By Rear Adm. Dean VanderLey, P.E., CEC, M.SAME, USN, Charles Bare II, and Sean Lebel, P.E., M.SAME
For many years, energy for military installations has been an area of opportunity for efficiency and cost savings initiatives. The Department of Defense has responded with projects that have saved billions of dollars and utilized more renewable sources, increasing the sustainability of its overall energy footprint.
However, as our nation is challenged by a Great Power Competition with China and Russia, the scope of our installation energy challenge has grown. Efficiency and cost savings are still important, but energy security and resiliency are now crucial focus areas. Our homeland is no longer a sanctuary, and we need to lean forward with innovative solutions to make our installations more resilient in contested environments where the availability of commercial utilities like water and power is no longer a given.
The National Defense Strategy has challenged us “to succeed in the emerging security environment…to out-think, out-maneuver, out-partner, and out-innovate” our adversaries. The Department of the Navy has accepted that challenge, using some traditional tools to accomplish expanded energy security goals for U.S. Navy and U.S. Marine Corps installations. The fleet demands, and expects, resilient infrastructure ashore to meet its readiness needs in increasingly complex security environments.
Guidance from the Department of the Navy (NAVFAC Publication P-602) provides direction to evaluate and measure energy security and best practices for utility system management, using a framework that is aligned with three pillars of energy security and readiness.
- Reliability: The percentage of time energy delivery systems can serve customers at acceptable regulatory standards.
- Resiliency: The ability to anticipate, resist, absorb, respond, adapt, and recover from a disturbance.
- Efficiency: The use of the minimal energy required to achieve the desired level of service.
To meet these pillars, three types of financing frameworks have been utilized to success by the Navy and Marine Corps: Utility Energy Services Contracts (UESCs); Energy Savings Performance Contracts (ESPCs); and Power Purchase Agreements (PPAs)/ Enhanced Use Leases (EULs).
UESCs. UESCs are energy project contract vehicles financed directly with a utility provider. These projects can include water or energy components that demonstrate an economic return on investment over a period not to exceed 25 years, with the repayment of contracts made as a portion of the utility bill. Since they are financed by the utility provider with savings generated by the project, UESCs do not compete for scarce appropriated funding, which allows for more responsive execution.
Larger and more complex UESC projects carry some risk, as there is no requirement for a guarantee of performance, and typically no long-term operations and maintenance is provided.
ESPCs. ESPCs are contract vehicles managed by the Department of Energy, where energy projects are financed with private contractors, an energy service company. Similar to a UESC in structure, ESPCs incorporate a performance guarantee and require the energy services company to perform all the required maintenance, repair, and replacement for the full term of the contract, which can be up to 25 years.
ESPCs can have challenges with complex negotiations of cost savings, maintenance, and performance guarantees, which can result in longer implementation timelines. In addition, ESPCs require long-term commitments by the Department of the Navy and the contractor (over 20 years in some cases) with regular monitoring and administration throughout the lengthy contract term.
With PPAs and EULs, performance risk is lower. The government has only agreed to purchase the energy generated by the developer. If energy is not produced, the developer is not owed payment. Challenges though include the long lead-time that could potentially be needed to execute the real estate agreement.
PPAs and EULs. Both newer tools available to agencies, PPAs and EULs provide a contractor access to government land to develop energy production facilities in return for an opportunity to purchase the power generated. These contracts usually include real estate agreements. The benefits of these frameworks include the ability to develop and execute immediately without having to compete for limited appropriated funding. The developer owns and operates all the constructed facilities and is responsible for operations and maintenance.
RELIABILITY & RESILIENCE
These financing frameworks were born out of the age of efficiency-driven priorities, where projects had to show an economic payback to be executable. With an increased focus on energy reliability and resiliency, the tools now are being used to creatively leverage efficiency savings to improve the overall energy security posture of Navy and Marine Corps installations.
These financing frameworks were born out of the age of efficiency-driven priorities, where projects had to show an economic payback to be executable. With an increased focus on energy reliability and resiliency, the tools now are being used to creatively leverage efficiency savings to improve the overall energy security posture of Navy and Marine Corps installations. Energy efficiency solutions create energy savings that can subsidize reliability and resiliency elements and do not always have significant energy or cost savings.
A recently awarded ESPC at Naval Station Guantanamo Bay, Cuba, leveraged an aggressive whole installation approach, generating significant annual cost savings while improving reliability and resiliency. Guantanamo Bay is a critical installation in the Caribbean where the mission is made more challenging by the need to self-produce power and clean water.
This recently awarded project has a fence-to-fence scope, allowing the energy savings company to evaluate all utilities and facilities for opportunities to maximize the potential for deep energy savings while improving energy reliability and stability. Energy conservation measures taken include a 2.7-MW photovoltaic system, upgrades to the chilled water plant, implementation of an installation-wide controls network, and upgrades of existing equipment to high efficiency units.
The significant savings generated by these efficiency initiatives fuel the financial engine to pay back the third-party investment. The significant decrease in the installation’s energy demand profile reduces dependence on diesel fuel that must be delivered by tanker, improving the reliability of power generation and increasing the duration Guantanamo Bay can operate without a fuel delivery.
Similarly, recently awarded projects at shipyards in Norfolk, Va., and Kittery, Maine, leveraged savings not only from traditional facilities applications but also from power-intensive industrial shipyard operations. Additionally, a newly completed EUL project at Naval Air Station Oceana, Va., improved resilience with a second electrical feed from the commercial utility provider as payment in kind for the land lease. At Joint Base Anacostia-Bolling, D.C., a renewable energy supply agreement will replace and supplement conventional power sources with solar photovoltaic arrays. This project will displace 8,900-MWh with an expected savings of $8.5 million. Though initially contemplated specifically with efficiency in mind, its impact has improved the overall reliability of the system. Likewise, an integrated ESPC/EUL project at Naval Base New London, Conn., will install generation, establish a microgrid, and construct electrical distribution upgrades to enhance resiliency and reliability.
ADAPTING FOR TOMORROW
The Department of the Navy’s energy priorities were developed to improve efficiency and sustainability, but it is now being leveraged to provide energy security in response to an increasingly challenging global security environment driven by Great Power Competition with Russia and China.
This does not mean efficiency is being ignored. In fact, it remains central to our efforts. As we utilize our best technology and business innovations to maximize efficiency, those savings are being leveraged to deliver on all pillars of energy security.
Rear Adm. Dean VanderLey, P.E., CEC, M.SAME, USN, is Commander, and Charles Bare II, is Resiliency/Renewable Energy Branch Electrical Engineer, NAVFAC Atlantic. They can be reached at firstname.lastname@example.org; and email@example.com.
Sean Lebel, P.E., M.SAME, is Associate Vice President, AECOM; firstname.lastname@example.org.
[This article first published in the March-April 2020 issue of The Military Engineer.]