Cleantech Market Intelligence
Better Buildings Initiative Achieves Big Savings, But Is It Enough?
New Energy Secretary Ernest Moniz, in one of his first speeches in his new role, recently recognized the first year of progress of the landmark Better Buildings Initiative (BBI). Announced by President Obama in December 2011, aimed to mobilize $2 billion worth of energy efficiency improvements, half in the federal sector and half in the private sector. It represents one of many ways that the federal government aims to “lead by example” on best practices in energy efficiency.
In his speech, Secretary Moniz highlighted the progress of the BBI’s private sector partners, which include companies like Legrand, Schneider Electric, and Briggs & Stratton. Over the course of the last year, the partners have improved the energy intensity of their building space by 2.5%, reducing energy costs by $58 million per year, with 1,300 facilities achieving over 20% energy reductions through energy efficiency retrofits. These represent significant gains in the private sector, which is plagued perennially by challenges such as a lack of capital availability and the fact that many commercial spaces are rented, leaving little incentive for building owners to engage in energy efficiency improvements that benefit tenants.
Feds Fall Behind
Unfortunately, the other piece of the Better Buildings Initiative, which involves federal buildings, has fallen behind on its targets. At the outset, the program aimed to deploy $2 billion worth of energy savings performance contracts (ESPCs), which allow building owners to finance energy efficiency improvements using the future energy savings as debt service against loans for capital expenditures, by the end of 2013. By the end of 2012, however, less than $200 million in ESPCs had been awarded. Many federal agencies, not well versed in the complexities of ESPCs, delayed in selecting projects and releasing RFPs in the initial months following the Better Buildings Initiative announcement. And as a result of the multi-quarter sales cycle for ESPCs, few contracts had been awarded by year end.
Will the federal government reach its $2 billion goal by the end of this year? With 6 months left to go, only $50 million of ESPCs have been booked, and signing almost $1.8 billion worth of additional contracts seems unlikely. However, many of the ESCOs I’ve spoken with recently report a flurry of federal RFP activity, and it’s likely we’ll see a lot of progress later this year. Hopefully there will be good news to report at the end of the year on the federal side of the Better Buildings Initiative, too.