Modernizing the energy infrastructure at federal facilities: Should utilities play a bigger role?

Abstract

Since the Energy Policy Act of 1992, federal facilities have increasingly used performance contracting to finance energy and water efficiency measures. Utility Energy Performance Contracts (UESCs) have received less attention despite having similar goals and processes as Energy Savings Performance Contracts (ESPCs). This paper provides a comparison between the two performance contracting models and highlights the tradeoffs that should be considered. Higher costs observed in ESPCs are driven by higher overhead and the costs of savings guarantees. These cost drivers cascade into longer financing terms and higher interest rates. These results suggest that federal agencies should explore UESCs as a potentially more cost-effective way to achieve energy savings improvements.