Military Energy Security: Current Efforts and Future … Energy Security: Current Efforts and Future Solutions ... Military in 2009 ... unacceptably high risk of extended disruption.”13

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Military Energy Security:

Current Efforts and Future Solutions

Global Green USA®

Daniel Sater August 2011

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Acknowledgements

About the Author

Daniel Sater was a Research Fellow at Global Green USA’s Security and Sustainability Office in Washington, DC in the summer of 2011. He is a graduate student at the Frank Batten School of Leadership and Public Policy at the University of Virginia. Daniel holds a BA in Foreign Affairs from UVA and will receive his Master of Public Policy degree in May 2012.

Point of Contact

Dr. Paul F. Walker Security and Sustainability Program, Global Green USA 1100 15th Street, NW, 11th Floor Washington, DC 20005 Phone: 202.222.0700 Any views expressed in this article are the views of the author and do not necessarily reflect the views of Global Green USA or its staff.

I would like to thank Global Green USA for providing me the opportunity to produce this report. I would like to thank Dr. Paul Walker, Director, Security and Sustainability, and Marina Voronova-Abrams for their guidance throughout the process. I would also like to thank Jonathan Hunt and Mart Stewart-Smith for their advice and edits.

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Table of Contents

Executive Summary ………………………………………………………………4

Introduction ……………………………………………………………………….5

Background ……………………………………………………………………….7

Smart Grid Definition ……………………………………………………………..9

Microgrid Definition………………………………………………………………10

Current Efforts

Net Zero Military Installations……………………………………………..11

Renewable Energy Generation……………………………………………..15

Microgrids………………………………………………………………………...19

Electric Vehicles…………………………………………………………...21

DOD Development of Microgrids………………………………………….22

Problems with Microgrids………………………………………………….25

Policy Options…………………………………………………………………….27

Recommendation………………………………………………………………….29

Appendix A ……………………………………………………………………….31

Appendix B...……………………………………………………………………...33

References………………………………………………………………………...34

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Executive Summary

In the first six months of 2011, the US civilian power grid suffered 155 blackouts affecting an average of 83,000 people with 36 blackouts affecting over 100,000 people.1 Despite these staggering numbers, US military bases rely solely on the civilian grid to power 99% of their war fighting capabilities, homeland security missions, and rescue and relief operations.2 This paper analyzes the Department of Defense’s current efforts to increase energy efficiency and assurance and makes recommendations on the policy options available to the DOD to increase the incorporation of smart microgrids onto its military installations.

A Microgrid is a small localized version of the Smart Grid. It increases energy efficiency by regulating demand and allows for better incorporation of renewable energy sources. During a power outage, a microgrid will disconnect itself from the civilian power grid and turn on an installation’s generators to ensure electricity availability to a base’s critical loads. By prioritizing loads during an emergency, a microgrid will drastically decrease the need for fuel resupplies during a civilian power grid failure. Microgrids also have the potential for deployment in war zones where power supplies are even less secure.

Despite the benefits of microgrids, the DOD, as well as legislation and executive orders, has focused on less efficient energy alternatives. The Environmental Conservation Investment Program, one of the principle funding mechanisms to fund conservation efforts in the DOD, rarely invests in microgrids and focuses too much on less cost efficient projects. Further, the DOD’s Net Zero Energy Installation Initiative does little to increase energy assurance at military installations. By focusing too much on renewable energy generation, legislation and executive orders have decreased the available funds for microgrids, which if installed before a renewable energy project, can increase its viability.

The Defense Science Board (DSB) has published two reports urging the DOD to decrease its energy costs and better secure its energy supply to bases. However, the development of microgrids, despite their cost effectiveness and impact on energy assurance, remains slow and infrequent. To increase national security and decrease the department’s energy expenditures, the DOD should enact changes to its investment programs to give more consideration to microgrids and pursue special appropriations from Congress for the widespread deployment of microgrids. The benefit of this two-pronged approach is that it allows the DOD to follow a short-term zero cost solution while it waits for the necessary appropriation from Congress to solve the Defense Department’s energy problems.

1 Office of Electricity Delivery and Energy Reliability. (2011). Electric Distrubance Events Annual Summary 2011. National Energy Technology Laboratory. 2 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics.

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Introduction

Lieutenant General James Mattis, Commanding General, Marine Corps Combat Development Command3

The Department of Defense (DOD) is entirely dependent upon its vulnerable fuel supply. As the largest single-entity end user of fuel in the world, the DOD requires vast amounts of petroleum for its tactical and fleet vehicles as well as vast amounts of electricity to power its facilities. In fiscal year 2009, the DOD spent $3.6 billion on facility energy and $9.6 billion on fuel for its tactical and fleet vehicles.4 The DOD’s energy expenditures outpace those of entire countries including highly developed states such as Denmark and Israel.

The figures are equally as shocking when compared to energy consumption in the US. In 2009, the most recent year for which data are available, the DOD consumed more energy than the entire state of Connecticut whose population in 2009 was 3.5 million residents.6 If the DOD were a state, it would rank as the 33rd largest consumer of energy.7

3 US Army Professional Writing Collection. (2011). Breaking the Tether of Fuel. Retrieved July, 15, 2011 from http://www.army.mil/professionalWriting/volumes/volume5/april_2007/4_07_3.html 4 Department of Defense. (2010). Annual Energy Management Report Fiscal Year 2009. Office of the Deputy Under Secretary of Defense (Installations and Environment). 5 Energy Information Agency. (2009). International Energy Statistics. Retrieved June 25, 2011, from http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=44&pid=44&aid=2&cid=all,&syid=2004&eyid=2008&unit=QBTU 6 US Census Bureau. (2010). State and County QuickFacts. Retrieved July 1, 2011, from http://quickfacts.census.gov/qfd/states/09000.html 7 Energy Information Agency. (2011). State Energy Consumption Estimates. Retrieved July 3, 2011, from http://www.eia.gov/state/seds/seds-data-complete.cfm#summary

Global Energy Consumption (Quadrillion BTUs)5 2004 2005 2006 2007 2008 World Rank

Portugal 1.111 1.111 1.083 1.109 1.060 55 Qatar .7052 .8441 .9062 .9469 1.002 56

Turkmenistan .8070 .8544 .8638 .9240 .9951 57 United States Military .9181 .8917 .8324 .8646 .8890 58 Trinidad and Tobago .5899 .6732 .8211 .8240 .8872 59

North Korea .8988 .9328 .9370 .8037 .8849 60 Bangladesh .6708 .7089 .7698 .8025 .8734 61

Israel .8554 .8758 .8835 .8777 .8595 62 Denmark .8609 .8417 .8968 .8743 .8363 63

“Unleash us from the tether of fuel”

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Total Energy Consumption of Select States and the United States Military in 2009 (Trillion BTUs)

2009 Rank Kansas 1,084 30 Oregon 1,066 31

Arkansas 1,054 32 United States Military 931.6 33

Connecticut 788.4 34 Nebraska 759.1 35

Utah 754.5 36

DOD energy use breaks down into two categories: tactical and facility use. During wartime, dependent upon the number of forces deployed, tactical fuel use represents about 75% of energy expenditures with the other 25% coming from facility electricity. Tactical fuel is all the energy used in theatre. Most of the tactical fuel is petroleum based. Jet fuel and gas to power generators represent the largest portion of tactical fuel use.8 Facility energy use is mainly electricity to power military bases with a very small portion going to non-fleet vehicles. By 2010, the DOD energy expenditures for facilities reached $4.0 billion, about 26% of total departmental energy costs.9

Apart from their financial costs, tactical fuel and facility energy use present more pressing national security concerns: for tactical fuel it is the logistics tail and for facility energy it is the civilian power grid. According to the DSB report, More Fight – Less Fuel, “fuel logistics represent a significant portion (~70%) of the tonnage the Army ships into battle.” Fuel convoy protection missions are among the most dangerous jobs in terms of casualty rates for a soldier and divert forces from direct war-fighting missions.10 Paradoxically, the US imports about 60% of its oil and much of that is from states known to sponsor terrorism, in essence funding both sides of the war on terror.

8 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics. 9 Robyn, D. (2011). Statement of Dr. Dorothy Robyn, Deputy Under Secretary Of Defense (Installations and Environment). Washington, DC. 10 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics.

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Background

Increasing fuel efficiency to increase combat effectiveness is not a new idea. A 2001 report from the Defense Science Board Task Force entitled “More Capable Warfighting Through Reduced Fuel Burden” provided recommendations to the DOD to increase combat effectiveness through changes in its fuel policy.11 However, in 2008 the Defense Science Board Task Force on DOD Energy Strategy published its report, More Fight – Less Fuel; its first principal finding was “the recommendations from the 2001 Defense Science Board Task Force Report… have not been implemented.”12 Despite the ever increasing cost of fuel and pressure from within the department, the DOD has failed to make significant changes to its energy strategy.

The second principal finding of the DSB’s 2008 report warned that the “almost complete dependence of military installations on a fragile and vulnerable commercial power grid and other critical national infrastructure places critical military and homeland defense missions at an unacceptably high risk of extended disruption.”13 The report found US military bases unacceptably dependent upon the civilian power grid. Military bases require a constant and secure flow of electricity to perform their missions. Given the increasing involvement of bases in Department of Homeland Security efforts, energy assurance is a national priority. Apart from training and housing military personnel, bases have war-fighting and disaster relief responsibilities. For example, military bases in the southern United States aided the Hurricane Katrina recovery by using military assets in relief and rescue missions, acting as a command and control center for relief agencies, and providing personnel for medical and other emergency services to survivors.14

The underlying problem is the assumption that the commercial grid is a safe and reliable source of power. Given that 99% of the power used by military bases comes from the civilian grid, this is a dangerous assumption to make. The assumption of reliability affects the robustness of backup systems. Diesel generators, with limited fuel supply, are the most common source of backup power on military installations and often do not prioritize power to critical loads. In the event of a blackout, generators will supply power to the entire base instead of prioritizing electricity to vital command and control functions, wasting precious fuel on non-critical sources. The DOD has failed to adapt its fuel strategy to the evolving role of military installations. Bases in the US and abroad that host functions “that are critical in strategic and tactical terms and must

11 Defense Science Board Task Force. (2001). More Capable Warfighting Through Reduced Fuel Burden. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logisitics. 12 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics. 13 Ibid. 14 Ibid.

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function 24/7” often have larger backup systems with more fuel supply, but nevertheless remain ill prepared to cope with a long-term outage15.

The loss of power at a military installation can have disastrous effects. In October 2010, at Warren Air Force Base in Wyoming, a power outage caused the Air Force to lose communication with 50 nuclear missiles for approximately 45 minutes.16 Although backup systems were in place and an Air Force official said that the base never lost the ability to launch the missiles, the dangers are obvious. In January 2011, the Fort Kamehameha Wastewater Treatment Plant at Joint Base Pearl Harbor-Hickam in Hawaii experienced a power disruption that caused the release of “110,000 gallons of treated but un-disinfected effluent” into the waters surrounding the base. The health department warned swimmers and boaters to avoid the area for several days.17 After the Fukushima nuclear disaster in Japan, Misawa Air Force Base required an airlift of extra generators to the base so that it could continue its normal operations as well as act as a hub for search and rescue missions. The power outage caused the loss of internet and phone service, leaving the base isolated, and shut down gas station pumps that became even more important as the air base had to transport search and rescue teams to the disaster site.18

Changes to the DOD’s energy strategy since 2005 have come primarily from two pieces of legislation and two executive orders. The “Energy Policy Act of 2005” and Executive Order 13423 require federal agencies to procure 3% of their total energy consumption from renewable sources between fiscal years 2007 and 2009 and 7.5% by fiscal year 2013, reduce energy intensity by 30% by fiscal year 2015, and meter all electric usage in facility buildings by 2012. The “Energy Independence and Security Act of 2007” requires a reduction in fossil fuel use in new and renovated building by 55 percent in 2010, increasing to 100 percent in 2030. 19 Finally, Executive Order 13514 requires that all new construction follow the “Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings,” and that by 2020 all new construction allow for buildings to reach net-zero-energy by 2030.20

15 Ibid. 16 Fox News. (2010, October 26). Military: Power Outage at Nuke Site Entrusted with 50 Missiles. Retrieved June 20, 2011, from http://www.foxnews.com/politics/2010/10/26/military-power-outage-nuke-site-shut-missiles/ 17 Associated Press. (2011, January 4). Wastewater Discharged after Hickam Power Outage. Retrieved June 20, 2011, from http://www.airforcetimes.com/news/2011/01/ap-air-force-hickham-wastewater-discharged-010411/ 18 Brewin, B. (2011, March 14). Despite Power Outage, Key US Air Base in Japan Supports Rescue Operations. Retrieved June 20, 2011, from http://www.nextgov.com/nextgov/ng_20110314_7198.php. 19 Department of Defense. (2010). Annual Energy Management Report Fiscal Year 2009. Office of the Deputy Under Secretary of Defense (Installations and Environment). 20 Executive Order 13514 Federal Leadership in Environmental, Energy, and Economic Performance

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The National Energy Technology Laboratory states that a smart grid must have the following features:

• Self-healing from power disturbance events • Enabling active participation by consumers in demand

response • Operating resiliently against physical and cyber attack • Providing power quality for 21st century needs • Accommodating all generation and storage options • Enabling new products, services, and markets • Optimizing assets and operating efficiently

According to the DOE’s The Smart Grid: An Introduction the smart grid will be:

• Intelligent – capable of sensing system overloads and rerouting power to prevent or minimize a potential outage; of working autonomously when conditions require resolution faster than humans can respond…and cooperatively in aligning the goals of utilities, consumers and regulators.

• Accommodating – accepting energy from virtually any fuel source including solar and wind as easily and transparently as coal and natural gas.

• Resilient – increasingly resistant to attack and natural disasters as it becomes more decentralized and reinforced with Smart Grid security protocols.

• Green – slowing the advance of global climate change and offering a genuine path toward significant environmental improvement.

Smart Grid Definition

The term “smart grid” represents a concept more than it does any device or component. In its most basic form the smart grid is “an automated electric power system that monitors and controls grid activities, ensuring the two-way flow of electricity and information between power plants and consumers—and all points in between.”21 The smart grid improves upon the existing grid in several ways: first, it uses information technologies to improve how electricity travels from power plants to consumers; second, it allows those consumers to interact with the grid; and finally, it integrates new and improved technologies into the operation of the grid.22

Changes to the grid will allow for improved response during peak demand times, meaning that consumers could set appliances such as washing machines and water heaters to only run during off peak hours when electricity is less expensive. A smart grid will better manage power outages, decreasing their length and number. A smart grid will allow for better integration of renewable energy sources such as wind or solar. Smarter control over these intermittent power sources will make them more effective by decreasing demand on traditional power sources during periods of high winds or strong solar activity, which

21 National Energy Technology Laboratory. (2011). Environmental Impacts of Smart Grid. Washington, DC: Office of Strategic Energy Analysis and Planning. 22 Ibid.

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will cut greenhouse gas emissions and save the consumer money. Finally, smart grids will enhance energy storage especially with increased use of electric vehicles and plug-in hybrid vehicles.23

Microgrid Definition

A microgrid resembles the smart grid in many ways except on a smaller scale. For the purposes of this paper, a microgrid shall be able to perform the following functions:

• Perform demand management during normal operating conditions • Island the microgrid from the main grid once an upstream fault is detected • Secure critical loads and shed non-critical loads according to the given priority list during

emergencies • Resynchronize the microgrid to the main grid after an upstream fault is cleared • Optimally coordinate internal loads and distributed energy resources, including

generation and storage devices, to address any operational, environmental, economic, or security constraints24

Like the smart grid, a microgrid would improve energy efficiency and accelerate the integration of renewable energy sources. During normal operations, a microgrid acts no different than the smart grid. It increases energy efficiency by relying more heavily on non-continuous sources of power when they are available, such as wind and solar, and decreasing the use of generators or power from the civilian grid. Microgrids better manage energy use to avoid peak demand times when electricity is most expensive and can incorporate energy storage devices such as electric vehicles.

If the microgrid detects a disruption in the civilian grid such as a blackout, the microgrid will isolate or “island” the facility from the main power grid. Once isolated, the microgrid will route power only to loads deemed critical, thus conserving fuel for the backup generators. If renewable energy options or battery backups are available, the microgrid will use energy from these sources to further conserve generator fuel. For example, if the civilian grid experiences a blackout during the day, a microgrid will draw power from solar photovoltaic arrays to run as many critical loads as possible, only turning on as many generators as are needed to meet the critical load demand.

23 Ibid. 24 Rahman, S., & Pipattanasomporn, M. (2010). Modeling and Simulation of a Distributed Generation-Integrated Intelligent Microgrid. Washington, DC: Strategic Environmental Research and Development Program.

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Current Efforts

Net Zero Military Installations

Developed in 2008, the DOD’s Net Zero Energy Installation Initiative is a plan to turn military installations into net zero energy users. The term “net zero” means that “the energy produced on-site over the period of a given year is equal to the installation’s energy demand.”25 Net zero does not imply an islanded installation. A net zero installation remains connected to the grid and uses renewable energy generated on site to meet the installations energy demand or sell back to the grid if the renewable energy exceeds demand. If the renewable energy produced on site is less than demand, the installation draws power from the civilian grid. For an installation to reach net zero status, the on-site renewable energy-generated electricity sold back to the grid must exceed in a given year the electricity bought from the civilian grid. “The Army goals for this initiative are for five Army installations to be net zero by 2020, 25 installations by 2030, and all Army installations by 2058.”26

To reach net zero status an installation follows three main steps, as laid out by the National Renewable Energy Laboratory’s “Net Zero Energy Military Installations: A Guide to Assessment and Planning.” The first step is to increase conservation. Conservation is the simplest and least expensive method of reducing energy use as most initiatives have no cost. Educating members of the installation about their energy use and ways to conserve electricity is the main priority of step one. Step two is to increase energy efficiency. This step does require capital expenditures. Installing more efficient lighting, replacing older HVAC systems, and using more efficient boilers are examples of increased energy efficiency. The final step to reach net zero status is to use on-site renewable energy generation to meet the electricity needs of the base. Wind turbine generation and solar photovoltaic arrays are the most common renewable energy sources with a smaller number of bases using geothermal or biomass generation.27

25 Booth, S., Barnett, J., Burman, K., Hambrick, J., & Westby, R. (2010). Net Zero Energy Military Installations: A Guide to Assessment and Planning. Golden, Colorado: National Renewable Energy Laboratory. 26 Department of Defense. (2010). Annual Energy Management Report Fiscal Year 2009. Office of the Deputy Under Secretary of Defense (Installations and Environment). 27 Booth, S., Barnett, J., Burman, K., Hambrick, J., & Westby, R. (2010). Net Zero Energy Military Installations: A Guide to Assessment and Planning. Golden, Colorado: National Renewable Energy Laboratory.

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The US Army has six pilot installations scheduled to become net zero users by 2020. The designated bases are Fort Detrick in Maryland, Fort Hunter Liggett in California, Kwajalein Atoll in the Marshall Islands, Parks Reserve Forces Training Area in California, West Point in New York, and the Sierra Army Depot in California. In FY 2014, the Army intends to designate 25 more bases to become net zero by 2030 and have all Army bases net zero by 2058. 28

The net zero initiative suffers from several drawbacks including its timeline, cost, and impact on energy assurance. Despite the dire warnings from the DSB’s More Fight – Less Fuel report, and also from the Quadrennial Defense Review concerning the need for immediate action on DOD energy policy, the net zero initiative takes an incredibly long-term approach. The initiative came to fruition in 2008 but the DOD did not choose the pilot installations until 2011. Furthermore, the pilot installations will not reach net zero status until 2020; even worse, the next batch of bases to become net zero will take 16 years (2014-2030), and the remainder will not reach net zero until 2058.29 This drawn out timeline of the net zero initiative puts military installations at risk and jeopardizes their mission readiness and the DOD’s war-fighting and homeland security missions.

The DOD website does not provide comprehensive cost data on the net zero initiative, but reports from the DOD’s Environmental Conservation Investment Program (ECIP) can provide insights into approximate costs. The first step of the initiative, conservation, requires little to no capital expenditures and the DOD should expand conservation efforts to all bases immediately instead of waiting until it deems an installation ready to start work towards net zero status. Waiting until 2014 for the next batch of 25 installations to start progress toward net zero to implement conservation measures will waste resources and keep the DOD’s energy expenditures unnecessarily high. Net zero’s implementation strategy ensures that the most cost efficient strategies are the first enacted. As an installation eliminates all of the low hanging fruit, the marginal cost of the later options will be far higher and the marginal benefits will be lower.

ECIP data show that investment in energy efficiency has a more significant return on investment than investment in renewable energy generation. The following two tables showing ECIP investments for FY 2007 and FY 2011 (the years with the most data points) indicate the significant difference in the savings to investment ratio (SIR) between energy efficiency investments and renewable energy-generation investments. The overall average SIR for energy efficiency investments was a return of three dollars for every dollar invested while the SIR for renewable energy generation was less than half that amount. (Tables comparing the other years between FY 2007 and 2012 appear in Appendix A. ECIP reports did not make SIR estimates for projects in FY 2010, so this year does not appear in the appendix.)

28 Department of Defense. (2011, April 20). Army Identifies Net Zero Pilot Installations. Retrieved July 8, 2011, from http://www.defense.gov/releases/release.aspx?releaseid=14420 29 Ibid.

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This data analysis excluded projects that fall under the category of both energy efficiency and energy generation such as solar heaters and geothermal heat pumps. Furthermore, ECIP reports label many projects as “Facility Energy Improvements” and some projects included energy efficiency improvements as well as renewable energy generation. This analysis eliminated both

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of these categories, leaving only projects solely devoted to increasing energy efficiency or renewable energy generation.

Renewable energy projects provide tangible benefits to military installations but at a high cost compared to efficiency upgrades. The net zero initiative encourages some installations to apply for funds for renewable energy projects before other installations have completed all of the more cost-effective energy efficiency improvements. A more cost-effective initiative would focus on conservation and energy efficiency improvements at all military installations and then transition into renewable energy generation instead of the net zero initiative which will see diminishing returns from its investments in the pilot installations and do little to decrease overall DOD energy use.

The third and final problem with the net zero initiative is its effects on energy assurance at military installations. Net zero does not imply independence from the civilian grid. While net zero installations are undoubtedly better able to withstand a prolonged black out, the focus on net zero shifts the focus away from islanding bases from the civilian grid. In 2008, the DSB advised the DOD to take immediate action to island the bases with roles critical to national security.30 The list of bases appears in the “Classified” appendix G and is thus not publicly available. As a result, some or all of the bases chosen as pilot installations may be on the critical list but the focus on net zero takes resources away from the efforts to island these critical installations.

Not all installations can reach net zero status. There must be significant opportunities for renewable energy generation for net zero status to be a possibility. The National Renewable Energy Laboratory (NREL) states “a net zero goal too strictly applied can lead to solutions that make poor sense from economic or other perspectives.”31 Other perspectives include mission assurance or safety. For example, wind turbines can interfere with radio transmissions, making them unfit for placement near airfields. The DOD’s focus on making all installations net zero energy producers is not economically feasible and could conflict with an installation’s war-fighting and homeland security missions. According to a 2005 DOD study, the department only has the resources to get about 20% of its electricity from renewable sources onsite. This figure is likely even lower due to possible conflicts between renewable energy and mission assurance.32 Given the problems with renewable energy generation, the drive towards net zero status promises to be costly and difficult.

30 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics. 31 Booth, S., Barnett, J., Burman, K., Hambrick, J., & Westby, R. (2010). Net Zero Energy Military Installations: A Guide to Assessment and Planning. Golden, Colorado: National Renewable Energy Laboratory. 32 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office.

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Renewable Energy Generation

Since 2005, the federal government has made significant efforts to increase the use of electricity from renewable sources. The Energy Policy Act of 2005 directs federal agencies to consume 3% of their electrical energy from renewable sources for the years 2007 through 2009 with the percentage gradually increasing to 7.5% in FY 2013, adding the caveat that progress towards the goal should be “economically feasible and technically practicable.”33 By 2007 the standards became far more rigorous. The “Energy Independence and Security Act of 2007” requires a reduction in fossil fuel use in new and renovated buildings by 55 percent in 2010, increasing to 100 percent in 2030. 34 Executive Order 13423 directs that in each fiscal year, at least half of the renewable energy counted towards the “Energy Independence and Security Act” must be “new,” meaning that the renewable energy generator came into service after January 1st, 1999.35

In 2008, the DOD acquired 2.9% of its electricity from renewable sources, falling just below the goal but surpassed the 3% goal in 2009 with 3.6% of its electricity coming from renewable sources.36 However, these numbers are deceiving. The DOD was only able to surpass this goal with the purchase of Renewable Energy Certificates.

When a renewable energy source creates electricity, it creates two commodities: the electricity itself and a Renewable Energy Certificate. The utility (or whomever owns the energy source) can sell the electricity and the certificate together in a process called bundling or separately, known as unbundled energy. For example, if a military base has a solar array that produces 1MW of electricity, it also creates a certificate for 1MW of electricity. If the base sells the electricity it creates back to the utility, but keeps the certificate, the base can count the 1MW credit towards the renewable energy goal. If the base uses the electricity and keeps the certificate, it can count 2MW towards the goal. Finally, if the base sells the electricity and the certificate, it cannot count either towards its renewable energy goal. A base can also buy unbundled electricity (the credit or 33 Ibid. 34 Department of Defense. (2010). Annual Energy Management Report Fiscal Year 2009. Office of the Deputy Under Secretary of Defense (Installations and Environment). 35 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office. 36 Department of Defense. (2010). Annual Energy Management Report Fiscal Year 2009. Office of the Deputy Under Secretary of Defense (Installations and Environment).

Wind Turbines at a US Navy Installation in California

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the actual electricity) or bundled electricity from a utility. The problem with only buying the certificate is that the base still must purchase electricity to power the installation.37

In meeting its renewable energy goal, the DOD does not distinguish between buying Renewable Energy Certificates and the actual use of renewable energy. The Army with 2.1% and Navy with 0.6% were well below the 3% goal, and the DOD was only able to surpass the goal because the Air Force consumed 5.8% of its electricity from renewable sources, but this figure comes mainly from the purchase of credits.38 The DOD’s FY 2009 Annual Energy Management Report does not specify what percentage of the energy use came from certificates but does make special mention of the Air Force’s purchase of certificates. However, the GAO reports that 90% of the DOD’s renewable energy use came from the purchase of certificates in 2007.39

The DOD’s efforts to increase renewable energy usage raise three key issues: cost, problematic state laws, and unintended effects.

Electricity generated through renewable sources tends to be more expensive than conventionally generated electricity because of the high upfront costs of building solar and wind farms, the two most common sources of renewable energy. By focusing so heavily on renewable energy-generation projects, the DOD diverts resources away from other energy efficient investments that are often more cost-effective. The guiding directive of the ECIP instructs military bases that “additional consideration can be given to projects that substitute renewable energy for non-renewable energy.”40 The same document states that all projects should have a savings-to-investment ratio of more than 1.25 and a payback period of ten years or less. However, the ECIP reports show that many renewable energy-generation projects do not meet either of these standards. However, only once since 2007 have renewable energy projects funded by ECIP averaged a payback period of less than ten years and in every year since 2007 the savings-to-investment ratio for renewable energy projects was below that of the ratio for all projects.

37 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office. 38 Department of Defense. (2010). Annual Energy Management Report Fiscal Year 2009. Office of the Deputy Under Secretary of Defense (Installations and Environment). 39 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office. 40 Office of the Assistant Secretary of Defense Production and Logistics. (1993). Energy Conservation Investment Program Guidance. Washington, DC: Department of Defense.

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Project Description FY 2007 Cost (in thousands)

SIR Payback (in years)

Wind Powered Electrical Generation $2,250 2.12 6.40 850 KW Wind Power Generation $1,150 1.29 11.55 Install Photovoltaic Solar Systems $600 1.25 11.52 Wind Generator 250 KW $1,650 1.54 7.49 Construct Photovoltaic Power system, Phase II

$1,850 1.23 10.74

Totals $7,500.00 1.47 (Average) 9.54 (Average) Total ECIP Funds for FY 2007 and Average Savings to Investment Ratio and Payback

$54,622.00 1.98 7.57 Percentage of ECIP Funds Spent on Renewable Energy Generation

13.73%



Electric Power Photovoltaic System 400 KW

$1,664 1.22 9.79

850 KW Wind Turbine $3,250 1.29 11.55 Construct PV Power generation System Phase III

$1,850 1.07 13.61



9.66%



Install 1.5 MW Wind Turbine $5,100 2.08 10.7 Solar PV System 100 KW $754 1 20 6 MW Wind Farm $18,479 3.74 4.0 Install Photovoltaic System $765 1.44 10.4 Install Photovoltaic System $719 1.40 10.4 Install Photovoltaic System $520 1.43 10.4 Install Photovoltaic System $494 1.40 10.4 Photovoltaic Generation System $3,700 1.71 9 Install solar PV system – rooftop $1,245 .99 14.0



26.48%

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Despite their long payback periods and low savings –to-investment ratio, renewable energy projects constitute a large portion of ECIP funds every year. For FY 2010, the only year in which the DOD provides neither a SIR or payback period, renewable energy-generation projects received 52% of the $120 million of ECIP funds. The DSB, in 2008, encouraged the DOD to pursue renewable energy-generation projects but “to a level commensurate with their operational and financial value”.41 The heavy focus on renewable energy generation, as a result of ECIP regulations and the Energy Policy Act of 2005, crowds out other projects that would be more cost efficient and lower the DOD’s energy usage to a greater degree. Furthermore, renewable energy sources, due to their non-continuous flow of electricity, are unsuitable as backup sources of power, though the implementation of a smart microgrid can mitigate this problem.42

According to a GAO report, a Navy base in California had to downgrade the size of its planned solar array from 20MW to 5MW because California law allowed the utility to bill the installation a surcharge because it would be self-producing a certain level of electricity. The reasoning behind the law is that the utility made an investment in its infrastructure and expected to recoup that money through charging customers for electricity. If the customers begin to produce electricity themselves, then the utility will never cover the cost of its investment. The state therefore allows the utility to place a surcharge, called a departing load charge, on a customer’s bill if they self-produce a certain percentage of their electricity.43 If bases, such as this one in California, face additional charges for producing their own electricity, it is unlikely they will invest in renewable energy given that it is usually more expensive per kilowatt hour than conventional electricity.

When Congress passed the Energy Policy Act of 2005, it was unlikely that they intended for federal agencies to purchase Renewable Energy Certificates, instead of producing or purchasing actual renewable energy. The DOD’s reliance on the purchase of certificates serves little purpose beyond compliance with renewable energy goals. After a base purchases an energy certificate, it still has to buy energy to power the base. Purchasing certificates increases the DOD’s energy costs and does not lessen reliance on fossil fuels or provide superior energy assurance at installations. Certificates do not have a fixed price as commodities traders buy and sell them on the open market. In 2008, the price of the certificates rose 185% compared to the 2007 price. The dramatic price increase kept the DOD from meeting its renewable energy requirement for that year because in 2008 it purchased certificates for 0.32 million megawatt hours as compared to 0.88 million megawatt hours of energy in 2007.44 The DOD should not rely on a commodity that

41 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics. 42 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office. 43 Ibid. 44 Ibid.

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is so volatile. In summation, certificate purchases are a gimmick that allows the DOD to meet its congressionally mandated energy goals, but which drains DOD resources and fails to provide any tangible benefit in terms of fossil fuel use, greenhouse gas reduction, or energy assurance and independence.

Microgrids

A microgrid consists of physical and cyber elements. The physical system is the distribution circuits, electronic devices, and electricity generators (either renewable or conventional) and the cyber system is the software that acts as the “central decision support unit.”45 Saifur Rahman and Manisa Pipattanasompornfrom from Virginia Tech, in partnership with the DOD’s Strategic Environmental Research and Development Program (SERDP), developed the five aforementioned tasks as well as a model called an Intelligent Distributed Autonomous Power Systems (IDAPS) microgrid. Their grid had the following characteristics:

1. Intelligence: The IDAPS microgrid knew which loads were critical and which loads it could shed during a commercial power outage. The grid made its decisions based upon a prioritized list of loads, the available internal power generation capability of the installation, and the expected duration of the outage.

2. Distribution: The grid connected various sources of power generation known as Distributed Energy Resources (DERs). By incorporating a range of generation sources the grid avoided the possibility of a single point failure being catastrophic to the mission assurance of the installation.

3. Autonomy: The grid could detect commercial power outages autonomously and island the installation without any human interaction, thus ensuring power to critical installation facilities.

4. Plug & Play and Scalability: An installation could add or remove DERs without any loss in function. This characteristic allows the installations to constantly update their renewable energy generation and add new sources of power without losing efficiency. Furthermore, the IDAPS microgrids are combinable. Installations could combine their microgrids to create “the building blocks for a more resilient regional electric power system.”46

An important part of this research from Virginia Tech was the development of algorithms for the microgrid to estimate the electrical generation coming from typical renewable energy sources, including wind, solar, microturbines, and fuel cells.

Some surprising evidence of the resiliency of electric grids controlled by microgrids comes from an unexpected place--Cuba. Cuba’s population of 11 million suffered 188 and 224 blackouts

45 Rahman, S., & Pipattanasomporn, M. (2010). Modeling and Simulation of a Distributed Generation-Integrated Intelligent Microgrid. Washington, DC: Strategic Environmental Research and Development Program. 46 Ibid.

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lasting more than one hour in 2004 and 2005, respectively. However, in 2007, the island suffered zero blackouts lasting more than one hour. In 2006, the Cuban government made a widespread, concerted effort to increase energy efficiency among its population and install microgrids with DERs across the country. In 2008, when two hurricanes in two weeks felled 167 transmission towers, the DERs and microgrids proved their resiliency. In the most damaged areas, microgrids islanded themselves and turned on portable diesel backup generators to maintain power to all critical services such as hospitals, food plants, and schools. The government is currently investing in renewable energy generation to replace its older diesel generators and make Cuba more energy independent.47

Cuba’s experience provides two lessons for the US military. First, the resiliency shown by Cuba’s microgrids and DERs, despite severe damage from the hurricanes, lends itself to possible application in areas where the electric grid is always at risk such as Baghdad’s Sadr City. 48 Providing reliable electricity to a hazardous area could serve as a valuable counterinsurgency tool. However, this is a topic deserving of its own analysis and report and is too nuanced to discuss in depth here. The second lesson for the US military is the ability of a command structured organization, such as the Cuban Government or the US military, to enact significant reforms quickly and effectively when significant problems arise. According to the NREL, the structural hierarchy of the DOD gives it advantages in enacting radical change at speed and scale. The DOD has a history of adopting new technologies that later became important on the consumer market such as the Internet and GPS.49

Evidence of the benefits of full scale integration of microgrids is available from the US as well. The residents and the public utility in Naperville, IL decided to invest in microgrid technology in the 1990s when their average duration of a blackout for a consumer, called the System Average Interruptible Duration Index (SAIDI), approached two hours. By 2010, the average duration was only 18 minutes. Likely the most important development was the construction of a real-time data acquisition system called System Control & Data Acquisition (SCADA). The so-called “smart grid brain” gathered and processed data and allowed the utility to anticipate demand spikes. Apart from the expected net benefit of $52 million the city expects over the next 15 years, the microgrid will eventually allow for lower prices per kilowatt hour of electricity as the utility better understands consumers’ needs and will serve as initial infrastructure for the integration of electric vehicles.50

47 Lovins, A. (2010). Efficiency and Micropower for Reliable and Resilient Electricity Service: An Intriguing Case-Study from Cuba. Boulder, Colorado: Rocky Mountain Institute. 48 Ibid. 49 Booth, S., Barnett, J., Burman, K., Hambrick, J., & Westby, R. (2010). Net Zero Energy Military Installations : A Guide to Assessment and Planning Net Zero Energy Military Installations : A Guide to Assessment and Planning. 50 Galvin Electricity Initiative. (2010). The Naperville Smart Grid Initiative. The Galvin Project, Inc.

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Electric Vehicles

The purchase of electric vehicles is an important step in the DOD’s strategy to reduce fuel consumption. In order to meet the petroleum usage reduction goals in Executive Order 13423, the DOD purchased 4,000 electric cars and trucks for use on its installations worldwide. Furthermore, the Army has plans to use electric vehicles to replace all of its 28,000 gas-powered vehicles. Electric vehicles can provide drastic savings on energy costs. The average cost of running an electric vehicle for a year is $460 compared to the $1,200 average cost of a gas powered vehicle.51

The most promising development is the purchase of neighborhood electric vehicles or NEVs. Designed for short-distance, low-speed travel, NEVs have a limited range and usually have a top speed of about 25 miles per hour. These vehicles can recharge anywhere there is a standard 110 volt outlet.52 NEVs are suitable for installation use because military bases usually prohibit driving faster than 40 miles per hour.53 The NHTSA bans the use of NEVs on highways but installations can use them for “on-post transportation for official visitors and maintenance personnel, and for light equipment.”54 Currently, NEVs average around $9,000, which is far less expensive than the average price of a new car. That price is likely to drop as competition in the market grows. By 2017, estimates place the number of NEVs on the road at 695,000, up from 479,000 in 2011.55

Many of the potential benefits of electric vehicle adoption rely on the prior adoption of smart grid technology. According to the National Energy Technology Lab:

“If done improperly, there could be significant ramifications for electric utilities in terms of generation requirements and costs [of electric vehicle adoption]. However, with effective, Smart Grid-enabled charging dispatch, EVs could deliver energy costs savings to consumers and increased profits to electric utilities, not to mention reductions in GHG emissions and overall environmental impact from the transportation sector.”56

The dangers associated with the widespread use of electric vehicles are increased stress on the nation’s power grid and the increased use of “peaker” generators. Peaker generators are the backup electric plants which utilities use in times of high demand. They tend to be less efficient

51 Avalos, I. (2011, June 21). Electric Vehicles Help Post Go 'Army Green, Army Strong'. Retrieved July 1, 2011, from http://www.army.mil/article/36128/electric-vehicles-help-post-go-army-green-army-strong/ 52 Ibid. 53 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics. 54 Avalos, I. (2011, June 21). Electric Vehicles Help Post Go 'Army Green, Army Strong'. Retrieved July 1, 2011, from http://www.army.mil/article/36128/electric-vehicles-help-post-go-army-green-army-strong/ 55 King, D. (2011, June 20). Neighborhood Electric Vehicle Sales to Climb. Retrieved August 1, 2011, from http://www.autoobserver.com/2011/06/neighborhood-electric-vehicle-sales-to-climb.html 56 National Energy Technology Laboratory. (2011). Assessment of Future Vehicle Transportation Options and Their Impact on the Electric Grid. Washington, DC: Department of Energy.

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than normal generation and lead to higher electricity prices and more pollution. While it is unlikely that the DOD’s use of NEVs will put much stress on the power grid, without smart grid technologies the department will face unnecessarily high electric bills that will lessen the potential savings from the switch to electric vehicles.

Electric vehicles can charge in three ways: opportunity charging, managed charging, and managed bi-directional charging. Opportunity charging refers to the vehicle charging upon being plugged-in. This method of charging is problematic because the vehicles could charge during peak demand times for the power grid when the price of electricity is higher. However, it is the only method of charging available if a microgrid is not in place. Managed charging refers to vehicles charging only when demand upon the grid is low. Managed charging can reduce spikes in demand but needs a microgrid. Bi-directional charging refers to vehicles only charging when demand is low and giving power back to the grid when demand is high. With bi-directional charging, EVs serve as backup batteries that can help mitigate spikes in demand.57

Bi-directional charging could help a military installation manage the output of renewable energy sources. The intermittent nature of wind and solar power can lead to large swings in output. A microgrid would instruct the EV to charge when the base has excess electricity during a period of high wind or strong sun and instruct the EV to stop charging or send power back to the grid if demand is high or during an emergency. Moreover, an EV connected to a microgrid could take advantage of the excess capacity and lower rates for electricity during off-peak hours.58 The DOD’s acquisition of EVs and NEVs has the potential to save the department money on fuel costs but the DOD must employ microgrids at its installations to reap the full benefits of electric vehicles and avoid any potential problems with the increased energy use.

DOD Development of Microgrids

Despite their benefits, microgrid development projects have received little funding from the ECIP. Since 2007, ECIP has funded only eight microgrid installation projects and two of those were the expansion of microgrids previously built. The percentage of ECIP funds allocated to microgrids was highest in 2011 at 10.89%, and at its lowest in 2009 and 2010 with 0% and .89%, respectively. The substantial funds allocated to renewable energy generation projects stand in stark contrast to the meager investment in microgrids. In only one year (2008), the percentage of ECIP funds fell below 10%. Furthermore, in 2010, over 50% of ECIP funds went to renewable energy generation projects, while 2011 and 2012 had percentages of over 26%.59

57 Simpson, M., Markel, T., & O'Keefe, M. (2010). Vehicle to Micro�Grid: Leveraging Existing Assets for Reliable Energy Management. Washington, DC: National Renewable Energy Laboratory. 58 National Energy Technology Laboratory. (2011). Assessment of Future Vehicle Transportation Options and Their Impact on the Electric Grid. Washington, DC: Department of Energy. 59 Office of the Under Secretary of Defense Acquisition, Technology, and Logistics. (2007-2012). FY 2007-2012 Energy Conservation Investment Program Reports. Washington DC: Department of Defense.

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The average SIR for microgrids funded through ECIP is higher in every year than the SIR for renewable energy-generation projects in which data are available (in 2009 there were no microgrid projects, ECIP 2010 reports did not provide SIR data, and in 2012 the ECIP report did not provide a SIR for the only microgrid project developed in that year). On average, microgrid development projects (labeled as Energy Management/Monitoring Control Systems or EMCS on ECIP reports) have an SIR of 2.43, making them among the most cost-effective projects funded through ECIP.

According to ECIP rules, the expected lifetime of an EMCS is only ten years, while other project categories such as renewable energy generation systems have an expected lifetime of twenty years.60 The expected lifetime of a system is important because it affects the savings-to-investment ratio. With an expected lifetime of ten years for an EMCS, the DOD calculates the SIR assuming that the system will only provide cost savings for the next ten years. If the expected lifetime were fifteen or twenty years, the SIR for EMCS projects would rise considerably. Unfortunately, simply doubling the SIR for EMCS projects to allow for a better comparison to renewable energy projects, whose lifetime is twenty years, will not work due to the effect of discounting long-term savings compared to short-term savings. Below are two tables detailing the ECIP investment in microgrids for years 2007 and 2011 (the years with the most data points).61

Project Description FY 2007 Cost (in Thousands)

Savings to Investment Ratio

Payback (in years)

Expand Energy Management Control System

$760 2.44 6.16

Energy Management Control System Upgrade Post-wide

$3,400 2.35 3.18


$54,622.00 1.98 7.57 Percentage of ECIP Funds spent on Energy Management Control Systems

7.62%

60 Office of the Assistant Secretary of Defense Production and Logistics. (1993). Energy Conservation Investment Program Guidance. Washington, DC: Department of Defense. 61 Office of the Under Secretary of Defense Acquisition, Technology, and Logistics. (2007-2012). FY 2007-2012 Energy Conservation Investment Program Reports. Washington DC: Department of Defense.

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Project Description FY 2011 Cost (in Thousands)

Savings to Investment Ratio

Payback (in years)

Expand Energy Management Control System to 27 buildings

$1,950 1.56 9.7

Energy Management Control System

$4,500 4.00 3.8

DDC Energy Management System Upgrade

$6,724 2.98 2.8


$120,000.00 2.77 6.4 Percentage of ECIP Funds spent on Energy Management Control Systems

10.89%

Though there is a lack of development of microgrids through ECIP, the DOD has made limited investments in microgrid development mainly through the Environmental Security Technology Certification Program (ESTCP). The Marine Corps signed a contract with General Electric for $2 million to develop a microgrid for its largest base, Twenty-Nine Palms in California. This microgrid will manage consumption and allow for the more efficient use of renewable energy sources. Cost savings are likely to result from decreased generator use on base. The base tends to run generators to handle any spikes in demand and thus runs more generators than necessary. Fossil fuel generators are most efficient when they run at peak capacity, so the base’s use of multiple generators at a lower capacity wastes fuel. The microgrid predicts consumption levels to avoid this wasteful practice. Moreover, the microgrid can divert power away from non-essential equipment if the spike in demand is particularly high. The brain behind the microgrid is a computer about the size of a standard desktop PC.62 Lockheed Martin received a contract similar to GE’s to develop a microgrid at Fort Bliss in Texas. ESTCP expects to see a reduction of more than 20% in greenhouse gas emissions and energy consumption at the base as a result of the microgrid.63

Microgrids also have the potential for deployment at military installations in the field. Reductions in fuel use in combat saves money, but more importantly can save lives by reducing the number of fuel convoy missions. Lockheed Martin received a contract from the US Army for $3.5 million to develop the Hybrid Intelligent Power (HI Power) microgrid system. Lockheed

62 Matthews, W. (2009, August 3). California Greening: US Marine Base Sees Savings in 'Smart Microgrid'. Retrieved July 15, 2011, from http://www.defensenews.com/story.php?i=4216235. 63 Vanbebber, C. (2010, December 15). Lockheed Martin to Demonstrate Full-Scale Intelligent Microgrid Solution at Fort Bliss. Retrieved July 15, 2011, from http://www.lockheedmartin.com/news/press_releases/2010/MFC_121510_LMtoDemoFullScaleIntelMicrogridatFtBliss.html.

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Martin estimates a fuel consumption reduction of 40% with the installation of its microgrid.64 Army Energy Security Director Dr. Kevin Geiss provides a similar assessment of the fuel savings to Lockheed Martin, estimating that microgrid use could lessen fuel use by 25 to 40%.65

Fuel use in combat zones comes from unexpected users. The DSB reports that of the top ten biggest consumers of fuel in the field, only two are combat devices with the rest being support systems. For example, “the water heater for the field kitchen created a larger battlefield fuel demand than the AH-64D attack helicopter.”66 Microgrids could lessen the burden on generators by turning off the generators when they are not in use and allowing a bank of generators to supply power to the entire base instead of having generators hooked up to single systems. According to the DSB, generators are often overpowered compared to the necessary load, meaning that generators either run below peak efficiency or run at peak efficiency and produce more power than is necessary.67

The potential of microgrids to save American lives is staggering. According to the Brookings Institution, a 1% reduction in fuel use in Afghanistan would lead to 6,444 fewer fuel convoy missions for soldiers.68 The Army Environmental Policy Institute reports that fuel convoy missions are the most dangerous missions for soldiers in Afghanistan with a casualty rate of one casualty for every 24 missions.69 Assuming a full integration of microgrids onto every base in Afghanistan and a 40% energy consumption reduction, the reduction in the number of casualties is greater than 10,000. The DOD does not have the resources to immediately install microgrids at every base in Afghanistan and many bases will be unsuitable to microgrid deployment, but even small scale deployment of microgrids at some of the larger bases such as Bagram Air Base could lead to a sizable decrease in fuel usage and fuel convoy missions.

Problems with Microgrids

Microgrids are not without their drawbacks. Similar to the problems with the departing load charge utilities levy on installations that produce renewable energy, many utilities try to restrict the use of renewable energy generation as backup power during a power outage. The utilities’ reasoning is that, if there was any electricity in the grid during an outage, their workers would be at risk while repairing any damage. According to the GAO, four out of five installations it visited

64 Vanbebber, C. (2010, October 21). Lockheed Martin Receives $3.5 Million Hybrid Intelligent Microgrid Contract. Retrieved July 15, 2011, from http://www.lockheedmartin.com/news/press_releases/2010/MFC_102110_LMReceives3.5MilHybridIntPower.html. 65 Matthews, W. (2009, August 3). California Greening: US Marine Base Sees Savings in 'Smart Microgrid'. Retrieved July 15, 2011, from http://www.defensenews.com/story.php?i=4216235. 66 Defense Science Board Task Force on DOD Energy Strategy. (2008). More Fight - Less Fuel. Washington, DC: Office of the Under Secretary of Defense For Acquisition, Technology, and Logistics. 67 Ibid. 68 Warner, J., & Singer, P. (2009). Fueling the "Balance" A Defense Energy Strategy Primer. Washington, DC: Brookings. 69 Eady, D., Siegal, S., Bell, S., Dicke, Scott (2009). Sustain the Mission Project: Casualty Factors for Fuel and Water Resupply Convoys. Army Environmental Policy Institute.

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could not use their renewable energy during a power outage due to utility worker safety concerns. However, one of the bases was able to negotiate a contract to allow the installation’s solar array to provide power to the critical loads of the base during a power outage.70 For an installation to fully benefit from the installation of a microgrid, the base must first negotiate with the utility to allow for renewable energy sources to remain in use during a power outage. The ability of a microgrid to island an installation from the civilian grid should nullify any danger to utility workers as they perform any maintenance work.

Cybersecurity remains one of the leading challenges impeding the development of a smart grid. In January 2011, the GAO published a report on the progress being made on cybersecurity as it related to smart grids71. Unfortunately, the report did not specifically address microgrids. The GAO found six challenges, however, to the development of a smart grid. The DOD is nonetheless well suited to handle the challenges listed by the GAO and the confinement of microgrids to military installations should mitigate many cybersecurity risks. The challenges listed by the GAO and the advantages of military microgrids for cybersecurity appear below.

Challenge 1: Aspects of the regulatory environment may make it difficult to ensure smart grid systems’ cybersecurity.

The federal government and state governments regulate electricity production and distribution. Having multiple entities produce regulations can lead to conflicting rules and thus confusion. Microgrids on military installations should avoid many of the regulatory issues the GAO found with the smart grid. The confinement of microgrids to military bases means that only the DOD will have regulatory control over them. There is precedent for states to exempt military installations from state regulations. According to a different GAO report, states often excluded military installations from their renewable energy-production goals.72 Furthermore, it is unlikely that any state government would want to get into the politically untenable battle with the Pentagon over issuing competing regulations governing military bases.

Challenge 2: Utilities are focusing on regulatory compliance instead of comprehensive security.

Microgrid cybersecurity will benefit from having the same entity, the DOD, issue the microgrid regulations and own the microgrids. Utilities have little incentive to invest in security measures past the bare minimum necessary for regulatory compliance. However, unlike a utility, the DOD will suffer in the event of a cybersecurity failure and thus has incentives to pursue comprehensive security.

70 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office. 71 Government Accountability Office. (2011). Progress Being Made on Cybersecurity Guidelines, but Key Challenges Remain to be Addressed. Washington, DC: Government Accountability Office. 72 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office.

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Challenge 3: The electric industry does not have an effective mechanism for sharing information on cybersecurity.

Different utility companies across different states do not have a central authority analogous to that which military bases have in the Pentagon. Though there will certainly be bureaucracy, the DOD has more capacity to share information about cybersecurity and cyber-attacks than utilities.

Challenge 4: Consumers are not adequately informed about the benefits, costs, and risks associated with smart grid systems.

The DOD can take steps to inform all of its employees about microgrids in ways that may not be available to utilities to inform their customers. The DOD could require short classes on the benefits and risks of microgrids for all its employees and more rigorous education for its base commanders and others making decisions about grid implementation. A utility company cannot require its customers to take a class. A utility’s best option for educating its customers would be to send out information packets with monthly bills and hope that consumers read them.

Challenge 5: There is a lack of security features being built into certain smart grid systems.

Given the importance of the DOD’s mission and the potentially catastrophic repercussions of lax cybersecurity, the Pentagon will not take the security of its microgrids lightly, especially with the recent publication of the “Department of Defense Strategy for Operating in Cyberspace.”73

Challenge 6: The electricity industry does not have metrics for evaluating cybersecurity.

The lack of evaluation metrics is a serious problem, but the DOD could instruct USCYBERCOM to create a specific set of metrics for microgrid development.

Policy Options

Option 1: Let present trends continue

The first option available to the DOD is to allow present trends to continue. Although the pace of development has been slow, the military is deploying microgrids at home and abroad. Currently, the military has about 20 microgrids deployed.74 By comparison, in 2010 the DOD had 454 renewable energy generation projects in active use or in the planning and development stage.75

73 Department of Defense. (2011). Department of Defense Strategy for Operating in Cyberspace. Department of Defense. 74Shifra, M. (2011, May 27). Safe and Secure: The US Military Takes a Stand on Energy Efficiency. Retrieved August 3, 2011, from http://energy.aol.com/2011/05/27/safe-and-secure-the-us-military-takes-a-stand-on-energy-efficie/ 75 Government Accountability Office. (2010). Defense Infrastructure: Department of Defense’s Renewable Energy Initiatives. Washington, DC: Government Accountability Office.

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Widespread development of microgrids will require large capital expenditures by the DOD and Congress. In the current climate of budget cuts, especially with regard to the DOD, any new spending is likely to attract heavy scrutiny. One of the benefits of allowing present trends to continue is that it does not require any new action by the DOD or Congress.

Microgrids remain a relatively new development and some base commanders might resist their implementation. Despite their advantages in cybersecurity over the large-scale smart grid, the DOD must make advances in cybersecurity to ensure that microgrids do not make the energy supply for military installations less secure instead of more so.

Option 2: Make changes to DOD regulations including project rules for the ECIP

A no-cost solution for the DOD to increase the number of microgrid projects would be to change the regulations of the Environmental Conservation Investment Program (ECIP). The DOD could add a stipulation to the program’s rules that microgrids should receive special consideration for funding, similar to the regulation that gives additional consideration to renewable energy projects. Another possible change would be to increase the expected lifespan of microgrids from 10 to 20 years. By increasing the expected lifespan, the savings-to-investment ratio would increase, thereby making these projects more appealing. Most project categories in the ECIP already have an expected lifespan of 15 or 20 years. EMCS projects are currently the lowest at 10 years. Finally, the DOD could allow base commanders to enter into special contracts with microgrid developers to build the grid at no upfront cost and pay the developer over time with the money saved from increased efficiency. The GAO labels these contracts as alternative financing agreements, and they already exist for the development of renewable energy projects.76 Avoiding upfront costs circumvents the appropriations process and could allow installations to deploy microgrids more rapidly.

Option 3: Request appropriations from Congress

A special appropriation for the development of microgrids in the next defense authorization and appropriations bills is the best option for the immediate widespread development of microgrids. The Secretary of Defense could urge Congress to authorize and appropriate these funds because of the importance of energy security at military installations. The current budget climate will make it difficult to secure additional funding. However, if the DOD presents the request with an emphasis on its cost-saving measures, Congress might realize the potential savings in long-term energy costs and accept the extra funding in the short-team.

76 Government Accountability Office. (2009). DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals. Washington, DC: Government Accountability Office.

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There are approximately 381 military bases in the United States and abroad.77 Removing the 20 that already have microgrids leaves 361 bases. Assuming an average cost of $2.75 million to install a microgrid (this figure is the average of most recent microgrid projects developed for military bases by General Electric and Lockheed Martin) means the necessary appropriation from Congress would be approximately $993 million. It is reasonable to assume that the DOD will stagger the development of the grids, building the most critical ones first. After the installation of all the microgrids, the DOD will see cost savings of approximately $473 million per year in reduced electricity costs. This figure assumes that the ESTCP estimation of 20% reduction in energy costs holds true and uses the DOD’s expenditures of $2.4 billion on facility electricity in 2009.

Recommendation

The DOD should immediately enact Option 2 and follow Option 3 as a long-term strategy. Allowing present trends to continue (Option 1) ignores the warnings of the Defense Science Board and the Quadrennial Defense Review. Overreliance on the civilian grid threatens the capability of military installations to carry out their missions. The current pace of microgrid development is not fast enough to ensure energy supply to critical military installations.

Option 2 is an ideal short-term strategy because it entails zero cost. Changes to the ECIP and new alternative financing agreements will ensure an increased number of microgrids. The ECIP reports do not make public the submitted projects that were not chosen for funding, so it is impossible to know how many microgrid projects lost out to other proposals. With the changes in Option 2, microgrid proposals will have a better chance of receiving funding because of their increased SIR and the special consideration afforded to them. The changes will also increase the number of microgrid proposals submitted to the ECIP because base commanders are more likely to submit proposals they believe will have a good chance of receiving funding.

The main drawback of Option 2 is that it relies on base commanders to submit microgrid projects for development. To ensure widespread development, the DOD must take efforts to inform base commanders of the benefits of microgrids as well as their associated costs and risks. Increasing the number of microgrid projects without an associated increase in the funding for the ECIP will reduce the number of other projects funded through the ECIP. Fewer renewable energy projects funded through ECIP could hinder the DOD’s efforts to meet the renewable energy goals dictated by the Energy Policy Act of 2005. However, as shown earlier in this report, microgrids ease the transition to renewable sources of energy, meaning that even if efforts to increase the percentage of electricity obtained from renewables suffers in the short-term, they would benefit in the long-term.

77 Military Bases. (2011). Military Base Directory. Retrieved July 28, 2011, from http://militarybases.com/directory/ This figure removes bases in Afghanistan and Iraq because microgrids developed for bases in war zones have different development costs and abilities.

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Option 3 is important as the DOD’s long-term strategy because the budget of the ECIP is too small to deploy microgrids at every military base. Receiving the nearly $1 billion necessary to build grids on every base in one appropriation is unlikely. Instead the DOD could take a staggered approach. First, the DOD should request sufficient funds to develop microgrids for the bases deemed critical by the DSB. After securing its most important installations, the DOD can focus on its other bases. The advantage of focusing on the most critical bases first is that these initiatives would supply Congress with crucial savings data. The DOD should make the request to Congress saying, for example, that “the last appropriation of X dollars made the US more secure and provided savings of Y dollars per year.” Framing the request as equal parts security and savings will increase the chances of receiving extra appropriations from Congress during a time of budget cuts. Further, additional funding could increase the development of microgrids for bases in Afghanistan and Iraq for which ECIP funding is not suitable.

Option 3 is not a viable alternative by itself because it is too dependent upon the actions of Congress. If the DOD fails to persuade Congress to appropriate money for improved grids, it will have to wait until a new defense authorization bill is up for debate, or possibly wait until after an election when more sympathetic members of Congress get elected. Of course, neither of these alternatives guarantees success. By combining Options 2 & 3, the DOD will be able to take immediate actions to reduce energy costs and increase energy security while ensuring that energy supply is a priority for the department now and in the future.

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Appendix A: Tables Comparing Savings-to-Investment Ratio of Investments in Renewable Energy Generation and Energy Efficiency

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Appendix B: List of Acronyms

• BTU: British Thermal Unit • DER: Distributed Energy Resources • DOD: Department of Defense • DSB: Defense Science Board • ECIP: Environmental Conservation Investment Program • EMCS: Energy Management/Monitoring Control System • ESTCP: Environmental Security Technology Certification Program • EV: Electric Vehicle • FY: Fiscal Year • GAO: Government Accountability Office • GE: General Electric • HVAC: Heating, Ventilation, and Air Conditioning • IDAPS: Intelligent Distributed Autonomous Power Systems • MW: Megawatt • NEV: Neighborhood Electric Vehicle • NHTSA: National Highway Transportation Safety Administration • NREL: National Renewable Energy Laboratory • PV: Photovoltaic • SAIDI: System Average Interruptible Duration Index • SCADA: System Control and Data Acquisition • SERDP: Strategic Environmental Research and Development Program • SIR: Savings to Investment Ratio

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