Energy Performance Contracting

The VAEEC aims to expand performance-based contracting for state-owned buildings and public institutions of higher education as part of our five policy recommendations outlined in our latest report titled “Why Energy Efficiency is a Smart Investment for Virginia.”

Several months after the release of the 2013 industry census, Governor McAuliffe signed Executive Order 31, identifying energy efficiency in state government as a priority for his administration and establishing a goal of reducing state government electricity consumption by 15% by the end of 2017. According to the 2016 Virginia Energy Plan update, Virginia has achieved 38% of this goal through Energy Performance Contracting (EPC), totaling $700 million in a portfolio representing state agencies, higher education, K-12 schools, regional jails, and local governments. The 200+ projects have resulted in the annual reduction of nearly 43 million kilowatt hours (KWh) of electricity and offsetting 31,219 metric tons of carbon dioxide (CO2) emissions.

Expanding performance-based contracting for state-owned buildings and public institutions of higher education is one of our policy recommendations from our latest report.

Our new recommendation for performance contracting is to expand the state’s energy efficiency program for state and higher education facilities. Much like federal legislation requiring justification for inaction on performance contracting, state agencies and departments could be required to provide to the Governor’s office their rationale for not implementing energy performance contracts that guarantee savings and could lower the tax burden on the Commonwealth’s citizens. Even though Virginia has made significant progress with performance contracting in recent years, it remains a largely untapped source of cost savings.

According to Trane, a leading energy performance contracting company in Virginia, they have been able to save their public-sector clients 20-40% on their energy bills through Energy Performance Contracts. These expenses are recovered through energy upgrades, at no additional cost to taxpayers, through work that pays for itself. Over the next 10-15 years, Trane estimates that there is more than $1B in untapped self-paying energy efficiency projects in public buildings still left to do in Virginia.

Over $3 billion in deferred maintenance has built up across state agencies and higher education institutions over the last several years due to the recession. These budget constraints have caused increased competition for capital dollars, wherein deferred maintenance is usually the last to be addressed. Typically, at least half of all deferred maintenance is energy-related and could be reduced through performance contracting. Performance contracting can help divert needed capital dollars away from buying replacement chillers, lighting, etc, and instead funnel those dollars to mission-critical activities — all while upgrading the performance, functionality and comfort of the facilities. Operating budgets will also be reduced through both lower energy costs as well as reduced maintenance costs.

Performance contracting can help address the most urgent needs and significantly reduce deferred maintenance in the Commonwealth.