August 26, 2013

The Department of Energy’s Administration of Energy Savings Performance Contract Biomass Projects

In 2012, to help achieve renewable energy goals and realize energy cost savings, the Department of Energy began operating two new biomass facilities located at its Oak Ridge National Laboratory (Oak Ridge) and the Savannah River Site. 

Our review of the Biomass Projects, financed by Energy Savings Performance Contracts (ESPCs), at Oak Ridge and the Savannah River Site disclosed that the Savannah River Site had generally developed and administered its Biomass Facility in an effective manner.  However, we found planning and operational issues with the Oak Ridge Biomass Plant could cause the Department to incur over $67 million more than necessary over the life of the project.  Specifically, we noted that the Oak Ridge Site Office had not always planned and operated its Biomass Plant to minimize the Government's risk. For instance, it had not mitigated the risk of biomass fuel shortages and cost fluctuations, which could result in fuel costs exceeding original plans/projections by more than $23 million over the life of the project. 

These problems were due in part to inadequate guidance and oversight.  The Department had not required major ESPC construction projects to adhere to critical elements of its existing capital project management and acquisition directive, and had not developed a process to identify, document and disseminate lessons learned from ESPC projects across the complex. 

We made several recommendations designed to assist the Department with ongoing biomass projects, and with planning, designing and operating future ESPCs and biomass facilities.  Management generally concurred with our recommendations and identified actions taken and planned to address our recommendations. 

Topic:  Energy