Renewable Energy Development for Governments

An overview of the current state of the market

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SSG RE Purpose and Mission

• MISSION– The SSG supports a leadership role for United States businesses in the deployment of renewable

energy technologies by funneling investments funds into good projects and good firms by assuring stakeholders of a positive outcome.

• MARKET – Independent Renewable Energy Power Production– Start Up: Renewable Energy Power Purchase Agreements (PPA) for US governments– Mature: Global RE PPA

• OPPORTUNITY– The US Federal government is sponsoring growth of a domestic renewable energy industry by

requiring Federal agencies to procure energy that is generated and consumed on site. There is no significant existing business in this sector. Multiple barriers have to be overcome for success.

– The opportunity is to provide expertise to overcome these barriers so that governments can function as early adopters of commercial and C round technologies and new business processes for RE implementation.

• THE SSG WILL CREATE AND CAPTURE UNIQUE INTELLECTUAL PROPERTY BY PERFECTING:

– Off-take Agreements: purchasing the energy– Site: Providing long term land agreements for RE on government sites– NIMBY: Government control of environmental permitting makes sites easier to permit– Utility: A consistent approach that encourages utility participation

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BLUF

• There is an emerging opportunity (>$20BN)with Governments to develop renewable energy power plants on spare land– For the government

• Helps meet their sustainability goals• Appropriate reuse of unused land • Makes money• Energy security

– For the developer• Can be faster, more effective • Can be a simpler decision making group• Avoids NIMBY• Help with permitting

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Early stage - The Federal Opportunity

• Mandated to develop RE projects– DoD – NDAA 2010 requires 25%RE x 2025– Executive Order 13514 – sustainability

• Evidence of a >$20BN funding requirement– Very limited appropriated funding– Stated goal almost all 3rd party financing – Army $7BN, Air Force $8BN

• Problem– They are not very good at it – Lack of credibility keeps the top developers away– PRICE

• The opportunity– Be good at it, win early and stay ahead

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VCsVCs

Land

SSG PositioningGovernment

EPCEPC

BankingBanking

PUCPUC

UtilityUtilityDeveloper

SSG RE

RE Project

Energy

$$

$$

$

Facilitatoror

Principal?

Tech entrepreneursTech entrepreneurs

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Energy Security – “assured access to reliable supplies of energy and the ability to protect and deliver sufficient energy to meet operational needs” – pg 87 DoD will

– promote investments in energy efficiency – ensure that critical installations are adequately

prepared for prolonged outages caused by natural disasters, accidents, or attacks

Balance energy production and transmission to preserve test and training ranges and operating areas needed to maintain readiness

“Energy efficiency can serve as a force multiplier, because it increases the range and endurance of forces in the field and can reduce the number of combat forces diverted to protect energy supply lines…” – pg 87

Driver: Quadrennial Defense Review Feb 2010

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Drivers = mandatesFederal Mandate Energy Topic Energy Performance Target

Energy Policy Act of 2005Electricity use for federal

government from renewable sources

• At least 3% of total electricity consumption (FY07-09), 5% (Fy10-12), 7.5% (FY13 +)

Executive Order 13423 Energy use in Federal buildings • Reduce 3% per year to total by 30% by FY2015 (FY2003 baseline)

Total consumption from renewable sources

• At least 50% of required annual renewable energy consumed from “new” renewable sources

Fleet vehicle alternative fuel use • Increase by 10% annually to reach 100% (Base line FY2005)

Energy Independence and Security Act of 2007

Total consumption from renewable sources

• 25% by FY2025 -”Sense of Congress”

Hot water in new / renovated federal buildings from solar power

• 30% by FY2015 if life cycle cost-effective

Fossil fuel use in new / renovated Federal buildings

• Reduce 55% by FY2010; 100% by 2030

Executive Order 13514 GHG emission reduction• DoD Goal: reduce Scope 1 & 2 GHGs by 34% by FY2020

• DoD Goal: reduce Scope 3 GHGs by 13.5% by FY2020

Net zero buildings• All new buildings that enter design in FY2020 and after achieve net zero

energy by 2030

Water consumption• Reduce consumption by 2% annually for 26% total by FY 2020 (FY2007

baseline)

Waste minimization • Divert at least 50% of solid waste & 50% of C&D waste by FY2015

National Defense Authorization Act, 2010

Renewable Fuels Use• Directs the Secretary of Defense to consider renewable fuels in aviation,

maritime, and ground transportation fleets.

Facility Renewable Energy Use • Produce or procure 25 % of the total quantity of facility energy needs,

including thermal energy, from renewable sources in FY202504/22/23

Development opportunities 5MW to 50MW

• Find federal government land – 50 acres + non-excess but available– Distribution or transmission access– Quiet enjoyment!

• 2 transactions– Lease agreement at fair market value– Power purchase agreement at or below utility

• Export to grid encouraged

• Open to all technologies, but LCOE will dominate

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Power Purchase Issues

• Greatest revenue is customer avoided cost compared to utility– Energy plus transmission and distribution

• System interconnection is important• Larger systems require system impact studies• Unregulated utility territory

– ISO membership requirements for PPA– Market price of energy is fairly transparent– Customer side - no export is easier

• Regulated territory– NO power purchase agreements of significant size– Deal with local utility is essential

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Opportunities

• Army– McGeown potential conflict of interest

• 158 installations

• Air Force, Navy – Enhanced Use Lease

• Department of Energy• Lots of smaller ones

– Coast Guard, Reserves, National Guard

• Where else?– Links with States, Cities etc.– Overseas

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Finding a starting point for SSG RE

• Customer Opportunities– Where do we have senior level contacts?

• Federal• Other governments• Utilities

• Technology Opportunities– Emerging tech firms

• Financing – Funds that need support

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MARKET INFORMATIONIntelligence Gathering

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Army Energy

We've got the LAND and the DEMAND!

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Army Power & Energy Program

• Three focus areas: Soldier Power, Vehicle Power, and Basing Power,

• Army Energy Facts– The Army owns over 15 million acres of land within the U.S., of which

about 5 million could be used for buffering or RE infrastructure.

– The Army currently spends nearly $4 B/year on energy!

– Renewable energy is a growing industry and is good business that will help the Army meet energy goals and mandates.

– The Army needs an additional 2.1 million MWh of RE and $7.1 Billion in private investment to meet the goal of 25% renewable energy by 2025.

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• Army faces critical installation energy challenges - – Achieving secure, reliable electricity supplies for a volatile, uncertain future– Meeting federal renewable energy mandates

• Renewable power mandate: – 25% of energy consumption in 2025 – FY10 performance: 2% vs goal of 5%

• Current decentralized installation-level approach is not meeting renewable energy mandates:

– Garrisons lack expertise, resources and financing for project development

– Army decision making longer than private sector standard; deals harder, transaction costs higher

– No clear focal point for Army-wide execution and accountability

Background

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2011 ADC WINTER FORUM | PAGE 17

Renewable Energy Project Potential

The Army prioritizes CONUS installations for Renewable Energy Development based on:

Resource potential State regulations Federal and State incentives Payback periods and levelized cost of electricity Regulatory considerations

Through existing authorities the Army will leverage private investment to install renewable energy

ESPC EUL PPA UESC

Army Installations 158Land Acreage 13,506,291Buildings 1+ Bsf

Army Installations 158Land Acreage 13,506,291Buildings 1+ Bsf

The Army currently receives 2% of its electricity from renewable sources**Does not include renewable thermal energy

Leveraging Private Investments

Authorities from Congress (underutilized): Energy Savings Performance Contracts (ESPC) – Implementation and financing of

energy efficiency projects out of energy cost savings Enhanced Use Lease (EUL) – Use of non-excess Army land exchanged for In-kind

SRM projects Power Purchase Agreement (PPA) – Energy projects installed on installations at

no-cost in exchange for long term agreements to purchase renewable energy Utility Energy Service Contracts (UESC) – Service contract with utility provider

Other Authorities (well utilized): Residential Community Initiative (RCI) – privatized housing Privatized Army Lodging (PAL) Utility Privatization (UP)

Leveraging private sector investments is a strategy to advance efficiencies in an era of constrained resources.

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The New Vision

The Energy Initiatives Office (EIO) Task ForceMISSION: Identify, prioritize and support the development and implementation of large-scale, renewable and alternative energy projects – focusing on attracting private investments and delivering the best value to the Army enterprise

GOALS:

1.Meet renewable energy federal mandates

2.Generate revenue and cost savings

3.Reduce greenhouse gas emissions

4.Contribute to achievement of Net Zero Energy

5.Increase energy security for installations

The EIO Task Force will make the Army the country’s leader in renewable energy by leveraging our land and power consumption to attract significant private investment,

provides long – term price stability and enhances the energy security of our installations

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EIO Task Force Concept of Operations

• Stand up small dedicated task force on 15 Sept 2011• Attract large-scale renewable power developers to invest up ~$7B• Variable project development/management costs ~4% of external

capital raised – $28.4M/yr

PlanningDivision

ExecutionDivision

Director

OutreachDivision

EIO Task ForceEIO Task Force

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Net Zero

A Net Zero ENERGY Installation is an installation that produces as much energy on site as it uses, over the course of a year.

A Net Zero WATER Installation limits the consumption of freshwater resources and returns water back to the same watershed so not to deplete the groundwater and surface water resources of that region in quantity or quality.

A Net Zero WASTE Installation is an installation that reduces, reuses, and recovers waste streams, converting them to resource values with zero landfill.

A Net ZERO INSTALLATION is one which applies an integrated approach to management of energy, water, and waste to capture and commercialize the resource value and/or enhance the ecological productivity of land, water, and air.

Energy Water Waste Integrated

Fort Detrick, MD Aberdeen Proving Ground, MD

Fort Detrick, MD Fort Bliss, TX

Fort Hunter Liggett, CA

Camp Rilea, OR Fort Hood, TX Fort Carson, CO

Kwajalein Atoll, RMI Fort Buchanan, PR Fort Hunter Liggett, CA

Parks Reserve Forces TA, CA

Fort Riley, KS Fort Polk, LA State-Wide

Sierra Army Depot, CA JB Lewis-McChord, WA

JB Lewis-McChord, WA

OR ARNG

West Point, NY Tobyhanna Army Depot, PA

USAG Grafenwoehr, Germany

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Army Chain of CommandSEC ARMY

ASS SEC ARMY (Installations Energy and

Environment)

DEP ASS SEC ARMY (Energy and

Sustainability)

EIO Director

ACSIMPolicy Guidance Budget

Regions

IMCOMLandlord - execution

Installations

Garrison Commander (COL)

DPW

Installation Commander (GEN)

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Air Force RE

• 14.2-megawatts (MW) solar array 140 acres at Nellis Air Force Base, Nev

• Davis Monthan AFB– Davis-Monthan officials awarded SunEdison 14.5-megawatt

photovoltaic on 130 acres– 35% of the energy needed to operate base facilities.

• Luke AFB with Arizona Public Service Company to build a 15-MW solar on 100 acres. 50% of the base's energy needs

• Air Combat Command and Nellis AFB leaders have plans to construct a 17-megawatt phase-two project in 2012 to add to the 14.2-megawatt array built in 2007.

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Improving Energy Availability by Increasing Renewable Energy Use

2nd Largest Federal purchaser of renewable energy Renewable energy represented nearly 6% of Air

Force energy consumption in FY09

Operating 85 on-base renewable energy projects on 43 bases, with 31 underway or planned for construction

Working with industry to install 24 wind turbines at Vandenberg AFB by 2014

Planning to develop over 1,000 megawatts of on-base renewable energy to meet 2025 goal

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Will Air Force meet installation energy goals?

• Energy Intensity: current AF budget for facility energy and water projects will make it challenging to meet energy and water intensity reduction goals , reactivate third party funding– Most investments require 2yrs from contract award to realize

measureable energy savings due to contract and construction lag time– Aggressive program in place to reduce overall square footage of facilities

to reduce maintenance costs; however, reducing square footage penalizes the intensity metric

• Renewable Energy: high levels of investment necessary coupled with limited cost-effectiveness of RE when compared to commercial utility rates will make goals difficult to reach– To meet solely by AF-funded capital would be in excess of $8B dollars

based on cost per MWh of recently-installed projects

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Air Force approach to RE energy projects?

• First Priority: Develop on-site renewable resources– Direct AF investment thru Energy Conservation Investment Program

(MilCon set aside)– Renewable Energy Power Purchase Agreements (PPAs)– Utility/Third Party Funded

• Second Priority: Procure power from off-site renewable resources delivered over the power grid

• Third Priority: Purchase Renewable Energy Certificates (RECs)• Why not develop more on-site renewable energy?

– Would need to build out almost 80 Nellis sized projects to meet goal (14MW solar array at $100M)

– Total cost for enough on-site projects nearly $8 billion

Top-10 on-base operational RE sites?

Tech Status Generation KWHNELLIS AFB, NV Solar Photovoltaic Fully Operational 33,933

HILL AFB, UT Landfill Gas Fully Operational 15,113

F E WARREN AFB, WY Wind Fully Operational 8,725

ASCENSION Wind Fully Operational 7,095

TOLEDO ANG, OH Solar Photovoltaic Fully Operational 1,006

YOSEMITE AG, CA Solar Photovoltaic Fully Operational 942

CAPE COD AFS, MA Wind Fully Operational 821

JB MCGUIRE/DIX/LAKH Solar Photovoltaic Fully Operational 760

MARCH AFB, CA Solar Photovoltaic Fully Operational 732

LUKE AFB, AZ Solar Photovoltaic Fully Operational 596

Current in–progress RE projects?

Initiative Source Cap KW

AF Academy, CO PV 6,003

Camp Perry ANG, OH PV 150

Los Angeles AFB, CA PV roof 225

AF Academy, CO PV 550

Moron AFB, Spain PV 1,100

Edwards AFB, CA PV 3,500

Davis Monthan, AZ PV 14,500

Future renewable energy projects?

Energy Source # of Projects Cap KW

Photovoltaic (PV) 10 45,160

Wind Energy 10 70,800

Waste to Energy 2 8,400

Landfill Gas 1 4,000

Biomass 1 25,000

PV Roof 2 1,263

USAF Chain of CommandSEC AF

Assistant Secretary of the Air Force for Installations,

Environment and LogisticsAFCECivil Engineering

AFCEEAir Force Center for Engineering

and Environment

AFRPAReal Property

Bases

Base Civil Engineer (COL)

DPW

Base Commander (GEN)

AFCESAAir Force Civil Engineering

Support AgencyEnergy Division -Facility Energy

Center

DEP ASS SEC AF (Energy)

MAJCOMMajor Commands

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Department of NavyEnergy Program

Abstract from:

Association of Defense Communities

February 15, 2011

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32

Federal Mandates

•Key Legal Compliance Drivers •30% Energy Efficiency Increase (in Mbtu/KSF) by 2015 (Energy Independence and Security Act (EISA) 2007)•25% Renewable Energy Production by 2025 (NDAA’10)•Advanced metering and annual energy audits by 2012 (Energy Policy Act 2005 and EISA’07)•20% decrease in NTV fleet fuel by 2015 and Alt Fueling stations (EISA’07)•Analysis and plan to address vulnerability of critical assets (NDAA’10)

•SECNAV Shore Energy Goals•50% Alternative Energy Ashore / 50% Net-Zero Installations by 2020•50% decrease in Non-Tactical Vehicle fossil fuel consumption by 2015•Improve Energy Security by identifying shore energy supply infrastructure vulnerabilities

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Navy Shore Energy Strategy

33

Increasing Energy Efficiency And Transforming Behavior Will Make Alternative Energy Goals More Attainable.

Increasing Energy Efficiency And Transforming Behavior Will Make Alternative Energy Goals More Attainable.

GovernanceGovernance

Leverage Technology

Leverage Technology

Embrace Sensible

Partnering

Embrace Sensible

Partnering

Transform Culture and

Behavior

Transform Culture and

Behavior

• Watch, Partner, Lead Framework to Assess New Technologies

• Watch, Partner, Lead Framework to Assess New Technologies

• All Echelons Look Externally for Win/Win Opportunities

• All Echelons Look Externally for Win/Win Opportunities

• Enabled by Technology• Individual, Command and

Functional Levels

• Enabled by Technology• Individual, Command and

Functional Levels

Strategic Communication

Strategic Communication

• Tactical Comms for Stakeholder Groups

• Overarching Themes

• Tactical Comms for Stakeholder Groups

• Overarching Themes

• Codified in 4100.5E• Coordinates

subordinate/supporting plans and guidance

• Codified in 4100.5E• Coordinates

subordinate/supporting plans and guidance

Energy Security and

Legal Compliance

Efficiency First

Navy Culture & Behavior

Renewable Energy &

Sustainability30% Energy Efficiency

Increase by 2015 (EISA’07)

25% Renewable Energy Production by 2025

(NDAA’10)

Advanced Metering and Annual Audits (EPAct’05, EISA’07)

Critical Assets Plan (NDAA’10)

Actual and Planned Strategy Impact

Nav

y En

ergy

Con

sum

ption

(TBT

U/Y

R)

40

20

10

30

50% Consumption Reduction Projection

Current & Planned Renewable Energy Production

Reduce Consumption toSimultaneously Achieve Mandates

50

NDAA’10 25% Renewable Energy Mandate

EISA’07 30% Efficiency Mandate

PlannedActual

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Energy Efficiency First Navy Culture & Behavior

Increased transparency at Individual, Command, and Function Levels

– Resident Energy Conservation Program Mock billing - 7.6% reduction over four months

Technology Enabled – 13,000 Advanced Meters (AMI) in place by

end of FY11– NDW SmartGrid Pilot: Secure integration of

AMI w/ Utility and Facility management systems

– Tailored Installation Goals for 50% reduction as a Navy-Wide Goal

Link to Operations– Identify even greater opportunities for energy

and cost savings beyond facility upgrades

New Construction/ Major Renovations LEED Silver or equiv.– Energy/ water efficiency– Recyclable Materials– CO2 Emissions Reduction

Renewable & Sustainability

34

Recapitalize Existing Infrastructure with more energy efficient systems– Energy Return on Investment – Decision Model for Utility and Facility

Upgrades

Annual Energy Audits – Building level assessments of opportunities– 25% of Navy Covered Facilities/ year– Added Base Renewable Energy analysis

Energy Security– Energy Security Audit Program

Integrated Technology Strategy– Watch Industry-led tech and invest

when/where viable and mission allows• Solar Energy (Ex: Ford Island PV)• Wind Energy (Ex: SNI, Newport)

– Partner at all echelons to develop needed technology w/ key stakeholders• Smart Grid

– Lead development of mission critical and game changing technologies

• Tidal and Ocean Energy RDT&E• Innovative Geothermal

Strategy Details and Successes

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35

Advanced Metering

Solar Wind

Waste to Energy

• 13MW China Lake• MCB Camp Lejeune

(up to 5 MW)• MCB Camp Pendleton

(2.8 MW)• Solar MAC SW, Hawaii (96

MW)

• 4 MW in Guam• 22 anemometer studies

underway

Alternative Energy Ashore and Net Zero Installations

Monterey Bay Rooftop Solar

MCLBBarstow

Total Installed: 5.7+ MWTotal Planned: 100 MW

Total Installed: 6+ MWTotal Planned: 4 MW

PlanningPlanning

• NAVFAC SW is exploring European and Asian best practices for ASN recommendations

• Spring 2011 – UCLA-NAVFAC SW Forum to discuss state of technology, partnership

MCLB AlbanyMay 2010 • DON has awarded 7,679

out of 14,211 electric meters in FY09 and FY10

• DON pursuing 95% tracking of all electricity

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• Coso Facilities – China Lake, CA

– Operational since 1987

– 270MW Max net output

– Enough power to supply electricity to 180,000 homes

• Awarded NAS Fallon NV

– Plant Sized at 30 MW

• Exploring NAF El Centro (CA), MCAGCC Twenty-Nine Palms (CA), MCAS Yuma (AZ), NAS Fallon (NV)

NAVY I Power Plant NAVY I Power Plant

Drilling RigDrilling Rig

Navy Geothermal Power

36

Department of Interior

• Working with the Bureau of Land Management in exploring additional well sites

Geothermal Energy

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Wave Buoy, HI

Tidal Turbine, Puget Sound

OTEC, Hi

• Ocean Power pilots to demonstrate ocean renewable energy

•OTEC – developing designs and critical components•Wave Buoy – 3rd generation buoy tied to grid •Tidal turbine – undergoing environmental review prior to deployment

Ocean Power

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Navy Chain of Command

SECNAV

Assistant Secretary of the Navy for Energy, Installations and Environment

CNICCommander Naval

Installations CommandPlanning, Programming, Budget and Execution

CNIC Facility ManagementFacility Management (Management

and Administration, Installation Plans and Engineering, Collateral Equipment,

Real Estate)

CNICReal Estate

NAVFAC ESCNaval Facilities Engineering

Service Center

DEP ASS SEC N (Energy)NAVFAC

Naval Facilities Engineering Command

NAVFACRegions

NAV GPOGeothermal Program Office

NAVFACRegion

PW Energy & Utilities

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39

OTHER POINTS

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Buy American

• New Buy American requirement for PV panels– NDAA 2010, sec 846– Any ESPC, UESC, Utility Service, land lead– Ownership test

• Installed on DoD property• Reserved for exclusive use of DoD for economic life of device

– Solar panel maker Solyndra today said that it will file for Chapter 11 bankruptcy protection, after failing to successfully compete against lower-cost Chinese manufacturers. It is one of largest failures ever suffered by venture capitalists, and a major black eye for a U.S. Department of Energy that loaned the company more than $500 million.

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LEGAL/REGULATORY ISSUES

Real Estate Authority

Power Purchase Authority

CBO Scoring

OMB Scoring

State Utilities Laws

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Real Estate Authority

• Enhanced Use Leasing (10 USC § 2667)– Underutilized Assets– Up to 50 years– In-kind consideration

• But Also – Easements– 10 USC § 2668 (Fort Bliss –El Paso Desalination Plant)– 40 USC § 1314 (Air Force Academy – Photovoltaic Project)– 43 USC § 961– 10 USC § 2688

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Power Purchase Authority

• FAR 41.103– 10 year, renewable at government option

• Western Area Power Authority (DOE)– At least 20 year authority– Western states

• Energy Savings Performance Contracts (42 USC § 8287)– 25 years– But revenues only from savings

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Power Purchase Authority

• Utilities Privatization (10 USC § 2688)• 50 years• Cost effective requirement

• Utility Energy Service Contract• 25 years• Only local utility

• 10 USC § 2922(a) (formerly 10 USC § 2394)• 30 years• Requires Sec Def approval

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Private Sector On Base Generation  FAR § 2922(A) WAPA Special Circumstances

Army   Army Position: Applies to All Renewables

Fort Carson2MW Solar __________

17 years w/one 3 year option

Fort DetrickElectric Energy not sold __________

Fort IrwinSold off base to grid

Navy   Navy Position:Applies to All Renewables __________

Navy Southwest40 MW Solar30 years

   

Air Force Nellis AFB14.2 MW Solar __________

Davis Monthan AFB14.5 MW solar __________

Edwards AFB3.5 MW solar

Indefinite Term with 1 year Termination

AF Position:Only Applies to Geothermal

  Edwards AFBSold off base to grid

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