Ross Wilkers
Alan Bloodgood oversees energy and infrastructure projects with responsibility over those with alternative financing models in his executive vice president role at Siemens Government Technologies — the German conglomerate’s federal business organization.
Bloodgood’s portfolio at SGT includes programs that are funded under evolving contract arrangements such as energy performance savings contracts and power purchasing agreements agencies use in an effort to generate savings and grow return-on-investment.
In this conversation with ExecutiveBiz, Bloodgood overviews the recent history of ESPC deals and others like it and gives an outlook on the White House’s energy efficiency agenda, plus a description of the mixed effects on agencies’ spending practices from oil price changes.
ExecutiveBiz: What progress have you seen over two years with emerging contract financing models like energy savings performance contracts
Alan Bloodgood: ESPCs play an essential role in facilitating industry’s contributions to helping federal agencies meet the president’s goal of establishing $4 billion in energy-efficiency performance contracts by the end of this year.
Since ESPCs don’t use appropriated dollars, these public-private partnerships provide an excellent privately-financed option for the government and the taxpayer. Siemens is pleased to support the government’s efforts to improve energy efficiency and energy security.
We built the largest federal wind farm at the National Nuclear Security Administration’s plant in Pantex, Texas, which is increasing the government’s use of renewable energy. Through an ESPC with the Army, we are partnering with the Pentagon’s largest helicopter repair facility to address water and energy infrastructure needs and improve energy efficiency at the Corpus Christi Army Depot. Just last month, we signed an ESPC with the Federal Bureau of Prisons.
In 2015, the National Park Service selected Siemens to implement energy and water conservation measures at some of our nation’s most important sites, including the Lincoln Memorial and the National Mall. We are leveraging both established and cutting-edge technology to make America’s iconic monuments, historic battlefields and other national treasures more environmentally sustainable.
And because we are making these improvements under an ESPC, we’re helping the NPS make these sustainable improvements, while saving taxpayer dollars.
We also see federal agencies making greater use of other financing mechanism such as power purchase agreements and enhanced use leases. We applaud the U.S. government for taking this flexible approach, recognizing that there is no one-size-fits-all approach when it comes to financing federal energy projects.
ExecutiveBiz:Â Where do you see the military’s energy savings efforts heading this year?
Alan Bloodgood: The short answer is sustainable and renewable energy. The White House has established a comprehensive plan to develop sustainable energy in federal buildings, including military installations which are the country’s biggest energy consumers.
In December 2013, President Obama directed the federal government to buy at least 20 percent of its electricity from renewable sources by 2020. The plan also emphasizes private financing rather than taxpayer dollars.
The Defense Department has been extremely proactive in meeting the administration’s challenge. And the Army has been quite active in the area of performance contracting. It has also notably reached out to industry for our input and ideas. We also have seen several awards and acquisitions from the Navy that look at broader fence-to-fence projects and region-wide activities from ESPCs.
The Air Force has likewise shown flexibility, using different contract vehicles where available, including considering joint efforts with other services.
ExecutiveBiz:Â What effects are happening or could occur in the federal energy market from low oil prices?
Alan Bloodgood: The relationship of oil prices to energy utility rates is complex. The government often buys energy through long-term purchase agreements so the impact of low prices is not immediate. But even when energy prices are low, these projects realize significant savings. If the benefits in an environment with lower oil prices and commodity prices can be demonstrated, then that sets the stage for a solid energy project.
From a technological and economic perspective, combined heat and power becomes attractive because it enables the customer to get more efficiency out of the fuel sources and it strengthens their energy security and independence.
ExecutiveBiz:Â How can agencies adjust to the low oil price environment?
Alan Bloodgood: Let’s not forget that oil prices are not the only determining factor. Interest rates are low and the cost to the government for financing these energy projects goes down. Also, reducing costs is not the government’s only goal. Increasing the sustainability of its operations is also an important priority.
Fuel oil results in higher emissions. Even in a low-price environment, there are benefits to finding solutions that reduce emissions and use cleaner energy.
ExecutiveBiz:Â What federal energy trends do you expect to pick up more steam?
Alan Bloodgood: Renewable energy, energy security, distributed energy systems. We see the government’s growing recognition of the importance of all these areas. We think the movement to renewable energy will remain a major trend for the government. Costs of several forms of renewables, especially solar, has fallen steeply over the last few years.
The federal government understands how greater use of distributed energy systems can strengthen our nation’s energy security and promote sustainability. This is an area where SGT is a proven and reliable partner as Siemens’ lead federal energy services company.
Now that affordable forms of alternative energy are available, our customers have the ability to invest in various forms of energy security and assurance. This could take the form of a microgrid that improves control and security as well as the “dispatchability of assets.”
This allows the customer to switch on assets and otherwise adjust the mix of renewable and non-renewable power and leverage energy storage based on factors such as demand and the time of day. This can be designed to give critical federal assets ongoing uninterrupted power.
We see a trend toward incorporating smart grids into federal infrastructure frameworks so that critical assets are not susceptible to disruptions. The seamless provision of energy from renewable sources into microgrids that serve critical assets at a military installation helps promote resiliency and security.
The administration has been driving a set of programs to meet federal energy savings and efficiency mandates. We’ve seen a significant focus from Washington on the drive towards sustainability and the use of energy performance contracting.
Our CEO has issued a similar goal for Siemens: to be the first major industrial company to achieve a net zero carbon footprint by 2030. To meet this goal, we are implementing the same technologies and upgrades to our own operations that we sell to our customers. We think this makes us a better partner.
