Off-Site Energy Procurement

FEMP also supports federal agencies with off-site renewable energy purchases.

Federal agencies can use a variety of procurement options to implement on-site distributed energy projects that help meet federal goals and requirements.

Distributed energy refers to a set of technologies that generate electricity near where they will be used, such as solar panels or combined heat and power. Distributed energy may serve a single structure or a campus, and may be part of a microgrid that provides electricity during a utility grid outage.

The Federal Energy Management Program (FEMP) helps agencies implement on-site distributed energy projects using the following ownership and financing options:

Distributed energy projects can be implemented through government-owned procurement options such as appropriations, utility programs, and energy savings performance contracts; or through privately owned procurement options such as energy savings performance contract energy sales agreements, power purchase agreements, and enhanced use lease or real property arrangements.
UESC Utility Energy Service Contract ESPC ESA ESPC Energy Sales Agreement
USC Utility Service Contract PPA Power Purchase Agreement
ESPC Energy Savings Performance Contract EUL Enhanced Use Lease

Appropriations

Projects funded with appropriations are implemented through either a design-build or design-bid-build process.

Agency develops and issues a request for proposal (RFP), which includes project requirements and evaluation criteria.

Agency evaluates responses and selects contractor(s) for design and construction.

Once the system is built, the agency will commission and accept the system.

The agency is responsible for the operations and maintenance (O&M), repair, and replacement or can contract it to a third party. Funding should be set aside for emergency repairs and/or equipment replacement that may not be covered by an O&M contract.

Appropriations can be combined with other on-site procurement approaches.

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Ownership Type: Government owned

Legal Authority: Agency dependent

Maximum Contract Length: Not applicable

Additional Resources: Use the FEMP Technical Assistance Request Portal to apply for assistance with a distributed energy project. 

Project Structure and Energy Savings with Appropriated Funding: Before Project - UtilityBill, Project Implementation - Utility Bill and Project Costs, Each Year After Project Implementation - Energy Cost Savings and Utility Bill

Energy Savings Performance Contracts

An ESPC is a partnership between a federal agency and an energy service company (ESCO) to procure energy savings and facility improvements.

After being selected for a potential award, the ESCO conducts a Preliminary Assessment (PA) and then an Investment Grade Audit (IGA).

After award, ESCO arranges financing and completes design/construction.

The ESCO guarantees sufficient energy cost savings to pay for the project over the term of the contract.

Distributed energy projects can be bundled with other measures.

The main types of federal ESPCs are:

  • DOE indefinite-delivery, indefinite-quantity (IDIQ)
  • DOE ENABLE
  • U.S. Army Corps of Engineers MATOC (IDIQ)

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Ownership Type: Government owned

Legal Authority: 42 USC § 8287 et seq.

Maximum Contract Length: 25 years

Additional Resources: Visit FEMP's ESPC page for additional information.

Project Structure and Energy Savings with an ESPC. Before ESPC - utility bill has no savings.  During performance period, there are small savings and a payment to ESCO. After the ESPC term, the utility bill is lower and energy cost savings are higher.

Energy Savings Performance Contract Energy Sales Agreements

An ESPC ESA is a project structure using long-term ESPC authority for a distributed energy conservation measure (ECM) on government land that is privately owned until the end of the contract. The agency purchases the electricity produced by the ECM, similar to a PPA.

The ESPC ESA must meet all ESPC authority requirements.

The ESA payment is based on kilowatt-hours generated (¢/kWh).

The ESCO captures tax incentives to reduce the ESA price.

The agency must retain equipment title by the end of the contract (OMB Memo M-12-21).

Safe harbor is provided by the Internal Revenue Service to not challenge treatment of an ESPC ESA as a service contract (Internal Revenue Bulletin 2017-07).*

ESPC ESAs can be implemented using the DOE IDIQ, DOE ENABLE, or a site-specific/stand-alone contract.

An ESA can be bundled with other ECMs (not recommended for site-specific/stand-alone).

* The ESCO is responsible for tax incentive due diligence.

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Ownership Type: Privately owned

Legal Authority: 42 USC 8287 et seq.,

40 USC 501/FAR Part 41.

Maximum Contract Length: 20 years (Section 4 of Internal Revenue Bulletin 2017-07 contains contract requirements).

Additional Resources: Visit FEMP's ESPC ESA page for additional information.

Project Structure and Energy Cost Savings with an ESPC ESA: Before ESPC ESA - Pay total utility bill. Under ESPC ESA - ESA Payment and Reserve Account Payment is the majority.  There is a small energy cost savings.

Utility Energy Service Contracts

A UESC is a limited-source contract between a federal agency and its serving utility for energy- and water-efficiency improvements and demand-reduction services.

During the contract period, agency payments come from resulting savings (or agency funds).*

After the term of the contract, the agency continues to benefit from the savings.

UESCs can be executed under a variety of agreement types, including area-wide contracts (AWC). Existing contracts can be accessed on GSA's Download Contracts/Modifications web page.

Distributed energy projects can be bundled with other measures.

* Unlike ESPCs, UESCs do not have a statutory annual savings requirement but must still be life cycle cost effective. Performance assurance is required for annual scoring.

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Ownership Type: Government owned

Legal Authority: 42 USC 8256,

10 USC 2913 (DOD).

Maximum Contract Length: 25 years

Additional Resources: Visit FEMP's Utility Program and UESC page for additional information.

Project Structure and Energy Costs Savings with a UESC. Before Contract, the utility bill is paid in full. During Contract the UESC Payment is partial and there is a Government Share/energy cost savings.

Power Purchase Agreements

A PPA is a contract where a federal agency buys electricity from a developer at a competed rate for a specified term without taking ownership of the distributed energy project until the end of the term.

The developer installs, owns, operates, and maintains a distributed energy project on federal land. In exchange, the agency agrees to purchase the electricity generated by the system.

The primary agreement is the PPA, but there is often a separate site access agreement.

The agency may have an option to purchase the system at the end of the contract.

The developer could be any third party including the site's serving utility company.

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Ownership Type: Privately owned

Legal Authority and Maximum Contract Length: 10 USC 2922a (DOD only, 30 years),

40 USC 501 (Federal Acquisition Regulations (FAR) Part 41, GSA authority requiring delegation for most agencies, 10 years),

FAR Part 12 (typically 5 years depending on agency policy),

WAPA (20-30 years).

Additional Resources: Visit FEMP's PPA page for additional information.

Project Structure and Energy Cost Savings with a PPA: Before PPA - Pay 100% of Utility Bill.  Under PPA -Pay a portion of utility bill, PPA pays a portion and there is also an energy cost savings.

Real Property Arrangements /Enhanced Used Leases

A real property arrangement where an agency contracts with a private company (could be the serving utility) that builds, owns, operates, and maintains a distributed energy project on under-utilized federal land.

Under this arrangement, the utility or third-party developer pays a "rental" fee to the agency in the form of cash or an in-kind consideration—most likely a renewable energy project, renewable energy, or renewable energy certificates produced from the renewable energy project.

Most or all of the electricity is sold by the private company to either the utility or another party.

Typical real property instruments include leases, easements, and licenses.

Some agencies have an EUL authority that involves the out-lease of underutilized property for a payment in cash or an in-kind consideration.

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Ownership Type: Privately owned

Legal Authority: Agency dependent

Maximum Contract Length: Varies depending upon project and agency authority (payment and/or in-kind consideration)