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August 25, 2022
Signed by Gov. Jay Inslee on March 24, legislators recently approved HB 1768, a bill that modernizes definitions used in performance contracting language applicable to energy conservation projects involving public entities. The bill went into effect in early June, and the expanded language allows state agencies, schools, and local municipalities to consider and apply more solutions to their performance contracting projects.
More specifically, the updates include emerging solutions such as electric vehicle (EV) charging infrastructure, distributed energy solutions, energy storage initiatives, and grid-interactive measures. These changes can have a positive impact on urban development by making it easier for cities, counties, K-12 schools, and higher education institutions to tackle these types of clean energy projects and others that create energy benefits outside of their “facilities.”
To better understand why these changes were proposed, it’s important to first recognize that the original performance contracting law was drafted over two decades ago. While the previous version was effective for many years and helped Washington state establish itself as one of the most successful performance contracting markets in the nation, it didn’t consider a clean energy future when adopted.
Put another way, the codes as written prior to HB 1768 limited performance contracting from advancing important clean energy projects. Further supported and strengthened by the current legislative updates, Washington state has a long history of being a national leader in climate innovation and environmental policy and continues to do so thanks to legislation like HB 1768.
Today’s energy landscape is quite complicated and diverse. The old legislation effectively held us back in ways never intended it was, simply, dated. So, why was now the time to update this legislation, especially as it relates to responding to greater needs around energy-saving solutions? And not only that but looking at opportunities outside the building, like charging infrastructure?
Three specific deficiencies forced the conversation:
1. EV charging is here, and while electric charging is an evolution of our transportation industry, it requires infrastructure that is tied to and operated by our built environment, or “facilities.” Electric transportation also creates opportunities to interact with the energy grid, meaning it should be considered in our energy solutions as well.
2. Wastewater treatment plants and other physical infrastructure have an opportunity to contribute to our energy landscape by providing renewable natural gas and other renewable resources to our communities. The new legislation allows us to incorporate these solutions in clean energy project plans.
3. Electrifying our buildings (fuel switching) doesn’t always occur because it’s purely an energy cost-saving strategy. The pure utility payback has been causing owners to hold back from making conversions. But, if allowed to consider other value streams to justify the return on investment (e.g., cost of carbon, maintenance savings, etc.), owners can more easily get work done.
HB 1768 modernizes existing statutes, which is a distinctly different task from drafting new legislation. Following is a summary of the updated definitions now in effect as a result of HB 1768:
• Public facility: The definition of public facility has been broadened to include structures, multi-building sites, groups of buildings, site improvements or other facilities.
• Cost-effective: The definition of cost-effective now includes other benefits generated by the project, which are purposefully undefined to allow developers and owners to consider other value streams such as the social cost of carbon, maintenance, or other kinds of cost-saving benefits.
• Conservation: The definition of conservation has been expanded to include, but not be limited to, energy cost, energy demand, greenhouse gas emissions, and other utility reductions like water, wastewater and solid waste.
• Distributed energy resources: New language has been added to allow the consideration of distributed energy resources, which include, but are not limited to, energy storage, energy efficiency projects, demand response, grid-interactive efficient buildings, and electric vehicle charging infrastructure.
What’s really exciting about HB 1768 is that it unlocks a delivery mechanism for public sector owners (K-12, higher education, governments, state agencies and hospitals) in Washington’s urban centers. Let’s take a closer look at a few examples that show what these changes and the opportunities they afford can look like in practice. While these projects could be done now, they were not previously possible under the old EPC law (in other words, these were recently completed but are now much easier for public entities to accomplish under the new legislation).
Embracing biogas opportunities in Tacoma. The energy efficiency or renewable energy benefit provided by this project occurred in vehicles, not in facilities. The old legislation specifically called out that efficiency needed to be achieved or produced by a “facility.” If the efficiency is driven in “fleet vehicles,” it’s still energy efficiency, but the previous legislation didn’t allow us to consider that.
Efficiency benefits don’t have to remain local. They can be benefits realized outside the building, at the grid level, or within the community. Sometimes efficiency is also monetary. Revenue driven by the deployment of facilities, infrastructure or solutions may be the reason to do a project that has a return on investment. The business case for projects can extend beyond just energy efficiency.
Washington commits to complete electrification of public health lab facility. Electrification of the built environment is an opportunity for building owners to capture new value streams through participation in an intelligent energy system. This project wasn’t exactly held back by the old legislation but projects like it might be. If a facility wanted to change its fuel source (or as it’s termed in the industry, “fuel switching”), that wouldn’t necessarily qualify as energy efficiency under the old legislation.
The new legislation allows us to consider other value streams to justify the benefit of a project such as placing a value on carbon impact of a particular solution. The new legislation allows us to be more flexible about why we’re endeavoring to make changes to infrastructure. Said differently, the old legislation only considered energy efficiency. The new legislation allows us to consider not only efficiency, but “clean energy” itself.
King County Metro electric bus charging pilot in Seattle: HB 1768 enables opportunities to create energy benefits outside the building, too. The energy efficiency at King County’s Battery Electric Bus project is technically being driven in the buses themselves, not in the “facilities.” The old legislation didn’t allow us to claim the efficiency benefit for the buses. Rather, they required us to demonstrate energy benefit within the facilities that the chargers are located. The new legislation allows us to look beyond the facility to claim energy efficiency and return on investment (i.e., cost savings from bus fuel, bus maintenance, etc.).
Yes, we were able to get creative with local governments and municipalities to complete these three projects but it wasn’t easy. Fortunately, HB 1768 opens the door for more projects like this in the future by making it significantly easier for municipalities to tackle their own clean energy initiatives. Projects like these are not only paving the way for Washington state but can serve as an example of what’s possible when state legislatures actively pursue a clean energy future.
The constraints upheld by the previous version of this law have been removed, enabling state agencies, school districts, and municipalities to deploy distributed energy resources as qualified energy conservation projects at their facilities. These public institutions are now free to go and do really innovative things. At McKinstry, we celebrate this legislation, as it unlocks our clients’ ability to participate in and drive toward a zero-carbon future. Efficient, smart and clean energy solutions are within reach.
Andrew Williamson is business development manager at Mckinstry.