Six days a week, year after year, the USPS delivers some 206 billion pieces of mail to 142 million homes and business across the country and serves 7.5 million customers daily at its 37,000 retail locations. These billions of letters, advertisements, periodicals, and packages are sorted and processed at highly automated facilities that operate 24 hours a day, seven days a week, year-round—capable of consuming up to 2 MW or more of electrical demand.

Maintaining this level of service costs the USPS $600 million in energy annually, and none of it is paid for in taxpayer dollars. Because the service operates as an independent federal corporation rather than a federal agency, all of its operating revenues are derived from the sale of postage and postal-related products and services. There are no Congressional appropriations and no taxpayer-financed capital improvement projects.

The USPS is the only mail delivery organization in this country that delivers to every household. Recent trends show that the delivery points the service reaches are increasing at the rate of approximately a million a year while the type of mail it delivers is changing. There is more third-class mail, for example, and more costly-to-handle packages (the result of Internet buying) but less of the bread-and-butter first-class mail, which has been losing ground to e-mail. “More delivery points, but less mail,” says Ray Levinson, manager of environmental compliance for the Pacific Area, “and thus less discretionary funding.”

Add to this the steadily rising cost of fuel, and it’s no wonder that the USPS is committed to becoming more energy-efficient.

In July 2006, after 20 years of what it calls pilot programs, the USPS announced that it has awarded $1.3 billion in energy conservation contracts to six energy service companies (ESCOs) through its Shared Energy Savings (SES) program, and that it expects to reduce energy costs systemwide by $11 million each year over the next 10 years. The national rollout is based on successful projects undertaken in the New York metropolitan area and particularly California, where energy-efficiency began with demand-side lighting retrofits and has expanded to a comprehensive suite of energy-efficient technologies, including supply-side onsite generation. In San Francisco, for example, two new projects that partner a fuel cell with photovoltaic panels for energy generation with demand-side efficiencies are expected to lower total annual electricity purchases by $1.2 million. This amounts to savings of 10 million kilowatt hours and a 46% reduction over previous energy use at these facilities combined.

Energy service contractors such as San Francisco-based Chevron Energy Solutions, which received the Postal Service contract for California, Arizona, Nevada, Hawaii, and Guam, are chomping at the bit. “Right now,” says Chevron Energy Solutions President Jim Davis, “energy conservation is the cheapest, most plentiful source of alternative energy there is.” These words are music to the ears of USPS Manager of Environmental Management Policy and Programs Mike Fanning, who thinks the answer for the Postal Service is to combine efficient energy use with onsite generation. In California, a unique partnership with Lawrence Berkeley National Laboratory (Berkeley Lab) helped steer USPS managers through the 1990s sole-source energy contracts, as well as deregulation to the state’s current leadership position in energy management. Among the Department of Energy’s national labs, Berkeley is known as preeminent in energy efficiency. Project Manager William Golove, a scientist at Berkeley Lab, has worked closely with the USPS since shortly after the 1992 Energy Savings Act required federal agencies to reduce their energy consumption 20% by 2010.

“The lab has been promoting energy efficient technologies for more than 20 years,” says Golove. “But in our association with the postal service we’re seeing technologies we’ve been promoting installed in a commercial environment and working well. This has validated a lot of our theoretical work.”

A Slow Start
According to Golove and Levinson, energy efficiency really got off the ground in California at the 1996 Energy and Environmental Management Conference in Monterey with a Berkeley Lab presentation on the Super Energy Savings Performance Contracts (ESPC) being used in federal projects. “At that time,” says Levinson, “energy conservation at the postal service was mostly a matter of tracking monthly energy use and reporting it to national headquarters. “We weren’t doing any retrofits, just turn-out the-lights kind of conservation.

Maintaining a high level of service costs the USPS nearly $600 million in energy on an annual basis.

“But our reporting was generating a database that made it possible to compare our energy consumption from year to year, and this gave us a place to start. This was the period when public utilities were beginning to offer sole-source energy management services whereby customers could go directly to the utility to procure energy-efficiency retrofit services.”

To facilitate these arrangements the USPS developed its own version of the Utility Energy Services Contract (UESC), which it called the Shared Energy Savings contract (SES). SES was designed to give postal facilities around the country a tool to facilitate retrofits through agreements that provided financing, project management, selection, and implementation/installation of energy conservation measures and measurement and verification procedures. For the postal service, with its inventory of outdated facilities (some of which were constructed as far back as the 1950s and ’60s) shared energy savings meant facility upgrades without capital expenditures. According to Levinson, California first retrofitted lighting in 75 postal installations under a single delivery order at no upfront cost using the noncompetitive SES contract.

Initially SES contracts were limited to lights, motors, and motor controls. Eventually they were expanded to include a range of 12 technologies, then opened up completely in California’s competitive post-deregulation environment. Initially, says Golove, the idea was for the USPS to share savings with contractors, but it soon became obvious that more work could be accomplished if the contractor received 100% of the savings. “The original idea was you’d do some retrofits that would generate a savings stream, and the postal service could take some of what was left after paying down the financing costs. But the more of the financial savings any client keeps in dollars, the less a savings stream they have to pay back the measures they’ve implemented. Conversely, the less of the savings stream you keep in cash upfront, the more savings you have to pay for equipment you’ve purchased. Because Levinson was looking for energy savings to improve the working environment and to better manage energy costs, he opted to use all the savings to finance more comprehensive projects. Given this arrangement, he got the new equipment he wanted, he got energy savings, and the postal service had not increased its expenses from before the projects were initiated. From a financial point of view it was a break-even, and from an equipment and energy savings point of view they were way ahead.”

“If you had a 20% savings on your energy bill,” says Levinson, “your following year’s budget would be cut by 20%. In the big picture, you were operating more efficiently, but line managers are held to their annual budget, which meant there was no huge incentive for them to save money. We emphasized that the bigger incentive was getting new equipment, such as lights and other equipment that required less maintenance and made their lives easier.”

Berkeley Lab also recommended the USPS expand the benefits of the SES program by bundling projects. Golove says the idea came from the lab in conjunction with the Federal Energy Management Program and was supported by USPS headquarters. “The first issue,” says Golove, “was whether you would allow the savings from one technology to pay back another. The second was whether you were going to require facilities to stand on their own or let one pay back the other. You could require that a lighting project in a facility stand on its own and that PV stand on its own, but you would rapidly find out that some technologies pay back more quickly than others. Aggregating projects allows you to use some of the faster savings you get from some technologies to help pay for those that pay back more slowly. If you allow this to occur across facilities, savings at one facility where the payback is quicker will allow you pay for work at a facility where there might be very little low-hanging fruit.”

The practice continued under deregulation as Honeywell Inc., which won one of two California 2002 competitive SES contracts, bundled projects of from 50 to 70 post offices together with large processing facilities. “We wanted new lights at 2,500 post offices where the letter carriers work,” says Levinson. “Nearly 100,000 people work in these small offices, which would never have qualified for a capital project. The result was that this type of aggregation essentially took energy consumption off budget for the smaller offices.”

New York Lights Up
Across the country in New York, Rick Paprocki, manager of environmental compliance for the USPS’s New York Metro Area, established an exclusive pre-deregulation partnership with Con Edison in much the same way California postal managers did with Pacific Gas and Electric and Southern California Edison. And like California, Paprocki started with lighting. “Capital funds were few and far between,” says Paprocki, who’s responsible for 1,700 sites and 77,000 employees in the southern tier of New York state, New York City and Long Island, New Jersey, Puerto Rico, and the US Virgin Islands. “But the infrastructure in the New York metro area is relatively old. Before deregulation we did a lot of work with lighting because it was relatively the simplest thing to do and you would get good a return on your investment in the large processing facilities, which in New York can run up to 3 million square feet. At that time we were spending about $26 million in energy just for the Con Ed Service area, which includes the five New York City boroughs and Westchester County.

“Be sure you have the paint ready when you change the lighting,” says Paprocki. “When we lit up our million-square-foot international sorting facility at Kennedy airport, the first thing we noticed was that it needed a paint job. The other things we noticed were that morale was better, attendance was better and we appeared to be experiencing less on-the-job accidents and less missorts, which is a good thing given that our job is getting things from one place to another. We went from T12 bulbs to T8 and from magnetic to electronic ballast, which means no PCB’s and no mercury in the bulbs, which is also good for the environment. From that one job, we’re looking at an annual cost savings of about $329,000 per year and annual kilowatt savings of 2.6 million a year.

The Morgan General Mail Facility, New York’s two-building postal services hub (one building is 10 stories, and the other is four; both have sub-basements), processes 14 million pieces of mail a day, making it the busiest USPS center in the greater New York area. The USPS installed Kameleon dimming software by Gentec in over 4,000 of Morgan’s lighting fixtures. The software is accessible either via the Web or a desktop computer, and by dividing each floor into zones of roughly 50,000 to 70,000 square feet, the facility can reduce energy consumption up to 30%.

“The amount of lighting needed in a room depends on what’s being done,” says Paprocki. “The amount of light needed in a room of bar code readers is greater than in the cafeteria or loading dock. And the fact is, dimming schedules can take into account an impressive array of variables. Timetables can factor in the amount of daylight coming through windows, peak load periods, the next day’s weather forecast, and whether HVAC or other energy-consuming equipment is in operation.”

Lighting updates also got a boost from Paprocki’s energy savings contractor. “There was interest on the part of the Public Service Commission in New York in encouraging customers to use more efficient equipment,” says Frank Napoli, director of national accounts for White Plains-based Con Ed Solutions, which was developed after deregulation. “This followed many years of Con Edison’s very aggressive energy saving program, Save A Watt. Simultaneously Con Edison had a very aggressive rebate program that offered benefits to our customers for upgrading lighting equipment.” Napoli figures that, combined, the USPS in New York and in New Jersey was the recipient of approximately $1.5 million in various rebates.

And, like California, New York bundled projects. “As we evolved,” says Paprocki, “we decided we should look at some of the smaller offices. We grouped upwards of 50 facilities together, focusing on the lighting aspects of it. Then we started looking at motors, HVAC systems, chiller replacements, things like that. You don’t get as much of a return as you would with lighting, but you can achieve efficiencies by combining them.

“We’re well aware the cost of energy is constantly going up,” says Paprocki. “And although we’re not going to show an actual savings, with these types of demand and supply side technologies, we will show an offset of the increase.”

Next Up: Deregulation
Deregulation helped with the learning curve. Faced with the prospects of having to buy electricity, gas and energy management services for 35,000 installations across the country, and with little expertise in purchasing competitive energy services, the USPS responded by forming the Utility Deregulation Oversight Committee (UDOC), which, says Golove, quickly concluded it needed assistance.

“The postal service knew it was facing deregulation and was concerned that an outside consultant would steer it into something that had a financial advantage for the consultant. Previously we had helped them evaluate proposals under their existing sole-source SES contracts. The next step was to rewrite the contract template to reflect the change in a marketplace where utilities were spinning off energy savings suppliers.

“The main difference in a competitive market is that you have to evaluate your suppliers. With sole-source suppliers the postal service evaluated price but not technical expertise, which is where we came in. The other aspect is managing the risk. You have to know that the measures being proposed are well-designed and are going to work and are appropriate. You don’t want to save energy by reducing the services you receive.”

In California, deregulation was followed by the statewide energy crisis in 2000, which turned out to be one factor in a set of circumstances that combined to produce what Levinson calls a perfect storm. “In 2001 we won a $1.2 million grant from the state (in response to forecasted rolling blackouts) to install advance meters and demand response controls in 24 facilities, and we were already starting to meter our demand at our very largest facilities. We had the energy crisis, which nobody else had. We had fuel volatility; there was a freeze on capital projects in the postal service and we had these competitive contracts. But it was the threat of regular rolling blackouts that got the attention of senior management. We finally got a complete year of data from all our largest sites for fiscal year 2002, which included sixty-five 50,000-square-foot-and-larger facilities in California and Hawaii. In October of that year, we gave each of our districts a goal to reduce their consumption from the previous year between 2% and 10%, depending on a variety of factors that included the cost of energy and their consumption as measured from this baseline.”

Some USPS facilities are capable of consuming up to 2 MW or more of electrical demand.

California also assembled District Energy Program Committees. Working with their SES contractors, the committees were responsible for local project approval. “It was an iterative process,” says Golove. “They would tell their contractor they wanted something done and the contractor would come back with a response. It went that way back and forth like this until they reached an agreement and made a decision.”

In 2002, California issued two competitive SES contracts to independent energy service providers, one to Honeywell Inc., based in Saugus, MA, and one to Viron, a small northern-California-based energy efficiency company that was subsequently acquired by Chevron Energy Solutions along with the Postal Service SES contract. Under the terms of its 2002 contract, Honeywell installed approximately $62 million-worth of energy savings projects in nearly 400 separate sites under 20 delivery orders, accounting for over 44 million kWh per year in savings, mostly through lighting and the USPS policy for replacing CFC refrigerants in HVAC systems. According to Honeywell’s Suzanne Wunsch, at Honeywell there were four financial components to the projects, including the individual financed piece, energy rebates and incentives and capital funds, the majority of which came from the CFC program through the Postal Service Headquarters Maintenance Programs and Policies office.

Chevron Energy Solutions’ advocacy of what it describes as a holistic approach to energy management produced valuable synergy as California moved toward onsite generation. On a program level,” says Golove, “we had proposed that the postal service look at solar, conventional generator sets, microturbines, and other onsite technologies. When Berkeley Lab suggested Chevron develop a renewable energy source for the West Sacramento Processing and Distribution Center, they came back with solar.”

The 573,000-square-foot facility is USPS’s third-largest in northern California. The complex employs more than 1,200 people and processes 8 to 10 million pieces of mail a day. According to John Gajan, who managed the installation of the $6.3 million project, Chevron’s goal was to deliver the “optimal amount of long-term energy-efficiency-based utility savings along with renewable energy generation that could: 1) be financed with incentives, 2) avoided utility costs, and 3) be self-funding over a 10-year financing period.” More simply put, this meant that after the project implementation cost was reduced by the utility incentives, the annual avoided utility costs had to be greater than the annual financing payments over the defined 10-year time frame.

On the demand side a mixture of high-efficiency, fluorescent, high-bay, office, hallway and ceiling lighting fixtures were installed with third-generation T8 lighting technology using electronic ballasts and, in some areas, occupancy sensors. In addition, compact fluorescent fixtures and LED exit signs were installed throughout the facility for a total estimated energy savings of 2,700,000 kWh per year. New high-efficiency, variable-speed cooling systems were installed using York chillers. The facility’s old constant-speed chilled water pumps were converted to a variable-speed chilled water pumping system controlled to produce exact amounts of chilled water to the air handling units. Constant volume air handlers were also retrofitted with variable-speed drives to reduce fan system energy use during milder ambient conditions and reduced occupancy periods.

The facility’s original air compressors were also replaced with more energy-efficient units, and the compressor system was outfitted with controls that vary the air pressure with the need for compressed air in the mail processing plant for a projected annual energy savings of 250,000 kWh per year. The existing energy management control system was recommissioned and improved to better manage the heating, cooling, and ventilation systems from an energy-efficiency perspective. Large, continually operating fan systems were modified to operate based on ventilation needs according to current standards. Modern, computerized software was installed to allow better operator control, more timely system information, and diagnostic views of the energy systems being managed.

What employees like most, however, is the solar canopy over the parking lot. A 403-kilowatt PV solar electric system from PowerLight Corp. covers nearly 28,000 square feet with 2,120 solar panels and provides shade for 180 vehicles. The solar PV system provides approximately 8% of the facility’s electric energy and generates 15% of the average peak electricity demand. Plus it put the facility on track to receive a $1.6 million rebate from Pacific Gas and Electric’s self-generation incentive program. In addition, Chevron estimates the USPS will receive a rebate up to $300,000 for its energy-efficiency improvements, which will in turn reduce the facility’s annual electricity purchases by more than $615,000 and its power consumption by more than 33%, or about 5.5 million kWh hours per year. It will also lower natural gas use by about 43,000 therms per year.

“PV,” says Levinson, “still has a 20-year payback. But by wrapping it with the high lighting retrofit, high payback projects, we get a 10-year payback overall, which is what we’re looking for.”

“West Sacramento was our proof of concept,” says Golove. “This is what we had been aiming for.”

More to Come
In New York City, Con Ed Solutions’ Frank Napoli estimates that the Metropolitan New York Postal Service has achieved 42 million kWh in demand-management energy savings over the last six to nine years, for a total of $6 million in energy cost savings dollars. Next up on New York’s plate is onsite generation. “We’ve completed two studies and have a couple more in the pipeline for the application of combined heat and power systems at their huge processing and distribution centers,” says Napoli. “We’re evaluating reciprocating engine generator sets as well as potentially utilizing fuel cells. We consider the most economical way to run whatever onsite generation systems we chose is 24/7.”

These are the kinds of projects Mike Fanning dreams about, especially for the 500 to 600 USPS facilities responsible for 80% to 85% of its annual power consumption. Southern California already has a 1.0-MW CHP in San Bernardino and a 1.5-MW CHP in San Diego, plus the West Sacramento facility and large PV systems in San Francisco and Oakland.

“Energy costs are high in California,” says Golove. “Subsidies and rebates make energy efficiency attractive. So we have had the luck of good timing. The lessons are that there are huge, cost-effective, energy-efficient and onsite opportunities out there, but they require creativity and flexibility to navigate the hurdles that develop when you try to implement large energy-efficiency projects. Another lesson is that partnerships are necessary to get the best projects done, partnerships both within and between organizations. Also we are in a rapidly evolving market, so a high level of continuing due diligence is important to maintaining a successful program.

“But the bottom-line lesson is it’s clean energy time. And that’s going to continue.”

PENELOPE GRENOBLE O'MALLEY specializes in environmental topics.

DE - November/December 2006