### MEMORANDUM

DATE: July 29 , 2015

TO: Clean Power Plan for Existing Power Plants; Docket Id: OAR

– 2013

- 0602

FROM: Lora Strine , EPA

SUBJECT: July 29 , 2015 Phone Call Regarding Proposed Clean Power Plan for Existing Power Plants

SUMMARY A phone call was held between EPA and Chris Hessler, AJW on July 29 , 2015 to discuss the proposed Clean Power Plan for Existing Power Plants

. The Clean Power Plan for Existing Power Plants was proposed on June 2, 2014.

Materials attached

ATTENDEES

AJW

Chris Hessler



### US EPA

Lora Strine Angie ShatasFrom: Chris Hessler [mailto:CHessler@ajw

- inc.com] Sent: Tuesday, July 28, 2015 5:47 PM To: Strine, Lora (Strine.Lora@epa.gov) <Strine.Lora@epa.gov> Cc: Chris Miller <cmiller@ajw

- inc.com>; Ted Michaels <TMichaels@ajw

- inc.com>; Mona Sheth

< msheth@ajw

- inc.com> Subject: per our discussion

Lora, Per our discussion yesterday, attached is pair of PowerPoint slides that illustrate how GHG savings from PC projects can be totaled and included in state plans. The chart shows how to get a snapshot i n 2018 of all the savings that can be counted on by the state because it has or will come from projects covered by guaranteed contracts as of 2018. States should be able to take 100% credit for these planned GHG reductions because of the guarantee.

In ad dition, we believe that reasonable estimates can be made for future projects that are not under contract, and progress toward those additional "estimated goals" could be checked in subsequent progress reports as additional projects were contracted. (One e xample of an estimated goal would be the President's Executive Order calling for $4billion investment in EE through performance contracts.) States would want to be more conservative including projections of "estimated" GHG savings when the projects are not under contract. We would recommend that in projections for state plans, states use no more than 50% of any estimated

- but not contracted

- EE project

- related GHG savings.

Lastly, industrial projects are not included in this graphic. We will work on an other one that illustrates the inclusion of EE from industrial projects.

Tomorrow I will have some suggested regulatory language that could dovetail with the language proposed by MJ Bradley. I think it is fairly easy to drop in some EE components.

Chris

[image001] Christopher J. Hessler | Partner | AJW, Inc. 2200 Wilson Blvd, Suite 310, Arlington, VA 22201 O: 202.296.8086 ext.101 / C: 202.460.0945 Chessler@ajw

- inc.com< mailto:Chessler@ajw

- inc.com > @AjwHessler

Enhancing market opportunities for innovative technologies.

# Predictability of CO2 Savings from Performance Contract (PC) Project Pipeline

Key Highlights:

• PC project lead times (up to two years) provide visibility on future

- year contributions from projects (indicated by blue boxes)

• Once built, PC projects provide states with clarity on how long the savings will persist (indicated by yellow boxes)

• GHG savings persist beyond the guaranteed period of the contract due to long

- term, useful life of the equipment (indicated in orange boxes)

• Future savings could be utilized through a credit system to buffer state plans to make them more robust 

### State Planning Activities:

• Analyze existing market by taking into account past programs and policies in place to deploy PC projects by a third party

• Identify target buildings for PC (e.g. all public buildings above a minimum energy

- using threshold)

• Use conservative forecast of GHG savings from existing and reasonably anticipated PC projects

• T rack total emissions avoided from the prior year using M&V reporting provided by ESCOs, a registry, or other appropriate source

• Include PC in Executive Orders, legislation, regulations, and EERS programs The chart above illustrates the GHG savings that can be anticipated in a sample state. 111(d) Compliance Year
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 1 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 2 Construction 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 3 Construction Construction 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 4 Construction Construction 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 5 Construction Construction 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 6 Construction Construction 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 7 Construction Construction 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 8 Construction Construction 467,457 467,457 467,457 467,457 467,457 467,457 467,457 467,457 467,457 431,794 9 Construction Construction 506,256 506,256 506,256 506,256 506,256 506,256 506,256 506,256 467,457 10 Construction Construction 548,275 548,275 548,275 548,275 548,275 548,275 548,275 506,256 11 Key: Construction Construction 593,782 593,782 593,782 593,782 593,782 593,782 548,275 12 Construction Contracted Project under Construction Construction Construction 643,065 643,065 643,065 643,065 643,065 593,782 13 267,612 Electricity-related CO2 Savings from Measures Operating under PC Guarantee Construction Construction 696,440 696,440 696,440 696,440 643,065 14 267,612 Electricity-related CO2 Savings from Measures Operating without PC Guarantee Construction Construction 754,244 754,244 754,244 696,440 15 Construction Construction 816,547 816,547 754,244 16 For purposes of this chart, 1 MWh saved equals 0.5 tons of CO2 avoided Construction Construction 884,645 816,547 17 Construction Construction 958,071

267,612 557,436 871,315 1,211,246 1,579,392 1,978,094 2,409,888 2,877,345 3,383,601 3,931,876 4,525,658 5,168,723 5,865,163 6,619,407 7,435,954 8,320,599 8,825,819 CO2 Avoided from Performance Contracting (by State)

Cumulative CO2 Tons

Saved AnnuallyYear PC Project Signed

# Guaranteed PC Savings Available in a Sample Planning Year

Planning Scenario for 2018:

• Estimated growth of the PC market between 2014

- 2018 would generate a universe of guaranteed savings approximating 26,776,380 tons of avoided CO2

• Note: A state may include PC Savings generated after the proposed rule was released (2014) and before compliance period begins (2020) if EPA allows states to take credit for early action 2014 2015 2016 2017 2018 (Planning Year) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2014 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 267,612 2015 Construction 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 289,824 2016 Construction Construction 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 313,879 2017 Construction Construction 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 339,931 2018 Construction Construction 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 368,146 2019 Construction Construction 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 398,702 2020 Construction Construction 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 431,794 2021 Construction Construction 467,457 467,457 467,457 467,457 467,457 467,457 467,457 467,457 467,457 431,794 2022 Construction Construction 506,256 506,256 506,256 506,256 506,256 506,256 506,256 506,256 467,457 2023 Construction Construction 548,275 548,275 548,275 548,275 548,275 548,275 548,275 506,256 2024 Key: Construction Construction 593,782 593,782 593,782 593,782 593,782 593,782 548,275 2025 Construction Contracted Project under Construction Construction Construction 643,065 643,065 643,065 643,065 643,065 593,782 2026 267,612 Electricity-related CO2 Savings from Measures Operating under PC Guarantee Construction Construction 696,440 696,440 696,440 696,440 643,065 2027 267,612 Electricity-related CO2 Savings from Measures Operating without PC Guarantee Construction Construction 754,244 754,244 754,244 696,440 2028 431,794 Universe of PC Savings Available to a State in Planning Year 2018 Construction Construction 816,547 816,547 754,244 2029 For purposes of this chart, 1 MWh saved equals 0.5 tons of CO2 avoided Construction Construction 884,645 816,547 2030 For purposes of this chart, states can count interim period energy savings Construction Construction 958,071

9,852,077 13,591,318 17,640,924 22,026,646 26,776,380 2018 Sample Planning Chart: Universe of Guaranteed PC Savings Available for State ComplianceYear

Delivered and Guaranteed CO2 Savings Available for Planning Year (tons) 111(d) Compliance Year

2014-2030 Total Delivered and Guaranteed CO2 Savings known in 2018: 26,776,380

## Success of the President’s Perfo rmance Contracting Challenge July 29, 2014

Energy Performance Contracts allow F ederal a gencies to partner with private energy service companies and utilities to implement energy efficiency improvements at Federal facilities by paying for the investment over time from guaranteed savings. In 2011, the President issued a Performance Contracting Challenge (PPCC) that asked Federal agencies to commit $2 billion in energy savings performance contracts (ESPCs) and utility energy savings contracts (UESCs) through 2013. In May 2014 the President announced the expansion and extension of the PPCC to $4 billion by 2016 . As of June 2014, nearly $1.5 billion in energy performance contracts were awarded.
Under energ y performance contracts, u tilities or energy service companies identify energy sav ing improvements, design a cost

- effective project to meet agency needs, arrange for financing, and ensure that sufficient energy and energy

- related cost savings are available to pay the project cost s up to a 25

- year term , after which all cost savings accrue to the agency. Projects may inclu de lighting and HVAC upgrades, energy management infrastructure, water conservation improvements, and construction of renewab le power generation such as solar photovoltaics and combined heat and power

. Energy Savings Performance Contract (ESPC) Energy, Cost, and GHG Savings ESPCs awarded by the Federal government under the PPCC should result in significant energy savings and GHG emissions reductions. Bas ed on the awarded value of ESPC s through December 2013, planned projects will achieve an estimated energy savings of approximately 3.34 trillion BTUs annually, which is equivalent to the annual energy consumption of 37,100 homes 1 

### and 320,000 metric tons of CO 2 

### emissions. The average ESPC is anticipated to deliver energy savings of 859 billion BTU over the life of the contract, which is equivalent to GHG reductions of 82,000 metric tons of CO 2


### . 2 

### T hese ESPCs at Federal facil ities should result in energy and relat ed savings of approximately $93 million annually. These savings are then used to pay off the contracts that enabled the government to make these capital improvements.
Economic Impact and Jobs Creation Energy p erformance c ontracts provide Energy Service Companies ( ESCOs ) with the ability to create and sustain new technical expertise , manufacturing capacity , and skilled jobs as a result of the new opportunities for private investment brought about by energy perfo rmance contracting projects. According to the Council of Economic Advisors (2009) , the current awarded value of investments for e nergy p erformance c ontracts ($1. 5 billion) from the President’s Performance Contracting Challenge will create approximately 16 ,045 new job

years in the private sector

. 3 

### In all, it is estimated that achieving the initial goal of $2 billion in awarded energy projects will create 21,739 new job

- years (one job for one year) . A chieving the expanded goal of $4 billion in awarded investme nt by 2016 will result in a total of 43,478 job

- years created by private industry through energy performance contract projects.
Geographic Distribution Energy p erformance c ontracts have been deployed at Federal facilities nationwide. Because e nergy p erformance c ontracts cover any number of applications from renewable energy generation, to improving water and energy infrastructure and heating and cooling systems, they can respond effectively to the energy efficiency needs of a wide geographic ra nge of Federal facilities and are found in almost every state. 4

### Conclusion Energy p erformance c ontracts provide Federal agencies with the opportunity to achieve their energy efficiency goals while supporting a clean energy economy and domestic job grow th. These public

- private partnerships enable Federal agencies to engage private sector funding and expertise while creat ing domestic jobs and reduc ing monthly energy costs for Federal agen cies and the tax payer . B y improving the efficiency of existing infrastructure and reducing energy intensity, energy performance contracts also provide opportunities for renewable energy production and ultimately contribute to reductions of Federal agency greenhouse gas emissions.

1 “2009 RECS Survey Data.” Energy Information Administration. December 2012. Average household consumes 90 million BTUs per year. 2 “Emission Factors for Greenhouse Gas Inventories.” Environmental Protection Agency. April 2014 http://www.epa.gov/climateleadership/documents/emission

- factors.pdf

. 3 “Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009.” Executive Office of the President, Counc il of Economic Advisors. May 2009.
4 “Improving Federal Energy Savings through Performance Contracting.” National Association of Ma nufacturers

.From: Chris Hessler [mailto:CHessler@ajw

- inc.com] Sent: Tuesday, July 28, 2015 6:09 PM To: Strine, Lora (Strine.Lora@epa.gov) <Strine.Lora@epa.gov> Subject: GHG reductions from PC projects
http://ofee.gov/Resources/Guidance_reports/Success

- of

- the

- President's

- Performance

- Contracting

Challenge.pdf

Lora, This document cites a GHG reduction number from the President's ESPC initiative. It is for projects under contract

- not a projection going forward. We may be able to get a similar one from DOE for the industrial SEP reductions achieved to date. Will get back to you on th at. Chris

[image001] Christopher J. Hessler | Partner | AJW, Inc. 2200 Wilson Blvd, Suite 310, Arlington, VA 22201 O: 202.296.8086 ext.101 / C: 202.460.0945 Chessler@ajw

- inc.com<mai lto:Chessler@ajw

- inc.com > @AjwHessler

Enhancing market opportunities for innovative technologies.