Key Actions in Budgeting
- Include renewable energy specific information into budget request, including:
- Additional planning/design costs.
- Estimated costs for renewable energy technologies.
- Revised project boundary definition (if needed) to enable systems outside the building envelope.
- Conduct early life-cycle cost analysis for renewable energy technologies prior to initial budget request.
- Review and include likely renewable energy project funding options in budget request.
- Decide on need for renewable energy installation phasing.
- Periodically update budget as renewable energy decisions are resolved.
Budgeting is done in parallel with planning and programming. Often, the planning stage produces an early economic evaluation of the project that is used in developing either a prospectus or a DD Form 1391. Prospectus and DD Form 1391 are common terms used by civilian and defense agencies, respectively, within the budgeting process.
Renewable energy considerations need to be included in the earliest budget planning and development. Many renewable energy technologies have distinct capital costs. This does not mean that renewable energy costs more than typical energy sources, but rather that the costs may be borne upfront and repaid through lower operating costs over the life of the project.
The prospectus or DD1391 establishes the economic feasibility of the project and documents that it is financially beneficial to the agency. The prospectus should include the cost of the measures likely to be included, but more importantly, it should state the savings and added value of those measures. If the earliest budget requests can include realistic placeholders for the renewable energy costs in the project, the process of securing capital for those systems is more efficient.
- Estimating Renewable Energy Costs
- Life-Cycle Cost Analysis
- Renewable Energy Budgeting Strategies
- Project Boundary Definition
Estimating Renewable Energy Costs
When adding renewable energy to either of these processes, the increased costs of upfront planning, programming, and integrated design need to be included. Costs for renewable energy technologies themselves also need to be estimated in the budgeting process. Some renewable energy technologies, such as passive solar, may not add to design costs when considered early in the process. Others, such as photovoltaics, are capital intensive, and may increase costs as much as 10% to 15%. This guide includes more information on the costs associated with integrating renewable energy into a project, including links to specific cost estimates.
Life-Cycle Cost Analysis
The prospectus should describe the business case for optimizing renewable energy in the project, especially since the long-term savings on operational costs will likely accrue to a completely different account than the initial capital expenditures. Both life-cycle cost analysis and a discussion of additional benefits should be included with all of the budget documents.
With cost and savings estimates for renewable energy from screening and the section above, agencies can conduct an early life-cycle cost analysis to provide further justification for the inclusion of renewable energy. If life-cycle cost analysis does not occur until schematic design, then costs for renewable energy may not be justified in the early budget and the agency may later have to force fit renewable energy into established capital budget requests.
Additional information on life-cycle cost analysis is available, including details and tools for conducting life-cycle cost analysis for integrating renewable energy into construction projects.
Note that an agency should not use this preliminary analysis to eliminate renewable technologies from consideration, but rather to provide a better idea of the type and magnitude of technologies that could be available. If life-cycle cost analysis is not favorable for certain technologies, the agency may want to examine additional budgeting strategies for renewable energy or need for meeting Federal renewable energy requirements.
Renewable Energy Budgeting Strategies
If tight budgets are affecting renewable energy adoption, other budgeting strategies could be investigated. These strategies need to be addressed upfront in budget submissions because they affect the overall project. These strategies need to be coordinated with the building program.
One such option is renewable energy project funding, which includes energy savings performance contracts (ESPCs), power purchase agreements (PPAs), or utility energy service contracts (UESCs). These funding mechanisms each have advantages, such as enabling the Federal agency to take advantage of financial incentives not available to government agencies. Each also has limitations and restrictions. The renewable energy project funding page has detailed information.
An additional budget strategy could be to phase the installation of renewable energy development to meet future goals while working within existing budgets. Often referred to as making a building renewable energy ready, this could involve incorporating the future renewable energy projects fully into the building design, but postponing the actual purchase and installation of the equipment. This strategy has advantages and limitations, but phasing renewable energy should not be viewed as option to postpone the integration of renewable energy into the building design. Many economic opportunities are lost if certain elements are not incorporated into the initial building design. The phasing renewable energy implementation page provides additional information.
Project Boundary Definition
Renewable energy technologies might extend geographically beyond the traditional building envelope. For example, a wind turbine on the property, a photovoltaic system on the adjacent parking structure, or a silo for biomass storage might be integral parts of the project's energy system but not located within the boundary typically allowed for authorized use of funding. Because some agency budgets are constrained by a boundary just outside the building envelope it is important to include boundary definitions to accommodate renewable energy in early budget submissions so that authority is part of the project from the beginning.