Energy-Efficient Product Procurement (EEPP)

In 2003, the US-government occupied 2.7% of non-residential floorspace (Harris & Shearer 2006, p.6) or roundabout 51,000 non-residential buildings (DOE NA). Moreover, the Department of Defence also operates 422,000 housing structures for the US military (Cleantechnica 2010).
Overall, energy intensity has been declining since 1985. In 1999, the energy intensity was 380 kWh/m² on average for non-residential federal buildings (Harris & Shearer 2006, p.6).
All in all, it is estimated that federal buildings used 114.3 TWh of energy in 2009, for which federal agencies spent US$7 billion. And US$5 billion was added due to product purchases. Due to EEPP, 4.4 TWh and US$270 million can potentially be saved (DOE & FEMP NA a).

The EEPP programme aims at promoting BAT or, occasionally, energy performance levels even better than BAT in the public sector. The programme also aims to use the market influence of the public sector to stimulate the production of more sustainable goods and to increase the energy efficiency of appliances.
FEMP provides guidance to achieve this goal. This guidance includes energy efficiency requirements, purchasing tips, cost data, user information, and calculators that help federal agencies offset energy consumption costs through energy-efficient product procurement (DOE & FEMP 2011 b, p.1).

The policy was implemented on national level.

Relevant sectors

• Services: Especially federal government agencies are the sectoral focus.

The programme distinguishes between food service equipment (e.g. commercial refrigerators, ovens), office equipment (e.g. computers, monitors), appliances (e.g. clothes washers, dishwashers) and electronics (e.g. battery chargers, cordless phones), which are all part of this description.
The programme also covers the product categories of space heating and cooling, water heaters, building envelope, lighting and water sense plumbing. These categories are therefore also part of this description, although they concern components and units of technologies integrated in buildings. bigEE normally covers these technologies in our buildings section. For policies and measures to increase the energy efficiency in buildings, please check our sections on policy in new or existing buildings.

Federal agencies have no other option than to purchase energy-efficient and/or low standby power appliances (if these belong to one of the 14 product categories). It is necessary for public purchasers or energy managers not to focus on purchasing costs, but rather on the life-cycle cost of an appliance.
The FEMP provides guidance to procurement managers. Not only can they contact the FEMP, they can also attend (web-based) seminars. On FEMP’s website more information is available (www.bigee.net/s/y8tjgi).

Relevant target groups

• Governmental actor The target group are public purchasers (i.e. the federal governmental sector). They will save money because of life-cycle cost effectiveness of purchased products.
• Manufacturer Another target group are manufacturers of appliances. The programme stimulates producers to develop and manufacture energy-efficient products. They are prompted to make their products energy-efficient. Otherwise they might lose a large market. The “leadership by example” might influence other investors (consumers, businesses, industry, government) to buy/procure energy efficient products, even before prices have started to drop. Therefore these investors are indirect target groups.

Direct beneficiaries

• Governmental actor

  Green public procurement reduces the public expenditure by reducing the annual energy bill.

• Manufacturer

  Manufacturers and importers that offer energy efficient products (e.g. Energy Star labelled products) directly benefit from the policy. Federal government agencies have to turn to their products as they are required to do this by law.

Indirect beneficiaries

• User

  Users will profit indirectly as a) the government will save money that can be used for other sectors and/or b) the reduced use of energy leads to less emissions. Moreover the purchase power of the public sector can reduce the purchase price of appliances through economies of scale. By increasing the sales of the more energy-efficient products on the market, public procurement can promote innovation.

Relevant barriers

• Knowledge and information barriers: Procurement officials often have a lack of information about energy-efficient products. Especially challenging is the fact that costs should be analysed on a lifecycle basis. The EEPP offers help to ease the procurement progress. The programme informs end-users and procurers about energy efficiency and makes information available on its website (e.g. purchasing tips, cost data, user information, calculator, FAQ). There are also lists of labelled products available and a tool to find a store that sells Energy Star labelled products. Furthermore, FEMP offers a broad range of online information opportunities (e.g. webinars) (DOE & FEMP 2011 a). Those responsible for the procurement process can access this information for free.
• Organisational barriers: Procurement staff often lacks time and knowledge to engage in energy-efficient purchasing. Without substantial help purchasers would have to develop their own methods on how to purchase energy-efficiently, which increases the procurement expenses for every single institution.
• Lack of interest and motivation in energy efficiency-improvement: There is a tendency that companies focus on their core activities only. For the vast majority of actors, the costs of energy are so small compared to their total (production or consumption) costs that energy-efficiency improvement is not even taken into consideration.

Relevant incentives

• Saved energy costs: After a period of time, the upfront costs, which are normally higher for energy-efficient products compared to their less-efficient counterparts, are amortised due to lower running costs. With the FEMP programme public purchasers not only have to take into account the upfront costs of a product but they have to assess their life-cycle costs. This is potentially time-consuming. The EEPP programme therefore reduces the time needed by publishing the easy-to-use purchasing criteria for the products that meet the life-cycle costs criterion and also the calculation tools.
• Directly increasing earnings or profits for actors on the supply side: The more market actors buy energy-efficient goods, the more manufacturers invest in energy-efficient production resulting in dropping prices. As soon as appliance manufacturers realise that there is a demand for energy efficient products, they start reaching out to this target group. Due to the economics of scale this will gradually reduce the manufacturing costs, which, in turn, will reduce the sales price.

The EEPP programme works perfectly with the voluntary label Energy Star (explore the policy guide and find our detailed description). The programme directed all federal agencies to purchase only energy efficient appliances. Although federal sales amounted to only 2-3% of the market, this policy caused an immediate jump in manufacturers joining the Energy Star programme, with most types of office equipment quickly reaching Energy Star penetration rates of 90% and more (Harris 2005).
The EPAct of 2005 simplifies a procurement officer’s search for adequate products. Two large supply agencies, the General Service Administration and the Defense Logistics Agency, both have to visibly display the Energy Star or a FEMP designated products sign “in any inventory or listing” (EPAct 2005, Sec. 553).
Another additional policy in the programme is the provision of information through educational elements (e.g. web seminars), user information and calculators that help federal agencies.

The federal government integrated an already existing successful label (Energy Star) into its contemporary product procurement policy and added two new schemes to it (FEMP Designated Product Categories, Low Standby Power Products).
Moreover, the FEMP provides relevant information and tools on the web, which makes the policy easy and immediately possible to comply with.
Last but not least, the FEMP established an interagency working group, which facilitated the exchange between DOE’s FEMP on the one side and federal agencies on the other.

The EEPP programme could be expanded mandatorily to subnational government agencies. This would firstly, increase the demand for energy efficient products, yielding additional energy savings, and then secondly, lower the prices. The products would become affordable to a larger public, and moreover, all levels of government would execute leadership by example.
To date there are no concrete targets. This could be optimised to monitor the process and to measure the effectiveness of the programme.

The package could also be optimised.
The USA could introduce mandatory classification energy labels for product categories with a large spread of specific energy consumption in addition to Energy Star.

There are some structural preconditions necessary to implement the policy. The government is responsible for formulating comprehensive energy-efficiency public procurement laws. Agencies are responsible for the design and implementation of the policy. Furthermore a funding scheme must be established. Other preconditions are the availability of a mandatory or voluntary energy labelling scheme.

Agencies and other actors responsible for implementation
The responsible agency is the Office of Energy Efficiency and Renewable Energy (EERE), which is part of the United States Department of Energy (DOE).

Funding
Funding for the whole FEMP reached a low in 2007. Only around US$17 million were made available (Harris & Shearer 2006, p.5). One year later, funding increased to more than US$19 million and the Technical Guidance and Assistance which the EEPP is part of was funded with US$8 million (DOE & FEMP 2010, p.14 et seq.).

Other
Other preconditions are the availability of an energy label, in this case the Energy Star label. The FEMP makes use of the label and integrates it into the energy-efficient product procurement scheme.
Another pre-condition of the programme is an interagency working group that co-ordinated and facilitated the exchange between the FEMP and federal agencies.

DOE’s FEMP, established in 1970s, has been experienced in consulting federal agencies on energy efficiency issues in order to “lead by example in reducing energy use, energy costs, and emissions in public sector facilities” (Harris & Shearer 2006, p.4). However, energy efficient product procurement on the federal level was introduced in 1992. The EEPP was established in response to the Energy Policy Act (EPAact) of 1992 Section161 (Procurement and Identification of Energy Efficient Products) to “undertake a program to include energy efficient products in carrying out their procurement and supply functions” (EPAct 1992, Sec. 161) Moreover, the Department of Energy, in consultation with other agencies, is directed to “Identify and designate those energy efficient products that offer significant potential savings” (ibid.). In 2005, in order to make it easier for agencies to meet the requirements regarding energy consuming products, EPAct was revised or clarified, respectively. From then on, agencies have had to procure either Energy Star products or FEMP designated products (EPAct 2005, Sec. 104).The programme identified 14 product categories that have the potential to improve the energy efficiency. In order to become an FEMP Designated Product Category (if there is no Energy Star label for the product group available), it must be made sure that:

• “Significant energy savings can be realized on a Federal Government basis”
• Products meeting FEMP product efficiency requirements may be assumed to be life-cycle cost effective
• Energy efficiency can be achieved with several technology options, at least one of which is non-proprietary
• Product energy consumption and performance can be measured and verified with industry-recognized testing standards
• Setting Federal requirements can effectively differentiate products and institutionalize energy efficiency” (ibid.)

The next figure illustrates the procedure as to how FEMP sets efficiency requirements.

Besides this procedure to define the products and their energy efficiency requirements, the EEPP programme helps public purchasers with information campaigns. The FEMP collects information about procurement requirements and provides data and training systems to federal agencies.

Co-operation of countries
Harris and Shearer (2006, p.23) state that “[m]any foreign delegations visiting the US Department of Energy request briefings on the USDOE/FEMP program, including […] visits from officials representing China, India, South Africa, Mexico, Singapore, and Denmark. Of the nearly 500,000 visitors to the USDOE/FEMP website in 2005, more than 20% were from countries outside the US. Among these, about half of the top 20 countries visiting the website were OECD members, the rest were developing or transition economies.”
Especially, regarding the “[e]nergy-efficient government procurement [i.e. the EEPP] policies based explicitly on the USDOE/FEMP program have been adopted government-wide in China and at the municipal level (with federal policies under consideration) in Mexico” (ibid.).

Quantified target
The EEPP policy itself has no quantified target, but the government has set overall goals to improve the energy efficiency of appliances and federal buildings.
The USA has an overall energy efficiency target for its federal buildings. The American government wants to improve energy efficiency by “3% each year, leading to 30% by the end of fiscal year (FY) 2015 compared to an FY 2003 baseline“ (The United States Congress NA, Section 8253). FEMP and EEPP as a part of FEMP are to support agencies in achieving this target, but the EEPP programme itself has no quantified target.

Actors responsible for design
The U.S. Department of Energy (DOE) – Federal Energy Management Program is responsible for the design of the policy.
In 1992, the U.S. Congress passed the Energy Policy Act (EPAct). The EEPP programme was designed in direct response to the EPAct. Section161 – Procurement and Identification of Energy Efficient Products contains the requirement for agencies to purchase energy consuming products that are life cycle cost effective. The EPAct directed the Department of Energy to co-operate with the Administrator of General Services, the Secretary of Defense, and the Director of the Defense Logistics Agency to implement a programme in order to “identify and designate […] energy efficient products that offer significant potential savings, using, to the extent practicable, the life cycle cost methods” (EPAct 1992, Sec. 161).
In 1999, U.S. President William Clinton specified energy efficient product purchasing with E.O. 13123 ordering every federal agency to buy Energy Star labelled products, which the Environmental Protection Agency (EPA) is responsible for, or “[f]or product groups where Energy Star labels are not yet available, agencies shall select products that are in the upper 25 percent of energy efficiency as designated by FEMP” (E.O. 13123, Part 4). 

Actors responsible for implementation
The President of the United States through Executive Orders.
The United States Congress through laws and regulations.
Department of Energy (DOE) – Federal Energy Management Program
All federal agencies are to follow the purchasing rules.

Monitoring
A monitoring system is in place. First, a “scorecard” has to be filled out annually. Among other things, it has to include aspects about the “reduction of energy intensity” and the “reduction in fleet petroleum.” An example of such a scorecard can be seen here: www.bigee.net/s/qhrbux. In 2011, the scorecards were published for the first time. The performance of 24 agencies can be seen here: www.bigee.net/s/77f1ji. Moreover, federal agencies have to publish Strategic Sustainability Performance Plans to discover “sustainable solutions to power and secure America’s future” (DOE 2010 a, cover page). DOE’s SSPP can be found here: www.bigee.net/s/x5fb36 

Secondly, agencies must report on their energy efficiency development in the “FEMP Annual Report to Congress” (Harris & Shearer 2006, p.54).

Evaluation
In 2000, Jeffrey Harris conducted an ex-ante evaluation for the target year of 2010. However, there is no comprehensive ex-post evaluation of the EEPP available.
Before 2010, there were evaluation efforts for the whole FEMP, which consists of several components. Harris and Shearer (2006, p.52 et seq.) state that “[d]etermination of the net impacts of each program element (and to some extent, the net impact of federal policies and programs in the aggregate) remain elusive. […] The truth is, there may be more emphasis on data collection than on thorough analysis of those data.”
There is only a 2010 FEMP Annual Report to Congress available which includes the reduction of energy consumption for several federal agencies.
Economic benefits and costs were not evaluated.
Source of the FEMP annual report: United States Department of Energy (2010): Annual Report to Congress on Federal Government Energy Management and Conservation Programs Fiscal Year 2007

• Dynamic market transformation and/or innovation: The EEPP programme aims at market transformation as it increases the demand for energy-efficient products. The programme stimulates innovation. Ambitious requirements are necessary in combination with regular updates. Although federal sales amounted to only 2-3% of the market, this policy caused an immediate jump in manufacturers joining the Energy Star programme, with most types of office equipment quickly reaching Energy Star penetration rates of 90% and more (Harris 2005). Preconditions are regular updates of the energy label and the public procurement energy-efficiency requirements.
• Avoiding lost opportunities: By promoting the most energy-efficient appliances the programme tries to avoid that public purchasers buy energy-wasting appliances (which would be a lost opportunity for saving energy).
• Minimising rebound effects: The programme goes along with campaigns and web-based information to avoid rebound-effects. However, the investor-user barrier exists.
• Minimising snap-back effects: Snap-back effects seem to be irrelevant as long as the EEPP remain in effect. Therefore the programme must be open-ended and regularly updated.
• Minimising free-rider effects: As federal agencies are required to purchase on the basis of EEPP, the free-rider effect is likely to be minimised.
• Creating Spill-over effects: The EEPP can be regarded as a “lead-by-example” policy in order to provide a good role model for other investors (either civil society or business etc.). With the concept of buyer-driven innovations, public sector programmes can play a significant role in the market transformation process towards more energy efficient products. The large volume of government purchases also pushes the U.S. market for energy-efficient appliances in general, so that all other buyers of the products benefit from a larger and cheaper supply of energy-efficient products. The policy, thereby, helps transform the market and achieves very large spill-over effects.

In addition to the energy efficiency guidelines there is an additional product category that requires agencies to buy water-efficient products.

The EEPP is mandatory. However, non-compliance is not punishable (Harris & Shearer 2006, p.54).
Another barrier is with the existing exceptions where an energy-efficient product does not meet the functional requirements of the purchaser.
In order to facilitate compliance without delay, FEMP has provided information and tools (seminars, online-cost-calculators etc.) on energy-efficient procurement to federal agencies.

In 2007, the US-President announced in Executive Order 13423 that federal agencies must reduce their energy intensity by 3% annually, "leading to 30% by the end of fiscal year (FY) 2015 compared to an FY 2003 baseline“ (DOE & FEMP 2009 a). However, this is not only to be achieved by the EEPP but also by FEMP overall, including other initiatives such as "High-Performance Building Design" (DOE & FEMP 2011 d).
Basically, the reduction targets for federal agencies are as follows:
FY Percentage Reduction/gross square foot
2006 – 2
2007 – 4
2008 – 9
2009 – 12
2010 – 15
2011 – 18
2012 – 21
2013 – 24
2014 – 27
2015 – 30
(The United States Congress NA, Section 8253). 

The next figure illustrates the progress toward facility energy efficiency goals.

“Potential Annual Savings from EEPP [can amount to] 15 Trillion BTUs [i.e. 5.3 TWh] and $270 million” (DOE & FEMP NA, p.13). This would equal around 4 % of all energy consumed in buildings of the federal government of the USA.

According to the Annual Report to Congress on Federal Government Energy Management and Conservation Programs “Federal Government decreased energy use per gross square foot by 11.1 % in FY 2007 relative to FY 2003 for buildings subject to the goal. This surpassed the NECPA energy reduction requirement of a 4 % reduction” (DOE 2010, p.11) (see next figure).
A study by Harris (2005) calculated that although federal sales amounted to only 2-3% of the market, this policy caused an immediate jump in manufacturers joining the Energy Star programme, with most types of office equipment quickly reaching Energy Star penetration rates of 90% and more.

“Potential Annual Savings from EEPP [can amount to] […] $270 million” (DOE & FEMP NA, p.13).
Other data suggests “assuming there is 100% market penetration of the FEMP-designated products purchased by 2010 by the federal government, there is a potential for $1 billion dollars in energy savings” (Jeff Harris, quoted in: Lawrence Berkeley National Laboratory 2008).

As the basis for the purchasing requirements under the EEPP is an analysis of life-cycle costs and rules are set to ensure net savings in life-cycle costs, it can be expected that the policy overall is cost-effective.