Reed Smith Client Alerts

Authors: Donald G. Ousterhout

On December 5, 2013, President Obama issued a memorandum establishing (1) a new goal for federal agencies’ use of renewable energy and (2) new energy management directives (Memorandum). By fiscal year 2020, the Memorandum requires that 20 percent of the total amount of electric energy consumed by each agency during any fiscal year be renewable energy "to the extent economically feasible and technically practicable." The Memorandum also directs federal agencies, inter alia, to update their building performance and energy management practices, and encourages them to consider demand response opportunities.

The 20 Percent Goal and Order of Priority

The 20 percent renewable energy use goal should provide some valuable new federal contracting opportunities for renewable energy companies, and the new building performance and energy management requirements should provide new opportunities for energy service companies.

Section 1.B of the memorandum establishes an order of priority for actions that federal agencies should take "where possible" to achieve the 20 percent goal:

  • Installing agency-funded renewable energy on-site at federal facilities and retaining renewable energy certificates (RECs)
  • Contracting for energy that includes the installation of a renewable energy project on-site at a federal facility or offsite from a federal facility, and retaining RECs for the term of the contract
  • Purchasing electricity and corresponding RECs
  • Purchasing RECs

Overall, given the high probability of future budget constraints on federal agencies, many agencies will likely find that the feasibility of installing agency-funded renewable energy projects on-site is not "possible." We anticipate that the other three options will be more readily used by agencies attempting to comply with the new target. Initially, it looks as though the least constrained option may be the third-party contracting option for projects at federal facilities.

Brownfield sites

Section 1.D requires federal agencies to consider opportunities “to the extent economically feasible and technically practical” to install or contract for "energy" installed on current or formerly contaminated lands, landfills, and mine sites.

Agency Accounting and Interim Goals for Renewable Energy

Agency progress generally will be determined by reference to the number of RECs owned for electricity consumed. In certain circumstances, the percentage of renewable energy counted toward the 20 percent target can be doubled if the renewable energy conforms to certain provisions of the Energy Policy Act of 2005. The Memorandum also contains an alternative accounting treatment for renewable energy not counted by REC consumption, such as thermal and hydrokinetic renewable energy and renewable energy generated on a federal facility or federal land, under certain circumstances.

The Memorandum also sets interim goals, requiring each agency to ensure that the percentage of the total amount of electric energy consumed by that agency that is renewable energy is:

  • Not less than 10 percent in fiscal year 2015
  • Not less than 15 percent in fiscal years 2016 and 2017
  • Not less than 17.5 percent in fiscal years 2018 and 2019
  • Not less than 20 percent in fiscal year 2020 and each fiscal year thereafter

Building Performance and Energy Management Requirements

The Memorandum additionally attempts to improve building performance and energy efficiency, and reduce energy waste by requiring agencies to, inter alia:

  • Install building energy meters and sub-meters as required by section 543(e) of the National Energy Conservation Policy Act where cost-effective and appropriate
  • Install water meters
  • Consider participating in demand-response programs where available

The addition of demand response as an acceptable form of energy management should be of interest to demand-response service companies; federal agencies are not likely to have the expertise, or have an interest in developing the expertise, to participate in such programs.

The Legal Effect of this Memorandum

President Obama did not execute the new directives by a formal executive order, but by memorandum. Legally, there is no practical difference the two. Both are written instruments by which the president directs, and governs actions by, government officials and agencies. They differ in that executive orders must be published in the Federal Register, but presidential memoranda are published only if the president determines that they have "general applicability and legal effect."1 If issued under a valid claim of authority and published, presidential memoranda have the force and effect of law2 and courts are required to take judicial notice of their existence. The president has instructed the Memorandum to be published, so it will have the force and effect of law on federal agencies.

If you have any questions about the Memorandum, or about possible federal contracting opportunities that may arise from the Memorandum, please contact the authors of this client alert.

  1. 44 U.S.C. § 1505(a).
  2. Armstrong v. United States, 80 U.S. 154 (1871); see also Farkas v. Texas Instrument Inc., 375 F.2d 629 (5th Cir. 1967); Farmer v. Philadelphia Electric Co., 329 F.2d 3 (3d Cir. 1964). Presidents have been issuing executive orders and memorandum under their executive powers set out in Article II of the Constitution since the founding of the Republic. They can also rely on specific statutes.


Client Alert 2013-332