United States: Biden Administration Executive Clean Energy Actions: Fleet Procurement

Highlights

• To supercharge the Biden Administration's efforts to position the U.S. as a leader on climate change, the "Executive Order on Tackling the Climate Crisis at Home and Abroad" aims to give nearly every federal agency a role in tackling emissions.
• Notably, President Joe Biden's directive to transition the federal fleet to clean and zero-emission vehicles thrusts federal sustainability back into the limelight and signals President Biden's intention to "green" the federal government and position the federal government as a market leader in the low-carbon economic transition to bring net emissions to zero.
• This Holland & Knight alert is designed to help companies understand how the Biden Administration plans to achieve its objectives, including a review of the contractual structures currently available without legislation or significant appropriations versus those that will ultimately be contingent upon congressional support to achieve in the months and years to come.

President Joe Biden signed three Executive Orders (EOs) on Jan. 27, 2021, to launch a "whole of government" approach to align federal policy with climate change, building upon three prior EOs that President Biden signed on Day One of his presidency.

To supercharge the administration's efforts to position the U.S. as a leader on climate change, the "Executive Order on Tackling the Climate Crisis at Home and Abroad" aims to give nearly every federal agency a role in tackling emissions. Contrary to most EOs, which are clear and straightforward regarding process and impact, this multi-segmented EO first provides additional details regarding the U.S. reentry into the Paris Agreement prior to setting forth numerous actions across the executive branch of the federal government that will take years to fully implement. The sweeping slate of actions 1) elevates climate change as a national security issue beyond simply rejoining the Paris Agreement; 2) instructs every agency to take climate change into account when formulating its policies; 3) directs the government to buy clean and zero-emission vehicles for federal, state, local and tribal government fleets; 4) establishes a new civilian conservation corps; and 5) orders a plan for conserving 30 percent of America's lands and waters by the end of the decade.

The directives mark the latest in a series of executive actions intended to reverse actions taken by the Trump Administration, a task that will by no means be expeditious or uncomplicated. In a single term, the previous administration endeavored to scale back or abolish some environmental protections as part of an a broader deregulatory initiative to "unravel the red tape."

Notably, President Biden's directive to transition the federal fleet to clean and zero-emission vehicles thrusts federal sustainability back into the limelight and signals President Biden's intention to "green" the federal government and position the federal government as a market leader in the low-carbon economic transition to bring net emissions to zero. Federal investments and procurement choices have the potential to provide a template for a broader societal shift toward a low-emissions economy.

The comprehensive plan aims to support President Biden's target to achieve economy-wide net-zero emissions by 2050 and to decarbonize the electricity sector by 2035, as well as to retain union jobs that the executive order calls "integral" to producing zero-emission fleets.

These objectives are far-reaching and, if fully realized, will be impactful. However, in order to better help companies understand how the Biden Administration plans to achieve its objectives – such as achieving a pollution-free electricity sector no later than 2035 and clean and zero-emission government fleets in the near-term – it is imperative to first understand the underlying framework that was utilized throughout the Obama Administration, including the strengths and weaknesses. This Holland & Knight alert will also review the contractual structures currently available to the Biden Administration without legislation or significant appropriations versus those that will ultimately be contingent upon congressional support to achieve in the months and years to come.

Underlying Federal Sustainability Landscape

During his presidency, President Barack Obama issued EO 13693: Planning for Federal Sustainability in the Next Decade to position the federal government as a leader in environmental sustainability. The order required federal agencies to consume 30 percent renewable electricity by 2025 and broadly aimed to reduce the federal government's greenhouse gas (GHG) emissions by 40 percent by 2025. The order included measures that aim to promote sustainability regarding building energy intensity, thermal energy, water utilization, waste management and fleet vehicle procurements. Further, the Obama Administration reinforced its commitment to EO 13693 when it committed the civilian agencies to collectively procure 1 gigawatt (GW) of renewable energy by 2021. The U.S. Department of Defense (DoD) has also committed the Navy, Army and Air Force to each procure 1 GW of renewable energy or 3 GWs in total by 2025.

In 2018, as promised on the campaign trial, President Donald Trump issued EO 13834 on efficient federal operations to revoke former President Obama's 2015 federal sustainability order. The policy framework remaining constitutes a patchwork of Bush-era and Obama-era statutes from 2005, 2007 and 2010 with significantly less aggressive goals for emissions reductions. Indeed, the DoD's mandate to develop energy resiliency and security at its mission critical assets would also remain statutorily in place.

Despite President Trump's rollback of EO 13693, the underlying foundation for rebuilding federal sustainability and numerous contractual authorities and "know how" has remained available for the federal procurement of clean energy solutions and green fleet initiatives. This is because of the EOs described above and an underlying legislative framework that was established when significant progress was made in the procurement of renewable and resilient energy solutions and electric vehicles by federal agencies from 2013 to 2016.

However, it is also important to note that there were limitations placed on the Obama Administration by Congress, which often made it a challenge to achieve the objectives memorialized in the EOs set forth above or other Obama Administration initiatives, such as the DoD's 3 GW renewable energy procurement goal by 2025. Although some of the Obama-era objectives were all but achieved (e.g., the Navy's 1 GW procurement), others – such as the GSA 100 percent renewable power goal by 2025 – were consistently stifled due to agency bottlenecks that couldn't be overcome or congressional limitations.

To better understand the Biden Administration's anticipated actions, timeline and strategy for meeting the objectives of the EO, it will help to understand the framework and precedent of each federal agency. This is especially important given the fact that many agencies' contractual structures and foundational precedents differ significantly due to legal interpretation and previous agency leadership.

Federal Clean Electricity and Procurement Strategy Overview

In the "Tackling Climate Crisis" EO, in addition to aiming to achieve a carbon pollution-free electricity sector by 2035, President Biden directed federal agencies, including the Council of Environmental Quality (CEQ), U.S. General Services Administration (GSA) and Office of Management and Budget (OMB), to develop a comprehensive plan to convert all federal, state, local and tribal fleets to "clean and zero-emission vehicles."

By leveraging federal regulations and purchasing power in issuing the federal procurement EO, the president took a first step to reorient federal energy purchases around clean power resources and federal procurement of renewables, batteries and electric vehicles.

The order requires agencies to comply with the Buy American requirements in making procurement decisions, consistent with President Biden's EO of Jan. 25, 2021, titled "Ensuring the Future is Made in All of America by All of America's Workers."

In spurring domestic clean energy adoption, the president also affirmed that the process will create "good-paying, union jobs" in green manufacturing. President Biden ties his climate plans closely to job promises, noting that the procurement plan will produce "millions of jobs, a million autoworker jobs, and clean energy, and vehicles that are net-zero emissions." Estimates have found that a transition to electric vehicles could generate 1.9 million new jobs.

The U.S. maintains a fleet of 645,000 vehicles and operates nearly 10,000 buildings, according to the GSA, which serves as the acquisition and procurement arm of the federal government. As of 2019, only 4,475 government-owned vehicles were electric, according to GSA.

The federal government typically buys approximately 50,000 vehicles each year. Accordingly, President Biden's plan will undoubtedly help accelerate the transition to getting zero emissions on the road, but given that it will be necessary for industry to provide such vehicles and there are numerous bottlenecks to doing so, this EO alone will not be sufficient to enable such objectives.

Existing Congressional Limitations and Implications

In addition to understanding the foundation for federal sustainability and the objectives of the EO, it's important to note the limitations of the EO and long-standing congressional limitations that remain in place and will be problematic from the onset for many agencies. First and foremost, the federal procurement executive order left discretion to federal agencies' interpretation and plan for action. Plus, funding for the shift to zero-emission vehicles for government fleets or clean energy will be limited to appropriations for each agency and the availability of third-party financing options. Because executive orders cannot change existing laws, they also cannot spend money that has not be appropriated by Congress.

Examples of key bottlenecks from years past that will be an ongoing challenge to overcome include the following.

• Pricing: There are numerous limitations associated with the cost of procuring renewable and energy resilient solutions versus traditional energy solutions through a patchwork of laws, policy memorandums and documents. Since the policy framework extends across numerous contractual vehicles from utility-scale projects and renewable energy credits (RECs) to performance contracting solutions such as Utility Energy Savings Contracts (UESCs), working through the patchwork framework of such limitations will take time to overcome.
• Contracting Structures: While some energy procurement contracts are in place and operating, other contractual frameworks are still limited to a degree that they prohibit the support needed to adequately contract clean energy to the degree that will be necessary to meet the objectives of this EO. For example, Federal Acquisition Regulation (FAR) Part 41 provides a 10-year GSA purchasing authority that may be used for both on-site and off-site renewable procurements. Certain agencies have received delegation to use this authority and have developed the structure necessary to procure renewable energy at 10-year increments and beyond; however, other agencies have yet to obtain this delegation or have yet to find a palatable way to structure clean energy procurement transactions requiring longer than a 10-year term.
• Complex First-of-Their Kind Procurements: In addition to the legal and contracting bottlenecks that remain in place, the Biden Administration will also be challenged to lay a foundation to ensure that the complex procurement processes necessary to meet such significant objectives proceed in a timely manner. For example, the U.S. Postal Service began planning in Fiscal Year (FY) 2015 for the acquisition of new Next Generation Delivery Vehicles (NGDV) to start replacing the current fleet beginning in FY 2018 through FY 2019. Due to frequent changes to the NGDV acquisition timeline, the planned deployment date is now scheduled for January 2022.

Finally, in addition to the obstacles set forth above, it's important to note that to ultimately support an electrified federal fleet, a vast charging network will needed to be built to support it. According to the U.S. Department of Energy (DOE), there are 22,000 electric vehicle charging stations. President Biden has pledged to build 550,000 overall, but as many as 2 million could be needed by 2030. However, the path to the capital needed to obtain such an investment remains unsure.

While third-party financing is increasingly available to assist the federal government in paying for the transition to clean energy over time in a manner that aligns with how it pays its electricity today, it's not available to all segments of the industry to assist in meeting the objectives set forth in the memo. Accordingly, President Biden will be heavily reliant upon Congress to accomplish his target of spending $2 trillion on climate change to help reach the goal of achieving economy-wide net-zero emissions by 2050 and meet his "greening the federal government" objectives.

Outlook

Federal officials have 90 days to put together a plan for electrifying the rest of the federal fleet and developing plans and objectives for the procurement of clean energy. Much remains unclear with regard to timeline, process and methodology, but the directive lays a strong foundation for restarting abandoned Obama Administration initiatives, providing greater oversight for the achievement of viable objectives and overcoming outstanding congressional bottlenecks that inhibited broader achievement of Obama-era objectives.

Holland & Knight Insights: What to Expect Next

The four takeaways or substantial items to expect as a follow-up to President Biden's EO are as follows.

• Interagency discussions spearheaded by new appointees to the White House Council on Environmental Quality (CEQ) that focus on the role of the GSA, Federal Energy Management Program and others in supporting federal agencies' efforts to meet the new sustainability and energy requirements.
• Further congressional engagement by the Biden Administration to develop pathways to support the goals of President Biden's EO.
• Revised guidance and processes established by the White House OMB and the CEQ for agencies to follow when preparing plans and metrics to achieve the goals of the new EO, as well as tools for measuring progress and shortcomings.
• Additional EOs and executive branch climate initiatives that build upon this foundational statement and will further drive climate change responses across the federal government.

Originally Published by Holland & Knight, February 2021

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