March 29, 2021

The U.S. Department of Defense, Distributed Generation, and Energy Resilience

Wilson Rickerson, Taite McDonald, Michael Wu, Chris Murray, and Jack Graul

In a January 2021 statement released on the same day as the new administration’s series of climate-focused executive orders, Secretary of Defense Lloyd J. Austin III declared, “I fully support the President’s direction today to include climate considerations as an essential element of our national security and to assess the impacts of climate change on our security strategies, operations, and infrastructure. He added, “The Department will immediately take appropriate policy actions to prioritize climate change considerations in our activities and risk assessments, to mitigate this driver of insecurity.” 

Only two years prior, a U.S. Department of Defense (DoD) survey of 79 “mission assurance priority installations” revealed that all but one—the Pentagon—is currently or potentially susceptible to the effects of a changing climate over the next 20 years. In the same year, DoD reported more than 2,500 unplanned utility outages, 542 of which lasted eight hours or longer. Nearly 30 percent of these outages were caused by “acts of nature.” While attributing specific extreme weather events to climate change is notoriously difficult, DoD has acknowledged the risks posed by climate change.

Extreme weather resulting from a changing climate may represent the most vivid threat to DoD, but it is not the only one. Cyberattacks, physical attacks, aging infrastructure, and equipment failure all have the ability to cripple operations. In addition, these threats are not self-contained events. DoD maintains a globally networked force that includes more than 500 military bases and installations, 300,000 buildings, and 160,000 non-tactical vehicles. As domestic installations support missions both domestically and abroad, power or fuel disruptions to any part of this network have consequences throughout the system. A loss of power at any one base in the United States can threaten DoD’s ability to provide intelligence, surveillance, and reconnaissance (ISR); launch spacecraft; remotely pilot unmanned aircraft; and support a host of other operations around the world.

In response to these emerging threats and the inherent interdependencies of running global military operations, DoD has recognized the need to reduce its reliance on civilian energy infrastructure and upgrade its on-base infrastructure with distributed, local power sources. Over the last decade, “energy resilience” has emerged as the central tenet of DoD. This culminated in 2018 with the passage of the National Defense Authorization Act (NDAA), which codified energy resilience as “the ability to avoid, prepare for, minimize, adapt to, and recover from anticipated and unanticipated energy disruptions” and elevated it to define DoD’s energy policy.

There are antecedents to DoD’s use of on-base generation to support its missions. Prior to World War II, many military bases built their own power plants because they were located too far from local utilities. During the second half of the 20th century, DoD connected to the expanding commercial electricity grid and sought to privatize its on-base energy infrastructure. Beginning in the 1970s, DoD emphasized distributed generation in order to maximize energy savings and environmental performance in response to executive orders and congressional legislation. The Energy Independence and Security Act of 2007 requires that DoD reduce its energy consumption by 30 percent from a 2003 baseline, updating previous energy efficiency baselines set by executive orders in the 1970s and 1990s. As of 2018, close to 40 military bases in the United States have installed combined heat-and-power (CHP) systems totaling more than 350 megawatts (MW) that have counted toward DoD efficiency goals.  

In the early 2000s, national legislation and mandates emerged as another driver for distributed generation at DoD facilities. The Energy Policy Act (EPAct) of 2005 required 7.5 percent of the electricity consumed by all federal facilities to come from renewable energy sources starting in 2013. The National Defense Authorization Act (NDAA) of 2007 specifically required DoD to “procure or produce” the equivalent of 25 percent of the electricity it consumes from renewable energy sources by 2025. The military departments pursued varying strategies, such as purchasing Renewable Energy Credits (RECs) and establishing 1 gigawatt on-base renewable energy generation targets, to achieve these renewable energy requirements. More than 1,500 MW of renewable energy capacity have been installed or procured by the military. Most of these systems have not been configured, however, for energy resilience and cannot be used to keep the lights on during power outages.

Recent DoD energy policy has emphasized the benefits of distributed generation technologies to provide energy resilience and energy security. DoD Directive 4180.01 (2014) defined DoD’s energy policy as the need to improve energy security, including the need to “enhance the power resiliency of installations.” DoD Instruction 4170.11 (2016) set specific strategies related to installation energy management and broadened energy resilience solutions beyond traditional backup power generation to include “integrated, distributed, or renewable energy sources.” Most recently, DoD’s Energy Strategic Plan (2020) confirmed that distributed renewable energy is an “essential ingredient” for resilience. The Army, Air Force, and Navy have each mandated that their installations be able to sustain critical missions independent of the commercial electricity grid for a minimum of 7 to 14 days.

In order to achieve these ambitious energy resilience goals at the scale and speed required by DoD’s top brass, a significant amount of investment is required. DoD provides direct funding for energy resilience projects through both construction and Research, Development, Test & Evaluation (RDT&E) funding. The Energy Resilience and Conservation Improvement Program (ERCIP), a subset of military construction (MILCON) appropriations dedicated specifically for energy resilience and energy conservation improvements, established nearly $190 million for energy resilience project costs in FY20, a 25 percent increase from the previous year and more than double from FY18. In addition, RDT&E programs such as the Environmental Security Technology Certification Program (ESTCP) have focused on deploying next-gen microgrid solutions at installations. Yet, taken together, neither ERCIP nor individual RDT&E programs are likely to scale at the order of magnitude required to address the energy resilience imperative.

In order to scale up the deployment of energy resilience solutions, DoD emphasizes partnerships with private sector capital providers to finance projects. Established third-party acquisition pathways––such as Energy Savings Performance Contracts (ESPCs), Utility Energy Service Contracts (UESCs), Enhanced Use Leases (EULs), and Power Purchase Agreements (PPAs)––have served as the primary mechanisms to achieve energy resilience. Using ESPC authority, Marine Corps Logistics Base Albany expanded an existing landfill gas plant to 4 MW, thereby enabling the base to support critical loads in “island mode” in the event of a blackout. Similarly, under a 20-year PPA, Fort Drum converted a coal-fired power plant into a 60 MW biomass power plant that is capable of providing 100 percent of the electricity for the base. Most recently, in 2016, Naval Construction Battalion Center Gulfport achieved similar energy resilience benefits by installing a solar-plus-storage microgrid under EUL authority.

These existing pathways are powerful, but limited in their ability to overcome the challenges to scaling energy resilience solutions. They originated from DoD’s era of energy efficiency–driven policy and prioritize cost-effectiveness over energy resilience. Only recently, through a series of guidance, has DoD begun requiring that on-base upgrades consider energy resilience solutions, which typically have a longer payback period, alongside more common energy conservation measures.

Existing government programs and third-party financing mechanisms may continue to provide the backbone of on-base energy resilience upgrades in the immediate future, but new and innovative opportunities are arising. For example, the Air Force recently explored Other Transaction Authority (OTA), a contracting pathway initially deployed during the U.S. government’s space race with Russia in the 1950s in order to rapidly prototype new technologies. In 2019, Hanscom Air Force Base was selected as a pilot site for a new “Energy-as-a-Service” business model using the OTA. Although this is a first-of-its-kind undertaking in DoD’s energy space, OTAs have rapidly gained momentum across all of DoD in the past few years, with DoD OTA obligations having increased by 712 percent since 2015.

As DoD forges ahead, buoyed by a new administration seeking to leverage the full extent of its executive powers to support climate-friendly technologies, the business case for energy resilience grows stronger. In January 2021, the White House signed an executive order directing “each federal agency to develop a plan to increase the resilience of its facilities and operations to the impacts of climate change.” Ultimately, there is not a single solution for ensuring energy resilience across the United States. However, ambitious goals by the federal government coupled with significant investment in distributed generation technologies can help DoD achieve its energy resilience requirements and strengthen its military capabilities. 

Wilson Rickerson, Taite McDonald, Michael Wu, Chris Murray, and Jack Graul

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Wilson Rickerson is a principal and cofounder of Converge Strategies, a consulting company focusing on the intersection of advanced energy and resilience. Rickerson works with a broad range of military, private sector, and government partners, and recently led a national study in the U.S. Department of Defense energy resilience law and policy in partnership with the American Bar Association.

 

Taite McDonald is an attorney in Holland & Knight's Washington, D.C., office and a member of the firm's Public Policy & Regulation Group. McDonald focuses her practice at the intersection of innovation and government. She is especially well versed in running complex, cross-government matters with intricate legal, policy, and financing components.

 

Michael Wu is a principal and cofounder of Converge Strategies. He leads work on community resilience, energy security, and distributed energy planning. Wu previously served as a senior advisor on energy resilience, microgrids, and clean energy in the U.S. Air Force.

 

Chris Murray is a strategic advisor and an energy developer with a legal, legislative, and regulatory background. For over 20 years, he has specialized in energy issues in a broad variety of settings, including the Departments of the Air Force and Navy, WGL Energy Systems, the White House, the U.S. Senate, the U.S. House of Representatives, the Federal Energy Regulatory Commission (FERC), and environmental nonprofits.

 

Jack Graul is an Energy Resilience Fellow at Converge Strategies and a 2021 MBA candidate at Boston University's Questrom School of Business. Prior to joining Converge Strategies, Graul provided comprehensive operations, budget, and project management support for clients in the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy.