FEMP Analyzes Federal Energy Savings From Utility Service Programs

August 31, 2005

In the 1990s, federal agencies began using a powerful mechanism to obtain alternative financing for energy services from their local serving utility—utility energy service contracts (UESCs). In 1996 FEMP started tracking the federal use of UESCs, collecting specific information on projects across the country with support by members of FEMP's Federal Utility Partnership Working Group. To date, more than 1,000 projects have been implemented using the UESC mechanism, with a capital investment totaling more than $1.4 billion.

FEMP recently performed a rigorous analysis of this data to provide valuable information on the relative measure of energy reduction effectiveness of various installed technologies and the ability to test hypotheses regarding the effectiveness of installed measures across geographic regions and agencies. The findings of this analysis allow a better understanding of the overall value of utility programs in the federal sector.

The core of the analysis was a statistical examination that shed light on the relationship between annual energy savings and capital investments (Btu saved per dollar invested) for specific technology categories for both civilian agencies and the Department of Defense (DOD). The primary technology categories used to classify each project were:

  • analysis;
  • boilers/chillers;
  • central plants;
  • comprehensive upgrades;
  • controls/upgrades/repairs;
  • distributed energy;
  • heating, ventilation and air conditioning (HVAC)/motors/pumps;
  • lighting only;
  • lighting and mechanical systems; and
  • renewables

The analysis revealed that DOD is predominantly involved in large, multi-measure projects including lighting and mechanical system upgrades, and is heavily invested in central plant upgrades. Civilian agencies invested mostly in multi-measure and lighting projects, as well as a few large distributed energy projects. DOD has been the primary implementer of renewable projects to date. The chart below shows these relationships in total investment for awarded projects for each technology category by agency type (civilian and DOD).

Chart showing technology category and total capital investment in millions of dollars for DOD and civilian agencies. Renewable for DOD - $83; Lighting and Mechanical Systems for DOD - $191; Lighting and Mechanical Systems for civilian - $55; Lighting Only for DOD - $99; Lighting Only for civilian - $40; HVAC/Motors/Pumps for DOD - $57; HVAC/Motors/Pumps for civilian - $54; Distributed Energy for DOD - $59; Distributed Energy for civilian - $106; Controls/Upgrades/Repairs for DOD $69; Controls/Upgrades/Repairs for civilian - $10; Comprehensive Upgrades for DOD - $38; Comprehensive Upgrades for civilian - $86; Central Plant for DOD - $179; Central Plant for civilians - $42; Boiler/Chiller for DOD - $68; Boiler/Chiller for civilian - $20
Projects by technology category for DOD and civilian agencies.

FEMP performed an analysis on annual Btu saved versus total capital dollar invested for each technology category, indicating the relationship between the amount of energy saved and the capital investment for the particular technology group. The figure below provides a visual comparison of the slopes and their uncertainties. The slope shows the typical energy savings per dollar invested for the technology category, and the standard error shows the range of values that can typically occur for this category.

Chart showing the range of each energy conservation measure. The mid-points are: Boiler/Chiller - 10,539; Central Plant - 9,502; Comprehensive Upgrades - 10,072; Controls/Upgrades/Repairs - 14,051; Distributed Energy - 2,103; HVAC/Motors/Pump - 7,097; Lighting - 5,643; Lighting and Mechanical Systems - 9,383; Renewable - 5,964
Estimated slopes and approximate 95% confidence intervals for simple linear model.

The highest return on investment resulted from controls/upgrades/repairs projects (approximately 14,100 Btu per dollar of investment). These projects typically are operational efficiency improvements as opposed to equipment replacement, and require lower capital cost, resulting in a higher Btu per dollar ratio. The lowest return on investment resulted from distributed energy projects (approximately 2,100 Btu per dollar of investment). Distributed energy projects are not considered energy savings projects in and of themselves, but energy savings result from improved efficiency of the existing system, including eliminating previous energy losses or downsizing baseline energy requirements. They also require significantly larger capital investments than individual controls/upgrades/repairs projects, so the ratio of energy savings per dollar invested is expected to be lower.

Individual lighting projects provide lower energy savings per dollar invested than might be first expected. A large number of lighting projects were small capital cost projects focusing on constant-use lights that resulted in higher energy savings. The larger capital cost lighting projects may have combined constant use lights with limited-use, less effective lights, yielding a lower overall energy savings.

The expected savings for projects that include both lighting and mechanical systems are markedly higher than lighting-only projects. This is expected since efficient lighting systems typically provide an opportunity to downsize HVAC system requirements. The magnitude of the standard error is about twice that of lighting-only projects, but is lower than the standard error for the controls/upgrades/repairs projects.

Both boiler/chiller and central plant projects have two of the highest returns on investment of the nine technology types studied. They have relatively high standard errors, indicating a large variance in expected savings, likely caused by the nature of these projects. Boilers/chillers and central plants tend to be very site-specific, and energy savings are dependent on a variety of factors that will differ from site to site. Comprehensive upgrades also have a similar return on investment, likely the result of the bundling of measures that occurs in this category. Many times a site will combine different projects to achieve an overall greater gain in dollar and/or energy savings.

The analysis results indicate that bundled projects tend to be more effective, and higher project savings per dollar invested may result from careful selection of these energy saving technologies and practices. The results also indicate that agencies may benefit from first investing in upgrades of existing equipment before considering large capital intensive retrofit projects, or consider bundling these activities to draw on the advantages of low-cost upgrades. Agencies should be careful not to retain existing equipment beyond its normal useful life, but focus on activities to ensure equipment is operating as efficiently as possible. In addition, central plant, boiler, and chiller upgrades have high energy savings per dollar invested, but also have a high uncertainty. These types of projects should begin with a thorough analysis to ensure the project will be cost effective.

For more information, please contact Bill Sandusky, Pacific Northwest National Laboratory, 509-375-3709 or Kate McMordie Stoughton, Pacific Northwest National Laboratory, 865-483-9436.