U.S. Postal Service Accrues Ongoing Benefits Through Innovative Project Financing

August 31, 2005

The U.S. Postal Service has had a long-standing alternative financing mechanism for energy efficiency services known as Shared Energy Savings (SES). Over the years, both utility- and competitively-provided services have been successfully procured under SES by the Postal Service. Motivated by changes that have occurred in the electricity industry since the late 1990s, the Postal Service has been engaged in process to revise the SES contract to reflect the new realities of the marketplace. FEMP-sponsored staff at Lawrence Berkeley National Laboratory (LBNL) have been actively working with the Postal Service to leverage the benefits of federal expertise in this area.

Based on this collaboration, the Postal Service issued a competitive solicitation in 2001 for regional, alternatively-financed energy efficiency services throughout California. As a result of this solicitation, Honeywell International and Viron Energy Services, subsequently purchased by Chevron Energy Solutions, were awarded SES contracts. Honeywell received the contract for services to the Postal Service in Southern California, while Chevron received the contract for Northern California.

With continuing assistance from LBNL/FEMP, particularly with respect to technical review of proposed measures, the Postal Service, under the leadership of Ray Levinson, Pacific Area Manager, Environmental Compliance and Deborah Wilcox-Loos, Category Lead of the Windsor Utilities Category Management Team, has awarded or completed nearly $60 million in retrofit activities. These projects include some of the largest federally owned on-site renewable and combined heat and power systems in the country.

  Photo of the U.S. Postal Service San Francisco Processing and Distribution Center
  The U.S. Postal Service used a Shared Energy Savings contract with Chevron Energy Solutions to upgrade lighting at the San Francisco Processing & Distribution Center. 250-watt high pressure sodium lamps (left) were replaced with 238- watt, high-output T8 lamps (right).

For example, major energy efficiency retrofits and the installation of a hybrid renewable power plant began recently at two Postal Service facilities in San Francisco. A project at the San Francisco Processing & Distribution Center, managed by Chevron Energy Solutions, will include a 250-kilowatt fuel cell and two solar photovoltaic technologies, thin-film roof-integrated panels and a tracking parking shade structure, totaling 309 kilowatts. Together, the efficiency upgrades and on-site generation are expected to lower total annual electricity purchases by about 10 million kilowatt-hours—a 46 percent reduction—saving $1.2 million in energy costs annually. The $15 million project cost will be funded by energy savings, contributions from the Postal Service's CFC/HCFC refrigerant replacement program, and more than $2.6 million in grants and incentives from the U.S. Department of Defense and the State of California.

In Southern California, Honeywell is replacing chillers and air handling units at three Postal facilities, upgrading lighting fixtures at more than 100 others, and building a gas cogeneration system at the San Diego Processing and Distribution Center, among other projects. The cogeneration system will produce 1.5 megawatts of electricity, roughly 85 percent of the facility's forecasted electricity demand. Exhaust heat from the system will be used as the input thermal energy for a 300-ton absorption chiller, which, in turn, will provide cooled water to the facility's HVAC system. The new absorption chiller will replace the existing natural gas-fired chiller at the facility and eliminate the need to purchase about 165,000 therms of natural gas annually. Honeywell, LBNL, and the Postal Service worked together to develop a strategy to mitigate the natural gas price risk associated with this project.

The blend of energy efficiency, renewable energy, and distributed generation projects undertaken during the past three years demonstrates the versatility of the SES contract, the technical and managerial expertise of the contractors, the benefits of FEMP services and the commitment to energy savings and environmental improvement by the Postal Service.

It is estimated that the two California contracts will generate at least $30 million in additional retrofit activity. Given this success, the Postal Service is now developing regional SES contracts—based, in part, on the California model—for regions throughout the country.

For more information, please contact Bill Golove, Lawrence Berkeley National Laboratory, 510-486-5229.