Lessons from America: Local Government News

Submitted by:  Dipak Shah, Director, Ameresco

Energy efficiency is big business in the United States and no sector has done more to drive this than State and Local Government.

A study prepared for the US Department of Energy in 2013 showed that State and Local Government was the most active sector in energy efficiency accounting for almost a quarter of recorded projects.

In total, State and Local Government were responsible for more than $1.2bn (or £864m) worth of energy efficiency projects. The United States Federal Government was the second highest with $1.1bn in project investment, followed closely by schools ($995m) and Colleges and Universities ($702m).  Comparatively, the private sector weighed in with just $419m.

It is difficult to find direct comparison figures for the UK. However, a report by the research and consultancy firm Verdantix showed that the public sector as a whole (including local and central government, hospitals and universities) spent the second highest amount on energy services in the UK with £216m, behind retailers and the manufacturers of consumer products who spent £359m.

What can the UK learn from State and Local Government energy efficiency Stateside?

1. Go large

When it comes to implementing energy efficiency, economies of scale really help. While each local authority can make substantial energy efficiency savings on their own, they can achieve much more by combining with other local authorities in nearby locations or with similar energy efficiency needs.

In one aggregation-type agreement, Ameresco was selected to partner with the Metropolitan Area Planning Council (MAPC) which covers 101 towns and cities in Metropolitan Boston. Under the agreement, Ameresco can audit certain MAPC member’s municipal-owned buildings and infrastructure with the aim of identifying and implementing budget-neutral energy efficiency and cost-savings measures.

Procuring on a grand scale can improve the financial viability for local authorities to tackle more complex and expensive projects, such as renewable energy generation, in order to provide a return on investment sooner.

MAPC members can work with an energy services companies like Ameresco to assess and implement a wide-range of energy saving and renewable energy solutions; such as, from energy efficiency measures, infrastructure upgrades, LED street lighting, rooftop solar,  solar on capped landfill, combined heat and cooling solutions, and  other forms of local power generation.

In order to implement these solutions, local authorities typically enter into an Energy Performance Contract with an energy services company, such as Ameresco. Under an EPC, the energy services company generally guarantees a level of energy savings over the length of the contract that will offset the cost of the improvements, sometimes completely. This allows the local authority to procure energy efficiency and renewable energy improvements in a budget neutral manner.

With local authorities in the UK facing an enormously challenging financial environment, the potential benefits of combined energy procurement and guaranteed savings from Energy Performance Contracts have never been greater. Despite managing a 40% spending reduction during the current Parliament, local authorities still need to find new ways to meet a £12.4bn funding shortfall by 2020.

In anticipation of having to find these savings, the Association of Public Sector Excellence (APSE) has identified 55 local authority members who have indicated a willingness to collaborate together on energy services.

Examples of UK local authority joint procurement energy projects include The Mayor of London’s Re:fit retrofit programme which was initially rolled out to London’s public sector in 2010 and is now available to all public sector organisations in England and Wales. Having already helped local authorities in Hull, Cambridge and Buckinghamshire to make savings, Re:fit is due to announce its new framework members later in February.

Across the border, the Scottish Futures Trust Non-Domestic Energy Efficiency Framework is expected to launch in March and will allow a whole range of public sector bodies from central government, health authorities, local authorities, universities and colleges and the third sector to join together on energy procurement.

2. Go long

Verdantix estimated that the public sector would invest £216m in energy services in 2015 and that 40% of this spend would be on Energy Performance Contracting. Verdantix stated EPCs in the UK typically run for 5-7 years.

In the United States, where Energy Performance Contracting is a more mature market, these contracts typically run for much longer periods.

In 2010, Ameresco signed the largest public housing EPC in the US at the time – a $66.7m (£46m) Energy Performance Contract with the Boston Housing Authority. The contract covered the installation of a mix of 17 energy efficiency and renewable energy measures and is expected to generate more than $100m (£70m) in energy and water savings over the 20-year contract term.

In its first year, the contract generated $4.8m (£3.3m) in savings and reduced water and natural gas usage by more than a third.

Contracting over a longer period enables authorities to tackle much larger energy efficiency and renewable energy generation projects which typically have longer paybacks, resulting in more comprehensive projects and greater reduction in energy consumption.

3. Go strategic

The Director of APSE Energy Mark Bramah says that for too long energy procurement has not been seen as an executive director level issue in the UK. He believes sustainability teams are cut in councils because they are seen as a luxury.

Mr Bramah believes they should rename sustainability teams as income generation teams or expenditure efficiency teams as energy efficiency is about saving money.

In the US, cities of all sizes are appointing Chief Sustainability Officers (CSO) ensuring energy efficiency is valued as a strategic priority for local authorities. Cities as far afield and varied as Los Angeles and Las Vegas to Denver, Austin and Chicago have all appointed CSOs. Even small local authorities like Galloway Township in New Jersey have a CSO.

The Rockefeller Foundation, one of the world’s largest philanthropic organisations, based in New York, has also pioneered the implementation of a new executive director position: The Chief Resilience Officer (CRO). The aim: create 100 resilient cities worldwide.

The world’s first CRO, Patrick Otellini, started his role in San Francisco in April 2014 where his responsibilities encompass seismic safety, sustainability, and energy assurance. CROs ensure a city is resilient to all forms of physical, social and economic challenges, such as fires, floods, high unemployment, violence, etc.

Currently the UK has two CROs in Bristol and in Glasgow.

Although Bristol is already the most energy and waste-efficient major UK city, it plans to meet future needs by managing resources even more efficiently; and as the UK’s fastest growing city, they are planning to invest millions in new and renewed infrastructure for transport, energy, housing, and business.

As the two best performing councils on the Local Authority Energy Index, it is also no coincidence that both Coventry and Peterborough City Councils have Executive Directors of Resources who ensure their councils take a strategic approach to energy efficiency.

4. Go Futuristic

Like many industries, energy is going through transformational change thanks to new technology.

Localised energy and heat networks are set to play a key part in this as they allow local authorities to make significant cost and carbon savings.

In the UK, the Government has announced £300m of funding to support up to 200 heat networks which could provide reliable, lower carbon heat supplies for more than 400,000 homes.

Two of the most promising forms of technology emerging in the US that are expected to help to provide localised energy networks are microgrids and battery storage.

A microgrid is a localised form of the UK’s National Grid that an organisation can use to generate power using renewables such as solar and wind and then distribute the energy at a local level when and where it’s needed. Using “smart grid” technology it would then be possible to better predict where and when specific demands will be made on the system, to ensure that adequate provisions are made for the distribution of power.

Batteries are being designed to work in combination with a microgrid to store excess energy during peak production times instead of having to turn off renewable energy systems when they over supply. The energy stored in batteries can then be used to power the microgrid when energy generation falls.

In the US, the concept of combining microgrid and battery storage technology together with on-site generation, including Combined Heat and Power (CHP) is being implemented by Ameresco in partnership with the Department of Defense to enhance the security and reliability of electric service to military bases.  This also allows them to feed back into the main grid to generate a potential new revenue stream for the department.

Through partnerships with energy services companies such as Ameresco, local authorities in the UK can make significant progress towards their cost and carbon savings goals.  By applying tools such as EPC, local authorities can more aggressively implement energy infrastructure improvements such as heat networks, and cost effectively improve energy efficiency, increase resilience and reduce carbon emissions.

Source:
Local Government News
Volume 38. No1
March 2016
www.LocalGov.co.uk (opens in new window)