It takes green to go green

President Biden made headlines with his recent executive order directing federal agencies to achieve net-zero greenhouse emissions by 2050, including meeting ambitious goals this decade to decarbonize federal vehicles, buildings and electricity use. While the President’s plan would make only a dent in US emissions overall, the real aim is to use the government’s vast buying power to accelerate the market for clean energy products and stimulate upstream innovation.

But it takes green to go green, which is why the Build Back Better (BBB) bill gave federal agencies money to cover the (initially) higher upfront cost of clean energy. With or without BBB, Congress should capitalize the President’s plan, lest the federal government (again) miss the opportunity for clean energy leadership in its own backyard.

Consumers are slow to adopt clean energy products like energy-efficient appliances and electric vehicles for two reasons. One is market failures, including the fact that energy-intensive products don’t pay for the pollution they generate. A second impediment is the “green premium” — clean energy products tend to cost more upfront and yield net savings only over time in the form of lower operating costs. As the country’s largest energy consumer — with 657,000 fleet vehicles, 350,000 buildings and a $6-billion-a-year utility bill — the federal government is in a position to adopt clean energy products early and often, giving innovators much-needed market-pull.      

As far back as the 1970s oil embargo, elected officials have sought to use federal procurement and asset management to achieve national energy goals. While these efforts have produced some notable successes, they have often fallen short.

Take vehicles. Decades of energy directives from Congress and the White House have yielded remarkably little improvement in the makeup and performance of the federal fleet, which is still dominated by traditional gas-powered vehicles. To meet targets for alternative-fuel vehicles, federal agencies have purchased large numbers of “flex-fuel” vehicles able to run on gasoline or gasoline-ethanol blends of up to 85 percent ethanol (E85). Setting aside questions about the sustainability of E85, what’s telling is that flex-fuel vehicles in the federal fleet operate almost entirely using conventional fuels because of the dearth of E85-refueling stations.

As another example, in a 2007 energy law signed by President George W. Bush, Congress directed federal agencies to reduce the energy consumption of their buildings by 30 percent by 2015. Civilian agencies came close to meeting the efficiency target, but the Department of Defense, with its scores of sprawling military installations, brought down the average, resulting in a government-wide reduction of only 23 percent. Today that number is just 27 percent – still shy of the 2015 target.

The key reason such directives fall short is that they are an unfunded mandate on federal agencies whose budgets are already strained. Understandably, agencies focus the resources they have on meeting their primary missions, such as national defense or homeland security. For most agencies, clean energy is not a mission.

The higher upfront cost of clean energy poses a particular challenge, because of the nature of the federal budget process, which fixates on the first cost of an expenditure, ignores the potential for lifecycle savings, and limits agencies’ ability to use the latter to pay for the former. (Increasingly, agencies are acquiring otherwise unaffordable clean energy assets in the form of pay-as-you-go services, but that can add significant cost.)

Like the budget process, the federal procurement process devalues sustainability and lifecycle savings in favor of what procurement law scholar Steven Schooner calls “the tyranny of low price.” When analysts from Lawrence Berkeley National Laboratory surveyed federal contracting personnel, respondents said getting the lowest purchase cost was their highest priority whereas buying energy-efficient products was their lowest priority. Perversely, they ranked “lowest lifecycle cost” as less important than “lowest purchase cost.”

To combat the tyranny of low price, BBB included $6 billion for electric delivery trucks for the U.S. Postal Service. Mail delivery is the poster child for electric propulsion, which is why many were surprised when Postmaster General Louis DeJoy announced in February that USPS’s new fleet of up to 165,000 trucks would be mostly gas guzzlers because of EVs’ higher capital cost. DeJoy worked with Congress on a plan to use taxpayer funds (BBB) to pay for the incremental cost of acquiring EVs, which will be far cheaper to operate. 

Like USPS, federal agencies need a one-time infusion of funds to cover the higher upfront cost of EVs, battery chargers, and upgrades to electrical infrastructure, and BBB included $3 billion to support that. With its demand for 50,000 new vehicles a year, the federal government is poised to boost competition in the EV market, support new and planned U.S. production, and give suppliers the confidence to invest in labor, equipment and new technology.

Finally, BBB included $3.75 billion to help reduce emissions from federal buildings and building materials: As the owner of the country’s largest and most geographically distributed building portfolio, the federal government is uniquely situated to serve as a test bed for and early adopter of next-generation building-energy technologies.

Federal procurement can drive clean energy investment and innovation if it’s not done on the cheap. BBB recognized that. BBB is on hold, but the need remains.


Tags: BBB, Biden, Clean Energy, Energy Consuption
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