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CHIPS Articles: Cost-Conscious Renewable Energy For Energy Security

Cost-Conscious Renewable Energy For Energy Security
By Dennis McGinn - February 10, 2016
The Department of the Navy (DON) has had quite a year for progress towards the Secretary of the Navy’s (SECNAV) one gigawatt (GW) goal. Along the way, we’ve received lots of feedback – positive, negative, and neutral. Often, it seems like much of the feedback stems from concerns that the DON is investing money that could be put to better use. I want to take the time to explain how our commitment to renewable energy actually makes sense from both a financial and a warfighting perspective. The DON needs to pursue every opportunity to make a more secure, reliable, and resilient fleet. This means a diverse array of power sources, including renewables.

Concern: The DON is spending lots of money on renewable energy that could be put to better use, like operational priorities.

Response: The DON does not pay for the construction of renewable energy generation assets on base. In fact, in exchange for the use of our land, we receive value from the developer, often in the form of electrical infrastructure upgrades.

The DON is not investing in the renewable energy infrastructure on our bases, which means that we don’t pay for the construction, operations, or maintenance. In fact, we don’t make any capital investments in the projects at all. For example, our Model 1 power purchase agreements (PPAs), which are long-term contracts to purchase energy at a set price, are projected to save us money over the life of the contract. The recently signed Western Area Power Administration deal, which will supply 14 Navy and Marine Corps bases with 1/3 of their energy, will save us at least $90 million over the lifetime of the contract. That’s a lot of money that can be put towards base and facility upgrades to better support our warfighters!

Long-term PPAs with low-fixed escalation rates also provide cost stability, which enables us to earmark valuable funds where they’re needed to support our Sailors, Marines, and their families. Knowing what we will pay for power is a valuable form of energy security.

Concern: If the DON isn’t paying for construction of renewable energy facilities, who is?

Response: The DON has three acquisition models that the Renewable Energy Program Office uses when working on renewable energy development. In each, our tenants are the entities making the capital investments in the projects.

Here are a few more details about our acquisition models (shown at right):

For Model 1s, we sign long-term contracts to purchase renewable energy from the grid to power our Navy and Marine Corps bases, providing stability and diversifying our energy portfolio. Regardless of what type of energy we purchase, we must have reliable supplies of power. Our policy is to buy renewable energy at or below the cost of “brown power,” or what folks might think of as traditional electric generation – coal, oil, natural gas, etc. That means we can’t spend any more money than we already would have to power our bases.

For Model 2s, we lease land on base to an external partner, who commits to build, own, operate, and maintain the renewable energy asset. We don’t contribute anything to the infrastructure, but as compensation for the land the lease holder must provide in-kind considerations to the DON, which are delivered in the form of increased energy security benefits.

Locating energy generation assets on base also increase future energy security options. On-base microgrids will be key to ensuring energy security, and on-base electricity generation resources, like solar facilities, enable future microgrid implementation.

Model 3s combine the price stability of Model 1s with the energy security opportunities of Model 2s. For a Model 3 project, a third party builds a renewable energy asset on base specifically to supply the base. These projects are prime opportunities to create on-base microgrids capable of allowing the renewable energy facility to continue to function in the event of a grid outage. Similar to Model 1s, the DON doesn’t make any capital investment in the project itself, instead signing a PPA to buy the electricity generated by the asset, and a real estate outgrant to lease the land to the external party.

Concern: The DON should be focused on warfighting, not on renewable energy projects.

Response: By having access to renewable energy on our bases we increase those bases’ energy security. Without power on base, planes can’t take off and ships can’t dock. Renewable energy is a crucial element of becoming a more lethal force.

Renewable energy can help to ensure that DON bases are always “on,” while also providing cost stability. The DON’s electric bill is roughly one billion dollars a year. Any change in electricity prices can make that number fluctuate wildly, creating uncertainty about how to allocate the DON’s valuable funds. By taking advantage of renewable energy, we have identified and executed innovative opportunities to stabilize and reduce that cost, giving us more flexibility to devote money to facilities, training, and equipment. Taken together, these partnerships and the savings we’re securing will make the DON a strong and more resilient fighting force.

SAN DIEGO (August 20, 2015) Secretary of the Navy (SECNAV) Ray Mabus, center, signs an agreement with Western Area Power Administration and Sempra U.S. Gas & Power to construct a 210 megawatt direct current solar facility. The agreement was signed last month and is the largest purchase of renewable energy ever made by a federal entity. U.S. Navy photo by Mass Communication Specialist 2nd Class Armando Gonzales
SAN DIEGO (August 20, 2015) Secretary of the Navy (SECNAV) Ray Mabus, center, signs an agreement with Western Area Power Administration and Sempra U.S. Gas & Power to construct a 210 megawatt direct current solar facility. The agreement was signed last month and is the largest purchase of renewable energy ever made by a federal entity. U.S. Navy photo by Mass Communication Specialist 2nd Class Armando Gonzales

Acquisition Model 1
Acquisition Model 1

Model 2
Model 2

Model 3
Model 3

SAN DIEGO (August 20, 2015) Secretary of the Navy (SECNAV) Ray Mabus signs a solar panel during a ceremony commemorating an agreement with Western Area Power Administration and Sempra U.S. Gas & Power to construct a 210 megawatt direct current solar facility. The agreement is the largest purchase of renewable energy ever made by a federal entity. U.S. Navy photo by Mass Communication Specialist 2nd Class Armando Gonzales
SAN DIEGO (August 20, 2015) Secretary of the Navy (SECNAV) Ray Mabus signs a solar panel during a ceremony commemorating an agreement with Western Area Power Administration and Sempra U.S. Gas & Power to construct a 210 megawatt direct current solar facility. The agreement is the largest purchase of renewable energy ever made by a federal entity. U.S. Navy photo by Mass Communication Specialist 2nd Class Armando Gonzales
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