Energy Savings Performance Contract Energy Sales Agreements for Federal Agencies

Your agency has energy goals, and you’d like to help meet them with on-site distributed energy generation. A solar photovoltaic system can get you closer to your goals and a carbon-free energy future — but how will you pay for it?

The U.S. Department of Energy’s Federal Energy Management Program, also known as FEMP, has great news. An Energy Savings Performance Contract Energy Sales Agreement, or ESPC ESA for short, can be used to implement a distributed energy system on federal land and secure electricity cost savings with no upfront cost to your agency. For example, in Gaithersburg, Maryland, the National Institute of Standards and Technology implemented a 5-megawatt solar PV system using an ESPC ESA. The system’s renewable electricity is priced about 30% less than the local utility rate, and NIST expects to save $12 million over the project’s lifetime.

In El Paso, Texas, the Drug Enforcement Administration implemented a 2.5-megawatt PV system that was bundled with lighting and water efficiency upgrades. The PV system saves about $288,000 each year, and, by structuring the bundled project as an ESA with private ownership, DEA will save an additional $1 million over the project’s lifetime.

So, how does an ESPC ESA work and what are the benefits?

Under an ESPC ESA, the energy service company, or ESCO, uses the Energy Savings Performance Contract authority to implement a long-term contract with guaranteed cost savings to the federal agency. The federal agency only pays for electricity generated from the distributed energy project, making an ESPC ESA low risk for the agency. The ESCO may also be able to take advantage of federal and other tax incentives, and could sell the renewable energy certificates to increase cost savings for the agency.

Finally, the ESCO is responsible for operations and maintenance, and for equipment repair and replacement, for the entire term of the contract. Implementing a distributed energy system for your agency can be a win-win. You get a distributed energy system at no upfront cost, and your agency benefits from significant energy savings – all without the burden of operations and maintenance.

Check out the FEMP website to find resources, webinars, technical assistance, and procurement and contracting support.