Friday, November 4, 2011

AIETF Big Reveal is Big Deal: Don't Forget the Gators

Ok, this is a long one, so get another cup of coffee and get comfy.

Yesterday, on the banks of the Potomac, the Army fell in at the Navy Yard in D.C. to unveil their plan to expediting large, renewable projects energy projects in and around their post, camps and stations. Some 250 companies sent over 300 people (not each!) to hear the hopeful news. In the impressive Admiral Gooding Conference center, with video screen every seven inches, the Army did not disappoint.

The White House sent Nancy Sutely, the Chair of the Council on Environmental Quality threw out the first pitch with a few softballs about DoD energy use, President Obama’s Executive Order on Federal Leadership in Environmental, Energy, and Economic Performance and Fort Irwin Soldiers deploying with foam tents (???). The fact that she was citing an EO issued over two years ago was a sad reflection on the fact that we lack a national energy policy. That the White House was there was impressive; their message was not.

Ms. Sutely was followed by Katherine Hammack, ASA, IE&E. Ms. Hammack had a multi-media presentation highlighting the progress the Army has made in Astro Turf ® and waterless urinals in the desert. While I poke fun, the video is worth seeing and will be available on line some where I am sure. The real point of her presentation was to introduce the team and the plan for the Army’s Energy Initiative Task Force. It kicked off with a video of the Secretary of the Army, the Honorable John McHugh announcing the EITF at GovEnergy in August. The first few seconds of that video lauds Ms. Hammack’s leadership and she was obviously uncomfortable with that, but then segued in to the announcement itself. In the announcement McHugh said the TF would be operational by 15 September and it was. Hammack then turned it over to Jon Powers, the fresh-faced Director of Outreach for the TF, who was MC’ing the affair and she Ms. Sutely and beat a hasty retreat. Always someplace else to be!

Next up was Richard Kidd, DASA, E&S. Mr. Kidd was sporting a walking cast acquired in a touch football injury administered by his seven year old son. As adorable as that is, if you don’t learn to stiff arm, bad things happen. DASA Kidd recognized the commitment of industry to this effort. By his calculation, given the number of folks in the room and typical Washington billing hours, industry plunked down about $180K in opportunity costs to be there that day. He also recognized that in order to attract the $7.1 billion in investment necessary to achieve the aggressive goal of 25% renewable energy consumption by 2025, the Army was going to have to behave differently.

In the good ole’ days, the Army issued an RFP, selected a vendor and paid for whatever commodity or services was required. For this effort, the Army must attract industry and entice them to invest in programs that will “Secure Army installations with energy that is clean, reliable and affordable”. This is the stated vision of the TF and it is telling. I know what word parsing goes on in “vision casting“ sessions, but word order matter. It would seem that energy security and mission accomplishment (reliability) is more important than affordability which clearly trumps clean. More to follow on this. Mr. Kidd then introduced John Lushetsky, the new Executive Director of the TF.

Mr. Lushetsky, a DOE alum like Kidd, brings impressive credentials to the job. With only three years’ experience in Federal government, he may be in for a bit of a shock facing the Army bureaucracy, but his much greater experience with industry and multiple business and engineering degrees he might be the right guy for the job. Lushetsky introduced the rest of his team: Kathy Ahsing, Planning; Al King, Execution and Jon Powers, Outreach (Strat Comms). They also have a detailed lawyer from the office of General Council to make sure they color inside the lines. The well-coiffed, Stan Lee (ok, a little jealous) from the Corps of Engineers rounds out the team. Why COE? Because that is where the plan comes in.

The TF plans to let an RFP in early 2012, fronted by the Huntsville office of the COE. In the Source Sought released in June the Corps said, “The U.S. Army Engineering and Support Center in Huntsville (CEHNC), Alabama intends to solicit and award multiple, indefinite delivery, indefinite quantity (ID/IQ) contracts for use in competing and awarding Power Purchase Agreement (PPA) task orders”. The RFP will be for a Multiple Award Task Order Contracting (MATOC) for power purchase agreements supported by enhanced use leases. The goal is to award that contract by early 2013 and then go after twenty three, currently identified projects almost nationwide. The southeastern United States is notably absent in the gang of 23, with only Fort Bragg as the token representative. You wonder if that is a function of local utility requirements or no good ideas. The utilities will play an enormous role in this effort.

The indication that the Army gets this is a new game and that they must now attract investment vice pay the bills was the announcement of the intent to lift some of the burden of NEPA. The National Environmental Policy Act makes federal agencies integrate environmental impacts into their decision about proposed actions. The Environmental Impact Statement is a painful, but responsible process. If you build outside the gate, the State may not require the EIS; the Federal government does. The EITF proposes to use the Army Environmental Command to conduct do the EIS, relieve industry of this time and cost burden. Good luck, Colonel Kimmell. His boss, MG Al Aycock was in attendance, but did not speak. Clearly, IMCOM is on board. That is a big deal.

One of the tidbits tossed out was that the Army intends to keep some of the RECs. This will allow the Army to take credit, literally, for consuming RE, but could affect the ability to get financing. We will wait and see the impact of this.

The finale was a marathon question and answer session. One of the things the TF has figured out is that communications will be the key to success. After engaging about forty minutes of questioning from the throng, Power announced that the TF will soon have a link on their site to allow industry to set up appointments to visit the team and share ideas. As painful and tedious as this might be for the folks tasked to take these meetings, no one can complain about not having access. This is right out of the Information Operations handbook. I wonder what Redleg came up with the idea?

So now we will be able to access ESPCs and UESC for energy conservation (and some RE), the MATOC for large (10MW or greater) for renewable energy. RFP in early 12, award in early 13, then off to the races. So where is the gap?

The gap is in true energy security provided by smart grid technology. Conserving energy is hugely important; that is always the first step. RE is laudable, achievable and a terrific goal. That being said, unless there is a capacity to store intermittent energy, to decouple load from source and to provide the physical/cyber security necessary in a local distribution system, you do not have energy security. If the local utility can switch off the power generation, there is no energy security. When asked about this, Mr. Kidd indicated that it was not part of the EITF charter. I respectfully suggest they rethink that charter.

It will be difficult, but not impossible, to get third party financing for secure distribution systems alone. The choices are to incorporate them into these large RE projects or get funding to install them separately. The meager ECIP budget (about $135M in FY2012 Budget) can put a dent in the need, but cannot begin to address energy security. It is important to remember that EITF is there to drain the swamp (energy security), something a Gator like Mr. Lushetsky should understand. More to follow as it develops. Great start, Army!

Also want to welcome Andy back. His technical expertise and balance approach will be a welcome counter point to my ravings. Glad to be collaborating again! Dan Nolan

5 comments:

Brian Smith said...

Great overview, and nice to see strong Army leadership in this area. You mention that "It will be difficult, but not impossible, to get third party financing for secure distribution systems alone." This implies that an energy secure distribution system could somehow generate a revenue stream. Is that what you meant? If so, how? Or did you simply mean it could be rolled up into the cost of the PV system?

Thanks!!

Dan Nolan said...

Brian,
Great comments. If a smart microgrid can demonstrate energy (and, therefore, cost) savings, it could be a candidate for any of the performance contracts available. Because there is insufficient history, this might be a hard sell. If is bundled with the RE projects, it could develop the demonstrated history necessary to make it to the next vehicle. Dan

HancockBS said...

Thanks for the great summary Dan. I'd like to posit that there is another gap. Where are the smaller renewable energy and energy security projects? While it is laudable to go after the 10MW plus scale projects, there are likely many more great and affordable opportunities for smaller projects. Perhaps the Army can eat the elephant in a single or a few very large bites, but I submit that there are many locations in need of energy security that won't be applicable to such large scale development.

Pablo Panadero said...

One thing that appears to be completely overlooked is nuclear electric power. While not renewable, it could be the bridge technology for the next 30 years while biofuels/renewables get ready for primetime, asd they are clearly not ready yet. Installing a 1GW plant at a base, which would enable higher security for nuclear materials, and further enabling the base to be a net energy producer seems like an attractive option to me.

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