Part 2 69914 v2 Energy Efficiency in the Public Sector A Summary of International Experience with Public Buildings and Its Relevance for Brazil World Bank/ESMAP Report Anke Sofia Meyer Todd M. Johnson May 2008 Table of Contents Executive Summary ................................................................................................................. 6 I. Introduction .................................................................................................................. 9 A. Why should the public sector become more energy efficient? ................................................... 9 B. Categories of Public Sector Energy Efficiency Programs ........................................................ 10 C. Benefits of Public Sector Energy Efficiency Programs ............................................................. 10 II. Barriers to Public Sector Energy Efficiency Improvements, and Possible Solutions ...................................................................................................................... 12 III. Financing of Energy Efficiency Investments in the Public Sector ......................... 16 IV. Delivery Mechanisms for Public Building Retrofit Programs ............................... 18 V. Energy Efficient Public Purchasing – Issues and Experiences .............................. 22 VI. Energy Efficiency in New Construction of Public Buildings.................................. 24 VII. Improving Energy Efficiency through Operations and Maintenance................... 26 VIII. Lessons Learned from Successful International Experiences, and Implications for Public Sector Energy Efficiency Initiatives in Brazil ................. 27 IX. Public Sector Energy Efficiency Investments in Brazil – Opportunities, Barriers and Initiatives .................................................................... 31 A. Energy Efficiency Opportunities ............................................................................................... 31 B. Public Procurement in Brazil – Current Rules and Issues ....................................................... 31 C. Sustainability Initiatives for the Public Sector in Brazil ............................................................. 32 D. Conclusions and Outlook ......................................................................................................... 34 Annex: International Case Studies ..................................................................................... 36 1. Serbia Public Buildings Energy Efficiency Project ................................................................... 37 2. Kiev Public Buildings Energy Efficiency Project ....................................................................... 39 3. Hungary Szemünk Fenye Program .......................................................................................... 40 4. Berlin Energy Saving Partnerships ........................................................................................... 41 5. Canada Federal Buildings Initiative .......................................................................................... 43 6. Intracting in Stuttgart/Germany ................................................................................................ 44 7. Energy Efficiency Leases in the USA ....................................................................................... 45 8. U.S. Federal Energy Management Program (FEMP) .............................................................. 46 9. PEPS - Promoting an Energy-Efficient Public Sector ............................................................. 48 10. New Energy Efficient Construction - LEED .............................................................................. 49 References ............................................................................................................................... 50 2 List of Tables Table 1. Energy Efficiency Programs in the Public Sector – Eight Country Examples ......... 15 Table 2. Advantages and Disadvantages of Energy Service Companies ................................ 20 Table 3. Public Sector Energy Efficiency Programs – Key Success Factors .......................... 29 Table 4. Estimated Public Sector Electricity Consumption and Cost, 2006 ........................... 31 List of Figures Figure 1. Implementation Spectrum of Energy Services Companies ..................................... 18 Figure 2. Energy Performance Contract Models ..................................................................... 19 Figure 3. Standards and Energy Savings in US Federal Buildings, ........................................ 25 List of Boxes Box 1. Benefits of Investing in Energy Efficiency ............................................................... 11 Box 2. Reforming Procurement and Budgeting Rules to Promote Energy Efficiency Investments – Four Country Examples .................................................................................... 13 Box 3. Solving Incentive Problems ....................................................................................... 13 Box 4. Major Components of PROCEL Programs Relevant for Public Sector Energy Efficiency ................................................................................................................................. 33 3 Acronyms and Abbreviations A3P Environmental Agenda for Public Administration ANEEL Agência Nacional de Energia Elétrica (Brazil) APF Program of Energy Savings in Federal Buildings (Mexico) ASE Alliance to Save Energy ASHRAE American Society of Heating, Refrigerating and Air-Conditioning Engineers BNDES Brazil Development Bank BREEP Brazil Energy Efficiency Project BREES Brazil Energy Efficiency Study C40 Cities Climate Leadership Group CCP Cities for Climate Protection (Brazil) CO2 Carbon Dioxide CSD Commission on Sustainable Development (United Nations) DOE Department of Energy (USA) EE Energy Efficiency EEP Energy Efficiency Program EKO Energy efficiency program for large, energy-intensive industries (Sweden) EPC Energy Performance Contract EPE Energy Research Corporation ESCO Energy Service Company ESMAP Energy Sector Management Assistance Program ESP Energy Saving Partnership EU European Union FBI Federal Buildings Initiative (Canada) FEMP Federal Energy Management Program (USA) FIDE Energy Endorsement Seal in Mexico (Fideicomiso para el Ahorro de Energia Electrica) GDP Gross Domestic Product GEF Global Environment Facility GHG Greenhouse Gas HVAC Heating, Ventilation and Air-Conditioning ICLEI Local Governments for Sustainability IDB Inter-American Development Bank IIEC International Institute for Energy Conservation KCSA Kiev City State Administration KLIMP Climate Investment Program (Sweden) LCC Life-Cycle Cost LEED Leadership in Energy and Environmental Design M&E Monitoring and Evaluation MME Ministry of Mines and Energy (Brazil) NDRC National Development and Reform Commission (China) 4 NRCan Natural Resources Canada O&M Operations and Maintenance OECD Organisation for Economic Co-Operation and Development PBI Public Building Initiative PEPS Promoting an Energy-Efficient Public Sector PICO Public Internal Performance Contracting PIMS Policy Information Marker System PIU Project Implementation Unit PPGM Partial Performance Guarantee Mechanism PROCEL National program for electrical energy efficiency (Brazil) PROESCO Support to Energy Efficiency Projects (program of BNDES) PROST Public Procurement on Energy Saving Technologies in Europe SEEA Serbia Energy Efficiency Agency TA Technical Assistance TCO Swedish label for eco-certification UNDP United Nations Development Programme USEPA Environmental Protection Agency (USA) USAID Agency for International Development (USA) VFM Value for Money (UK) Exchange Rate 1 US Dollar = 1.6490 Brazilian Real (May 21, 2008) 1 US Dollar = 0.6343 Euro (May 21, 2008) 5 Executive Summary 1. This report constitutes Part 2 of the three-part Brazil Energy Efficiency Study (BREES), which was prepared by the World Bank, with funding from the Energy Sector Management Assistance Program (ESMAP). The objective of BREES is to support the evaluation of energy efficiency (EE) programs and opportunities in Brazil based on good practices nationally and internationally. The topics included in the study were selected as a result of consultations with the Brazilian Government, academia, and the private sector in December 2006 and March 2007. As agreed by the Bank with the Government, the study would be organized around two major themes: ï?¶ Review of and recommendations for revising Brazil’s Energy Efficiency Program (EEP), in support of ANEEL’s recent decision to improve regulation of the program (Part 1); and ï?¶ Analysis of policy, institutional, and market issues related to realizing energy efficiency potential in public sector buildings (Part 2) and in the water and sanitation sector (Part 3). 2. Energy efficiency in the public sector. This specific report (Part 2) summarizes Brazil’s energy efficiency programs and initiatives, with a focus on public sector buildings at the federal, state and municipal level of government. It discusses the broader management, incentive and legal issues involved in implementing such programs, and through the use of case studies, present various policies and institutional frameworks to create sustainable and climate-friendly initiatives. The target audience is energy service companies, utilities, banks, as well as federal, state and local governments involved in the sector. International Experience 3. Energy efficiency is cost-effective at the national scale. International experience has shown that investing in energy efficiency saves energy and money and reduces local pollution and carbon emissions. The energy savings potential in the public sector, including in facilities of all levels of government, as well as in public services and infrastructure, is large and very cost-effective. Energy savings in the public sector can exceed 20 percent of energy use; rates of return for energy efficiency investments typically range from 20 to 30 percent; and the life-cycle costs of investments in energy-efficient buildings and goods and services are lower than in business-as-usual goods and services. Moreover, the public sector has a substantial presence in markets for energy and energy-using products, as measured by public procurement, and therefore can assert market leadership and contribute to market transformation through its implied endorsement of energy efficient products and services and exemplary behavior. 4. EE potential in the public sector depends largely on innovative delivery mechanisms. Despite the substantial benefits of public sector energy efficiency programs, however, many governments have been reluctant to undertake such programs, due to several 6 types of barriers, including (i) public procurement rules and annual budget cycles that make the implementation of energy efficiency programs difficult; (ii) the lack of incentives and information for the public end-user; and (iii) tight budgets and limits on debt. In attempting to overcome these barriers, some governments have turned to specialized energy service companies (ESCOs) that can both implement energy efficiency projects in government facilities and provide the necessary financing. The substantial savings realized from those projects are first used to pay back the financing costs and the services of the energy service company, and then shared with the public sector client. The case studies in the annex describe experiences with ESCOs and other innovative kinds of delivery mechanisms that have made public sector energy efficiency investments feasible despite initial constraints. 5. Barriers to EE can be overcome through an appropriate enabling environment. In addition to innovative delivery mechanisms, the successful implementation of public sector energy efficiency programs also depends on an appropriate enabling environment, including (i) public policies and requirements to reduce energy intensity in the public sector; (ii) procurement rules that require life-cycle costing or best value instead of least costs; (iii) budgeting reforms that enable departments to retain some of the energy cost savings; (iv) the existence of an experienced ESCO industry that is able to access financing; and (v) the existence of dedicated agencies to support public sector entities in developing, preparing, implementing, and monitoring energy efficiency projects. Public Sector Energy Efficiency Issues in Brazil 6. Energy efficiency in public sector remains largely untapped. In Brazil, total combined public procurement of federal, state and municipal governments in 2004 was about RS$120 billion (approximately US$40 billion). Financing and procurement limitations, as well as insufficient knowledge by public sector agents about opportunities and benefits for energy efficiency investments, are the main issues preventing the realization of energy and operational cost savings in Brazil’s public sector. 7. Key barriers in public policies and regulations. Two key procurement requirements act as barriers to expanded energy efficiency in the public sector: (i) the lowest price criterion, which prevents the application of least-cost or best-value criteria that would favor more energy efficient goods and services; and (b) the requirement that a detailed description of the project be provided before services can be tendered, and that the entity bidding for the service must be legally separate from the entity developing the technical description, which makes it difficult for ESCOs to provide third-party financing. 8. Case studies provide examples of successful approaches. Some steps are now being taken to change the policies and regulatory framework within which public investment and expenditure decisions are made – most importantly, the incorporation of sustainability requirements into procurement rules, and the creation of sustainable and climate-friendly initiatives by some states and many municipalities. To substantially increase energy efficiency investments in the public sector, however, delivery models need to be designed that can bring together federal and state governments, municipalities, energy service companies, utilities, and banks in successful ventures. The experience of successful international public 7 sector energy efficiency programs shows that significant technical assistance is needed for the preparation and implementation of such programs, especially during the start-up phase. 8 I. Introduction Energy Efficiency is a strategy to deal with scarce public funds while at the same time addressing serious energy and climate challenges. (PROST 2003) 1. In the past few years, many international organizations and studies have substantiated that improving the efficiency of energy use is a leading option to gain better energy supply security; improve economic competitiveness; increase peoples’ livelihoods; and reduce the overall energy sector impacts on the environment, including on climate change. Perhaps the greatest attraction of many energy efficiency (EE) measures is their cost effectiveness. Costs vary among technologies and countries where energy efficiency measures are implemented, but often are only one-quarter to one-half of the comparable costs of acquiring additional energy supply (Taylor et al 2008). 2. Though Brazil does not yet have a major public sector EE program, some demonstration projects have been carried out, mostly in the infrastructure sectors. As a corollary to this effort, the Government of Brazil, through the Ministry of Mines and Energy and other agencies, commissioned this review of successful international programs, with the aim of stimulating discussions in Brazil. The review focuses on laws and regulations governing investments, such as public procurement rules and, institutional incentives/disincentives, as well as on financing, energy service companies (ESCOs), and other private sector involvement. The review compares the strengths and weaknesses of the different programs, including energy savings results; legal and regulatory barriers and measures to overcome those barriers; institutional complexity and capacity requirements; financing options; and sustainability of the programs. An annex provides short summaries of relevant case studies. A. Why should the public sector become more energy efficient? 3. Investing in energy efficiency produces large savings in energy, money, pollution, and carbon emissions – typically, more than 20 percent of energy can be saved, with rates of return ranging from 20-30 percent. The life-cycle costs (LCC) of investments in energy- efficient buildings and goods and services are lower than in business-as-usual goods and services. Moreover – in contrast to the private sector – the public sector has an obligation to make investment decisions that promote the public good by reducing environmental damage and carbon emissions. 4. The public sector typically constitutes between 10 and 20 percent of the national economic product, and is often the largest buyer of energy-using equipment.1 Due to its market presence, the public sector can assert market leadership and contribute to market transformation by influencing manufacturers and other buyers through its exemplary behavior and implied endorsement of energy efficient products and services. 1 In Brazil, government spending was about 15 percent of GDP in 2005. In the EU, public procurement is in excess of 200 billion euros, or about 3 percent of total GDP. The public sector accounts for 10 percent of the purchase of energy-using products in the USA. 9 B. Categories of Public Sector Energy Efficiency Programs 5. Definition of public sector. For purposes of EE programs, the public sector comprises all levels of government and all public services and infrastructure, including water and sanitation, public street lighting, public transit, and fleets. Public services and infrastructure are not included in the overall Brazil Energy Efficiency Study; water and sanitation services are covered in Part 3. 6. Categories of public sector energy efficiency activities. Most public sector energy efficiency programs tend to emphasize public buildings, such as schools, hospitals, and office buildings. In many countries, educational facilities are the first targets of energy efficiency improvements. Military facilities and prisons are also large energy users and should be included in national EE programs. It is important to distinguish between the retrofit of the existing building stock and new construction, since encouraging greater energy efficiency in these two subsectors involves different issues and requires different approaches and interventions (Taylor et al 2008). 7. In addition to improving the energy efficiency of buildings, other areas of public sector EE programs include (a) government purchasing; (b) the management, operation, and maintenance of public facilities from an energy efficiency perspective; and (c) appropriate policies, goals, targets, information, training, and incentives. C. Benefits of Public Sector Energy Efficiency Programs 8. Investing in improved energy efficiency of the public sector has three major benefits. ï‚· It can reduce operating costs, and therefore public expenditures. This can be especially attractive when governments need to balance their budgets without cutting services. ï‚· Reducing energy consumption cuts down on air pollution and greenhouse gas emissions. ï‚· Public sector spending can transform energy efficiency markets, especially if all public agencies adopt common practices, energy efficiency targets, and purchase specifications. Suppliers adapt to that market and sell the same efficient products to private companies and consumers to reach economies of scale and higher profitability. 9. Depending on the type of program, other benefits of EE programs could include improved affordability of and access to public services, generation of local jobs and incomes, better indoor environment, and more effective delivery of health and education services. Box 1 summarizes the benefits of EE programs in Germany and the USA. More details of the two programs are provided in the annex (case studies 4 and 8, respectively). 10 Box 1. Benefits of Investing in Energy Efficiency Germany: Berlin Energy Saving Partnership (ESP) Performance contracting (incl. financing) in 19 pools of 500 public real estate complexes with about 1400 buildings (1996-2006) Baseline: annual energy costs of €37 million for energy consumption of 749,197 MWh/yr Investments: €43 million Energy savings: 26% (on average) Annual CO2 reductions: 60,484 tons Annual financial savings: €10 million USA Super Energy Saving Performance Contracts under FEMP, with $1.9 billion project investment by 19 agencies in 46 states (1998-2006) Energy cost savings of $5.2 billion, with net savings of $1.5 billion Energy-efficient purchasing by federal and non-federal government agencies resulted in estimated energy cost savings of US$1 billion/year Each dollar invested in federal energy efficiency saved about US$4 in energy costs over project lifetime. Source: Case studies 4 and 8. 11 II. Barriers to Public Sector Energy Efficiency Improvements and Possible Solutions 10. Despite substantial benefits, many governments are reluctant to embark on programs to improve the energy efficiency of the public sector. One set of barriers relates to public policies and regulations – in particular, public procurement rules and annual budget cycles – that make it difficult to implement EE programs. Other barriers have to do with the lack of incentives, information, and financing. 11. To overcome some of these obstacles to energy efficiency investments and purchases, many countries have changed their procurement and budgeting rules (see Box 2). Reforms have fallen into three broad areas: ï‚· Change in tender criteria for public procurement. Tender criteria in the public sector almost always require that the least-cost proposal be adopted. However, most energy efficiency investments and goods have higher first costs and therefore do not qualify for public procurement. Many governments have therefore changed their procurement rules to require that bids be evaluated on the basis of life-cycle costs, best value for money, or overall economic advantage. ï‚· Tendering typically requires that projects are well defined and that equipment and services are unbundled. This approach requires that the public sector end-user gathers all the information necessary and the expertise to define the project and the solution. Many public sector end-users, however, do not have the necessary expertise to design the best project possible. Specialized ESCOs may be able to design better solutions and implement them based on performance contracts. Since they typically receive their remuneration based on their performance, they design the project from scratch and define their own solutions. Governments have started to adopt much less prescriptive tendering processes, which only define baselines and basic project descriptions which set out the targets to be achieved. ï‚· Budgeting. Budgeting typically occurs in an annual cycle and may not allow multi-year contracts for which the budget is not fully appropriated upfront. In such situations, first experiences with public sector energy efficiency projects have sometimes been obtained with one-year projects, and with those projects completed successfully, agencies have then been allowed to move to multi-year contracts. 12 Box 2. Reforming Procurement and Budgeting Rules to Promote Energy Efficiency Investments – Four Country Examples UK Value for money: bidding criterion is the economically most advantageous offer; energy efficiency is an explicit criterion in public procurement. France Flexible budgeting: capital and operating expenditures can be decided upon within departments; savings can be retained. Canada Flexible budgeting; savings can be retained (see details in case study 5). USA Federal and several state and local governments require purchasing of energy efficient products (Energy Star or FEMP designated). Source: PROST 2003. 12. Other barriers to energy efficiency in the public sector emerge due to the particular incentives and disincentives of agents in bureaucracies: ï‚· Staff have no incentive to change or take risks and will therefore most likely not take energy efficiency into account when making decisions on retrofits or equipment purchases. Therefore, many countries (particularly EU countries and the USA) have adopted legal requirements to incorporate energy efficiency criteria into decision-making. Box 3 lists other types of incentives that have been successful in promoting energy efficiency in procurement and operations. Box 3. Solving Incentive Problems ï‚· Raise the visibility of energy waste by providing feedback on energy consumption through, e.g., installation of meters, comparison of energy bills. ï‚· Score energy use by rating agencies, facilities, and employees. ï‚· Recognize achievements by handing out awards. ï‚· Assign responsibilities, budgets, and costs by making energy users also the payers of energy bills, and/or by making the buyers of equipment the payers of energy bills. ï‚· Enable savings retention by letting end users keep between 50 and 100 percent of the savings. Source: Coleman 2007. ï‚· Staff are not aware of technical specifications regarding energy efficiency programs and equipment. Energy efficiency programs should therefore provide training and capacity-building for procurement staff and facility managers. Computer-based EE information, as well as standardized documentation and purchasing specifications, have proven useful (see Chapter V). ï‚· Discretionary budgets for upgrades or special projects are rarely available. Leasing and third-party financing are possible alternatives (see Chapter III). ï‚· Split incentives are more prevalent in the public sector than in other sectors, since the customer (e.g., a particular agency or department) is often different from the buyer or original investor (e.g., the procurement officer). Further disincentives can arise when the end user does not benefit from cost savings from energy efficiency investments or purchasing decisions. Therefore, savings should be at least partially retained by the end-user. Better yet, individual departments should be at least semi-autonomous and flexible in their budgeting decisions, thus enabling more efficient procurement. 13 ï‚· Other competing policies or organizational needs, such as domestic content or preferred supplier rules, may trump energy efficiency. Therefore, it is important to have clear, specific policies and concrete guidelines for energy efficiency programs at all levels of government. Few countries have yet implemented such specific energy efficiency policies; see Table 1. One notable exception is the UK, where central government departments are required to reduce CO2 emissions in government facilities by one percent annually. Another is China, which recently introduced an official target to reduce the energy intensity of the country’s GDP by 20 percent during 2006-2010. Policies regarding sustainable procurement might also help to improve energy efficiency in the public sector. 14 Table 1. Energy Efficiency Programs in the Public Sector – Eight Country Examples National Programs for Energy Activities Efficiency Finland Government Energy Conservation Energy efficient requirements for public Program procurement; voluntary framework agreement on energy conservation France Administration Greening Program Training, raising awareness in environmental themes National Program Against Climate Provision of best practices and ideas about Change funding to public administrations National Program for Energy Efficient Promotion of energy efficient activities and Improvement investments Germany No specific energy efficiency program, Länder energy agencies providing but the Umwelt-Bundesamt guidebook consulting and advice to local authorities on “greenâ€? procurement and energy efficiency activities on the state level Ireland Comhar Eco-labeling, green procurement Irish Energy Centre Research, advice, implementation, and coordination of policies; advice State Building Program Building management systems Netherlands Duurzaam Inkopen (Sustainable Development of a toolbox for procurement Procurement Program) officers, including environmental specifications Sweden Climate Investment Program (KLIMP) Grants for energy efficient investments The Committee for Ecologically Environmental purchasing guidelines Sustainable Procurement TCO’95 Labeling system EKO Energy Program Seminars, information, education UK Value for Money (VFM), administered Quantified reduction target for central by Treasury Circular government VFM procurement requirements for Government departmental regulation to government departments buy on VFM basis (lifetime least cost) â€?Green Ministersâ€? for each government department, with annual review USA Department of Energy’s Federal Energy Technical support, facility audits, design Management Program (FEMP) assistance, technical assistance, training, recommendations, tracking; and reporting EPA/DOE Energy Star Purchasing Encourages energy efficient purchasing by Program state and local agencies Source: PROST 2003. 15 III. Financing of Energy Efficiency Investments in the Public Sector 13. Public sector investments typically use three different sources of funding – internal appropriations, debt financing, and third-party or private sector financing. In the case of energy efficiency investments, a fourth source of financing can be the savings realized from energy efficiency investments. Each source of financing is described briefly below. 14. Internal appropriations. An agency or department requests the funds for an energy efficiency project. One variation is to use the original appropriation to set up a revolving internal loan fund, with the proceeds and repayments continuing to fund new projects. One example of such a revolving fund is the “intractingâ€? mechanism, which is used in combination with energy performance contracts (EPCs) in some German cities (see annex, case study 6). 15. Debt financing. A public agency takes out a loan or issues a bond to finance an energy efficiency project. Some counterpart funding may have to be provided, especially in the case of a loan from a commercial bank or international financing institution. Examples are World Bank energy efficiency loans for hospitals/schools in Serbia (case study 1), for schools in Lithuania and Kiev/Ukraine (case study 2), and for the rehabilitation and modernization of centralized heating systems in many Eastern European countries and China. A variation on this approach is to borrow from public non-commercial revolving funds, as in the Texas LoanSTAR Revolving Fund Program (http://www.eere.energy.gov). 16. Leasing is another variation, which has become increasingly popular in the public sector since it does not require capital outlays. Instead, the equipment is procured and paid for from the operating budget. Examples are the tax-exempt lease-purchase agreements in the United States (case study 7), which have the additional advantage of lower financing costs, since the supplier/lessor does not have to pay income taxes on the lease payments. Such leases are also often used as underlying financial instrument in EPCs (see Chapter IV). 17. Third party/private sector financing. Many countries use utility-financed energy services contracts and rebate programs to improve energy efficiency in public facilities. For example, Brazil uses wire charge funds to upgrade public lighting and other public (and private) facilities (Taylor et al 2008). 18. Build-Operate-Transfer or Build-Own-Operate-Transfer contracts can also be used to improve energy efficiency in public sector facilities. For example, energy services such as heating or cooling can be contracted to a private operator, who would have an incentive to replace inefficient existing systems. 19. Financing from energy savings. This requires a set of transactions to convert a flow of foregone energy expenses into a capitalized energy efficiency investment (Taylor et al 2008). Two different models can be employed, both using energy performance contracts (EPCs) between the public end user and an ESCO: 16 ï‚· A public sector entity enters into an EPC with an ESCO, and into a financing contract with a financial agent (bank or leasing company). The ESCO guarantees the savings from the project and uses the savings to repay the financial agent. ï‚· A public sector entity and an ESCO enter into an EPC, agreeing to share the savings. The ESCO makes a contract with a third-party financier, again using the savings for repayment. This arrangement with the ESCO providing the financing has the advantage of not requiring the public sector entity to make a capital outlay. 17 IV. Delivery Mechanisms for Public Building Retrofit Programs 20. One decision the customer has to make is whether to carry out an energy efficiency retrofit investment in house, outsource some of the tasks to contractors, or outsource the entire process to an ESCO or other specialized agent. An ESCO offers a range of technical and financial services to end-users, including identification, design, packaging, oversight of installation and commissioning of energy efficiency projects, measurement and verification of savings, and operation and maintenance of facility and equipment for the contract period. 21. The term ESCO is typically used for a wide spectrum of companies offering a variety of services (see Figure 1): ï‚· At the least complex end of the spectrum are consulting engineers specialized in efficiency improvements, or energy efficiency equipment vendors offering energy audits and providing a service for a fixed fee. The full cost of providing the service is recovered in the fee, and the company does not assume any risk in case of underperformance. ï‚· In the mid-range of the spectrum is the ESCO that does not provide financing, but assists in arranging financing for energy efficiency investments by providing a savings guarantee to the customer. ï‚· At the other end of the spectrum is the full service ESCO, which provides both technical services and financing. It guarantees the energy savings through a performance guarantee, and its remuneration is directly tied to those energy savings (achieved or stipulated), in which it shares according to the performance contract with the customer. Figure 1. Implementation Spectrum of Energy Services Companies Technical Full Service a) Services ï‚· Technical ï‚· Technical ï‚· Technical and provided (Consulting- or services and financial services supplier-based) arrange financing b)Remuneration ï‚· Fee-based ï‚· Guaranteed ï‚· Shared savings technical savings service c) Risks ï‚· None ï‚· Technical and ï‚· Technical, assumed by performance risks performance, and ESCO financial risks Source: Authors. 22. In the following discussion, the term ESCO refers to an energy service company that enters into performance contracts with its customers, namely options (b) and (c) above. An ESCO thus assumes certain risks; i.e., it shares risks with its customer. The two parts of 18 Figure 2 show the different institutional arrangements in the guaranteed savings and the shared savings models, respectively. Figure 2. Energy Performance Contract Models Source: Taylor et al 2008. 23. In several developed markets, particularly the USA and Canada, certain characteristics of the public building sector allowed for the emergence of ESCOs as a mechanism for implementing energy efficiency projects in existing facilities: ï‚· high potential for cost-effective energy efficiency investments; ï‚· easy replication of basic projects among many similar customers; ï‚· customers who regularly outsource many tasks; ï‚· customers with limited expertise in energy efficiency retrofits; ï‚· highly creditworthy customers that did not want to incur additional debt. 24. Energy performance contracting started in the late 1970s in the USA in state and local schools, despite initial problems such as lack of public funding and restrictive budgeting and procurement rules. Many state governments eventually changed those rules. So did the Federal Government, starting in the mid 1980s (see case study 8). “Model contracts, model procurement procedures, and model monitoring and verification requirements were needed to develop a smooth path through contracting and procurement systems in each caseâ€? (Taylor et al 2008). In addition, incentives for organizations and officials to participate in the new way of doing business, as well as training programs, had to be put into place. While the process of developing performance contracting in the USA followed a bottom-up approach, in Canada the Federal Buildings Initiative (FBI) was instrumental in developing model contracts and bidding packages and providing training to agencies (see case study 5). 25. In Europe, energy performance contracting was slower to develop, but began to take off in the late 1990s, when EU energy markets were liberalized and the Maastricht treaty, requiring the convergence of member states' economic policies, went into effect. The treaty required strict fiscal discipline at all levels of government. In several countries, energy agencies worked with state and local governments to change legal frameworks, to allow 19 public entities to enter into performance contracts with ESCOs, and to develop standard documents offering transparency of procedures. Many cities, required to reduce operational costs but unable to fund the rehabilitation of public facilities from their own budgets, are entering into contracts with ESCOs for retrofits of those facilities. Independent experts often manage project development and tender procedures. 26. A typical procedure is to pool procurement of energy efficiency retrofits for many facilities. In Berlin, for example, a typical pool includes 20 buildings (see case study 4). In Hungary, the modernization of all schools funded from the central government budget was centrally tendered by the Ministry of Education. The ESCO with the winning bid has access to the entire market without any additional public procurement, since major terms and conditions have been centrally negotiated (see case study 3). 27. The involvement of ESCOs in energy efficiency retrofit projects has advantages and disadvantages (see Table 2). While ESCOs can offer technical expertise and assume various risks, performance contracting is very complex and requires capacity building and training and possibly technical assistance for the public sector customer. Table 2. Advantages and Disadvantages of Energy Service Companies Advantages Disadvantages ï‚· ESCOs have technical expertise to identify and ï‚· Performance-based contracts are very complex package EE projects and require technical, financial, management, and legal expertise on client side ï‚· Performance-based contracts shift technical and ï‚· Complex and time-consuming procurement, performance risks from end user to third party often for a variety of subprojects, and possibly with prequalification ï‚· Service contracts with financing options allow ï‚· EE services tend to be more expensive, since for EE investments when budgetary constraints ESCOs provide more services and assume more exist risks ï‚· ESCOs can offer “one-stop-shopâ€? services, ï‚· Cost and contract negotiations are generally reducing transaction costs from acquiring more difficult than for equipment or service equipment and services separately only procurement Source: Based on Coleman, Singh and Filippov 2007. 28. In countries where local ESCOs are relatively new and inexperienced and big international ESCOs are not active, procurement for public sector projects to be implemented by ESCOs may be problematic due to a limited number of bidders. For example, in Hungary, which probably has the most developed ESCO industry among the transition economies, three consortia participated in the bidding for the school program (see case study 3). In the Berlin program (see case study 4), bids for the various building pools were received from two to six ESCOs. 29. It is also generally the case that ESCOs initially have problems accessing financing from commercial sources. Therefore, in several countries, loan or partial guarantee programs have been set up to provide a source of financing for ESCOs (see, for example, Taylor et al 2008). 20 30. Another form of energy efficiency service delivery, which has become popular in Germany and Austria, is “intracting,â€? or “public internal performance contractingâ€? (PICO). It is similar to performance contracting, but uses in-house “third-partyâ€? financing or EPC schemes. A unit of the public entity, such as a technical department of a municipality, carries out the functions of the ESCO (see case study 6 on Stuttgart). 31. To summarize, the public sector customer considering an energy efficiency investment should evaluate whether all necessary resources are available to carry out the project internally or whether various aspects need to be outsourced. The cost-effectiveness of various degrees of outsourcing should also be considered. 21 V. Energy Efficient Public Purchasing – Issues and Experiences 32. Public policies and targets are necessary to clearly establish energy efficiency goals for public procurement. Few countries have established such policies and targets (see Table 1), although CO2 reduction emission targets are becoming more common. In addition, on the sub-national level, the number of states and cities committed to improving energy efficiency in order to achieve CO2 reduction goals is growing rapidly. For example, 40 large cities around the world (known as the C40), among them Rio de Janeiro and Sao Paulo, have recognized the need to take action and to cooperate on reducing climate emissions. Among the promised action points are the creation of procurement policies and alliances to accelerate the uptake of climate-friendly technologies and influence the market place (see http://www.c40cities.org). 33. As noted above, broad policies need to be underpinned with changes in rules and regulations. Furthermore, agency staff need tools and information that make it easy to comply with energy efficiency requirements. In public purchasing millions of decisions need to be made, the majority for small or medium-size purchases. To guide such purchasing decisions, simple methods are needed, such as a recommended efficiency level; an energy-efficient designation (such as Energy Star); or an approved list of energy efficiency products. For large purchases, a life-cycle cost analysis should be required. Purchasing programs should aim to maximize the number of buyers and organizations using the same efficiency levels. For example, in the USA, federal purchasing requirements to buy only Energy Star or FEMP- designated products have been adopted in more than 15 states and 6 cities, covering 40 percent of the population. Energy efficiency purchasing programs should be reviewed regularly and adapted to changing technologies and market conditions. 34. In the practical implementation of public energy-efficient purchasing programs, the following approaches have also proven useful (see, for example, PROST 2007): ï‚· a learning-by-doing exercise, where procurement officers practice writing calls for tenders, and evaluating those tenders, based on purchase specifications; ï‚· the selection of a limited number of products relevant for as many administrations and countries as possible; ï‚· pilot projects that identify current practices and propose energy-efficiency procurement reforms within institutions; ï‚· development of common information material and simple how-to guides, based on the experiences of the pilot action. 35. When introducing an energy efficiency purchasing program, the following enabling conditions should generally be in place (Van Wie McGrory et al 2006): ï‚· mandatory energy-efficiency performance standards for relevant products; ï‚· an effective energy-efficiency endorsement labeling program; ï‚· an immediate need for energy conservation, such as high energy prices or energy shortage; 22 ï‚· a simple pilot phase (focusing on a limited number of strategically chosen products); ï‚· specialized technical assistance. 36. Country conditions should also be evaluated to determine whether a top-down or bottom-up approach might be more successful. Top-down purchasing programs are likely to be more successful where there is high-level political endorsement and a national procurement law in place, supported by a network of trained purchasers. These conditions have, for example, led to the rapid implementation of a national energy efficiency purchasing program in China (see case study 9). Bottom-up (municipally led) purchasing programs require that municipalities have the authority to set their own purchasing policies, benefit from existing networks of cities, and are supported by motivated municipal leaders and trained purchasing officials (see case study 9 on Mexico). 23 VI. Energy Efficiency in New Construction of Public Buildings 37. In the building sector, market failure and numerous barriers inhibit the realization of considerable energy efficiency gains for new construction. Consumers’ decision making processes when buying homes involve many parameters, often leaving energy efficiency as a minor determinant. Incentives for reducing energy consumption tend to be misplaced due to separation of expenditures (builder/owner) and benefits (homebuyer/tenant). Energy efficiency standards are therefore used to reduce the intensity of energy use in new buildings. 38. In most OECD countries and some non-OECD countries, thermal building codes are mandatory for all new buildings, including public buildings. In the USA (see Figure 3), these codes have been revised several times in the past 25 years, moving from component- to performance-based standards (specified in terms of annual energy consumption per cubic or square meter), and increasingly considering the whole building system (including the building envelope, heating and air conditioning system, ventilation, lighting, hot water supply, and elevators). 39. Enforcement is an issue, however, since in most cases, compliance with the codes is only verified ex-ante (often using computer programs); real performance is rarely investigated. 40. In the U.S. federal agencies have been required to reduce energy consumption. The 1995 and 2000 goals of a 10 and 20 percent reduction in final energy use per m2, respectively, relative to 1985 were comfortably achieved, but the 30 percent reduction for 2005 was narrowly missed (Figure 3). The Energy Policy Act of 2005 requires new Federal buildings to be designed to achieve energy consumption levels that are at least 30 percent below the levels established by the ASHRAE (American Society of Heating, Refrigerating, and Air Conditioning Engineers) standard, if the technologies employed are life-cycle cost- effective. Sustainable design principles are to be applied to new and replacement buildings. All agencies must identify new buildings in their budget requests, and identify those that meet or exceed the standard. FEMP can provide design assistance from national laboratories. 41. Many government agencies and state/local governments now require LEED (Leadership in Energy and Environmental Design) certification of new buildings, or provide incentives to achieve it. For example, Pennsylvania offers financial incentives to public school districts, and many cities expedite permitting for buildings aspiring to LEED certification (see case study 10). 24 Figure 3. Standards and Energy Savings in US Federal Buildings, 1985-2005 Source: Based on FEMP 2006 (http://www1.eere.energy.gov/femp/pdfs/annrep05.pdf). 25 VII. Improving Energy Efficiency through Operations and Maintenance 42. Effective operations and maintenance (O&M) is one of the most cost-effective methods for ensuring the reliability, safety, and energy efficiency of energy-using systems in both public and private facilities. Energy losses from steam, water, and air leaks, non- insulated lines, maladjusted or inoperable controls, and other losses from poor maintenance are often considerable. O&M programs targeting energy efficiency can save an estimated 5-20 percent on energy bills without significant capital investment. In addition, properly operated and maintained equipment will increase the safety of all staff and provide a healthy indoor environment, thus improving comfort and health of building occupants. (Sullivan et al 2004). 43. Many performance contracts require the ESCO to be responsible for facility O&M during the contract term (case studies 3 and 4). In such cases, O&M management is one of the bidding criteria. The Canadian FBI program (case study 5) also emphasizes good O&M. Federal organizations entering into the EPC process can receive assistance to identify the specific training needs of facility operators and managers and create plans for customized training to be provided by the ESCO during the post-contract period. 44. Since many public agencies contract out facility O&M, such contracts should specify that the operator, in the context of improving energy efficiency: ï‚· Increase the operating efficiency of mechanical equipment (boilers, chillers, etc.); ï‚· Apply preventive maintenance procedures to reduce chances of premature equipment failures; ï‚· Provide for periodic inspection of building systems to avoid emergency breakdown situations. 45. When public agencies are in charge of their own O&M, the use of energy managers has been beneficial. In the state of Colorado, for example, the “Rebuild Coloradoâ€? program supports energy management in public facilities through the provision of information and documentation, as well as training campaigns covering various O&M areas. The state government also plans to establish a statewide system to collect and monitor utility bill data to provide the necessary tools for effective energy management programs (see http://www.eere.energy.gov/state_energy_program). 26 VIII. Lessons Learned from Successful International Experiences, and Implications for Public Sector Energy Efficiency Initiatives in Brazil 46. International experience confirms that public sector energy efficiency programs offer high rewards in terms of energy savings and energy cost and emission reductions. They also offer opportunities for private sector participation, including by ESCOs, manufacturers, contractors, and installation companies. These programs can be important contributors to transforming markets for energy-efficient products and services. International experience also shows that such programs can be difficult to implement due to public procurement and budgeting rules, a lack of incentives to consider such projects, and financing constraints at all levels of government. 47. The case studies presented in the annex describe the requirements that had to be met for programs in different countries to be successful. Table 3 summarizes the key factors that contributed to the successful implementation of these programs. 48. Many of the successful programs began with a statement of explicit goals to be achieved through the energy efficiency program, in terms of either energy savings or cost savings or emission reductions. Especially for new buildings and public purchasing programs, explicit standards and requirements were put in place. 49. Most implementation arrangements require some changes in legal and budgetary frameworks. Where fee-based turnkey contracts are involved and debt financing is possible, the changes could be minor (see cases 1 and 2) – for example, raising the awareness of public end-users, making them responsible for their energy bills, and enabling them to share in cost savings realized from such projects. 50. Other approaches, however, are more complex, particularly when governments have limitations on borrowing and are looking for third-party financing. In such cases, some governments use energy performance contracts carried out by ESCOs that also provide the financing. In addition to bringing much needed funding, ESCOs reduce performance and technical risks and give the public end-user a degree of confidence that energy savings will be achieved and can be used to pay for the services of the ESCO. 51. The use of ESCOs is also a way to bundle a large number of smaller projects and cut down on the transaction costs of separate contracts. For example, some innovative procurement practices have emerged where governments provide central procurement of ESCO services for other agencies, which can then more easily enter into EPCs. Examples are the US FEMP program (case 8), the Hungarian school renovation program (case 3) and – to some extent – the Berlin Energy Saving Partnerships (case 4). 52. In general, full energy efficiency service provision by ESCOs requires substantial changes in procurement and budgeting rules, in particular to allow bidding based on basic project description and baseline data instead of detailed project and tender description; on 27 best-value instead of least-cost criteria; and on retention of at least some of the energy cost savings. 28 Table 3. Public Sector Energy Efficiency Programs – Key Success Factors Case Key Success Factors 1. Serbia ï‚· Sharing of cost-saving benefits Buildings ï‚· Dedicated agency in charge of preparation and monitoring ï‚· Many non-efficiency, local benefits (improved comfort, aesthetics, health) ï‚· Local stakeholders 2. Kiev Buildings ï‚· One municipal department in charge and provides financing for many healthcare and educational facilities ï‚· EE training program for building managers and municipal staff responsible for O&M of the new equipment 3. Hungary School ï‚· Central federal-level procurement for municipal projects; best-value Renovation criterion ï‚· Lease or fee payments out of operating budget ï‚· Experienced ESCO industry able to access financing (Bank part of consortium) ï‚· TA for project development, monitoring 4. Berlin ï‚· Public goal to reduce debt/operating costs and improve municipal Buildings infrastructure ï‚· Pooling of large number of building complexes in each contract ï‚· Experienced ESCO industry able to access financing ï‚· Support from energy agency for development of tender procedures and materials, advice to participating departments and provision of TA 5. Canada Federal ï‚· Flexible budgeting, savings can be retained Buildings ï‚· Individual project approval by Treasury replaced by management framework ï‚· Dedicated agency provides bidding packages, contracts, training, etc. 6. Stuttgart ï‚· Existence of experienced public sector agency acting as internal Intracting performance contractor for other departments ï‚· Revolving municipal fund for EE investments 7. USA EE Leases ï‚· Lease payments out of operating budget ï‚· Tax-free lease payments reduce financing costs 8. USA FEMP ï‚· Agency in charge to develop supporting material (procurement guidelines, model contracts and monitoring/verification requirements) and provide TA EE Buildings Retrofit Program ï‚· Initial federal-level fiscal incentives to use ESCOs at state/local level ï‚· States and municipalities devise their own rules/legislation to change procurement and budgeting rules to allow EPC ï‚· Change of budgeting and procurement rules: savings can be retained, regular departments can bypass regular procurement rules by dealing directly with previously competitively selected ESCOs Public EE Purchasing Program ï‚· Federal requirements to buy products with EE labels ï‚· Tie-in with extensive EE labeling and standards program 9. China PEPS ï‚· High-level political endorsement ï‚· National procurement law 29 ï‚· Tie-in with EE labeling and standards program ï‚· Staff education and training 9. Mexico PEPS ï‚· Motivated municipal leaders and network of cities ï‚· Development of procurement specifications for limited number of products (lack of single EE endorsement label) ï‚· Staff education and training 10. USA ï‚· Incentives to achieve LEED certification – financial or preferential LEED – New treatment Const. ï‚· Public recognition of achievement Source: Author, based on case studies (see annex). 53. For energy efficient public purchasing programs, similar procurement and incentive problems have to be overcome, even though in this case the use of regulations, such as purchasing requirements and their enforcement, is an important part of the overall package. A big challenge is to enable purchasing staff to efficiently deal with thousands of items of equipment to be procured. Public mandates and rules to buy energy efficient products and the coordination with existing energy efficiency labeling and standards programs are important. Also needed is the change of procurement rules to emphasize best value or the use of life- cycle costing methods, as well as incentives and training for staff. 54. International experience is conclusive regarding the need for intensive technical assistance to support the preparation and implementation of public sector energy efficiency programs, especially during the start-up phase. In almost all cases reviewed, a dedicated agency has been in charge of developing the program, including preparing framework requests for proposals, bidding documents, model contracts, and other documentation; pre- qualifying bidders; and supporting public customers in project preparation and monitoring. Cooperation with public agencies to identify barriers and solutions to overcome them has also been an important element in the programs’ success. 55. Finally, many programs would not have succeeded were it not for motivated leaders at all levels of government who were determined to move ahead with projects that had clear local, national and global benefits. 56. These lessons suggest that the widespread implementation of public purchasing programs for energy efficient goods and services in Brazil may not be a long way off, since several municipalities and state governments have already made some of the necessary changes and seem highly motivated to move ahead. The implementation of public building retrofits on a larger scale will require more extensive changes, however, and thus may be further in the future. The transfer of international experiences in public procurement and budgeting reforms could speed up Brazil’s own reforms. The positive experiences with energy performance contracting seem particularly relevant, since Brazil already has an ESCO industry with some experience in performance contracting. Even the eternal financing problem is being addressed: A BNDES pilot is underway to facilitate the access of ESCOs to commercial financing. It is also possible that wire charge resources could be used for some types of public building retrofits. 30 IX. Public Sector Energy Efficiency Investments in Brazil – Opportunities, Barriers and Initiatives A. Energy Efficiency Opportunities 57. The public sector accounts for only two percent of total energy use in Brazil, but for nine percent of electricity consumption. The cost of electricity consumption in the public sector has increased substantially during the past few years, due to some consumption growth, but more significantly due to large increases in average tariffs (Table 4). If the largely untapped energy savings potential – estimated between 10 and 23 percent (cited in World Bank 2007 and in UNDP/IDB 2007, respectively) of current consumption – could be realized, this would generate benefits such as liberating significant budget resources or decreasing debt,, postponing investments for new capacity, and lowering environmental impacts 58. So far only public lighting has benefited from substantial energy efficiency investment ─ more than R$850 million between 1998 and 2004 from the RELUZ program and the wire charge program (da Silva and Meyer 2007). In the rest of the public sector, including in water and sanitation, only some demonstration projects, small investments by ESCOs, and some wire charge-financed investments have been carried out. The potential for cost-effective and otherwise very beneficial investments in the public sector, as discussed n the preceding chapters, remains to be tapped in Brazil. Table 4. Estimated Public Sector Electricity Consumption and Cost, 2006 GWh R$/MWh R$10 Average Cost Per Average Annual Consumption MWh Cost Public buildings and installations 10,566 R$ 292.5 R$ 3,090 Public lighting 10,993 R$ 165.3 R$ 1,817 Water and sanitation 10,774 R$ 185.9 R$ 2,003 Total 32,334 R$ 213.7 R$ 6,910 Subtotal Buildings + Water 21,340 R$ 238.7 R$ 5,093 Percentage increase 2004-2006 8.3% 23.1% 33.3% Notes: Consumption values: EPE (Empresa de Pesquisa Energética): “O Mercado de Energia Elétrica em 2004â€?; July, 2005. Water and sewage treatment derived from total for public services (11.3 TWh) less 1.04 TWh for transport. For 2006: EPE preliminary estimates. Electricity prices: Average price is from ANEEL website. In the case of water and sewage treatment, the price is an approximation, since the ANEEL category includes consumption for urban railways. The other categories ("Poder Público" and "Iluminação Pública") appear to closely coincide with the EPE categories. B. Public Procurement in Brazil – Current Rules and Issues 59. Federal government expenditure in 2002 amounted to R$15.5 billion, or about US$6.4 billion, for total public procurement. Total combined public procurement of federal, state and municipal governments in 2004 was about RS$120 billion, or close to US$40 billion (see Valente de Macedo and Biderman Furriela 2005). 31 60. Article 37 of the Brazilian Constitution and Procurement Law 8666 of 1993 regulate government procurement at the federal, state and municipal levels, and apply to all public agencies. The Procurement Law specifies that there is no central procurement agency in Brazil; instead procurement is the responsibility of each individual governmental entity. Control takes place through the budgets. Contracts may be awarded based on various criteria: (a) best offer, (b) lowest price, (c) best technology, and (d) combination of price and technology. Lowest price is the main criterion. 61. One of the main barriers to energy performance contracting between public sector clients and ESCOs is the requirement that a detailed technical description of project parameters must be provided before services can be tendered. In addition, the entity bidding for the service has to be legally separate from the entity developing the technical description. This clause would prevent ESCOs from entering into any performance contract, as they would be very reluctant to guarantee savings based on audits carried out and investment measures proposed by others. 62. Financing of public investments is especially difficult for municipal governments. In addition to the normal borrowing conditions, they also need to comply with the Lei de Responsabilidade Fiscal. This means that they cannot borrow and leave the bill to be paid by the next government, unless the funding sources for loan repayment are clearly identified and accepted by the Tribunal de Contas, the government’s legal auditing body (which is independent from the executive). This makes third-party financing potentially attractive to municipal governments, but, as explained above, the practice is currently limited by procurement rules. C. Sustainability Initiatives for the Public Sector in Brazil 63. Sustainable public procurement initiatives have been proposed in Brazil for a number of years. They typically include conservation of resources, including energy and water. Like energy efficiency initiatives for the public sector, the successful implementation of sustainable public procurement practices depends on a change of procurement rules, as well as capacity building for public sector officials, and more generally, a reform of public sector management. 64. A revision of Law 8666/93 to include sustainability criteria is in progress. The Ministry of Environment has sent a draft amendment to Congress which emphasizes the need to respect environmental sustainability as a general principle of procurement. The amendment includes environmental protection as a criterion for the selection of products and services, and requires that bidders comply with environmental laws as a pre-condition to participate in bidding. 65. The Environmental Agenda for Public Administration (A3P, http://www.mma.gov.br), a voluntary action of the Federal Ministry of Environment, was established in 1999 and includes sustainable procurement recommendations. The A3P network, which includes more than 300 public agencies, facilitates the exchange of information about actions, technical advances, and sustainability indicators. 32 66. Many initiatives are also emerging at the state and local level. For example: ï‚· Seven Brazilian cities participate in Cities for Climate Protection (CCP): Betim, Goiania, Palmas, Porto Alegre, Rio de Janeiro, Sao Paulo, and Volta Redonda. CCP is organized by ICLEI, Local Governments for Sustainability (see http://www.iclei.org/index.php?id= 1484 ®ion=LA). The CCP campaign assists cities to adopt policies and implement quantifiable measures to reduce local greenhouse gas emissions, improve air quality, and enhance urban livability and sustainability. It will also include approaches to adapt to climate change; implementation modules on specific topics such as street lighting and purchasing; and a new focus on ambitious targets and carbon neutral communities. ï‚· Rio de Janeiro and Sao Paulo are among the 16 cities included in the public building energy saving program proposed by the Clinton Climate Initiative in 2007 (see case study 4). ï‚· The state of Sao Paulo is currently introducing environmental criteria for the acquisition of materials, construction, and general and engineering services, for which total public procurement surpassed US$5 billion in 2004. 67. PROCEL, a program for electrical energy efficiency managed by Electrobras (the federal holding company in the power sector), has several subprograms to improve energy efficiency in the public sector (Box 4). These programs provide funding or co-funding of R&D, education and training, testing, labeling and standards, and demonstration projects. Box 4. Major Components of PROCEL Programs Relevant for Public Sector Energy Efficiency (numbers in parentheses are the budgets during the period 2003-2004) PROCEL EPP (R$2 million) – Energy efficiency in public buildings. Collaborative program with other government agencies supporting the creation of a database of government buildings, training of building managers, and an action plan for hospitals. Interagency task force created to establish performance contracting for public buildings. PROCEL GEM (R$2 million) – Energy management in municipalities: Provides support to municipal governments in developing energy management capability. In 2003-4, ten energy management plans were developed and socioeconomic criteria for prioritizing municipalities were prepared. Supports the program “Network of Efficient Cities,â€? and promotes the “Energy Efficient Cityâ€? prize. PROCEL Edifica (R$3.5 million) – Energy efficiency in buildings. It focuses on improving the energy performance of new buildings, including the implementation of Energy Efficiency Law 10925/2001, which mandates minimum standards for new buildings. It provides support for 13 laboratories, demonstration projects, education, capacity building, and dissemination and collaborates with the Caixa Economica Federal, which has a large program for financing buildings (http://www1.caixa.gov.br/gov/gov_social/municipal/programas_habitacao/index.asp) Selo PROCEL (n/a) – Labeling program for domestic and commercial appliances. The program includes, the participation of 69 manufacturers of 17 categories of equipment. Approximately 1,000 models have been tested and labeled. Investments were made in laboratories for this purpose. There is also a program of annual prizes for industrial and commercial consumers (Prêmio de Conservação de Energia). SANEAR (R$8 million) – Energy efficiency for water and sewage treatment systems and efficient water use by consumers. Objective is to achieve universal water supply and treatment services at lower cost. Supports 12 demonstration projects and training programs, and provides technical support to the Ministry of Cities. Source: http://www.eletrobras.com/elb/procel/main.asp. 33 68. In addition to these efforts, the Brazilian Government is supporting the UNDP/IDB/GEF project, Market Transformation for Energy Efficiency in Buildings, to be implemented in Brazil during 2008-2014. Its objective is to foster energy efficiency investments in private and public buildings, with a special emphasis on HVAC equipment. The project proposes to develop and implement a Public Building Initiative (PBI) program to eliminate the barriers to implementing energy efficiency projects in public buildings and facilities. The PBI will be based on the promotion of energy performance contracting, and has the mandate to promote changes in the policy and legal framework in order to clear the way for federal, state, and municipal public sector energy consumers to use such contracts. To make the contracting process easier, the PBI will provide model contracting and assessment documents, including requests for proposals, actual EPCs, environmental assessments, and other necessary information. The PBI will also provide a list of pre-screened private-sector firms qualified to bid for EPCs. In collaboration with IDB, the project will establish a partial performance guarantee mechanism (PPGM) to support ESCOs in raising financing from the local commercial banking sector. D. Conclusions and Outlook 69. Brazil has made some progress on the regulatory side of energy efficiency. An extensive labeling program is in place for domestic and commercial electrical appliances; and standards for the minimum energy performance of new buildings have been developed. 70. The realization of energy and operational cost savings in Brazil’s public sector has not yet gone beyond demonstration projects. Broad implementation of public sector energy efficiency improvements is still limited by financing and procurement issues, and also by the insufficient knowledge of public sector agents about opportunities for and benefits of energy efficiency investments. 71. Some steps are now being taken to change the framework within which public investment and expenditure decisions are made: ï‚· Many agencies on all government levels have started to incorporate sustainability aspects into the procurement of goods and services as part of their normal business practices. ï‚· Some initiatives by NGOs and government officials suggest a move toward amending the current procurement law to include sustainable procurement practices, as well as the elevation of sustainability criteria such as least cost for public tendering processes. ï‚· There is more focus on increasing public awareness of the benefits of integrating energy efficiency criteria in decision-making on expenditure and investments. 72. It appears, therefore, that public purchasing rules in Brazil are changing in a way that will make it possible to incorporate energy efficiency criteria, and to link purchasing decisions with the country’s existing energy efficiency labeling program. Judging by programs implemented in other countries, however (see case studies 8 and 9), agencies and their staff will need guidelines, training, and incentives to actually apply energy efficient criteria to their many purchasing decisions. 34 73. To substantially increase energy efficiency investments in public sector facilities, delivery models need to be designed that that could bring together federal and state governments, municipalities, ESCOs, utilities, and banks in successful ventures. 35 Annex: International Case Studies This annex presents case studies of public sector energy efficiency programs in various countries that have achieved some success. In each country, barriers to implementing energy efficiency projects in the public sector had to be overcome. The majority of cases deal with energy efficient retrofits of public buildings (cases 1-8). These projects were difficult to implement due to public procurement and budgeting issues, the lack of incentives to take on such projects, and financing constraints at all levels of government. Many of the programs (cases 3-5, 8) use ESCOs as the specific delivery and bundling mechanism. Except for the USA FEMP case (8), ESCOs provide financing to their public sector customers. This presumes that a viable ESCO industry exists and that ESCOs are able to access financing. In all cases, procurement rules were changed to allow bidding based on basic project description and baseline data instead of on a detailed project and tender description, and on best-value instead of least-cost criteria. Where the public customer raises financing (as in USA cases 7 and 8), leasing is often used, enabling financing of investments from the operating instead of the capital budget. In most cases, budgeting rules were changed to allow agencies to retain at least some of the energy cost savings. For energy efficient public purchasing, a major challenge is to enable purchasing staff to efficiently deal with thousands of items of equipment to be procured. Cases 8 and 9 show the importance of public mandates and rules to buy energy efficient products, and of tie-ins with existing energy efficiency labeling and standards programs Changes in procurement rules are needed that emphasize best value or the use of life-cycle costing methods, in addition to staff incentives and training. In almost all of the cases, a dedicated agency has been in charge of developing the program, including bidding documents and model contracts, and has supported public customers in project preparation and monitoring. Finally, case 10 shows how existing standards for energy-efficient new construction can be improved through a program that has high visibility and is supported by local incentives. 36 1. Serbia Public Buildings Energy Efficiency Project Financing: US$21 million IDA credit (2004); additional financing US$28 million IDA/IBRD (2006) Main Features: ï‚· Public sector project with four participating ministries – Mines and Energy, Health, Education, and Social Welfare – and involvement of municipalities; ï‚· IDA credit of $21 million supplements and/or complements Government budget for various building improvement measures; ï‚· Stakeholders extend to caregivers (doctors, nurses), patients, students, teachers, etc.; ï‚· Has strong energy savings incentive and contributes to reducing pollution; ï‚· Tackles mainly energy use, but also energy supply at select sites (e.g., clinical centers); ï‚· Serbian Energy Efficiency Agency (SEEA) and an inter-ministerial Project Implementation Unit (PIU) carry out implementation. Project components: (a) replacement of inefficient lignite and heavy oil-fired boilers with new gas-fired plants at two clinical centers in Belgrade and NiÅ¡; (b) energy efficiency improvements in selected public and social buildings throughout Serbia, such as schools, hospitals, orphanages, and other social care buildings; and (c) technical assistance for capacity building, energy audits, public outreach/ communications, monitoring and evaluation, and training of municipal and government officials in evaluating capital expenditure decisions on energy efficiency investments Institutional/implementation arrangements: Financing through the national government; inter-ministerial Project Steering Committee (PSC) with participation of the ministries of Mines and Energy, Health, Education, and Social Welfare; implementation through a PIU. SEEA provides support for energy audits, technical review, and monitoring. Each ministry selects a short list of buildings to be retrofitted; final selection based on priority needs; ministries are responsible for contracting for work and equipment. Results (May 2007): Energy efficiency improvements completed in six schools and four hospitals, with savings in annual energy consumption of more than 40 percent. Energy efficiency upgrades at seven schools have been almost completed, with commissioning expected imminently; and works are almost completed on four hospitals. Design and preliminary works have been completed in the Belgrade Clinical Center. Key drivers of success: ï‚· Broadly distributed benefits among strong constituents; ï‚· Highly visible benefits from projects – comfort, aesthetics, health, lower energy bills, etc.; ï‚· No-load policy conditions; projects attractive even at low energy prices; ï‚· Local population and mayors driving the project; 37 ï‚· Investments borne by national government, energy cost savings shared between national government and local communities and municipalities; ï‚· Sustained non-partisan political support; ï‚· High levels of local skills and knowledge; ï‚· Well-motivated PIU and SEEA staff; ï‚· Project scaled up with another US$28 million from World Bank – scope for CDM (Clean Development Mechanism) financing is built into project design. 38 2. Kiev Public Buildings Energy Efficiency Project Financing: US$18.29 million IBRD loan to the national Government (2000), on-lent to Kiev Municipality. Main Features: Investments in public buildings (healthcare, educational, and cultural) owned by Kiev City State Administration (KCSA). Energy efficiency measures were evaluated in advance to determine those with the highest economic rates of return and easiest and quickest implementation. Implementation was through a PIU within KCSA by means of supply and installation contracts. Project components: (a) energy efficiency improvements in 1,302 institutional buildings, with floor space of about 5.1 million square meters: heat meters, heat substations, radiator reflectors, weather stripping, etc. (estimate US$26.2 million, actual US$20.5); (b) technical audits and design of retrofits; (c) institutional support program; (d) financial audits. Results: ï‚· Energy savings and emission reductions: 17 percent reduction of annual energy consumption (2004), up to 26 percent expected when investments are functional year- round (starting in 2006). ï‚· Development of an energy efficiency industry: manufacturing of energy efficiency components, supply and installation companies, technical audits and design. ï‚· Capacity building in international procurement, financial management, monitoring and verification of energy savings, and in promoting public awareness about energy efficiency; ï‚· Development of a training program in energy conservation issues for building managers and district administration officers responsible for O&M of the new equipment. 39 3. Hungary Szemünk Fenye Program Financing: IFC/GEF provide US$150 million guarantee package (50 percent risk sharing) to OTP Bank Hungary (2006), which in turn provides credit line (€180 million) to winning bidder – a consortium of Caminus (ESCO, leader), OTP Bank, General Electric (lighting supply), Viessmann (gas boiler supply), Ratherm (heat supply reconstruction). Main Features ï‚· Streamlined central procurement, with one central tender by Ministry of Education: selection of the best-value-for-money ESCO provider that offers off-balance-sheet, no-recourse financing to the client. Selection is based on a scoring system with technical, pricing, experience, terms of financial package, and other criteria; ï‚· Winner is offered access to the entire market; no further public procurement is necessary, as major terms and conditions have been negotiated centrally; ï‚· Winning bidder finances investment of US$250 million over 5 years; ï‚· Modernization of indoor lighting and heat supply in 2000 municipal and budget educational institutions, based on multi-year service contracts; ï‚· The Ministry maintains an IT system, pre-qualifies participating schools, and carries out monitoring and evaluation of the program ï‚· The municipalities and other school operators conclude multi-year service contracts with the consortium. The fixed fee or lease paid out of the operating budget (balanced by energy cost savings) is not counted against their indebtedness, which is strictly regulated in Hungary. Results: Not yet available since program started only in 2006. Program IFC/GEF Structure Guarantee (50% risk sharing) Fee Credit Line Caminus OTP Framework (ESCO) Bank Contract Consor- Interest & Principal Ministry of tium Education GE Viessmann Ratherm (heat (lighting) (boilers) supply) reconstr.) Budget Service Contract EE Investment, O&M Fixed Fee Municipalities, or Lease Ownership, other school Payment Budget operators Schools Ownership, Operation Source: http://www.accessmylibrary.com/coms2/summary_0286-17364719_ITM. 40 4. Berlin Energy Saving Partnerships Financing: By ESCOs, and paid back through guaranteed savings (ongoing since 1996). Main Features ï‚· Retrofits for large local government-owned building complexes, through special contracts between building owners and ESCOs. Coverage of 19 building pools (1 building pool includes an average of 20 buildings), totaling about 1400 buildings (1996-2006). ï‚· Baseline energy costs: €37 million; guaranteed investments: €40 million; guaranteed net savings: 25 percent; guaranteed annual budgetary savings: €3.4 million; contract length: 10-14 years. ï‚· Use of project managers to support client during project preparation, public tendering process, contract award, and project oversight. ï‚· Assessment criteria for contract award: guaranteed savings, remuneration, budgetary reduction, bonus if additional savings; length of contract; investment volume; operations management; concept for end-user motivation; reduction of CO2 emissions. ï‚· For the first 12 building pools, between 15 and 20 ESCOs provided expressions of interest, a smaller number requested bidding documents, between 2 and 6 submitted bids, and negotiations were held with 2-4 ESCOs. Results (1996-2006) ï‚· Investments: €43 million (light fittings, energy control system, insulation, fuel switch, etc.); ï‚· Energy efficiency: 26 percent average savings per building pool; 749,197 MWh/yr energy consumption baseline. Projected savings of 15-33 percent; actual realized savings of 22-39 percent; ï‚· Annual CO2 reductions: 60,484 tons; ï‚· Annual financial savings: €10 million. Remuneration Public ESPartner Authority/ Savings Guarantee Building Owner Project Manager Financing/ Repayment General for Client Support Maintenance Energy Savings Service Bank Facility Pool Remuneration Gas Heating Coordination Supply DH Technical Issues Electricity Oil Utilities Source: http://www.nycclimatesummit.com/casestudies/energy/energy_berlin.pdf. 41 In 2002, a similar pilot project for federal building complexes was started, covering 19 building pools with annual energy costs of €12 million. Guaranteed energy efficiency investments amount to €12.5 million, with estimated annual energy cost reductions of €2.8 million. An approach similar to the Berlin program was proposed by the Clinton Climate Initiative during the New York Climate Summit in May 2007, for implementation in 16 cities worldwide, among them Sao Paulo and Rio de Janeiro. 42 5. Canada Federal Buildings Initiative The Federal Buildings Initiative (FBI) allows federal departments to contract with ESCOs under energy performance contracts, with the ESCO providing the financing. EPCs under Can$25 million can be concluded without the Treasury Board's approval, except for the first contract in excess of Can$1 million. Departments have the option of either immediately sharing in energy savings or deferring them until the conclusion of an EPC. The Government agency Natural Resources Canada (NRCan, http://www.oee.nrcan.gc.ca), which manages the program, is responsible for: ï‚· promoting the concept to federal agencies; ï‚· training agency staff in developing projects with ESCOs; ï‚· providing model contracts and bid packages; ï‚· maintaining a list of ESCOs qualified to bid on contracts: and ï‚· helping agencies identify the specific training needs of facility operators and managers, and assisting in the creation of customized training plans. Procurement and Expenditure Management Policy: Departments need not conform with the Treasury Board's policy concerning capital plans, projects, and procurement, as long as they follow the FBI management framework. Consequently, limits concerning Preliminary Project Approvals and Effective Project Approvals do not apply to departments entering into EPCs. The present Expenditure Management Policy gives departments wide latitude in switching funds from one expenditure item to another. Consequently, energy savings (both shared savings and those accruing at the end of an EPC) can be directed toward other priority areas within a department. Results (1991-2006) ï‚· Retrofits of 7500 federal buildings; ï‚· Can$265 million private sector investments; ï‚· Can$38 million annual energy cost savings; ï‚· Additional benefits: improved building comfort; healthier, more productive workplace; 250,000 tons reduction in greenhouse gas emissions. 43 6. Intracting in Stuttgart/Germany The Environment Department of the city of Stuttgart has taken on some of the roles of an internal ESCO and offers energy services to other units of the municipal administration (host departments) and municipally-owned public utilities. The energy management unit within the Environment Department is responsible for energy efficiency improvements in 2000 city- owned facilities. It draws on the technical know-how of the building surveyor’s office, supplementary energy audits and cost estimates of the Construction Department to propose energy efficiency measures. If good cost-effectiveness is confirmed, the host department and the Environment Department conclude an agreement. In this agreement, the measure to be performed is specified, the costs are set out, and the potential energy savings are calculated. The agreement further determines whether financing is to be provided exclusively from a revolving fund, set up in the Environment Department, or whether cost-sharing is agreed. Financing from the revolving fund is in the form of an interest-free loan to be paid back from energy cost savings. The energy saving measures are implemented by the Construction Department, based on awarding contracts for work after calls for tenders to efficient and competent companies. A precondition to this approach is that there is an office within the administration which can provide a technical appraisal of potential energy efficiency measures and has an overview of potential savings throughout the entire administration. Results: The internal revolving fund for energy efficiency investments, set up within the city’s Environment Department, invested a total of €3.32 million in 158 individual projects between 1995 and 2001. These investments yielded total annual cost savings of €0.7 million, compared to an energy bill of €35 million in 2000. The annual savings generated by the projects amounted to 12,300 MWh of heat, 1,500 MWh of electricity and 31,700 m³ of water. (http://www.reneuer.com/upload/STUT_EN_M.PDF) 44 7. Energy Efficiency Leases in the USA As part of its program to improve energy efficiency in the public sector, the US federal government provides tax incentives. The interest payments on municipal lease-purchase agreements for energy efficient equipment are exempt from federal income tax. Their interest rates are thus lower than those on a taxable commercial lease-purchase agreement. (http://www.energystar.gov/ia/business/easyaccess.pdf). Neither the lease nor lease payments are considered to be debt, since the lessee’s payment obligation ends if the lessee fails to appropriate the funds needed to continue to make lease payments. Lease payments can, however, be made from the energy savings in the operating budget. Municipal leases are often used as underlying financial instrument in an energy performance contract. Examples include the Mississippi Energy Efficiency Lease Program; the Oklahoma K-12 School Energy Loan/Lease Program; and the Iowa Public School Energy Efficiency Project Lease Program. 45 8. U.S. Federal Energy Management Program (FEMP) FEMP, operated by the US Department of Energy, is responsible for coordinating the energy efficiency activities of federal agencies. Energy-efficient purchasing: The Energy Policy Act of 2005 (PL 109-58) and Executive Order 13123 require federal buyers to purchase ENERGY STAR®-qualified or FEMP- designated products. Purchase of these energy-efficient products is mandatory for all federal acquisitions and can be waived under only two conditions: no efficient product meets technical needs, or no efficient product is cost-effective for a specific application. More than 15 states and 6 cities are using the same federal criteria. Assistance with product procurement: FEMP helps federal purchasers identify efficient products, provides model language for specifying efficient products in capital projects and service contracts, and gives buyers advice on everyday procurement decisions. FEMP publishes a series of Purchasing Specifications for Energy-Efficient Products (published online at www.eere.energy.gov/femp). For each product, FEMP identifies the efficiency levels needed to meet procurement requirements. FEMP and ENERGY STAR offer two software tools to compute lifetime energy cost savings for specific products and applications, and for detailed life-cycle cost analysis of buildings. Results: Energy-efficient purchasing by federal and non-federal government agencies has resulted in estimated energy cost savings of US$1 billion per year. Energy Performance Contracts (EPCs) FEMP promotes the use of ESCOs and EPCs by facilitating the navigation of procurement processes and maintaining lists of approved ESCOs. FEMP also developed Super Energy Savings Performance Contracts (Super ESPCs) for use by federal agencies to implement comprehensive energy saving projects. FEMP selects a limited number of ESCOs to be eligible for Super ESPCs through a competitive process. The Super ESPCs concept allows federal agencies to bypass procurement procedures and deal directly with a pre-qualified ESCO to design and implement energy efficiency projects. An agency can have many projects with the ESCO under an umbrella contract. The ESCO conducts a comprehensive energy audit, identifies measures, arranges financing, guarantees a level of annual cost savings to the agency, and implements the agreed measures. The agency pays for the measures through a portion of the guaranteed savings. FEMP provides facilitators who guide agencies through the ESPC process; their services are free through the initial proposal stage. Key features: ï‚· Common class of credits; ï‚· Lead agency organizes the market; ï‚· ESCOs responsible for identification, planning, implementation, and financing of energy saving measures in public buildings; ï‚· Transparency of contracts and process; ï‚· Framework RFP; 46 ï‚· Standardized EPC contracts. Results: Between 1998 and mid 2006, the Super ESPC concept has resulted in US$1.9 billion project investment by 19 agencies in 46 states, with energy cost savings of US$5.2 billion and net savings of US$1.5 billion. 47 9. PEPS - Promoting an Energy-Efficient Public Sector PEPS (Promoting an Energy-efficient Public Sector) was established in 2000 to help government agencies worldwide identify and overcome barriers to achieve a more energy- efficient public sector. PEPS is a partnership of Lawrence Berkeley National Laboratory (LBNL), ICLEI/Local Governments for Sustainability, the Alliance to Save Energy (ASE), and the International Institute for Energy Conservation (IIEC), which has received funding support from the U.S. Agency for International Development (USAID), U.S. Department of Energy (U.S. DOE), U.S. Environmental Protection Agency (USEPA), and the Energy Foundation. Mexico, China, and India are participating in the project (see Van Wie McGrory et al 2006). China Energy Efficient Purchasing Program (since 2003) ï‚· National Procurement Law (detailed procurement guidelines and list of products subject to mandatory central procurement); ï‚· 2002-03 baseline of equipment usage and energy consumption in selected public sector buildings in several provinces (technical savings potential of 26 percent); ï‚· Existing policy mechanism: mandatory minimum efficiency standards and EE endorsement labeling program; ï‚· Selection of nine products for an EE procurement list (low incremental costs, commonly procured, multiple vendors, many complying product models); ï‚· NDRC (National Development and Reform Commission) and Ministry of Finance released Notice on Implementation of Government EE Procurement; ï‚· Purchasing Guides were developed, detailing lifetime benefit of EE models. Results: Implementation has been slow due to low level of authority, insufficient training, and insufficient information materials. Mexico Energy Efficient Purchasing Program (since 2000) No national procurement law or existing national policy mechanism; Lack of single energy efficiency endorsement label; No interest at federal government level, despite the successful program with audits and lighting retrofits in about 1,000 government buildings; Instead project focuses on municipalities: started with 8 cities, now 40 cities, plus 4 states); Procurement specification for pilot-phase products (qualify for Sello FIDE, the Mexican energy efficiency endorsement label, or Energy Star), and training of procurement officials in 8 municipalities; 11 products currently approved for procurement; Results: 15 cities buying energy efficient products, several adopting new purchasing policies; 11 cities reported 2006 savings totaling more than US$1 million. 48 10. New Energy Efficient Construction - LEED The Leadership in Energy and Environmental Design (LEED) Green Building Rating System is an accepted benchmark for the design, construction, and operation of high-performance green buildings, developed and administered by the U.S. Green Building Council (http://www.usgbc.org). LEED promotes a whole-building approach to sustainability by recognizing performance in five key areas of human and environmental health: sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality. To earn certification, a building project must meet certain prerequisites and performance benchmarks ("credits") within each category. Projects are awarded Certified, Silver, Gold, or Platinum certification, depending on the number of credits they achieve. Many US government agencies and state and local governments now require LEED certification of new buildings, or provide incentives for achieving it. For example, Pennsylvania offers financial incentives to public school districts, and many cities expedite permitting for buildings aspiring to LEED certification. Results: ï‚· 867 million square feet of commercial building space registered or certified under the LEED Green Building Rating System; ï‚· 765 total commercial LEED-certified projects and 5,562 total commercial LEED- registered projects; ï‚· 46 percent of LEED projects are owned by federal, state, and local governments; ï‚· 30 percent cut in energy usage can save tenants 50 cents per square foot per year; 20 percent savings in O&M costs for LEED buildings over their life. 49 References Coleman, Philip. 2007. Why Would They Care? Incentivizing Energy Efficiency in the Public Sector. Presentation at Commission on Sustainable Development Learning Centre (CSD-15). New York, NY (May 4). http://www.un.org/webcast/ Coleman, Philip, Jas Singh, and Alexander Filippov. 2007. Financing Public Sector Energy Efficiency Projects: U.S. Experiences and Lessons Learned. Presentation at Commission on Sustainable Development Learning Centre (CSD-15). New York, NY (May 3). http://www.un.org/esa/sustdev/csd/csd15/lc/usaid_energyEfficiency.pdf D’Amico, Valéria. 2005. Sustainable Public Procurement in the State of São Paulo, Brazil. http://www.un.org/esa/sustdev/sdissues/consumption/procurement/valeriad.pdf Harris, Jeffrey. 2001. PROST Supplemental Report on Programs and Policies in the U.S. (draft, November 17). http://www.eceee.org/european_directives/EEES/public_sector/US_PROST.doc PEPS/LBL. 2007. The Public Sector: A Catalyst for Energy Efficiency. Presentation at Commission on Sustainable Development Learning Centre (CSD-15). New York, NY (May 3). http://www.un.org/esa/sustdev/csd/csd15/lc/energyEfficiency_publicSector.pdf PROST. 2003. Harnessing the Power of the Public Purse. Final report from the European PROST Study on Energy Efficiency in the Public Sector. http://ec.europa.eu/environment/gpp/pdf/harnessing_power_prost_study.pdf da Silva Filho, Pedro Paulo, and Anke Sofia Meyer. 2007. Energy Efficiency in the Water and Sanitation Sector in Brazil. Consultant Report for the World Bank/Energy Sector Management Assistance Program (ESMAP). Sullivan, G. P., R. Pugh, A. P. Melendez, and W. D. Hunt. 2004. Operations and Maintenance Best Practices – A Guide to Achieving Operational Efficiency. Release 2.0. Prepared by Pacific Northwest National Laboratory for the Federal Energy Management Program, U.S. Department of Energy (July). http://www1.eere.energy.gov/femp/pdfs/omguide_complete.pdf Taylor, Robert P., Chandrasekar Govindarajalu, Jeremy Levin, Anke Sofia Meyer, and William A. Ward. 2008. Financing Energy Efficiency – Experience from Brazil, China, India and Beyond. Washington DC: World Bank. United Nations Development Programme/Inter-American Development Bank. 2007. Market Transformation for Energy Efficiency in Buildings. Policy Information Marker System (PIMS) 3665. http://gefweb.org/uploadedFiles/Documents/Council_Documents__(PDF_DOC)/GEF_31/PI MS%203665%20BRA%20PRODOC%20Rev%20Submission%20FINAL%202May07.pdf Valente de Macedo, Laura and Rachel Biderman Furriela. 2005. Development of Sustainable Procurement in Brazil – Current Initiatives and Challenges. Third Expert Meeting on Sustainable Public Procurement. United Nations Department of Economic and Social Affairs (UNDESA). New York (June). http://www.un.org/esa/sustdev/sdissues/consumption/procurement/lauraandrachell.pdf 50 Van Wie McGrory, Laura, Philip Coleman, David Fridley, Jeffrey Harris, and Edgar Villasenor Franco. 2006. Two Paths to Transforming Markets through Public Sector Energy Efficiency: Bottom Up versus Top Down. American Council for an Energy-Efficient Economic (ACEEE) Summer Studies Program, Lawrence Berkeley National Laboratory. http://www- library.lbl.gov/docs/LBNL/601/44/PDF/LBNL-60144.pdf World Bank 2007. Project Concept Note for Brazil Energy Efficiency Strategy. 51