-foot well; powers the water disinfection process; and provides the
lighting, forced air ventilation, and the power requirements for the
toilets, showers, and other buildings. In addition, a solar process was
adapted to produce hot water for the showers at no cost. Such models
should be replicated wherever cost-effective.  They may be particularly
well-suited for military facilities, where command consolidations have
led to increased energy demand -- a demand that could be met with
less-expensive and less-polluting renewable energy sources.
 
Finally, federal efficiency-seeking efforts will also create new
markets and incentives for innovative technologies. By itself, this
should promote economic vitality and jobs in a critical industry sector.

Cross References to Other NPR Accompanying Reports

Department of Energy, DOE05: Strengthen the Federal Energy Management
Program.

Reinventing Federal Procurement, PROC20: Streamline Buying for the
Environment.

Improving Financial Management, FM06: "Franchise" Internal Services.

Reinventing Human Resource Management, HRM04: Authorize Agencies to
Develop Incentive Award and Bonus Systems to Improve Individual and
Organizational Performance.

Endnotes

1. The total energy bill for fiscal year 1991 was nearly $11.3 billion,
including the energy costs associated with jet and diesel fuel. See U.S.
Department of Energy (DOE), Annual Report to Congress on Federal
Government Energy Management and Conservation Programs, Fiscal Year 1991
(Washington, D.C., October 22, 1992), p. 10. The federal government pays
approximately $4 billion in subsidized energy expenses or low-income
housing. See U.S. Congress, Office of Technology Assessment (OTA),
Energy Efficiency in the Federal Government:  Government By Good
Example?, OTA-E-492 (Washington, D.C.: U.S.  Government Printing
Office, May 1991), p. 3.

2. Trenkle, Anthony, "Government Customer Perspectives," Proceedings:
Energy-Efficient Office Technologies: The Outlook and Market (Electric
Power Research Institute, December 1992), p. 3-6.

3. Executive Order 12845, "Energy Efficient Computer Equipment
Purchasing," April 21, 1993. See also President William J. Clinton,
"1993 Earth Day Address," April 21, 1993.  (Press package.)

4. Installation of efficiency measures for cooling could reduce
commercial energy consumption by 30 to 70 percent and space heating
energy consumption for commercial and industrial uses by 20-30 percent.
Rubin, Edward S., et al., "Realistic Mitigation Options for Global
Warming," Science, vol.  257 (July 10, 1992), p. 148. Installation of a
series of 11 best practice technologies options available at little or
no net cost could reduce electricity use in the U.S. building sector by
45 percent. Id. at p. 149 and 262. In 1991, a highly efficient cooling
and heating system and several other simple changes were estimated to
cut office energy consumption by 50 percent or more. "Conservation
Power: It Has a New Look That's Igniting an Energy Revolution," Business
Week (September 16, 1991), p. 88.

5. The 23 billion gallons of water per year excludes most of the
Department of Interior facilities and does not include any water
figures from the Postal Service, the Department of Defense, the
Department of Energy, the Department of Housing and Urban Development,
the General Services Administration (GSA), the Department of Labor, and
the Department of Veterans Affairs.  "Water Efficiency in Federal
Facilities and Programs," Environmental and Energy Study Institute, June
1993, pp. 1-3.6.  Ibid.

7. OTA, p. 4. The figure includes multifamily units which may be in one
building.

8. Telephone interview with Debra Yap, Office of Real Property and
Management and Safety, General Services Administration, July 29, 1993.

9. See detailed discussion of water-efficient landscaping in ENV04:
Increase Environmentally and Economically Beneficial Landscaping.

10. See Energy Policy and Conservation Act of 1975, P.L. 94-163; Energy
Conservation and Production Act of 1976, P.L. 94-385; Department of
Energy Organization Act of 1977, P.L.  95-91; National Energy
Conservation Policy Act of 1978, P.L.  95-619; Comprehensive Omnibus
Budget Reconciliation Act of 1985, P.L. 99-272; Federal Energy
Management Improvement Act of 1988, P.L. 100-615; National Defense
Authorization Act of 1989, P.L.  100-456; National Defense Authorization
Act of 1990, P.L.  101-189; National Defense Authorization Act of 1991,
P.L.  101-501; and Energy Policy Act of 1992, P.L. 102-486. Executive
Orders: Executive Order 11912; Executive Order 12083; Executive Order
12374; and Executive Order 12759.

11. OTA, p. 3.

12. P.L. 102-486.

13. Ginsberg, Mark, Speech to World Energy Congress, Association of
Energy Engineers, Atlanta, Georgia, October 1992.

14. The Department of Energy was established in 1977. Prior to that time
the Federal Energy Management Program was located in the DOE's
predecessor organization, the Federal Energy Administration.

15. For further discussion of contracting methods for energy efficiency
and water conservation measures, see Reinventing the Procurement
Process, PROC20: Streamline Buying for the Environment.  

16. National Defense Authorization Act of 1991, P.L. 101-510.

17. 10 U.S.C. -2865.

18. Metropolitan Water District of Southern California, Proposed
Executive Summary Annual Budget, 1993- 1994 Fiscal Year (April 2, 1993),
p. D-18.

19. Telephone interview with Barbara LaHage, Massachusetts Water
Resources Authority, July 20, 1993.  

20.  Dziegielewski, B. and D.  Baumann, "The Benefits of Managing Urban
Water Demands," Environment, vol. 34, no. 9 (November 1992), p. 7.  

21.  The loss in revenue is tied to 1990 value of shipments. See
California Urban Water Agencies, "Cost of Industrial Water Shortages,"
November 1991, pp.  7-10 -- 7-19.  

22.  California Energy Commission.

23. OTA, p. 7.  

24.  The partnership includes the following: the GSA, the Naval
Facilities Engineering Command, Metropolitan Water District of Southern
California, San Diego Gas & Electric, Southern California Edison, the
City of San Diego, and the San Diego County Water Authority.

25.  Personal correspondence with Mark Ginsberg, Director of the Federal
Energy Management Program, Department of Energy, August 15, 1993.

26.  DOE, Annual Report to Congress, p. 18.

27. Personal correspondence with David R. Horne, David R. Horne and
Associates, July 12, 1993.

28. The cost of extending the commercial grid power to the site was
$750,000 and a monthly service charge of $1,000, while the cost of
installing a solar system was only $240,000. See U.S.  Department of
Energy, "FY1991 Special Recognition Awards," Special Edition, No. 1,
Washington, D.C., 1992, p. 2.