The White House is placing a $2 billion mark down to improve the energy efficiency of federal buildings. President Barack Obama Thursday announced a commitment by the federal government to enter into Energy Savings Performance Contracts over the next 24 months as part of his broader effort to create jobs.

The President signed a memo directing agencies to commit to at least $2 billion worth of projects over the next two years.

“The federal government works with private sector energy service companies to develop energy upgrade projects that are guaranteed to save at least enough energy to pay for the cost of the project over the term of project,” he said. “Once the project costs are covered, the rest goes to the federal government.”

He said the pay back to the energy companies must be within 10 years, and they take all the risk in developing and installing energy efficiency initiatives.

Zients said several agencies already are using ESPCs. For example, the Joint Base Charleston in South Carolina replaced old heating and air conditioning systems, installed more efficient lighting and an energy management system and is saving $2.6 million a year on a $23 million investment.

“These contracts really work,” he said.

In the memo, Obama is asking agencies to:

• Report their planned implementation schedule for using energy performance contracts by Jan. 31 to Department of Energy’s Federal Energy Management Program (FEMP), OMB, and the Council on Environmental Quality (CEQ).
• Incorporate the planned implementation schedule into their annual Strategic Sustainability Performance Plans in furtherance of Executive Order 13514 starting in 2012.

The Energy Department also has long used these contracts to have contractors install renewable energy source such as wind, solar or geothermal without any upfront costs.

The Defense Department also is a large user of ESPCs. The Army has more than 100 in place now to improve the energy efficiency of existing buildings.

Zients said every agency will be part of $2 billion investment, but DoD and the General Services Administration will lead the charge as they own or run a majority of federal buildings. The government owns or manages more than 3 billion square feet of office space.

“We are anxious to review our entire owned building portfolio and determine how we can best utilize energy savings performance contracts to increase energy efficiency, reduce operating costs and create jobs,” said GSA Administrator Martha Johnson. “Our agency has extensive experience with ESPCs. Since 1992, nearly $300 million has been invested through ESPCs to improve the efficiency of federal buildings. In fact, we recently challenged energy service companies to bring creative solutions and innovative technologies to the table which will allow agencies to maximize their investment and achieve the greatest energy savings.”

OMB and DoE will work with agencies to make sure they are making investments with the highest return and track their efforts, Zients said.

“We will report the results to the public,” he said. “The bottom line is we will be keeping score and making sure we have good implementation here.”

Zients said the Chamber of Commerce estimated this type of effort by the federal government alone would create 35,000 jobs.

Along with the federal commitment, Obama will announce a $2 billion investment by the private sector that could create more than 50,000 new jobs, said Gene Sperling, the National Economic Council director.

More than 60 companies, universities and non-profits, including 300 manufacturing plants, have committed to improving the efficiency of 1.6 billion square feet of office space.

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