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Utility Energy Service Contracts for Renewable Energy Projects

Utility energy service contracts (UESCs) offer Federal agencies an effective means to implement energy efficiency, renewable energy, and water efficiency projects. In a UESC, a utility arranges funding to cover the capital costs of the project, which are repaid over the contract term from cost savings generated by the energy efficiency measures. With this arrangement, agencies can implement energy improvements with no initial capital investment. UESCs can be used for renewable energy thermal, electric, or combined heat and power projects. The net cost to the Federal agency is minimal, and the agency saves time and resources.

Further information and technical assistance with UESCs is available, including case studies, resources, and contacts to assist Federal agencies with implementation.

An agency integrating renewable electricity generation into its construction project must coordinate with its serving utility to interconnect the system. Because this relationship will already be established, the agency can explore a UESC option if the utility is favorable to the renewable energy project. A UESC is an effective method of contracting for the design, implementation, and financing of on-site renewable energy projects.

As with other financing methods available to Federal agencies, a primary benefit of UESCs is the ability to implement projects without using direct appropriations or through a combination of financing and appropriations. Other benefits include a streamlined contracting process and low finance rates.

Contracting options include a task order under an existing General Services Administration (GSA) utility area-wide contract or a site-specific contract. Both contract types may have terms up to 25 years, but policies vary by agency. Area-wide contracts are blanket contracts, which are essentially indefinite delivery, indefinite quantity (IDIQ) contracts for public utility services. GSA has established more than 150 utility area-wide contracts to provide utility services for Federal facilities around the country.

UESCs can be flexible contracting options. Utilities are interested in varying project sizes, so partnering with the serving utility can facilitate resolution of interconnection issues, and utilities are eligible for renewable investment tax credits if they own the system.

Although the applicable UESC regulations do not require measurement and verification (M&V), it is a requirement under recent Federal guidelines for new construction and major renovations. Systems are likely to be subject to M&V regardless of the UESC requirements, but the responsibility may fall on the agency to implement those measures.