In addition to promoting project-based life-cycle cost analysis, the Federal government also encourages the incorporation of PV in its facilities’ performance contracts. Since 1988, performance contracts of various types have been used to attract more than $1 billion in private-sector investments for Federal efficiency upgrades (FEMP, 2002 and 2004c), with $259 million in investments in 2003 alone (FEMP, 2004c). As a result, the US Federal government has emerged as the country’s largest customer for performance contracts (Rufo, 2001) and has a potential need for an additional $5.2 billion in energy service investments (Brown et al., 2000).

The Super Energy Savings Performance Contract (ESPC) program is the most current iteration of the Federal government’s performance contracting authority (FEMP, 2004a). Managed by the Federal Energy Management Program (FEMP), Super ESPCs are umbrella contracts designed to streamline the performance contracting procurement process. Under Super ESPCs, ESCOs are awarded Indefinite Delivery, Indefinite Quantity (IDIQ) contracts that allow them to bypass the cumbersome Federal Acquisition Regulations. As a result, agencies and ESCOs are able to design and implement projects in a shorter period of time.

In the late 1990s, the Super ESPC model was expanded by the creation of a ’’technology — specific ESPC” that targets the inclusion of PV in performance contracts (FEMP, 2003b).

The release of Executive Order (E. O.) 13123, "Greening the Government through Efficient Energy,” in 1999 more thoroughly outlined the case for Federal PV performance contracting. E. O. 13123 sets goals for a 35% decrease in energy costs compared to 1985, a 2.5% renewable energy goal for Federal facilities, and 20,000 solar energy systems on Federal buildings by 2010 (Clinton, 1999). To achieve these targets, EO 13123 recommends that facilities maximize their use of ESPCs (Sec. 403.a), bundle energy efficiency projects with renewable energy projects (Sec. 401), and "use savings from energy efficiency projects to pay additional incremental costs of electricity from renewable energy sources (Sec. 404.c.1).”

In response to this emphasis on renewable energies, several agencies have incorporated PV into their performance contracts. Of particular note are two large-scale PV installations on military facilities in California. The first is a 750 kilowatt (kW) PV system installed at Naval Base Coronado as part of a $22 million Super ESPC. The PV panels were deployed to shade a large section of the base parking lot as a carport and thus provided value through electricity savings and as a construction material (FEMP, 2003a). The PV system, which had a 38-year simple payback as a supply technology, was advantageously bundled with other energy conservation measures, including lighting and air compressor upgrades, for an overall simple
payback of 9.8 years. State rebates and Federal prepayments further reduced the project payback to 6 years and a 10-year financing term (Neeley, 2003).

The second large-scale PV performance contract was a 1.1 megawatt (MW) PV installation incorporated into the $56 million contract for the Marine Air Ground Task Force Training Command (MAGTFTC) in the Mojave Desert. The PV system was selected to help maintain combat readiness by providing emergency power, and to help shave the base’s 20-MW summer peak (DOE/EERE, 2003). As with Naval Base Coronado project, the MAGTFTC PV system was advantageously bundled with other technologies, and the overall simple payback was blended to 7.4 years (Johnson Controls, 2003).

Taken together, these two projects demonstrate that PV can be deployed as an energy services technology in a performance contract: PV was effectively bundled with other technologies in both projects for an acceptable blended payback term; both projects sought to capitalize on PV’s distinct service values; and both projects incorporated large-scale PV systems that rank among the biggest in the nation. In the past 4 years, the Federal government has completed eight PV performance contracts with a combined total of over 2 MW of PV. Unfortunately, the Federal ESPC authority expired in October 2003, and has yet to be renewed (FEMP, 2004b). While there is broad support for ESPC renewal, the expiration has nevertheless stalled momentum of the Federal energy services market and put a halt to new PV performance contract development.