What impact is sequestration having on the government's sustainability goals? During today's OnPoint, Lou Hutchinson, vice president of public sector and energy efficiency at Constellation, explains how budget cuts are affecting the public and private sectors on efficiency and sustainability. He also weighs in on the need for a comprehensive energy bill.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Lou Hutchinson, vice president of public sector and energy efficiency at Constellation. Lou, thanks for coming on the show.
Lou Hutchinson: Thanks for having me.
Monica Trauzzi: Lou, a big focus here in Washington right now is on the impact of the sequester on renewable and clean energy programs as well as sustainability efforts. At Constellation, are there any material impacts on your business at the government starts to make these cuts?
Lou Hutchinson: I think the cuts lift up the offerings that Constellation provides to the government, more than even before. It provides the government an opportunity to look at its overall energy ecosystem, toward meeting some of the challenges as it relates to the cuts, being able to use not just one component of their energy, but all the components towards using energy to be an asset in their budget balance sheets, as compared to a liability. And as a result of a need for additional cost savings and accomplishing and trying to do more, Constellation's offerings from energy efficiency to commodity products such as power and gas and load response and renewable energy, those in collaboration with one another can often provide a solution that moves towards meeting the needs of the federal government.
Monica Trauzzi: So would you suggest that these types of programs can actually produce revenues, and does that then make the case for putting more money into them on the front end, because you're going to see financial gains on the back end?
Lou Hutchinson: I would suggest that the current budget constraints drive - will drive the government toward looking for solutions that would do what you just described, being able to evaluate how they're purchasing their commodity products in a way that further enhances their strategy around renewable energy implementation or new generation, and efficiencies that they might put in place that would have an end result of more of a guaranteed cost savings for the government, a very definable revenue stream toward an ultimate budget.
Monica Trauzzi: So do you expect that the government will have to change its sustainability goals at all as a result of these cuts?
Lou Hutchinson: No. No, I would not. I would think that it would, the government was already going down a path independent of sequestration to look for public/private partnerships and to look for solutions that are further required now because of sequestration. And so it's my expectation that there'll be a more creative and granular strategy towards achieving sustainability goals, as compared to even the path that we were already going down that was accelerated. And we're seeing that. I mean, we're seeing organizations that are coming to us that are looking for not only renewable generation, but new build facilities of renewable generation. We had recently been approached by the U.S. Department of State, and the U.S. Department of State had come to us with a requirement to move from a 10 percent GHG reduction to as much as a 60 percent GHG reduction within a few months, without an increase in budget, and in a way that would stay net neutral within the existing brown power expenditure. We were able to partner with them through a public/private partnership to be able to do an extended ten-year term traditional power generation, or brown power deal, and that was coupled with two PPAs for renewable energy development, one for a solar implementation that was about five megawatts, and then another for a wind PPA that was about 17.5 megawatts of wind. The end result is that they're now at a 60 percent GHG reduction. There's been no increase in their expenditures as a result of doing that. And we as a public/private partnership are now in very solid partnership with Department of State, and looking for additional ways to decrease their expenditures and to find more efficient ways for their energy implementation.
Monica Trauzzi: Do you think sequestration refocuses the conversation on subsidies?
Lou Hutchinson: I don't know if it refocuses the conversation on subsidies. I think it refocuses the conversation on creative solutions and efficiencies and collaboration with not only the overall ecosystem within the organizations, but between portions of the energy ecosystem that would not usually work together in concert. That's, if anything, sequestration will force and bring granularity to that thinking, those types of contract vehicles that are offered and developed, and the solutions that must be provided in order to achieve the GHG reduction goals, the national security goals around energy security, and overall redundancy.
Monica Trauzzi: It doesn't seem that the Senate Energy Committee will be moving a comprehensive energy package this session. Does the lack of a comprehensive bill make it more difficult to sort of lay out a plan for how to get to these sustainability goals, or even when you are approached about a project, how to make it happen, because you don't have the certainty that a comprehensive bill might provide you?
Lou Hutchinson: Yeah. When we're approached about many of these projects, the certainty of a comprehensive bill, that's not relevant necessarily to us. What's relevant is the moving forward aspect of wanting to deal with meeting those goals, because to get there from a financial perspective, there was either going to be some form of third party financing or direct investment from partners in order to achieve the sustainability goals. That which we're seeing as a result is we're seeing organizations move to take a step back, not leaning on, as much dependence on congressional action, and figuring out ways to move forward with achieving those goals without that. We've seen that continuously now, both with the U.S. Department of Defense, I can't speak of all the things that we're doing with Defense, but it's quite enhanced and quite extensive as a result of the fact that they knew that this sequestration was coming. There's also the possibility of an exacerbation of that sequestration through continuing resolution. And so how do they continue to move the ball forward without real compromise to the timeframes that they're dealing with? I mean, there's seven years left to get to those goals, and we're seeing a lot of creativity in achieving that.
Monica Trauzzi: Lou, very interesting stuff. We're going to end it right there. Thank you for coming on the show.
Lou Hutchinson: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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