Why is the Military Going Green?

As Democrats and Republicans in Washington, DC look for federal budget cuts to avoid a government shutdown crisis, the nation’s military appears to be one of the few targets where there is hope for any consensus. Unfortunately, this budget cutting effort could impact cutting edge sustainable energy programs that support microgrids – small islands of self-sufficient power – which can not only save lives in Afghanistan and Iraq, but shrink fuel consumption. If the past is any guide, the U.S. Department of Defense (DOD) push on innovation with microgrids could have major ramifications for the broader economy, replicating past successes with cutting edge technologies such as the Internet, GPS systems, computers and airplanes.

The concept of “net zero energy” will drive adoption of microgrids, since it is virtually the only technology that can get the military where it needs to go. The Navy (including the Marines) has the most aggressive goals, with 50% of installations reaching this “net zero energy” goal by 2020. Another primary driver of the DOD market is the mandate to increase reliance upon renewable energy – 25% of supply by 2025 -- a goal widely shared across the entire DOD portfolio of facilities per the 2007 National Defense Authorization Act. Given the lack of funding for capital expenses, military agencies will be leaning heavily on the private sector to help meet these aggressive deployment targets.

Of all government institutions, why is DOD going green?

For one, DOD is the single largest consumer of petroleum in the world. U.S. military operations are also the largest consumer of all forms of energy globally. If it were a state, DOD would rank 32^nd in the U. S. in terms of energy consumption, a level of energy use akin to the entire state of Oregon.

The genesis of DOD's interest in improving energy security stems from its heavy reliance upon all forms of fossil fuels, often imported from regions of the world hostile to U.S. interests. Consider this: U.S. military operations in Afghanistan pay the equivalent of $400 per gallon of gasoline when security, transportation and mortality costs are tallied up. (And U.S. residents are up in arms about $4 gasoline!) With a deep dependency on oil that adds up to approximately 125 million barrels annually, the DOD is taking major steps to shrink its appetite for fossil fuels in order to save lives and preserve its critical mission functions during times of war and other heightened states of emergency.

Here at home, the current radial transmission grid system dominated by centralized power plants primarily fueled by coal, nuclear and natural gas entails a variety of security risks. The primary concern of any military operation is disruptions of service from utility transmission and distribution lines. The lack of control and ownership of these lines -- and the uneven quality of power service regionally throughout the U.S. -- has prompted DOD to reexamine this existing electricity service delivery model.

This analysis has led DOD to the inevitable conclusion that the best way to bolster its ability to secure power may well be through microgrid technology it can own and control. Furthermore, in order to meet mandates to boost reliance upon renewable energy developed on-site -- whether the generation be solar PV or waste-to-energy combustion -- a microgrid can tie these disparate and distributed resources together and allow them to be managed locally.

The principal value proposition for a microgrid for military operations is security, cyber and physical, since the term “emergency” is a 24/7 matter.  (Deploying mobile applications during combat missions can literally mean that microgrids are a matter of life and death when it comes to minimizing reliance on liquid fossil fuels.) Still other military microgrids never interact with larger grids, and are focused on reducing diesel fuel consumption and optimizing the relationships between otherwise disparate generation or customer loads at Forward Operating Bases (FOBs).

The current uncertainty over future DOD budgets is prompting some other creative strategies to generate new revenue streams that could ultimately underwrite microgrid deployments. Unlike capital-intensive generation resources, demand response (DR) programs, which automate reductions in energy use in response to price signals, have a relatively quick payback.  A recent Federal Energy Regulatory Commission (FERC) ruling mandates that grid operators compensate DR energy providers at a rate equivalent to payment streams that flow to generators. By no later than the summer of 2012, these revenue streams should be available virtually in every part of the US.

Revenues from DR programs may help fund capital improvements such as distributed renewable energy resources and, ultimately, the microgrid island overlay, since through an enhanced use lease, these revenues can be collected and spent according to a base commander’s prerogatives.

Viridity Energy is entering the military market betting on this new business model which is particularly prudent given the political dynamics of Washington, DC. The company recently signed an agreement in 2011 with the Defense Logistics Agency to pursue load curtailment programs at DOD and federal bases throughout the U.S., beginning with Fort Meade in Maryland. This DOD base is located within the PJM grid, the most advanced DR market in the U.S. The recent FERC ruling on behalf of DR providers will double potential revenues from DR for Fort Meade, a fortuitous turn of events for Viridity Energy.

No matter what happens in the coming weeks as President Obama and leaders in the House and Senate try to come to some sort of budget deal, companies such as Viridity Energy are hedging their bets. The company’s new pitch to the military microgrid sector goes something like this: instead of focusing on islanding microgrids at the start, instead start generating revenues from DR aggregations, and add the microgrid overlay last. Now, that’s smart.