Friday, March 30, 2012

The DoD is Seeking Private Industry Collaboration to Enhance Our Energy and National Security

The DoD needs private industry help to reduce the Armed Forces’ reliance on fuel and enhance our national security.  Leaders from the Department of Defense (DoD), and each branch of the military testified about the defense energy challenge before the House Armed Services Committee on March 29, 2012.  “Over reliance on fossil fuels and connection to a vulnerable electric power grid jeopardize the security of Army installations and mission capabilities.  Investment in energy capabilities, including renewable energy and energy efficient technologies will help ensure the Army can meet mission requirements today and into the future.”  The Honorable Katherine Hammack, Assistant Secretary of the Army for Installations, Energy and the Environment.

Energy impacts every mission in the DoD.  To protect the security of our nation, our armed forces require secure and uninterrupted access to energy.  Key to private industry is that the armed forces have a history of energy innovation and with innovation comes opportunity.  The Navy transitioned from sail to steam in the middle of the 19th Century, stem to oil in the early 20th Century and pioneered nuclear power in the middle of the 20th Century.  “At each of those transitions, there were those who questioned the need, challenged the cost or simply opposed change of any kind,” testified the Honorable Jackalyne Pfannenstiel, Assistant Secretary of the Navy for Energy, Installations and the Environment.

For the DoD, energy security is tied to facility energy.  Facility energy is important for two reasons: (1) cost and (2) mission assurance.  The DoD energy bill is $4 billion annually.  DoD installations support combat operations and serve as staging platforms for humanitarian and homeland defense missions.  “These installations are largely dependent on a commercial power grid that is vulnerable to disruption due to aging infrastructure, weather-related events and a potential kinectic or cyber attack.”  Dr. Robyn, Deputy Under Secretary of Defense, Installations and Environment.
The first step is to reduce demand through conservation and improved energy efficiency.  “We share Energy Secretary Chu’s view that ‘Energy efficiency is not just the low-hanging fruit – it’s the fruit laying on the ground,” says Dr. Robyn.  The DoD’s budget for FY13 includes more than $1.1 billion for investments in conservation and energy efficiency.  Under Dr. Robyn’s leadership, the DoD is developing the Enterprise Energy Information Management (EEIM) system that will facilitate the automated collection of standardized facility energy and cost data.  The EEIM vision statement and capability requirements is scheduled for release this spring “so that industry can adapt its commercial off-the-shelf solutions to meet DoD needs.”

Secure energy for installations is another initiative.  DoD is increasing supply of renewable and other forms of distributed (on-site) energy on DoD installations.  “On-site energy is critical to making our bases more energy secure.”  To expand energy generation, the DoD is relying on third-party financing.  “Third party financing makes sense because private developers can take advantage of tax incentives that are not available to federal agencies.”  The Army Energy Initiatives Task Force was established in September 2011 to execute 10+ MW projects at Army installations.  “The Army hopes to develop around one gigawatt of renewable energy on its installations by 2020, and it has solar energy projects underway at Fort Bliss, TX (1 MW), White Sands Missile Range, NM (4.5 MW) and Fort Carson, CO (2 MW).

The DoD is further looking to “next generation microgrids” to address the need for greater energy security directly.  According to Dr. Robyn, “we envision microgrids as local power networks that can utilize distributed energy, manage local energy supply and demand, and operate seamlessly both in parallel to the grid and in “island” mode.” 

"Advanced microgrids are a ‘triple play’ for DoD’s installations.  First, they will facilitate the       incorporation of renewable and other on-site energy generation.  Second, they will reduce installation energy costs on a day-to-day basis by allowing for load balancing and demand response – i.e., the ability to curtail load or increase on-site generation in response to a request from a grid operator.  Most important, the combination of on-site energy and storage, together with the microgrid’s ability to manage local energy supply and demand, will allow an installation to shed non-essential loads and maintain mission-critical loads if the grid goes down."

The vision for microgrids is still evolving and the opportunity for companies to participate in the discussion is now.  The DoD has commissioned 3 studies from outside experts relating to microgrids.  One, Business Executives for National Security (BENS), a non-profit, is analyzing alternative business models for the deployment of microgrids on military installations.  As part of that analysis, BENS is looking at the appropriate scale and scope for an installation microgrid (e.g., should it stop at the fence or include critical activities in the adjacent community?) and at the challenges to widespread deployment. 

The DoD is further looking to leverage advanced technology relevant to facility energy.  “Emerging technologies offer a way to cost effectively reduce DoD’s facility energy demand by a dramatic amount (50% in existing buildings and 70% in new construction) and provide distributed generation to improve energy security.”  Under Dr. Robyn’s leadership, the DoD created the Installation Energy Test Bed to help firms overcome the barriers that inhibit innovative technologies from being commercialized and/or deployed on military installations.

The DoD intends to rely heavily on third parties to finance its investments in energy efficiency (ESPCs and UESCs) and renewable energy (PPAs and Enhanced Use Leases).   There are, however, clear challenges to using these models.  The American Council of Renewable Energy (ACORE) is holding a series of military forums to identify and work around road blocks and to ensure that the expectations from the private industry side and the DoD side are clear.  The objective is to enable our armed services to embark on projects much earlier than if they had to go through normal planning and budgeting systems.  The ability to remove roadblocks lies within discussions between ACORE, DoD, related and supporting agencies and the private sector.  Through collaboration these challenges can be addressed and ACORE and the DoD is seeking private industry input.

As a member of the ACORE committee I am working with ACORE and the DoD to identify challenges and develop strategies to streamline the transaction space for private industry.  Feel free to contact me if you would like to discuss.  I can be reached at