Everyone says energy efficiency can pay for itself, and now the White House is out to prove it, by spending zero money to produce $4 billion. Yeah, I'm not making that up. From the administration:
The $4 billion investment announced today includes a $2 billion commitment, made through the issuance of a Presidential Memorandum, to energy upgrades of federal buildings using long term energy savings to pay for up-front costs, at no cost to taxpayers.
The other half of the $4 billion will come from a consortium of private investors, assuming they all come through. The whole operation has the stamp of approval of both the Clinton Foundation and the U.S. Chamber of Commerce, which aren't often mentioned in the same sentence.
The White House says this initiative will lead to retrofits for 1.6 billion square feet of commercial and residental space, and create 50,000 jobs over the next two years.
The entire thing will be accomplished through an existing, decade-old mechanism called an Energy Savings Performance Contract.
Here’s how those work: The feds pay nothing, and the contractor itself pays for the retrofit. Then the feds pay the contractor what they were paying before, for energy. The contractor keeps the difference between new, lower energy bills and what they're paid, until the cost of the retrofit is paid off. Then the contract ends, and the feds reap all the efficiency benefits from there on out. It's a similar financing mechanism as, for example, SolarCity, which offers homeowners solar panels for free.
An ESPC is a partnership between a Federal agency and an energy service company (ESCO). The ESCO conducts a comprehensive energy audit for the Federal facility and identifies improvements to save energy. In consultation with the Federal agency, the ESCO designs and constructs a project that meets the agency's needs and arranges the necessary funding. The ESCO guarantees that the improvements will generate energy cost savings sufficient to pay for the project over the term of the contract.