Barriers To Installing Energy-Efficient Lighting in Federal Buildings

Published by the Government Accountability Office on 1990-07-11.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office    / y/    ‘/ 0


For Release        Barriers    To Installing  Energy-Efficient
on Delivery        Lighting    In Federal Buildings
Expected at
lo:00 a.m. EDT
July 11, 1990

                   Statement  of
                   L. Nye Stevens,  Director
                   Government Business Operations           Issues
                   Before the
                   Subcommittee   on Environment,  Energy and Natural
                   Resources,   Committee on Government Operations
                   and the
                   Subcommittee   on Energy and Power, Committee on
                   Energy and Commerce
                   House of Representatives

GAO/T-GGD-90-54                                                      GAO Foriu ~60   (12/W)
                       LIGHTING IN FEDERAL BUILDINGS

                               SUMMARYOF STATEMENT BY
                                   L. NYE STEVENS
                           DIRECTOR, GOVERNMENTBUSINESS
                                  OPERATIONS ISSUES
                             GENERAL GOVERNMENTDIVISION
                           U.S. GENERAL ACCOUNTING OFFICE
At the request        of   Senator William    Roth, GAO has carried         out a
preliminary     review       of barriers   to installing      energy saving
fluorescent     light      bulbs in federal    buildings.       With the
enactment     of P.L.      loo-615    in November 1988, Congress set a goal
of reducing     total      energy consumption      in federal     buildings    by 10
percent     by 1995.
Technological        and contracting     advances have opened up
possibilities        of major savings     in lighting      costs,   which with
associated       air conditioning     requirements      account for about 60
percent       of the electricity     an office    building     consumes.
GAO's work to date, however,    has revealed   several obstacles                that
can hamper agencies   taking  advantage  of these potential
opportunities.   These include:
       --Lack of funding         for investments     in conservation
          technology,      which may involve      somewhat higher    initial
          outlays     than conventional      technology    but offer   long-term
          advantages      that are not reflected        in the budgetary
          allocation      process;
       --Dispersion   of responsibility       for energy conservation,
          which must compete with many other building         investment
          priorities,   and lack of a central      capability   to evaluate
          and compare alternative       measures;
       --Because     energy usage of individual          buildings      is often not
          Separately     accounted     fOK, baseline     data on energy usage is
          lacking    for measurement of conservation             savings and
          evaluation     of alternative     investments;
       --Only    20 states  have utilities         that offer   rebates  for
          energy conservation    measures,         which provide    an additional
          incentive    where they do exist;
      --Unfamiliar        federal     procurement     methods and untested
         private     sector     financing     result    in time-consuming
         negotiations        for awarding       "shared energy contractsl',    where
         a contractor        offers    to install     and maintain    energy saving
    u    equipment      in return      for a share of the cost savings        that
         result    over a specified          period   of time.
MK. Chairman                  and Members of the                     Subcommittee:

We are pleased                     to be here             today      to discuss             the preliminary
results          of our            review         of the      barriers            to installing                   energy             saving
fluorescent                light          bulbs         in federal         buildings.                  Our review                was
requested              just        last     month by Senator                    William          Roth.

Efficient              lighting            is     one of      the        key elements                 in reducing                energy
usage          in buildings.                     According          to the        Department                of Energy's
Berkeley           LabOKatOKy,                   about     one-fifth            to one-fourth                 of        total         U.S.
electricity                consumption                  is consumed            by lighting,                 of which             40 to
50 percent               is used           for     commercial             sector        lighting.                 In addition,
lighting,              and the            attendant          air     conditioning                it     requires,
accounts           for        approximately                60 percent             of    the electricity                         an
office          building            consumes.

Congress          has long                recognized          the        importance         and benefits                        of
reducing           national               energy         usage,      and the           need for             the    federal
government               to set           an example          to the           rest     of the          nation.                 The
federal          government                is     the     nation's         largest         energy            user.              Every
year      the     government                spends         approximately                $4 billion                for      energy
used      in     its       500,000          buildings.               Most       recently,             with        the      enactment
of     P.L.      loo-615            in November              1988,        Congress         set        the     goal         Of
reducing           total        energy            consumption             in    federal       buildings                  10 percent
by 1995.



            S e n a tor       R o th a s k e d th a t               w e look             into         th e o b s tacles           th a t      th e
            General           Services              A d m inistration                    ( G S A ) faces            in installing                   high
            te c h n o l o g y ,        e n e r g y - e fficient                lighting                in its        buildings.               He has
            p e r m i tte d         us to share with                         y o u th e preliminary                          results       of our
            work,        which b e g a n in J u n e ,                        a n d consisted                   o f interviewing                GSA,
            D e p a r tm e n t        of Energy              (DO E ), a n d D e fe n s e                    Logistics            Agency (DLA)
            personnel;                reviewing             D O E reports                    o n Federal            e n e r g y conservatio n
            progress               and energy              e fficient               lighting;               a n d reviewing                DLA
            d o c u m e n ts o n selling                    to civilian                      a n d m ilitary            agencies.

            N E W E N E R G YC O N S E R V A T IO NO P P O R T U N ITIE S
            In recent              years,          m a n y technological                            i m p r o v e m e n ts     have been made
            in flu o r e s c e n t             lighting             th a t      substa n tially                   r e d u c e electrical
            c o n s u m p tio n .           FOK        example,              th e m a jor            commercial               sources         of lamps
            n o w o ffer            flu o r e s c e n t       lights            th a t        fit       into      sockets         th a t
            previously                a c c e p te d       only       incandescent                     bulbs.          A n 1 8 w a tt          compact
            flu o r e s c e n t         bulb       c a n replace               a 7 5 w a tt               incandescent             bulb,
            producing               th e s a m e a m o u n t o f light                          a t a fo u r th          o f th e p o w e r .
            O th e r     i m p r o v e m e n ts           include            high        e fficiency             ballasts              (the    starter
            for      flu o r e s c e n t         tubes),            m irrored                reflectors             in lighting               fixtures
            th a t     m a k e it          possible           to r e m o v e s o m e o f th e bulbs                             with       little          OK

            n o reductio n                 in light           o u tp u t,        and high                intensity             discharge             lamps
            which        c a n replace                 incandescent                  l a m p s a t a fo u r th                 o f th e w a tta g e
            with       5 percent              more         light.


     In addition               to technological                    improvements                  in lighting,            there        have
     been new programs                       developed           in government                and in          the     private
     sector       intended             to make it               easier         for      energy       users       to reduce
     their       electricity                 consumption.                Legislation                was enacted              on April
     7, 1986 authorizing                        federal          agencies            to participate                 in shared
     energy       savings             programs           for     the     purpose           of achieving               energy        and
     related           cost     savings             in federal           buildings.                 Under      this     program,
     a contractor               installs             and maintains               energy            conserving          equipment.
     In exchange               for     its      investment,              the     contractor             is paid         a
     percentage               of the         energy       cost      savings             directly        resulting             from        the
     energy       conservation                 measures            taken        during        the     life       of    the
     contract.                Funding         for      such projects                 is taken          from      budgets
     appropriated               for     energy          expenses             and related             operations             and
     maintenance.                    Since      federal          participation                in     these       programs            is
     fairly       new,         sufficient              experience             and information                   is not        yet
     available           to evaluate                 their       success.             However,          the      concept          has
     been successfully                       applied           in private            industry         and state             and local

     Another        alternative                 that      appears            promising             in concept          is     the
     rebate       programs             offered          by several              utility          companies.             With        the
     rebate       programs,             utility           companies             offer       users       cash        rebates         to
     install        new lighting                    fixtures.            For example,                starting          in February
     1990,       the     Potomac             Electric           Power Company (PEPCO) began providing
     lighting           rebates         to private               and federal              customers           who replace
     existing           equipment             with      high      efficiency              bulbs       and ballasts,

reflectors,                  occupancy                sensors,         daylight         savings            sensors,             and
energy         efficient                 exit       signs.          The rebates               are determined                    per
fixture            replaced              and include              a 10 percent                bonus        if        the    customer
installs            more than                 one energy            efficient           improvement                   per    fixture.
The company will                         pay up to 50 percent                      of     the       equipment               and labor
costs.             Utility              companies             in many sections                 of the            country         are
participating                     in     these         programs         to avoid          having           to build
additional              generating                  capacity,           a comparatively                    more expensive
option.             According                 to DOE officials,                   the     results               of    federal
participation                     in these             programs         are     not     yet        available.

BARRIERS TO INSTALLING                                 ENERGY EFFICIENT                 LIGHTING IN FEDERAL
Although            the       technology                 is available             and there               are        incentives          to
help        agencies              fund        the      cost     of energy             reduction            measures,             GSA has
made limited                  progress              in     taking       advantage             of    such opportunities.
GSA and DOE officials                               cited        several        barriers,             including              the
inability             to obtain                 the      additional           funding          required;               dispersion
of authority                  among managers                    with        many other             priorities;               the      lack
of     a central              point           in government                 responsible             for         evaluating            the
claimed            benefits              of     lighting          products         and disseminating
information                  on which            product          is    the most cost-effective;                                the     lack
of baseline                  data        on individual                 buildings          to measure                  energy
reductions              after            installing             energy        efficient             replacements;                  the
fact        that      not         all     utility             companies         offer         rebate            programs;          and
the        nuances           of     federal            procurement            regulations                 which        can inhibit

    energy          savings               initiatives.                I will           briefly        discuss          each of             these
    barriers,                with         the      caveat     that       we have not                independently
    verified              them or measured                    their          overall            impact.

    Energy          saving           lighting             equipment              is generally              more costly               to
    initially                purchase              than     conventional                 lighting          equipment,               in     spite
    of     its      lower           "in      the     long     run"       life          cycle      cost.        For example,
    compact           fluorescent                   bulbs,       which           are     four      to five          times       more
    energy          efficient                and last         10 times             longer          than      regular           bulbs,
    cost         $10 to $15,                 whereas         regular             bulbs     cost       70 cents           to $1.09.
    In times            of budget                deficits,            facility            operations           and maintenance
    is one of the                    easiest           targets         for        budget         reductions.                Government
    agencies              like       GSA get          caught          in a proverbial                     "catch       22"
    position          --if          they        had some additional                       funds       they     could           save
    money,          but       the         savings         are not        possible               without       spending              that
    additional                amount            of money up-front.                        For example,               even with                 the
    shared          energy           saving          programs,           where           a contractor               installs             the
    energy          efficient                equipment           at    its        own expense,               agencies           are
    required            to       invest          some funding                to seek candidate                     buildings,
    monitor           their          savings,             and evaluate                 alternatives            and progress.

    Dispersion                of Authority
    During          the       last         administration,                   and to a lesser                  extent           in    the
    current           administration,                       energy       conservation                did      not      receive             a
    high         priority            in government                operations,                   according           to DOE and GSA

officials         we contacted.                 More emphasis                has been recently                   placed
on the        budgetary        and other           benefits            of    reducing         energy       usage       in
Federal        buildings.             However,        dispersion               of operating              authority
for     the    government's            500,000        buildings              among more than               a dozen
agencies,         compounded           by GSA's recent                   delegation           of building
management         functions           to tenant            agencies,            makes central             leadership
difficult.           Energy         conservation             must compete              with     many other
building        investment           priorities,             such as occupant                  health           and
safety,        needed       renovations            to many old               and deteriorating                   Federal
buildings,         and increased                leasing          costs       facing      GSA.

No Central         Evaluation            of Alternatives
No one in government                   has the        responsibility                  to test       the         claimed
benefits        of energy           efficient        lighting               equipment.          The decision                on
whether        to install           such equipment                is     often      made by the manager                     of
a particular            building.           With     limited             information           and budget,             a
building        manager       can have difficulty                        deciding        whether          to spend
what money is available                     on replacing                 ballasts        in multiple-bulb
fixtures        or on replacing                 incandescent                bulbs     with     fluorescent
fixtures,        or tradeoffs             between         Brand          X which       costs      $5 a unit            and
saves        25 watts       each,      or Brand        Y which              costs     $7 a unit           but     saves
40 watts.

Although        limited       research           on some alternatives                        has been done at
DOE's Lawrence              Berkeley        Laboratory             in California,               little          work
has*been        done to evaluate                 specific          innovations               or competing

products,               and there            is no formal                  mechanism             in place           to transfer
the     information               obtained           at Berkeley                    to the        individual               building

Further,           there         is   some confusion                        in government               as to which               agency
is    responsible              for      getting           energy             efficient            lighting           products           on
government               catalogues            and schedules.                        Initially,              both         GSA and DLA
handled          the procurement                    of    light            bulbs.         In December                1989,
through          an agreement                with        GSA, DLA was given                         sole         responsibility
for     this       function.              When we asked                      DLA in early               July        how a
civilian          agency          could       get        a product                introduced            on the            DLA
catalogue,               DLA officials               said           that      they       did      not      know.           When DLA
assumed          full      responsibility                     for     purchasing                 lighting           for     civilian
and military               agencies,              no procedures                    were established                       to handle
requests          from       civilian             agencies             to     introduce             products              on the       DLA

No Baseline               Data
A key requirement                     of P.L.            loo-651             is to reduce               energy            consumption
10 percent              in each agency                   by 1995.                 This    will        require             comparing
the     amount          of energy            used        in     the base year                  with        that      used       in
1985.          Establishing               prior          energy            use,      or the baseline,                      in   federal
buildings           is difficult               because               very         few buildings                  are metered
individually.                 Furthermore,                    according              to GSA officials,                      utility
costs      are      included            in    the        rent        in a majority                 of      its     leased        space,

and the        owner has no obligation                            to give            GSA detailed              information
on utility            usage.

The lack         of      individual          building             meters            also     impedes         the
utilization              of shared          energy         savings            programs,            where       contractors
project        energy           savings      from        their         installation                of energy
efficient         devices           and are        paid       a percentage                   of    the     cost      savings.

Not All        Utility           Companies         Offer          Rebates
According            to the       Department           of     Energy’s               April        1990 utility              rebate
guide,        51 energy           service         companies                 are currently               offering          rebate

programs         on energy            efficient            lighting             fixtures           in    the      following
20 states:               Arizona,          Arkansas,          Connect icut,                  District          of Columbia,
Florida,         Illinois,            Kentucky,            Maine,            Maryland,            Massachusetts,
Minnesota,            Montana,         Nevada,         New        Hampshire,               New     Jersey,          New     York,
Pennsylvania,                Texas,       Washington              State,            and Wisconsin.                  While       the
number        of utilities             participating                   in     rebate         programs          is
encouraging,              certainly          not     all     major            locations            where       the
government            has buildings               are covered                 by such programs.

In 1989,         PEPCO applied               to    the      Public            Utility         Commissions             of
Washington,              D.C.     and Maryland              for        approval            to participate                 in
utility        rebate           programs      and increase                    its       generating          capacity.
PEPCO received                  approval      to participate                        in such programs                 in
Maryland         in November               1989 and in                the     District            of Columbia             in
  *             of       this     year.       GSA officials                    said        that     as a result                of

the     expansion            to PEPCO’s program,                          20 to        25 Federal                     buildings
would      be retrofitted                     with     energy           efficient             lighting                 in     1991.
Similarly,              on June        29 DOE released                     its      first           shared             energy
savings         solicitation                dealing          with        lighting             for         its      headquarters
building          in Washington,                     D.C.       The project                 will      involve                 an
investment              of approximately                    $1-l/2         million            to replace                    40,000
existing          fixtures           with       energy          efficient              fluorescent                     fixtures.

Federal         Procurement                Requlations
DOE and GSA officials                          said      that        negotiating               shared              energy           savings
contracts           can be time-consuming                           because            they         involve             both
unfamiliar              federal        procurement               procedures                 and relatively                         untested
private         sector        financing               concepts,            such as where                        the     contractor
pays      the    cost        to     install           and maintain               energy             saving             equipment.
According           to the        National             Association               of Energy                 Service
Companies,              a particularly                 significant               problem             is         that        the     Federal
Acquisition              Regulation             language             is not         directly               applicable                 to the
innovative              contracting             format          required.                 Federal               agencies            are
required          to implement                 shared        energy         savings            contracting                     using      the
“Request          for       Proposal”           process.                Under       this       process,                 contractors
submit       proposals            on selected                buildings              for      which              the     agency         has
not    defined           a scope           of work.             Because          the        contractors                     work
independently,                the      diversity             of proposals                   resulting                  from        an RFP
make it         difficult            for       federal          agencies            to evaluate                    them.
Regulations              restricting                 communications                 with       the         bidders            prior       to

the    award        of a contract               are another                   factor      inhibiting             the
evaluation           of    technologically                    diverse           and innovative                proposals.

Determining           the        allocation            of     actual           versus       projected            savings
between       the     contractor              and the          agency            involves        a calculation                 of
risk      on both         sides.          Changing            utility            rates,      stemming            for     example
from      an unanticipated                 decline            in energy            prices,          can result            in
savings       lower        than      expected.                The government’s                   characteristic
aversion       to risk            tends       to lead           it      to place          the    risk        on the
contractor.               Should      energy           prices           return         to the       volatility            of      the
1970’s,       the     relative            inflexibility                  of     the     government’s
contracting           process         could          be a deterrent                    to extension              of    the
shared      energy         savings         concept.

In addition,              according           to DOE and GSA officials,                              the      procurement
process       is complicated                  for      both          shared       energy        savings          projects
and utility           rebate        programs               because          agencies         have       to    identify
available       energy            savings           in their            buildings;           find       out      how to
take     advantage          of     them;       evaluate               the      various       energy          savings
projects;       and award             a contract               to an energy                 service          company.

Mr.    Chairman,           that     concludes               my prepared                remarks.          We would            be
pleased       to respond            to questions.