The latest chapter in the government’s quest for carbon-free electricity

Tom Temin Let’s talk about what the general purpose of this program is, what are we trying to achieve here for the Federal Construction Service and the Ministry of Defense?

Bonnie Buter Yes. Therefore, GSA has requested proposals for retail electricity supplies, at least a portion of which will be combined with carbon-polluting electricity in the PJM balancing authority, and that covers states in the mid-Atlantic region. And our goal in doing so is to meet the federal environmental goal of achieving 100% net carbon dioxide pollution annually by 2030. This is outlined in Executive Order 14057 and encourages the development of clean energy industries and jobs through federal sustainability. And this was published in December 2021.

Tom Temin Everything is fine. Give us a baseline of how the average federal building gets its electricity today.

Bonnie Buter Yes, in the retail electricity market, where you can compete for your electricity supplier. Nowadays we usually do short-term contracts there, usually around 36 months. And we are looking for retail supplies from a third party supplier. As I said, these contracts are usually for a period of about 36 months and are awarded on a technically reasonable basis at the lowest possible premium. So this is a 10-year term that includes comprehensive requirements for carbon-neutral electricity as well as retail electricity.

Tom Temin And this is only for government buildings? Because in rented premises it is the lessor who buys the electricity. This is right?

Bonnie Buter This procurement involves 16 different agencies and 182 accounts in several states, including Delaware, Pennsylvania, New Jersey, Maryland, Illinois and Ohio. So it’s a very diverse portfolio. Details of which buildings are being submitted are included in the application, which is currently posted on sam.gov.

Tom Temin Everything is fine. And you said it was for 10 years. And what kind of market research is even required to find out whether such suppliers exist?

Bonnie Buter This is a great question. And one of the most interesting parts of my job, I would say, is that we actually did market research for over a year. We conducted market research jointly with the Department of Defense as well as the Department of Energy. We met with many third-party providers, asking them about their portfolio. How will they meet this requirement? What conditions will they need? So we really designed it in a way to strike a balance between what our market research was telling us and what we needed. But we did a lot of market research, attended a lot of conferences. We have issued a joint request for information with the Department of Defense. And then as part of that RFI, we held an industry day in Washington where we met with these third-party vendors and they were able to ask us questions directly and we could talk one-on-one about how to develop a requirement that would lead us to our goals because they can achieve it.

Tom Temin And in a nutshell, what exactly is the requirement?

Bonnie Buter Thus, the requirement is approximately 1.1 million megawatts of retail electricity, at least a portion of which is bundled carbon-neutral electricity, and bundled carbon-neutral electricity is where the electricity is purchased from a qualifying generating resource along with energy attribute certificates. Thus, they are acquired from the same source, from the same source. They are not separated. And this is different because many of our other purchases have been for what we call split energy attribute certificates, and this is where the certificate is secured separately from the electricity. So this product is unique in the sense that we are looking for this comprehensive product. Therefore, it must first meet the comprehensive requirements of the CFE, and the executive order has several conditions or qualifications in order for it to count toward achieving those goals, one of which is the absence of carbon dioxide pollution. Therefore, it must be produced from a source that does not produce carbon dioxide emissions. So it’s a little different than some of the other renewable sources. It must also be placed into service on or after October 1, 2021, either as a new resource or as new capacity of an existing resource that has been modified to increase capacity. So that’s a whole other thing, and that’s probably one of the biggest challenges because we’re looking for this new resource and we’re encouraging this additionality through this requirement. Finally, it must be delivered to the same balancing authority or network region where the federal government selects it. In this case it is PJM. We could not meet this requirement with, say, standalone EACs from ERCOT. We’ll have to look at packaged products in PJM. Here are the main points of procurement.

Tom Temin We spoke with Bonnie Buter. She works as a contract specialist in the Public Utilities Retail Purchasing Division of the General Services Administration of the Public Buildings Service. It’s difficult because you have a network, you have a generator, and the generator must have some kind of generation that doesn’t burn anything, in other words. So the big utilities are doing both, and are there new utilities that are doing it in just one direction and then converting it to a carbon-free path and then putting it on the grid.

Bonnie Buter Yes, that’s true. This is a good point because it touches on another part of our requirements. I have just described the implementation of the comprehensive requirements of the CFE Treaty. The other part is retail electricity demand. So when you turn on the light switch, a certain amount of power coming from the grid is clean, and this is what we call CFE supplied from the grid. So this also has implications for achieving our goals by simply using clean energy that is already on the grid. And in PJM, for the purposes of these procurements, we assume that the share of CFE supplied by the network is about 65%. So we get that by just using retail electricity.

Tom Temin So you don’t have to run separate wires from the wind turbine to the federal building, in other words.

Bonnie Buter No. And that was what you mentioned about market research. That was part of what we really looked at in our market research and what led us through this process was we decided that we weren’t actually going to enter into a contract directly with the developer, like a power purchase agreement. We are seeking a contract with a third party retail provider that offers a portfolio of diverse CFE projects and resources. And we think that really helps mitigate risk and allows them to manage their portfolio because GSA doesn’t want to do the development or tell the developer how to produce energy. We really want that third party to support that portfolio so that it’s as diverse as possible and then bring that energy to GSA through the network.

Tom Temin And this requirement is that it must be put into service after the date, I believe you said 2021. This doesn’t take nuclear energy into account, does it?

Bonnie Buter For the most part, this is currently the case. Nuclear energy is included in the definition of the CFE Treaty, so it should be so, unless it is a new nuclear source that has appeared since 2021, as we know. But you can look at a source that has been modified to increase power, and then we can only use a fraction of the increased potential to achieve our goals. So if you were to revive a nuclear plant and its power actually increased, that would meet the definition. So, new nuclear weapons are not available now, but that is part of the definition.

Tom Temin Because a whole class of localized reactors is starting to appear on the market. People in data centers want to install them. And I think people are envisioning a day when the complex will have its own generator with these new technology small reactors. But that’s beyond your game at this point, to be honest?

Bonnie Buter Yes, this is not the purpose of the petition at this time.

Tom Temin Everything is fine. So this request for information came in February or early this year. Where are you now? What is the status of this entire acquisition?

Bonnie Buter I am very pleased to announce that we have published the request. It closed on October 10th and we are currently evaluating technical proposals.

Tom Temin So you have enough responses to create real competition in the classical sense?

Bonnie Buter I can say that we are considering proposals.

Tom Temin Certainly. No, I understand, this is an acquisition. You don’t want to name names, and we’re not going to ask names or how much should this guy take? And the Department of Defense is your partner in this, so you should have a colleague from the Department of Defense who will also conduct the assessment.

Bonnie Buter So the Department of Defense has its own separate procurements, and they have different timelines, and their procurements and what they’re looking for is a little different. And I really couldn’t talk about these details. But I can tell you that the GSA-coordinated executive order does provide a comprehensive government approach. And GSA has coordinated with the Department of Defense and continues to cooperate with them. And we are in constant contact at meetings and exchange resources and information. So it’s very much a coordinated and collaborative approach. But let me emphasize that these are very separate petitions.

Tom Temin And what is your overall date goal to switch it all up?

Bonnie Buter Well, we’d like it to be early January.