This post, written by Jonathan Messinger, originally appeared on Public Spend Forum.
It’s not often one catches sight of a press release about energy procurement and does a double—or, if we’re being honest—single take. But recently a release from Massachusetts’ World Energy Solutions crossed my path, and one particular number popped out at me. Assisting the GSA with an energy procurement reverse auction for federal facilities in New England, the company estimates that it was able to save the GSA $16.6 million (roughly $5.5 million a year over a three-year term).
The story rang a bell for me, because last month, I’d read about six public utilities in Massachusetts coming together to leverage their size in purchasing wind power, driving down cost considerably. Whatever is happening in Massachusetts right now, it’s clear that the Red Sox aren’t the only ones winning.
There are several keys to the GSA’s success with this procurement, says Jonathan Harvey, VP of Government at World Energy. GSA’s energy division contracts with the company to provide procurement support, market analysis, and a host of other services, the end result of which is a unique, real-time reverse auction process. (The GSA did not respond to requests for comment.) According to Harvey, prior to this procurement, the GSA had been on a five-year, fixed-price contract with its energy supplier for those facilities. The World Energy team introduced what’s called a block-and-index pricing plan for the buildings. Following an analysis of the facilities’ peak power usage—in terms of hours of the day and months of the year—the plan allows the GSA to purchase energy in blocks at a fixed rate, but then any energy used in excess of that block is paid at market rate.
Leveraging Green Energy Investments
“At any point during the day the price of electricity is changing,” said Harvey. “After 11pm, there’s not as much demand, and prices tend to go down significantly. What facilities have done, with more money going into energy efficiency, they’ve invested in technology to be able to shift their load to off-peak hours, instead of using the majority during the normal business day. Things like running chillers overnight to make ice to cool the building.”
But because the facilities were still on a fixed-rate plan, running those chillers at night cost the same as running them during the day. By taking advantage of drops in energy prices in off-hours, the GSA could save a bundle.
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