The Defense Department’s energy mandates are as clear as they are difficult to reach: Procure at least 25 percent of facility energy from renewable resources by 2025.
With patchworks of infrastructure in and outside the fence line, electrical energy rates all over the map, and a mandate to do it all without additional expense, meeting these goals could prove to be an insurmountable challenge.
The solution isn’t a cheaper solar panel. A fast emerging trend in renewable energy is offering base commanders the opportunity to get the benefits of large-scale projects with the deliverability of traditional rooftop solar. Known as virtual net metering (VNM), or more colloquially as community solar, this policy solution may help crack the funding wall around renewable energy, allowing it to quickly deploy nationwide without requiring significant public capital investment.
To understand how VNM might help the military services meet their renewable portfolio goals, it helps to understand just how hard it is to get a renewable energy project like a solar array built today.
For decades, solar has been stuck in one of two forms: Either fairly small arrays on a building or parking lot, connected directly to the electrical meter of that facility, or large, so-called “utility scale” projects, most often assigned to power companies. But with a huge upfront sticker price, relatively few projects were getting built, and none were coming close to offsetting grid power. One of the problems was the enormous upfront financing.
Then in 2001, the solar industry began using a financing model known as a power purchase agreement (PPA) in which a customer contracted to finance a project over a fixed term — usually 20 years — at a preset price. It functions much like a mortgage. The owner gets a manageable cost per month, and the lender gets certainty the debt will be repaid. Most contracts recognized two streams of value — the cost paid per unit of energy, as well as the emerging market for renewable energy credits, or the environmental attributes of that renewable power.
The model began taking off in 2007, after it was used to finance the then blockbuster 14-megawatt solar project at Nevada’s Nellis Air Force Base, still the largest operational solar project on a military facility. PPAs are well suited to the military, since they depend on having a stable counterparty with a good credit rating, and even with the recent downgrade, there are few counterparties with the standing of Uncle Sam. Importantly, PPAs use all private capital, require no money down and can monetize tax incentives that are off limits to government projects.
“This was really the first time this tool [PPA] showed how it could make even $100 million solar projects affordable,” explains Dave Williams, who worked on the solar project at Nellis.
There were other, equally significant obstacles to overcome, like understanding the impact renewables could or would have on force readiness and base operations.
“There is no renewable energy experience in the military. It’s not a core competency,” explains retired Col. David Belote, former commander of Nellis Air Force Base. “A wing commander doesn’t have a group of men and women who are used to thinking about how we can create renewable technologies.”
Back when the Nellis plant was built, there were concerns as to how such a large project might affect operations. The answer was that they don’t, says Belote. “There’s no water, there’s no maintenance. I’ve been told that [the Nellis array] has never been washed, and it’s been in operation for four years now. It really is the lowest impact of all the technologies I’ve seen.”
Belote was the first executive director of the Defense Department’s “siting clearinghouse” in the office of the deputy undersecretary of defense for installations and environment. The Army Corps of Engineers’ Huntsville Engineering and Support Center has been coordinating procurement models, resulting with the release in January of a draft request for proposals for $7 billion in renewable energy procurement. The Navy Facilities Command has recently announced several large renewables procurements.
These efforts have been aided in part by a steep decline in the cost of solar panels, which have dropped almost 60 percent in just the last two years. Still, many would-be projects are running into a brick wall of expense. In most states, it still costs much more to install solar systems than it does to buy energy from the power company, especially if the approach is one electrical meter at a time.
“The math is the math — it costs much more on a per-unit basis to put a small solar array on the roof of a building than it does to build a large one in a field,” explains Matt Cheney, who ran the company that built and financed Nellis, and is now CEO of CleanPath Ventures.
The concept of community solar or VNM could be the final piece that makes the puzzle of meeting renewable energy procurement obligations without additional spending fall into place.
How it works is simple: A large array is built in a single, secure location, and is connected to the grid. As energy is created, it flows out past a meter, which calculates the amount generated.
At the end of the month, the amount of energy generated can be credited to other, offsite accounts.
This public policy and private capital convergence might be tailor-made for the military. While most bases are known for their large city-like installations, they also have numerous outlying support facilities such as storage areas, hospitals and reserve centers. Having the opportunity to aggregate these individual metered facilities into one system would allow economies of scale.
In 2001, Cheney acquired a former solar testing facility called Photovoltaics for Utility Scale Applications, or PVUSA. Located amidst the verdant farmlands of California’s Central Valley, it was a test bed for solar panels and tracking systems located miles away from any load centers. Cheney refurbished the facility, then convinced the California legislature to pass a law allowing PVUSA’s energy production to be credited to 33 meters in the nearby city of Davis.
Nearly a decade later, the arrangement continues to work seamlessly. Each month, the amount produced is allocated to a designated meter on a proportional basis. It has worked so well Davis lobbied to expand it, and now a bill, SB 843 sponsored by state Sen. Lois Wolk, is pending before the legislature in California.
The first military branch to recognize the potential was the Navy, which has more than 110,000 facilities, and 2 million acres of land. Wolk’s bill now reads: “The Legislature notes that the secretary of the Navy established as policy that 50 percent of shore power for naval and Marine Corps installations in the United States be from renewable sources by 2020. … The Legislature notes that military installations, and other institutional users, have identified a number of regulatory barriers to implementing distributed energy projects. The enactment of this bill will create a mechanism whereby institutional customers such as military installations, universities, and local governments as well as groups of individuals can efficiently generate their own renewable power.”
The California effort mirrors a nationwide movement toward decoupling the production of energy from the end user. There are now versions of virtual net metering in 10 states, with legislation pending before several others. The day of widespread adoption is coming soon, according to Joe Weidman of the Interstate Renewable Energy Council, who has been involved in crafting policies in states nationwide.
“Interest in virtual net metering continues to grow as more people recognize how it can fill gaps in existing renewables programs. We’re now seeing programs popping up all over the country,” he says. “VNM can be a powerful tool to drive down costs and increase opportunities for participation. For customers like the military with many facilities and meters in a variety of locations, it can be a very important policy development in allowing more cost-effective participation in renewable energy programs.”
A VNM solar facility once built offers a service branch significant flexibility in allocating credits, allowing allocations to various operations to scale up and down with varying demand. Although most bases are served by a single master meter, under the “if you can’t measure, you can’t count it” approach, there is now a move afoot at several facilities to allocate energy use to sub-account usage. That means no more leaving the door open with the AC operating. As military leaders begin to recognize energy as a force multiplier, energy use effectiveness will likely start playing a larger role in performance evaluations and group budgeting.
VNM can also crack a challenge most solar customers don’t have: security. A single, “behind the fence” project allows an umbrella of protection to be cast over the solar array, with no additional cost. If the array can be paired with backup battery storage for critical facilities, then even if the entire grid goes down the base can still perform.
Belote brings up the issue of mission assurance. Battery pricing will still mean most facilities would have to pay a bit more for energy, but he suggests a 5 to 10 percent energy security premium isn’t out of the question. “If we can teach base commanders how they can guarantee that critical facilities will have sustained uninterrupted power, that’s all a man or woman in uniform cares about.”
Virtual net metering isn’t without obstacles. For facilities located in the service territory of a publically traded utility, it generally takes an act of the local legislature to enable VNM, followed by public utility commission rulemakings. But for military facilities located in the service areas of municipal or cooperative utilities, permission can happen virtually overnight. As has been demonstrated recently in states such as Colorado, all it takes is a request to the local utility’s management.
Affordable, clean renewable energy for the military is now possible, while just a decade ago, solar was prohibitively expensive. PPAs were almost unknown, and no one had imagined how to generate power in one site and take credit for it in another. But new lower cost materials and innovative policy are offering breakthroughs at exactly the right time for the military to meet renewable energy procurement goals.
“What the military craves is guidance and doctrine and repeatable processes,” says Belote. “If there is a PPA structure that all the big players in contracting can get comfortable with, then that will allow virtual net metering to really go to scale.” Tom Price is director of policy and market strategies at CleanPath Ventures, a San Francisco-based solar energy development and finance firm.