Kevin Elliott 2015-07-22 17:42:48
With the energizing of the Department of Defense’s (DOD) first industrial-scale solar array at Nellis Air Force Base, Nevada, in 2007, the Air Force signaled to the world that America’s flying force was going to be increasingly powered in new, more sustainable ways. Over the near decade since the Nellis array came online, the Air Force has parlayed those initial efforts into a diversified portfolio of renewable energy projects, utilizing nearly all available technologies and energy sources, including not just photovoltaic (PV), but wind, hydro, landfill gas, and, coming in the near future, waste-to-energy (WTE). According to the Air Force Civil Engineer Center (AFCEC) annual energy management report, the Air Force spends more than $1 billion on facilities energy per annum, equating to 62,190 billion British Thermal Units (BTU) in fiscal 2014—roughly 15% of the total Air Force energy bill. And while installation consumption represents a relatively small fraction of the whole energy expense by number, keeping the lights on at Air Force bases is likely more important than that percentage indicates. If installations do not have a constant, secure supply of energy, planes do not fly, and missions fail. As Air Force Secretary Deborah Lee James succinctly put it in a 2014 DefenseOne.com article, “Energy is central to readiness.” The Air Force is motivated by mission—to fly, fight, and win in air, space, and cyberspace—and does not have the option to wait for the power to come back on when the grid goes down. America looks to the service not only to meet its airborne missions, but also to help during times of crisis or natural disaster here at home, as during the 2012 Hurricane Sandy emergency. The Air Force must therefore have redundancies in its power generation and distribution systems that other entities may not require. “Diversification of traditional, centralized power with decentralized, renewable power makes Air Force bases more nimble and robust,” says Miranda Ballentine, Assistant Secretary of the Air Force for Installations, Environment, and Energy, in a recent article in The Military Engineer magazine. “There is no airpower without power.” Renewable energy generation delivers to the Air Force the potential to increase independence from an aging national grid and assure supply during times of distress. To expand its renewables capacity, and given the constraints of the current budgetary landscape, the Air Force has adopted new methods for investing in utility-scale renewable energy projects. The service reached out to the energy industry itself, not only for capital, but also for expertise and innovation, and found a helping hand. By forging long-term relationships with private sector businesses and public utilities, the Air Force is leveraging the vigor and competitive spirit of the marketplace to bring new ideas, technologies, and funding capabilities to bear on its energy requirements. One of the most utilized third-party partnership models for the Air Force today is the power purchase agreement (PPA). As the name connotes, PPAs are special arrangements for buying energy and have been used by the energy industry to sell traditional power for decades. In this case, however, the Air Force uses PPAs to acquire energy from renewable sources actually built on Air Force installations by private industry. The Air Force has two renewable energy PPA projects in operation of over 10-MW direct-current capacity, is underway on two more, and has seven in active development. PPAs are currently providing 34 MW of the Air Force’s 102 MW of renewable energy capacity; those in development, once complete, will add another 89 MW of off-grid energy potential. “PPAs create strategic opportunities for the Air Force to find alternative ways to produce electricity to meet our mission,” says David Bek, director of the Air Force Civil Engineer Center Energy Directorate, the agency responsible for execution and management of the Air Force’s large-scale renewables projects. “We have a great opportunity to leverage some of our underutilized assets through PPAs, and at the same time improve our energy assurance, resiliency, and security through the use of renewable energy production at or near our bases.” Many Air Force bases have available non-excess land, meaning the property does not qualify for sale under excess land requirements, but is suitable for mission-compatible development. A PPA stipulates that a third-party entity, a business, or utility, lease a portion of that land from the Air Force, install an agreed upon renewable energy capability on the property, and then sell the energy produced back to the Air Force at a fixed rate for the life of the contract. The entity gains a long-term, reliable customer, and the installation secures renewable energy at predictable rates for decades. Take, for example, the Air Force’s first PPA, at Nellis Air Force Base. The 14-MW solar array was, at the time, America’s largest PV system and a groundbreaking example of public-private business partnership. The 72,000-panel solar farm was constructed on 140 acres of underutilized non-excess land, part of which includes a capped landfill. The array generates nearly 31 million kWh of electricity annually, providing for 25% of the installation’s energy needs and saving the Air Force approximately $1 million per year. This inaugural project, named Nellis I, has been so successful that another array, 19-MW Nellis II, is slated for completion by the end of 2015. Under the terms of the 2007 Nellis I PPA, SunPower Corporation, financed by MMA Renewable Ventures, built the solar farm at no upfront cost to the Air Force. MMA holds a 20-year lease for the land on which the array sits, and electricity generated by the plant is sold to Nellis at 2.2 cents per kilowatt-hour for the length of the contract. According to the US Energy Information Administration, the average 2014 commercial electricity rate in Nevada was 9.52 cents per kilowatt-hour. So, the Nellis I PPA provides the base a steady renewable energy-generating capability for at least 20 years, and a 75% electricity cost savings, on average, on power from the array. A similar deal was crafted for the 16-MW solar plant in the Tucson desert at Davis-Monthan Air Force Base, AZ. The base, before the array was energized, paid Tucson Electric Power an average of 8.6 cents per kilowatt-hour for electricity. Under the 25-year PPA, Davis-Monthan pays Sun Edison, the system’s developer and owner, 4.5 cents per kilowatt-hour with a 1.5% annual increase. The array currently meets over 40% of the base’s total energy needs and more than 100% of its daytime requirement, all off-grid and at an annual savings of $500,000 per year for the Air Force. “PPAs are a great way for the Air Force to accomplish renewable energy projects,” says Steve Dumont, a member of the energy team at Air Combat Command, the Air Force major command under which Nellis and Davis-Monthan are organized. “The Air Force doesn’t have the capital to build such large power plants and doesn’t need to have the expertise to maintain them. PPAs are a means of acquiring very large capital investment projects with no upfront money from the Air Force. ” While the core component of every Air Force PPA is site-built renewable capacity, other terms of the agreements are flexible and contingent. AFCEC conducts detailed business case analyses for every opportunity and brokers deals that seek best value case-by-case. “Our energy agreements can include more than just electricity,” says Bek. “They can, in theory, include the addition of other components necessary for getting an eventual microgrid capability. These could include switches, secondary transmission lines, and secondary substations. These provide us more than just the power itself; they provide us other aspects of energy security and resiliency.” An example of this agility, and the evolving nature of Air Force energy agreements, can be seen in the 19-MW Nellis II project. Terms for that agreement were negotiated differently than Nellis I based on current needs analysis. Nellis II is a hybrid arrangement, in that NV Energy, Nevada’s state utility, will fully own and operate the array. All electricity from the system will flow through the base first, like a PPA, but will be purchased by Nellis at existing tariff rates. Any unused power will then go to the outside grid for use by others. “Nellis II is a great opportunity for us to partner with the Air Force base and at the same time benefit our other customers,” says Stacey Kusters, vice president of renewable energy and origination at NV Energy. “Because the array is situated on the installation, Nellis gains an energy security component. And because any extra electricity generated by the system will flow to the grid, the surrounding community benefits as well. So, what’s good for Nellis is good for all our customers.” The distinguishing feature of the Nellis II agreement for the Air Force lays in benefits other than below-average rates. In exchange for the 31-year land lease and rate structure, NV Energy agreed to install an additional substation and transmission line to the base as an in-kind consideration, providing Nellis a much-needed power source redundancy. “The Air Force base was looking for an additional connection to NV Energy’s electrical grid, for security reasons,” says Kusters. “So, as part of the lease structure, the new substation and transmission line were included. This way, NV Energy was able to maintain its existing rate for all customers, Nellis included, but at the same time, the Air Force base was able to gain a backup interconnection to satisfy its energy security needs.” This type of asymmetrical thinking will characterize Air Force energy projects generally, and PPAs specifically, going forward. “The Air Force has to look at the total picture of where our energy needs will be decades down the road,” says Dan Gerdes, director of the AFCEC Rates and Renewables Division. “We have to make smart choices now to support that evolution. So, sometimes ancillary benefits are, for us, more valuable than a lower rate. We have to set ourselves up for follow-on projects, so we are always looking for where we can find second-order, non-monetary benefits.” Another virtue of PPAs concerns long-term operation and maintenance of renewable energy assets. Because a third party owns the systems, that entity is responsible for maintaining, upgrading and optimizing them. This liberates precious Air Force dollars and manpower to be reallocated to other mission requirements. “For a minimal investment in manpower, projects like this provide substantial savings,” says Lt. Col. Brian Stumpe, 355th Civil Engineer Squadron commander at Davis-Monthan Air Force base. “Since we (the Air Force) don’t own the project, our civil engineers are freed up to focus on the core mission of operating and sustaining the air base and generating air power.” The Air Force also cannot commit resources to training Airmen to be experts in a fast-emerging field like renewable energy. Under PPAs, it does not need to. The Air Force can let private industry compete for projects and allow businesses to bring their expertise and best practices to the table. The service can then choose the most beneficial arrangement to meet its needs installation-by-installation. “In general terms, the Air Force is not going to specialize in owning, maintaining and operating renewable energy systems,” says Bek. “What the Air Force is interested in is the energy security and resiliency aspect for mission assurance at or better than prices we currently pay for traditional power. The system owners will have the expertise to bring in the right technologies, to keep those technologies fresh, and also to maintain them so they are optimally producing the electricity we need.” The US Air Force will continue to be responsible for protecting America in air, space and cyberspace, no matter the fiscal or geo-political environment. The energy needed to accomplish that mission will likely not diminish, nor can the country afford for its Air Force bases to go dark. But by partnering with private industry and harnessing the vitality of the marketplace, the Air Force continues innovating, ever finding new ways to power the fight. Kevin Elliott is a specialist with the Air Force Civil Engineers Center for Public Affairs.
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