High-Tech Weapon Makers Set Sights on ‘Smart Microgrid’ Market

By Sandra I. Erwin
Pentagon contractors are looking to transition their skills in assembling complex weapon systems into the nascent market of energy microgrids.

The U.S. military’s interest in reducing consumption of fossil fuels in favor of renewable energy is seen as a potential catalyst for growth in so-called “smart” microgrids, even though the Pentagon so far has made only nominal investments in these systems.

Smart, or intelligent, microgrids are small-scale versions of a centralized electricity system. They generate, distribute, and regulate the flow of electricity to consumers, but unlike conventional grids, smart microgrids are viewed as a more effective means to bring renewable resources into the mix, and to match supply and demand of energy in ways that reduce overall consumption.

The Pentagon sees microgrids as a promising new weapon in its campaign to reduce troops’ dependence on massive supplies of fossil fuels. Energy microgrids could make it easier for deployed units to become self-sufficient in war zones. At military bases, electric microgrids also are regarded as security mechanisms as they would ensure that bases have access to energy during emergencies such as weather-related blackouts or terrorist attacks.

For defense contractors, the microgrid market opens up opportunities for “systems integration” work that traditionally has focused on weapon systems where disparate pieces of hardware and software are pieced together to create complex machinery such as a combat jet or a command-and-control network.

The global microgrid industry reached $4 billion in 2010, and 75 percent of that work came from North America, according to the market research firm SBI Energy. The demand is being accelerated by the buoying renewable energy and smart-grid markets, said an SBI report. “Microgrid installations around the world include everything from diesel generator-based rural electrification projects that supply electricity to small rural communities to large, futuristic cities and theme parks using the newest microgrid technologies.”

The military microgrid segment, predicts SBI, will rise by 375 percent from 2010 to 2020, when it could top $1.6 billion, up from about $330 million in 2010. Electrical output, the report says, will soar from .13 gigawatts in 2010 to .60 gigawatts in 2020.

SBI suggests that most of the military microgrid business will come from U.S. military bases that seek reliable and secure energy. “The majority of U.S. military bases are powered by public electrical grids, which in some instances lead to as many as 300 power outages per year,” the study says. “These interruptions weaken military readiness and security. In the face of a terrorist attack or natural disasters, reliance on conventional energy supplies may be inefficient and may even be detrimental to military functions.”

A Pentagon advisory panel, the Defense Science Board, noted in a 2008 study that military bases’ dependence on often unreliable commercial power suppliers makes Defense Department installations vulnerable. Many defense contractors viewed that study as a cue that they needed to get into the energy business.

Lockheed Martin Corp. is one of several top defense industry firms that are jockeying for position in the microgrid market.

The company recently expanded its “microgrid development center” in Dallas to increase its load capacity from 100 kilowatts to 500 kilowatts, and energy storage from 4 kilowatt hours to 20 kilowatt hours.  

Lockheed officials not only see an emerging market in constructing microgrids but also in supplying cybersecurity systems to protect them from hackers or computer viruses.

Lockheed Vice President and Chief Technology Officer Ray Johnson says the company has been pursuing new business in the energy sector for about two years. Revenues from defense-related energy programs currently are minimal, but Lockheed officials anticipate greater Pentagon investments in green programs. “DoD has recognized the strategic importance of energy, and it uses 1.5 percent of the nation’s energy,” Johnson says in an interview. “Energy activities are part of each of our four business areas, and [they] are expanding broadly.”

He predicts smart grids increasingly will become an “imperative” for the Defense Department as it searches for ways in which deployed units and military installations can “operate independently when they’re off the [local] grid.” Smart grids also make it easier to bring renewable energy into a larger grid. Under a 2007 law, the Defense Department by 2025 must generate 25 percent of its electricity from renewable sources, such as wind and solar.

Advanced microgrids have been on the military’s wish list for years, and there is now fresh momentum to begin deploying them, says Elizabeth Porter, director of corporate energy initiatives at Lockheed Martin. The military services are beginning to see the data about potential fuel savings and are interested in moving projects forward, she says.

Lockheed’s cybersecurity arm envisions additional business in the future shielding electric grids from hackers. “When you put meters on a network and give meters an Internet protocol address, they become more susceptible to cyber-attack,” says Johnson. The company already has a contract with American Electric Power, based in Ohio, to protect its expanding smart grid.

Lockheed has two research-and-development contracts with the Army and the Air Force, worth $5 million and $3.5 million, respectively. The work so far involves modeling and testing, says Paul M. Marks, a senior manager at Lockheed’s Intelligent Microgrid Solutions. The goal is to cut fuel usage by 25 percent, he says. “We estimated in models that we can save up to 40 percent just by intelligently managing” fossil fuel usage. Even greater savings can be achieved by integrating renewable energy sources, he says.

The Army program that Lockheed is overseeing is called “hybrid intelligent power management.” It is a project that U.S. military officials consider the “architecture of the future” for microgrids, says Marks.  

One hurdle in the adoption of microgrids is that few Defense Department civilian or military personnel have enough technical knowledge or experience working with these systems, says Tom Lederle, vice president of NEST Energy Systems. “I don’t think there is a lot of expertise in the field to do that,” he says. “That is a pretty big problem.” It is an area where he foresees large systems integrators such as Lockheed or Boeing stepping in. “I don’t see little players doing this unless we are teamed up with big guys.” Currently there are “bits and pieces” of smart microgrids in various stages of design but, so far, “I don’t think anyone has put all the elements together.”

Turning 160,000 miles of transmission lines that comprises the country’s antiquated electric network into a smart grid is a daunting technical and political challenge, says Paul “Bo” Bollinger, general manager of government solutions at The Boeing Co.’s energy division. There are more than 3,200 power-producing utilities governed by commissions and state laws that can severely limit the amount of renewable energy that can be independently produced and consumed, he says at an industry conference in New Orleans. “Where will the estimated $1.4 trillion required to upgrade the nation’s transmission system come from in this economic environment?” he asks.

Smart grids could revolutionize the way the military, and all Americans, use energy, Bollinger says. “For government customers, specifically the Department of Defense, the first priority is to decrease consumption and increase efficiency on each installation,” Bollinger says.

Boeing has added smart-grid systems at several company locations, which cut energy use by 32 percent. It also outfitted the International Space Station with a solar-powered microgrid, and many of its features can be adapted to support other systems, he says. Boeing’s new 787 aircraft also could be seen as a microgrid, he added. The 737 has two 90-kilowat generators in each engine. The 787 will have two 250-kilowat generators in each engine, as well as an additional 500-kilowat generator.

Heightening efforts in the private sector to tap into the military energy market, however, face huge barriers, experts note.

A sense of urgency permeates official speeches and media reports about the need to reduce U.S. military dependence on fossil fuels. But in the real world, projects move at the usual Pentagon program speed — measured in years, not weeks or months.

It has been five years since Marine Corps Maj. Gen. Richard Zilmer issued a call to free the military from the “tether of fuel.” He cast a spotlight on the issue of energy security by exposing the dangers of transporting fuel supplies. Officials have estimated that at least one U.S. military service member is killed for every 20 fuel convoys that reach their destinations in Afghanistan. Amory B. Lovins, an energy expert at the Rocky Mountain Institute, told a recent Navy conference that at least 1,000 U.S. troops have been killed in convoy attacks in Afghanistan and Iraq while transporting fuel.

Zilmer in 2006 specifically asked for a “hybrid-electric power station,” which is a variation of a smart microgrid. That urgent request evolved into the Army’s current hybrid-electric power management system that is still in the R&D stage. This illustrates how the Pentagon has mismanaged energy efficiency efforts, says Dan Nolan, a consultant at Sabot 6 Inc., an energy services company. The Pentagon in 2006 allocated $30 million to acquire the hybrid-electric power system that Zilmer requested. The Army’s “rapid equipping force” initially got the project rolling, but service officials later decided to turn it into a formal acquisition program. In hindsight, that was a bad decision, Nolan says. “After five years, you would think you would be pretty close to something,” he says. “It has been fumbling along.” To this day, “there are no hybrid electric power stations in theater.”

The Marine Corps’ much-publicized green technology that it deployed to Afghanistan is there now because it didn’t go through a traditional procurement process. In the Army, meanwhile, “it’s acquisition as usual,” Nolan says. “They move at their own pace.”

An ongoing Pentagon project known as “smart power infrastructure demonstration for energy reliability and security,” or SPIDERS, is seeking industry ideas for how to build smart grids in partnership with the departments of Homeland Security and Energy.

Nolan says programs such as SPIDERS give industry some hope for increased funding for microgrids in the future, but so far efforts remain embryonic. “I don’t think this is an enormous technology leap,” Nolan says. The problem is that renewable energy and smart grids have yet to achieve cost parity with oil and coal. The reason advanced microgrids haven’t proliferated is that electricity is so cheap, he says. “It’s easier for the utilities to build a new coal power plant than it is to figure out the technology surrounding switching off someone’s refrigerator at 4 p.m. to increase supply at the local hospital.”

The Defense Department is backing green technology because it is a security issue, but it is not going to move as fast as many contractors would like, he says. Major defense firms such as Lockheed see this as “someplace where the money is really going,” but it is not apparent that microgrids require the same level of complex integration as an F-35 Joint Strike Fighter, says Nolan.

“Everyone says the Defense Department is leading the charge in energy security. … But I hope the rest of the world isn’t depending on the Defense Department to do that,” he says.

The cost-parity issue that is likely to slow down the expansion of microgrids also applies to other green technologies. “If you have a new idea, you have to compete with Exxon,” says Nolan. “That’s really hard to do.”

In fiscal year 2012, the Pentagon is requesting $230 million for its green energy program. “Unless the money is hidden someplace else,” that is hardly a major investment, says Nolan. “I’m a small business, and I’m watching the fedbizopps offerings that are coming out, and I’m not really seeing it.”

Another tough obstacle to smart-grid growth is a perception that this technology is susceptible to cyber-attacks or to manipulation by Big Utility.

“There is a lot of fear mongering about the arrival of the smart grid,” says Andrew Bochman, energy security lead at IBM Rational Software. The company, too, is pursuing new business in military smart grids.

Just about every media story about cybersecurity in the context of utility grids has the words Armageddon, Apocalypse, Digital Pearl Harbor, or some other fear-inducing term, says Bochman. “Fear itself can be a real inhibitor to positive action,” he says. “It causes you to curl into a fetal position.”

Securing the grid is a priority, but it shouldn’t stifle progress, he says. “The smart grid is the most critical of all critical infrastructures.”

Pentagon energy programs also could be facing strong headwinds coming from Capitol Hill.

The House has moved in recent weeks to kill defense-energy legislation that had been co-authored by Rep. Gabrielle Giffords, D-Ariz., and Sen. Mark Udall, D-Colo. If Congress ends up dropping the DoD Energy Security Act, it could deal a major blow to green programs, writes Christine Parthemore, an energy analyst at the Center for a New American Security. The House passed a measure in the fiscal year 2012 defense authorization act, Parthemore says, that would exempt the Defense Department from compliance with renewable energy use set in the 2007 Energy Independence and Security Act.

Eric Beidel contributed to this report.

Topics: Energy, Alternative Energy, Power Sources

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