Renewables and the U.S. Defense Department
Uday Varadarajan, February 2012
The American Council on Renewable Energy (ACORE)’s webinar last month on Security, Sustainability, and Renewables was the latest in a series of recent renewable energy policy discussions to highlight growing interest in the emerging opportunities for the renewable sector to work with the U.S. military. Interest in military applications of renewables have risen at least in part due to federal policy uncertainty. The impending expiration of several renewables incentives (such as the Recovery Act’s tax grant program and the production tax credit for wind) along with the budget constraints arising from the political impasse over government spending and debt suggest the real possiblity of significantly lower direct federal government support for renewable technology R&D and deployment. As a result, there is growing interest in looking for ways to improve the efficiency of existing renewable policies as well as looking for opportunities for hedging against possible removal of support (see for example, the work of the Bipartisan Policy Center on more efficient subsidies for renewables).
Why look at the military?
In particular, the renewable industry is looking to the military as one possible alternative source of government support. As discussed in greater detail in a recent Pew study entitled “From Barracks to the Battlefield: Clean Energy Innovation and America’s Armed Forces,” interest in renewables in the U.S. military has been growing in recent years for a mix of practical, policy, and administrative reasons:
- DOD is a the single largest energy consumer in the U.S.: The direct operations of the Department of Defense (DOD) comprise 1% of primary energy consumption in the United States, making it the single largest energy consumer in the nation, spending nearly $11 billion annually on energy. Roughly 3/4 of this is associated with the consumption of liquid fuels for vehicle and equipment operation, primarily jet fuel. DOD also operates more than 500 military bases with 2.2 billion square feet of buildings and facilities (about 2/3 of the government’s total building space, and roughly 2.5% of all commercial building space).
- DOD is mandated to use more renewables and reduce emissions, providing a large deployment opportunity: DOD is subject to stringent requirements in statute and through executive orders to reduce its energy consumptions and increase its use of renewable energy. DOD must:
- reduce its facility energy intensity by 3% annually, and its fleet’s petroleum consumption by 2% annually from a 2005 baseline.
- procure or produce 25% of its energy consumption from renewable sources starting in 2025
- reduce its greenhouse gas emissions from sources controlled by DOD by 34% from a 2008 baseline by 2020.
- DOD has the authority to enter into long-term contracts for on-site renewable generation:Unlike the rest of the Federal government, the DOD has special authorities that allow it to enter into long-term contracts for electricity generated on-site by private entities.
- DOD can influence renewable energy use more broadly through its supply chain: Indirect energy consumptions associated with DoD’s annual procurement of $400 billion in goods and services comprise an additional nearly 3% of U.S. GDP, and likely a similar additional fraction of primary energy consumption (we are not aware of a study that has quantified this). Thus, DOD is the single largest consumer of goods and services and could exert market power on its suppliers’ renewable energy use.
- DOD is increasingly investing in clean energy innovation: DOD has increased its investment in R&D on clean energy technologies from roughy $300 million in 2006 to nearly $1.2 billion in 2010 – about a quarter as much as the Department of Energy’s annual budget for clean energy technology programs. Further, DOD has developed substantial internal capacity to assist with demonstration, commercialization, and scale-up of new technologies, including using its bases as pilot test beds for the operation of new technologies. In this vein, DOD has signed an agreement with DOE to cooperate on clean energy R&D as well as demonstration.
- DOD’s innovation culture and commercialization infrastructure could be a great asset for driving clean energy deployment: As the single largest source of R&D funding in the U.S., the Defense department has developed unmatched capabilities for developing and commercializing innovative products needed to address its mission requirements. These capabilities could play an important role in helping innovative renewable technologies overcome the commercialization “valley of death.”
While the military’s growing interest in renewable energy presents a substantial opportunity for advancing the development and deployment of renewable energy, reliance on this pillar also poses significant barriers and issues for industry development.
- DOD energy requirements are not likely to be well aligned with civilian energy requirements: DOD’s energy consumption is primarily (75%) from transportation fuels, while they make up roughly a third of U.S. energy use more generally. Thus, there will be an emphasis on specialized biofuels applications, which are of general interest, but not necessarily the area of greatest potential impact on national emissions or energy consumption. Further, R&D to adapt renewable technologies to the battlefield may not have substantial commercial applications, but are critically important for defense operational needs and will be prioritized.
- Dual-use clean tech R&D may face security barriers to commercialization: There may be barriers to full, international commercialization of new technologies developed for defense needs arising from security concerns associated with the spread of technologies which may be used by adverseries.
- DOD procurement rules and requirements may be a challenge to an industry with little experience with the Pentagon: Matching renewable technologies to the needs and requirements of specific military applications, and navigating the military bureaucracy may be challenging, particularly for companies with the relatively small-scale of many renewable companies.
More generally, as policy-makers think about the possibility of supporting renewable energy through defense spending, careful consideration of the potential consequences of this shift as it relates to the efficiency of spending to achieve renewable deployment is needed. Nevertheless, this is a significant opportunity which we at CPI hope to examine more closely in the coming year.