Thursday, January 3, 2013

Thru a Glass Darkly: A SWAG about DOD Energy in 2013

This prediction is based upon the assumption that the country has not cease to exist due to Obamacare, the Fiscal Cliff, or the inclusion of leap year into the Mayans’ calculation.  The most likely of these was the FC, but since it is just a 10% reduction over the next 10 years and we should be down to about half a war shortly, how bad could that be? Since we dodge all these bullets, here is how I see 2013 in DOD Energy.

Contracting in 2013
                MATOC – I predict that the USACE MATOC will be let by 1 June 2013.  The first task orders will be withheld pending the resolution of the various protesting proposers deemed “noncompliant” by the proposal review panel.  Expect great fun and games.  Earliest I would expect to see task orders is 30 September, just in time to qualify for FY2013!
                ESPC – The various ESPC vehicles, (DOE, Army, etc.) will get a modest workout.  The military remains suspicious of anyone who does the work, gets paid on the savings and then self evaluates how well they are doing.  Someone needs to figure out how independent M&V gets done. 
                EUL & PPA – This method will continue to be the predominant vehicle during 2013.  If the AEITF can continue to help with pre clearing, impact statements and other government requirements, that will go a long way to easing the pain.  We have seen two efforts so far, but they have not progressed sufficiently to determine their likelihood of success.   Air Force and Navy will exercise these vehicles in an effort to meet their energy commitments, but just enough. 
                UESC – The utility energy services contracts bring together utilities and coops with the Department of Defense.  Now if we could just get the IRS involved, we would have the three largest, intractable bureaucracies known to man in one knife fight.  The UESC market is a competition to see who can move the slowest. 

                The fifth fuel will continue to be where the smart money goes.  The problem is that SPF and double glazed windows do not make for great photo ops.  Unless you take a picture of a balance sheet and watch the savings mount up.  It is hard to get a DOD official to stand in front of a CFL when every right wing nut job is demanding to have the right to be stupid and waste money on incandescent bulbs. Every penny not spent on energy is a penny that can go into housing, training, equipping……..  The REF is running around the country, creating a mission for themselves as the Army’s new startup incubator.   Hope they have had a chat with OnPoint Technologies!   Remember, the cheapest, cleanest, most secure electron is the one you don’t use.   Operational energy will make great use of this by drawing down in Afghanistan.  Otherwise it will be a year of writing about it. Read what the Congressional Research Office had to say.   The Marines are continuing to look for a few good systems, so check out this solicitation.

Smart Grid
                Whatever the question is, SPIDERS is the answer.  The program has been as successful as any technology demonstration run by a committee could possibly be.  Smart grid technology has the potential to make intermittent renewable energy sources non-intermittent, to reduce production requirements by balancing and shaving peaks and provide real-time understanding of energy use.   What it will not do is make everyone happy.   As one very smart guy said, “If everyone is pissed at me, I’ve done my job!”.  I think it was Harold.

Power Production
                The AEITF will continue to push for big deal, 20MW+ projects that will make for fine photo ops but tough business models.  Investors want 20% Return On Investment.  How do I know?  I asked them.  And when I showed them solid 15% ROIs on projects, they passed.  So as the government pushes for more control on the EULs supported by PPAs, remember: every dollar you garner for yourself takes bread out of an investor’s mouth.  I believe in the Machiavellian rule of financial survival: Remember who you need more than they need you!  As natural gas starts to supplant coal in conventional power plants, only government subsidies are going to make RE cost competitive.   We are not exactly in the mood for that, are we?  The only other factor that will make RE work in many locations is a value for energy security.  DOD has not articulated a value, nor do they seem likely to.   I wonder what value Governor Christie would put on energy security.

The Bottom Line on the Bottom
                The urgency for operational energy peaked early last year.  The REF and USMC will continue to seek opportunities, but without Requirements, nothing gets into the system.  CASCOM is working on this, but the clock continues to tick.  Even though the Cliff has been pushed off, reductions in funding for DOD will continue to be the norm and the priorities will be recovering a force exhausted by 10 years of war.  The priorities must be to heal the force and their families while maintain their capabilities and the infrastructure to support them.  This provides a pretty clear 1 to N list of things to get done, but I hope energy security shows up on the list closer to 1 than to N.  Happy New Year!  Dan Nolan 


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