Purchasing Power

The Air Force buys more electricity from renewable sources than any other federal agency, and it's in the market for much more.

The Air Force announced a surprising achievement last December: The service now has the largest solar panel array in the Americas. More than 72,000 panels installed at Nellis Air Force Base in Nevada produce 30.1 million kilowatt hours per year-enough to power more than 13,000 homes during daytime. Through an unusual arrangement among the Air Force, state regulators, a power company and a venture capital firm, officials at Nellis turned 140 acres of unused land into a 20-year power deal that will supply the base with about one-third of its electricity. That's a a utility bill discount of $1 million per year, savings that will escalate to about $4 million annually by the end of the 20-year contract.

It took 26 weeks for contractor SunPower Corp. to finish the $100 million project, which was financed by private investors. That was the easy part, says Michelle Price, energy manager at Nellis. The hard part? Figuring out how to coordinate the legal, economic and technical requirements of the state, the military and the private sector. "You had to have a lot of people committed to the project," she says. "It's a land lease combined with a power purchase agreement. Basically, we put out a request for bids like you do on a construction project."

The military services have long used what are known as enhanced use lease agreements to bring retail outlets or private industry to military bases. But in this case the construction involved a power plant and all the related technical, regulatory, legal and environmental concerns. The responsibilities and relationships among all the players-the Air Force, Nevada Power, SunPower and MMA Renewable Ventures, which handled the financing-had to be spelled out during the course of the 20-year contract. "There were a lot of bureaucratic hurdles, because it had never been done before," Price says. The Air Force has long been a major purchaser of renewable energy from private utilities, but the unprecedented deal at Nellis, where an unused government parcel, which included a 33-acre capped landfill, was turned into a multimillion-dollar savings venture, has sent service leaders looking for other opportunities to exchange unused land for power derived from the sun, wind and even garbage.

The service wants to "drive the supply side of the energy equation," says William Anderson, assistant secretary of the Air Force for installations, environment and logistics and the service's senior energy executive.

There's strong incentive to do so. The service spent $1.1 billion on energy at its installations in 2007. "The energy bill for the Air Force has gone through the roof, even though we have been able to accomplish what I consider some pretty impressive reductions in the number of kilowatt hours used per year," Anderson says.

A New Business Model

Renewable sources account for less than 10 percent of the nation's electricity production, according to the Energy Department's Energy Information Administration. The Air Force has been the top federal purchaser of renewable power for several years now, and in 2006, it was the biggest purchaser of green power in the country. Intel and PepsiCo have since overtaken the service for that distinction, but it still ranks third nationally, according to the Environmental Protection Agency.

Not all renewable energy qualifies as green, though. Large hydropower plants, which account for roughly three-quarters of the renewable power produced in the United States, have a tremendous impact on fish habitat. Nuclear power plants emit no greenhouse gases, but uranium needs to be mined and radioactive waste needs to be stored, both of which can have significant environmental consequences. So EPA defines green power as electricity produced from methods that have the least environmental impact. For the most part, in green power production, no carbon dioxide is released into the atmosphere unnaturally as the result of human activity. Solar, wind, geothermal, biogas, biomass and low-impact small hydroelectric sources all produce green power by EPA's definition. The success of the Nellis deal and a recent analysis of lease opportunities for renewable energy throughout the Air Force by consulting firm Booz Allen Hamilton have sparked considerable interest across the service in finding similar opportunities elsewhere.

But the Booz Allen Hamilton analysis makes clear that this will be an enormously complicated undertaking. State requirements on the percentages of power utilities must obtain from renewable sources vary considerably across the country, as does the availability of the power itself. Sun in Nevada is more productive than sun in Pennsylvania. Wind in Nebraska or Wyoming is more reliable than elsewhere.

Nevada is among the most aggressive states in pursuing renewable energy development, a factor that was a major contributor to the outcome of the Nellis deal. The state has mandated that utilities generate at least 15 percent of electricity using renewable sources by 2013, a move that has created a strong market for renewable energy credits in solar power. At Nellis, the Air Force was able to leverage the value of its sun-soaked land into a long-term power purchase agreement. It's an appealing deal for the service as well as the contractors. SunPower got to design and build the massive array. MMA has a 20-year agreement to sell power to the Air Force and energy credits to Nevada Power, which helps Nevada Power meet its renewable portfolio requirements with the state. And the Air Force gets price stability and significant savings.

The Air Force did incur some costs, but Price estimates them to be well under $200,000, mainly for surveys that had to be performed and the salaries of staff working on the project. Her advice for other base energy managers interested in pursuing similar agreements: "Make sure you get the best people from every entity that has to have input, and get them immediately in line so you don't have to re-explain the project every time you get somebody on the phone." Price is in the process of developing a lessons-learned document the Air Force can use as a blueprint for future deals. "This business model has been so successful for us we believe it's the idea of the future," Anderson says.

While dozens of new energy initiatives are being pursued at installations across the country, Air Force leaders are focusing on six major leasing agreements generally modeled after the Nellis business plan. These include large-scale solar projects at Edwards Air Force Base in California, Luke Air Force Base in Arizona, and Kirtland Air Force Base in New Mexico; and plans for a plant that would burn garbage from Dyess Air Force Base in Texas, and the adjacent city of Abilene to produce electricity for the base.

But two other projects the service wants to pursue likely will be much more controversial. One is a plan to build a plant at Malmstrom Air Force Base in Montana that would convert coal into synthetic fuel for use in aircraft. The other is to install small, self-contained, subterranean nuclear reactors at one or more installations to provide secure power sources.

"It's not like we're seasoned experts. We're kind of feeling our way along as we're doing these first projects," says Anderson. "Because these are commercial deals, there's no guarantee that any or all of them will actually go from concept to operation. Like in the commercial world, you try a lot of stuff. My expectation is that any deals we have on the table at any given time, some will succeed and some will fail. We'll just continue to have an inventory of projects to draw from."

'No Silver Bullet'

The nuclear reactor plan faces the biggest hurdles. Last summer, Republican Sens. Larry Craig and Pete Domenici, nuclear power supporters from Idaho and New Mexico, respectively, sent letters to then-Air Force secretary Michael Wynne, asking the Air Force to consider the feasibility of hosting small-scale, gas-cooled nuclear power reactors at one or more of its bases.

Such technology is not commercially available anywhere in the world, so implementing it raises a host of complex technical and regulatory questions. Nonetheless, the idea of using small, self-contained nuclear devices to power military installations-similar to the technology used to power submarines now-is appealing to security officials worried about the vulnerability of installations to widespread grid failure. While details of any potential plan are unclear, Anderson envisions the re-actors would essentially operate like buried batteries-they would produce power until the fuel is depleted, after which the contractor would replace the reactor with a new one, returning the depleted reactor to the "factory" for refueling. The Air Force would not be dealing with nuclear waste.

"We did our initial studies and it seems like an Air Force base might be a really good place to do something like this," says Anderson. In response to an Air Force request for information from industry late last year, a number of consortiums of companies submitted ideas that appear viable, he says. By the end of December, the Air Force expects to sign a letter of intent with at least one of the consortiums. That would create a roadmap for selecting the technology, establishing performance requirements, site requirements and working relationships among the Air Force, the Nuclear Regulatory Commission, the Energy Department and industry players.

Anderson says he wants "to at least lay the groundwork in this administration, while my team is still here, to pick the consortium and put together . . . a timeline that will get us to the installation and operating capability on this reactor or reactors by 2018. It's ambitious, but we believe it's doable." Whether that turns out to be true or not (future political support is questionable-neither Craig nor Domenici plans to return to Congress next year), it surely will be controversial, as have been virtually all decisions about nuclear power during the past six decades. But the idea will remain attractive to some for several reasons. Nuclear power, which does not produce greenhouse gases, is under-going something of a bipartisan-supported ren- aissance. Putting small reactors on remote Air Force bases would likely reduce the not-in-my-backyard public reaction that usually meets most nuclear projects. Also, the vulnerability of military installations to commercial grid failure is a real and growing concern, as noted in a recent report by the Defense Science Board, a Defense Department advisory panel. The study recommended installations maintain their own power generation capacity independent of local resources.

"You can go to renewables like wind and solar, but when the wind doesn't blow or the sun doesn't shine, you don't have power. You can do traditional fossil-fuel fired plants, but you need a pipeline or gas lines or a coal train and those can be impacted [during grid failure] because they're outside the wire," says Anderson.

"I think everybody agrees there's no silver bullet," he says. "You've got to look at all options."