Green-Energy Arms Race Heating Up
Top military suppliers now believe there ismoney to be made in Defense Department green-energy programs, even though the dollars in this sector so far are pocket change in the context of $700 billion a year Pentagon budgets.
Joining the green-tech arms race are the two largest Defense Department suppliers — Lockheed Martin Corp. and The Boeing Co. Both firms are now in pursuit of military contracts in the nascent field of electric "smart grids."
Boeing announced Aug. 8 it has joined forces with energy giant Siemens to develop and market "smart grid" technologies. The partnership would open an avenue for Siemens to expand its presence in the government sector while giving Boeing a chance to branch out into the commercial energy arena. Green technologies such as energy smart grids increasingly are being tested by government agencies, and corporations see these R&D programs as springboards to bigger deals.
“We see Defense Department leading the way to commercialization,” said Tim Noonan, vice president of Boeing Energy. Defense Department’s microgrid projects are “test beds” that will help commercialize the technology and get programs across the “valley of death,” where many efforts perish because of lack of funding.
The Pentagon’s focus on electric smart grids is reassuring industry that there will be money to be made. “We see the signal that says they are serious about this,” Noonan said during a conference call with reporters.
Judy Marks, head of Siemens U.S. Federal Business, said the company has been seeking an alliance with a major government contractor for more than a year. Boeing fit the bill because of its knowledge of the defense market and because of its expertise integrating complex systems, she said. One of the challenges in building smart grids is that it often requires hooking up aging “legacy” hardware with modern digital technologies such as smart meters and communications devices.
“Defense has been an early adopter and mover of many markets,” Marks said. A demand for upgraded electric grids at military bases, she said, is a “market we identified with tremendous potential.”
Analysts forecast that military bases will be in the market for reliable and secure energy. According to studies, the majority of U.S. military installations are powered by public electrical grids, which are vulnerable to blackouts, terrorist attack or natural disasters. The Defense Department, said Marks, has to be able to “go off the grid and still maintain operations.”
Siemens sees this sector as the perfect market niche for a civilian-military industry team because it will require expertise in renewable energy and in cybersecurity. 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 bring renewable resources into the mix, and match supply and demand of energy in ways that reduce overall consumption.
The Defense Department has set a goal to provide 25 percent of its energy from renewable sources by 2020.
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.
Elizabeth Porter, director of corporate energy initiatives at Lockheed Martin, told National Defense earlier this year that advanced microgrids have been on the military’s wish list for years, and there is now fresh momentum to begin deploying them. The military services are beginning to see the potential fuel savings and are interested in moving projects forward, she said.
Noonan said Boeing also decided to invest resources in this sector because the company expects that today’s small programs will be scaled up. “This is a market that is undergoing a transformation,” Noonan said. A growing emphasis on de-carbonization, a shift from analog to digital grids, as well as an aging infrastructure and increasing needs for security will spur business opportunities, he said. “We think this window will be open for a long time. … We are seeing the activity that says the defense customer is serious about investing.”
Secure electric grids also will be needed at overseas bases, where U.S. troops are more vulnerable to enemy attacks, said Amory B. Lovins, chairman and chief scientist at the Rocky Mountain Institute. “Power-system vulnerabilities are even worse in-theater, where infrastructure and the capacity to repair it are often marginal,” he wrote in Joint Forces Quarterly, a Defense Department journal. “Simple exploitation of domestic electric vulnerabilities could take down DoD’s basic operating ability,” he said. The Defense Science Board already has advised DoD to reduce its reliance on the commercial electric grid and build preferably renewable power supplies in “netted, ‘islandable’ microgrids,” Lovins said.
Whether these trends will translate into big dollars remains to be seen. Market research firm SBI Energy estimated the global microgrid industry reached $4 billion in 2010, and 75 percent of that work came from North America. 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.