🔒State gov’ts energy-reduction efforts need more money

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A $20 million taxpayer-backed investment to reduce state government's energy use and power bills has shown modest results over the last five years, but the state remains well behind an original energy-savings target established by the General Assembly.

The legislature created the “Lead by Example” (LBE) program in 2011, aiming to reduce Connecticut's power bill — which exceeds $200 million annually — as well as its environmental footprint by paying for lighting upgrades, replacement windows, new HVAC systems and controls, and a myriad of other efficiency measures at state buildings, universities and high schools.

But the program, whose bonded funds have been exhausted on 70 different projects, has only reduced energy consumption by approximately 2.3 percent from 2010 levels, well below the legislature's goal of a 20 percent reduction by 2018.

The Acadia Center, an environmental nonprofit with an office in Hartford, recently released a report criticizing Lead by Example's lack of progress.

“It doesn't appear that the program is on track,” said William Dornbos, senior attorney and director of Acadia's Connecticut office. “It's hard to see, based on this information, how the program is going to get there.”

Lawmakers allocated $15 million to the program, overseen by the Department of Energy & Environmental Protection (DEEP), in 2011 and an additional $5 million in 2015. The program has also benefited from utility-run, ratepayer-funded efficiency programs.

Though the energy-savings pace appears sluggish, DEEP defended its efforts and investments thus far, which are projected to save $2.8 million per year, with an average payback of less than seven years per project. Approximately half of the projects aren't complete, according to DEEP, meaning they aren't yet realizing projected savings, but the agency is also laying the groundwork for much larger efficiency projects that will ramp-up savings in the future.

“Here's what I'm confident about,” said Diane Duva, director of DEEP's Office of Energy Demand. “We're making significant progress in making our buildings more energy efficient.”

Acadia's report also criticized DEEP for not releasing mandated annual reports on the program's progress, which it said makes it difficult for the public to track results. DEEP published annual reports online earlier this month covering 2014 and 2015, following the publication of Acadia's report.

“We regret that reports on the progress of the Lead By Example program were delayed and not submitted on the required annual basis, although we provided updates on our web site on a regular basis and responded to requests for information,” DEEP spokesman Dennis Schain said.

Financing challenge

It's likely Lead by Example will need far more than the original $20 million to shave 20 percent off of the 3.9 trillion British thermal units of electricity and natural gas the state used in 2010, which is the equivalent of how much power 130,000 average households use in a year.

Besides the cost and complexity of projects, particularly larger ones, the state's realty portfolio is massive, with approximately 4,000 buildings and a nearly equal number of separate utility accounts.

“The $20 million, I think it was a start,” Duva said, adding that DEEP is already preparing to add $38 million of its own previously approved bond funding to push several large energy-efficiency projects forward. “It gets some projects going and proves the concept that there's a good return on investment for energy efficiency in state buildings.”

The next major project on deck is Connecticut Valley Hospital in Middletown, which would receive $33 million from DEEP's own pot of money to finance an energy-performance contract projected to save the state facility $1.8 million a year. Under such an arrangement, an energy contractor would guarantee a certain level of energy savings, which would pay for the upfront costs over time.

The Department of Motor Vehicles would receive the remaining $5 million, while DEEP hopes a third large project involving the Department of Corrections will receive upfront financing from the quasi-public Connecticut Green Bank. The three combined would save an estimated $6 million a year, nearly tripling the financial savings of the LBE program to date. Still, even if those projects are completed, they're unlikely to make a large enough impact to get the state to its 20 percent reduction goal by 2018, according to Acadia's Dornbos.

Duva said there are other opportunities for major energy savings, but to complete additional efficiency projects, DEEP and the Green Bank will likely need the legislature's help.

Bert Hunter, the Green Bank's chief investment officer, said private financiers have plenty of appetite to invest in energy-performance contracts at state facilities, but Connecticut's bond cap creates a hurdle.

As it currently stands, borrowing for such projects — even though they generate revenue in the form of negotiated, guaranteed savings — counts toward the bond cap and therefore must compete with many other requests for funding.

Several states, such as Massachusetts, have exempted such green bonds from their caps, Hunter said, and the Green Bank would like Connecticut to take similar action. Hunter said the agency has had some discussions with legislators but cautioned that talks are preliminary.

“It'll be a challenge to move forward, certainly with the volume of projects that are necessary,” if the bond-cap exemption isn't greenlighted, Hunter said. “It's not to say we wouldn't be able to move forward, but the volume would be less.”

Energy comparisons tricky

Despite the millions of borrowed dollars spent so far on reducing the state's energy use, estimates suggest the state's energy consumption may actually be rising.

To measure its progress, DEEP has been using data from the Office of Policy Management that shows 2010 energy use of approximately 3.9 trillion BTU.

But DEEP's recent Lead by Example report estimated the state's total energy in use at 4.5 trillion BTU, a 15 percent increase from 2010.

While the mix of state properties is ever changing, and there has been new construction — at UConn for example — Duva cautioned against relying too heavily on the 2010 consumption estimate, which she said was compiled from paper records and was likely missing a number of properties and utility accounts.

“I don't think we have a complete picture of what our energy use was in 2010,” she said. “I wish we had better information to work from.”

She said she has far more confidence in the more recent estimate, as the state's methodology for collecting energy-consumption data has become more sophisticated. DEEP has been using software to streamline energy-data collection from agencies and utilities.

“The simple conclusion anyone can draw from our energy work is we're making good progress,” Duva said. “The real challenge ahead of us is how we can scale up sustainably.”