Department of Defense budgetary pressures have spawned a new approach to financing federal projects. Federal agencies cannot rely on congressional appropriations alone to fund the energy projects needed to meet federal requirements.
Third-party financing is an alternative means of financing these projects. One of the greatest benefits of third party financing is it allows agencies to use their appropriated dollars more efficiently and effectively for other non-energy re-capitalization projects and get more bang for the buck.
As the Army’s third party financing center of excellence, Huntsville Center Energy Division offers a one-stop full service shop (project management, contracting, engineering, legal) for three third-party finance options to implement energy, water savings and renewable energy projects:
- Energy Savings Performance Contracts (ESPCs): A partnership between a federal agency and an energy service company (ESCO). It allows agencies to procure energy savings and facility improvements with no up-front capital costs or special appropriations from Congress utilizing Huntsville Center’s $1.5 billion ESPC multiple award task order contract, Department of Energy’s $80 billion Indefinite Delivery, Indefinite Quantity (IDIQ) contract, or GSA acquisition tools. In an ESPC, the ESCO designs a project meeting the agency's needs, arranges for funding, and guarantees the project will generate energy cost savings to pay for the project over the term of the ESPC.
- Utility Energy Service Contract (UESCs): Similar to ESPC, UESCs offer federal agencies an effective way to implement energy-efficiency, renewable-energy, and water-efficiency projects through partnerships with local utility providers. In a UESC, the utility company provides the analysis, design, installation and arranges for financing when necessary. Agencies may implement a UESC with no initial capital investment or may use appropriated funds strategically to maximize the impacts of their projects.
- Power Purchase Agreements (PPAs): Allow federal agencies to fund large and small-scale renewable energy projects with no up-front capital costs. Huntsville Center’s PPA program’s $7 billion multiple award task order contract (MATOC) streamlines the Department of Defense's procurement process for solar, wind, biomass, and geothermal renewable energy generating projects. In a PPA, the private sector contractor finances, owns, operates and maintains the facility, and the agency pays for the power generated for the life of the contract.