When the Army Materiel Command’s Anniston Army Depot in Alabama signed a $20 million Utility Energy Services Contract with Alabama Power Aug. 11, the Army surpassed a presidential challenge to award $1 billion in energy savings performance contracts by the end of 2016.
This contract will enhance the Army’s readiness efforts by allowing Anniston to run more effective and efficient daily operations.
The President’s Performance Contracting Challenge set the goal of $4 billion in Energy Savings Performance Contracts and UESCs across the federal government. The Army’s share of that goal was $1 billion.
In response to the PPCC, the Army has contracted for 127 individual projects, or task orders, totaling $1.015 billion. This represents 33 percent of the federal government’s total performance and 68 percent of the Department of Defense’s total efforts.
While the Anniston Army Depot contract was not awarded by the U.S. Army Corps of Engineers, Engineering and Support Center, Huntsville’s Energy Division was instrumental in helping the Army reach the PPCC goal. Huntsville Center’s cumulative ESPC and UESC capital investment represents 78 percent of the Army total.
The Huntsville Center is considered the USACE Technical Center of Expertise for ESPC. Much of Huntsville Center’s success can be attributed to having all members of the project delivery team co-located and its streamlined acquisition processes.
“In order to help the Army achieve the $1B milestone not one person could do it alone,” said Jason Bray, Huntsville Center’s ESPC program manager. “That is why at the Huntsville Center Corps of Engineers, we have program and project managers working with project delivery teams centrally located to strategically plan and execute Energy Savings Performance Contracts and Utility Energy Service Contracts.
“Having all members of the PDT close together assists with keeping the process efficient and effective,” Bray said. “Customers come to Huntsville Center because they know that they will be provided with a team effort, and the partnership between the agency, the customer, and the energy service company or energy utility provider brings a holistic approach that both helps meet Army energy initiatives as well as a better quality of life for personnel manning the installations.”
Projects such as White Sands Missile Range, Puerto Rico and Rock Island Arsenal, awarded by Huntsville Center, illustrate the value of using third-party financing to achieve energy goals.
At White Sands Missile Range, more than $2 million in energy costs have already been saved through a 42-acre solar-array project that came online in December 2012, according to Randall Smidt, an engineer working for the Office of the Assistant Chief of Staff for Installation Management. The 4.465 megawatt solar photovoltaic system, completed in December 2012 guarantees energy savings of 35,358M British thermal units per year and reduces the range’s energy consumption by 10 percent.
Two wind turbines at Fort Buchanan, Puerto Rico, are estimated to produce more than 5 percent of the installation's power while 21,824 solar photovoltaic panels there will produce about 5.5 megawatts of power, which is at least 60 percent of the post's current power demand at peak periods, Smidt said.
Not all ESPC contracts involve renewable-energy projects, though, Smidt said. Rock Island Arsenal, Illinois, has a $39-million infrastructure-modernization project at its Joint Manufacturing and Technology Center. Honeywell is installing high-efficiency HVAC systems and natural-gas heating that will allow the tech center to disconnect from the garrison's coal-fired steam plant. New plating and paint systems at the tech center are also part of the upgrade.
The Army has a long history of using performance contracting that predates the President’s challenge. Since 1992, the Army has been aggressively pursuing energy savings and currently has the largest energy savings performance contracting program in federal government. The Army’s 624 individual projects, or task orders, represent private investment of more than $2.5 billion.
These contracts are important to the Army, said Katherine Hammack, assistant secretary of the Army for Installations, Energy and Environment. Federal agencies like the Army can leverage their utility budgets and take the steps essential to enhancing resiliency, achieving cost savings, and improving operations and maintenance, with no up-front costs to the government.
Private investors use their own funds to modernize, upgrade, or implement energy and water efficiency, as well as renewable energy systems on Army installations. In return, the Army pays back the investment with some of the utility cost savings achieved from these improvements. The investors guarantee a minimum savings that meets or exceeds the required payments. At the end of the contract, the Army owns all of the improvements and benefits from the continuing savings, which it can use to meet other readiness requirements.
The costs of the projects are paid back over time as the Army realizes savings from the improvements.
UESCs and ESPCs are similar, but different. UESCs are limited-source contracts between utility companies and federal agencies. The Anniston project is a UESC contract and the Army has initiated 42 of these in the last five years. ESPCs are partnerships between the government and an energy service company – such as Honeywell Building Solutions, Siemens Government Services or Schneider Electric. The Army has initiated 85 of these ESPC partnerships in the last five years.
UESC projects do not require savings Measurement and Verification, (M&V), though M&V can be obtained, and do not provide guaranteed savings for the customer. UESCs require annual equipment performance verification. ESPC task orders require annual savings M&V, as well as a minimum guaranteed savings amount.
Funding for these projects must be paid back to the energy service company within 25 years, along with interest. The cost avoidance in energy savings is used to pay the company, and the government gets to keep the rest of the energy savings.
The maximum contract term for both ESPC projects and UESC projects is 25 years. The Army will continue to work hand-in-hand with industry partners to develop cutting-edge methods to reduce energy consumption, enhance energy efficiency, improve readiness, and help the Army continue to be a good steward of taxpayer dollars.
(Editor’s note: This article incorporates information originally released by Army News Service.)