Defense Infrastructure
DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals Gao ID: GAO-10-104 December 18, 2009The Department of Defense (DOD) consumes about 60 percent of all energy used at federal government facilities. To encourage an increased use of energy from renewable sources, such as solar and wind power, (1) the Energy Policy Act of 2005 (the 2005 Act) directs DOD to consume at least 3 percent of its total electricity from renewable resources starting in fiscal year 2007; (2) Executive Order 13423 (the 2007 Executive Order) directs that an amount equal to half of the statutorily required renewable energy be generated by sources placed into service in 1999 or later; and (3) the 2007 Defense Authorization Act directed that at least 25 percent of electricity consumed by DOD come from renewable sources in fiscal year 2025. The Government Accountability Office (GAO) was asked to examine (1) DOD's progress toward these three key goals for consuming renewable energy in fiscal years 2007 and 2008, (2) challenges to DOD meeting those goals, and (3) DOD's plans to meet the goals. GAO reviewed relevant laws and DOD and Department of Energy (DOE) policy, plans, and data; interviewed agency officials; and visited DOD facilities.
DOD has three key goals for its installations' consumption of renewable energy, contained in the 2005 Act, the 2007 Executive Order, and the fiscal year 2007 National Defense Authorization Act. DOD met the goals in the 2005 Act and 2007 Executive Order in fiscal year 2007. However, in fiscal year 2008, DOD fell just short of the 2005 Act goal. Moreover, in fiscal years 2007 and 2008, DOD overstated its progress toward the goal in the 2007 Defense Authorization Act, counting nonelectric renewable energy. In these 2 fiscal years, the 2007 Defense Authorization Act goal allowed only electric renewable energy to be counted. According to amendments in the fiscal year 2010 Defense Authorization Act--which became law in October 2009--DOD is now able to count nonelectric renewable energy toward this goal. In fiscal years 2007 and 2008, when calculating progress toward the 2007 Defense Authorization Act goal, DOD included renewable electricity produced on DOD land, but not consumed by DOD. According to DOD, it has "facilitated production," but has not "directly consumed" this electricity. It is unclear whether such renewable energy should be included in the Office of the Secretary of Defense's (OSD) calculations of progress toward this goal. Moreover, OSD has not published guidance clarifying key terms in the language of the goal. With such guidance specifying how the services are to implement this goal, DOD will have greater assurance that it can accurately assess progress toward the goal and accurately report on this progress to Congress. DOD faces three key challenges in meeting the renewable energy goals. First, renewable energy projects may sometimes be incompatible with installations' need to use land for primary mission objectives. For example, wind turbines may conflict with aircraft operations during training. Second, renewable energy is often more expensive than nonrenewable energy. Therefore, using renewable energy can be at odds with DOD and DOE guidance that calls for DOD to invest in energy projects when cost-effective. In response, DOD plans to obtain additional funds by joining with private industry, such as local electric utilities, to develop renewable energy projects. Third, however, the use of those private sector approaches can be constrained by several factors. For example, energy produced by the projects may not count toward the renewable energy goals. By addressing these challenges, DOD would strengthen its ability to fully realize the potential of its renewable energy resources, improving its chances of meeting the goals in the most cost-effective way. OSD has not developed a long-term, DOD-wide plan to help ensure that DOD meets the renewable energy goals. Such a plan that identifies and addresses key challenges, has strategies for coordinating the services' renewable energy activities, sets realistic performance measures for achieving the goals, and aligns DOD resources will better enable DOD to meet the renewable energy goals.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-104, Defense Infrastructure: DOD Needs to Take Actions to Address Challenges in Meeting Federal Renewable Energy Goals
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Report to the Subcommittee on Readiness, Committee on Armed Services,
House of Representatives:
United States Government Accountability Office:
GAO:
December 2009:
Defense Infrastructure:
DOD Needs to Take Actions to Address Challenges in Meeting Federal
Renewable Energy Goals:
GAO-10-104:
GAO Highlights:
Highlights of GAO-10-104, a report to the Subcommittee on Readiness,
Committee on Armed Services, House of Representatives.
Why GAO Did This Study:
The Department of Defense (DOD) consumes about 60 percent of all energy
used at federal government facilities. To encourage an increased use of
energy from renewable sources, such as solar and wind power, (1) the
Energy Policy Act of 2005 (the 2005 Act) directs DOD to consume at
least 3 percent of its total electricity from renewable resources
starting in fiscal year 2007; (2) Executive Order 13423 (the 2007
Executive Order) directs that an amount equal to half of the
statutorily required renewable energy be generated by sources placed
into service in 1999 or later; and (3) the 2007 Defense Authorization
Act directed that at least 25 percent of electricity consumed by DOD
come from renewable sources in fiscal year 2025. GAO was asked to
examine (1) DOD‘s progress toward these three key goals for consuming
renewable energy in fiscal years 2007 and 2008, (2) challenges to DOD
meeting those goals, and (3) DOD‘s plans to meet the goals. GAO
reviewed relevant laws and DOD and Department of Energy (DOE) policy,
plans, and data; interviewed agency officials; and visited DOD
facilities.
What GAO Found:
DOD has three key goals for its installations‘ consumption of renewable
energy, contained in the 2005 Act, the 2007 Executive Order, and the
fiscal year 2007 National Defense Authorization Act. DOD met the goals
in the 2005 Act and 2007 Executive Order in fiscal year 2007. However,
in fiscal year 2008, DOD fell just short of the 2005 Act goal.
Moreover, in fiscal years 2007 and 2008, DOD overstated its progress
toward the goal in the 2007 Defense Authorization Act, counting
nonelectric renewable energy. In these 2 fiscal years, the 2007 Defense
Authorization Act goal allowed only electric renewable energy to be
counted. According to amendments in the fiscal year 2010 Defense
Authorization Act”which became law in October 2009”DOD is now able to
count nonelectric renewable energy toward this goal.
In fiscal years 2007 and 2008, when calculating progress toward the
2007 Defense Authorization Act goal, DOD included renewable electricity
produced on DOD land, but not consumed by DOD. According to DOD, it
has ’facilitated production,“ but has not ’directly consumed“ this
electricity. It is unclear whether such renewable energy should be
included in the Office of the Secretary of Defense‘s (OSD) calculations
of progress toward this goal. Moreover, OSD has not published guidance
clarifying key terms in the language of the goal. With such guidance
specifying how the services are to implement this goal, DOD will have
greater assurance that it can accurately assess progress toward the
goal and accurately report on this progress to Congress.
DOD faces three key challenges in meeting the renewable energy goals.
First, renewable energy projects may sometimes be incompatible with
installations‘ need to use land for primary mission objectives. For
example, wind turbines may conflict with aircraft operations during
training. Second, renewable energy is often more expensive than
nonrenewable energy. Therefore, using renewable energy can be at odds
with DOD and DOE guidance that calls for DOD to invest in energy
projects when cost-effective. In response, DOD plans to obtain
additional funds by joining with private industry, such as local
electric utilities, to develop renewable energy projects. Third,
however, the use of those private sector approaches can be constrained
by several factors. For example, energy produced by the projects may
not count toward the renewable energy goals. By addressing these
challenges, DOD would strengthen its ability to fully realize the
potential of its renewable energy resources, improving its chances of
meeting the goals in the most cost-effective way.
OSD has not developed a long-term, DOD-wide plan to help ensure that
DOD meets the renewable energy goals. Such a plan that identifies and
addresses key challenges, has strategies for coordinating the services‘
renewable energy activities, sets realistic performance measures for
achieving the goals, and aligns DOD resources will better enable DOD to
meet the renewable energy goals.
What GAO Recommends:
GAO makes 5 recommendations to DOD, including that DOD accurately
report progress toward the goals and develop a long-term, DOD-wide plan
to address challenges and meet goals. DOD concurred with 4
recommendations and partially concurred with 1, agreeing with its
intent but stating that it is a service responsibility.
View [hyperlink, http://www.gao.gov/products/GAO-10-104] or key
components. For more information, contact Mark Gaffigan at (202) 512-
3168 or gaffiganm@gao.gov or Brian Lepore at (202) 512-4523 or
leporeb@gao.gov.
[End of section]
Contents:
Letter:
Background:
DOD Met the 2007 Goals, Missed a 2008 Goal, and Overstated Reported
Progress in Both Years toward the 2007 Defense Authorization Act Goal:
DOD Faces Three Key Ongoing Challenges to Its Ability to Meet the
Renewable Energy Goals:
OSD Lacks a Long-Term, Departmentwide Plan to Meet the Renewable Energy
Goals:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 18, 2009:
The Honorable Solomon P. Ortiz:
Chairman:
The Honorable J. Randy Forbes:
Ranking Member:
Subcommittee on Readiness:
Committee on Armed Services:
House of Representatives:
The Department of Defense (DOD) is the largest single energy consumer
in the United States--accounting for over 60 percent of all federal
government facilities' energy consumption in fiscal year 2006. To put
this in a national perspective, if DOD were a state, it would rank
between the 35th and 36th largest states, based on total electricity
consumption.[Footnote 1] DOD reported that it spent almost $4 billion
on facility energy in fiscal year 2008.[Footnote 2] Over the course of
many years, federal statutes and executive orders have set and revised
a number of goals for changing the way federal agencies use or obtain
energy.
Existing laws and an executive order direct federal agencies to
increase their use of renewable sources of energy such as solar and
wind power. First, the Energy Policy Act of 2005 (the 2005 Act) directs
federal agencies--"to the extent economically feasible and technically
practicable"--that 3 percent of the electrical energy consumed in
fiscal years 2007 through 2009 come from renewable energy, with this
percentage gradually increasing to 7.5 percent annually beginning in
fiscal year 2013.[Footnote 3] The amount of electricity needed to meet
the 3 percent goal in fiscal year 2007 would power about 79,209 homes
for 1 year.[Footnote 4] Second, Executive Order 13423 (the 2007
Executive Order) directs that in each fiscal year, an amount of
renewable energy equal to at least half of the statutorily required
renewable energy that is consumed by a federal agency must come from
"new renewable sources placed into service after January 1, 1999."
[Footnote 5] Third, Section 2852 of the National Defense Authorization
Act for Fiscal Year 2007 (the 2007 Defense Authorization Act)
established a goal for DOD "to produce or procure" not less than 25
percent of its total electricity consumption during fiscal year 2025
and each fiscal year thereafter, from renewable energy sources.
[Footnote 6],[Footnote 7] The amount of power needed to meet the 25
percent goal in fiscal year 2025 would power approximately 660,080
homes for 1 year.[Footnote 8] While one of the statutes and the
executive order also contain goals for agencies to increase their
energy efficiency, this report focuses on goals regarding the use of
renewable energy at federal facilities.
This report responds to your request that we review the status of DOD's
progress in meeting the three key renewable energy goals. Specifically,
for domestic installations,[Footnote 9] we (1) assessed the progress
DOD had made toward the three key goals for consuming renewable energy
in fiscal years 2007 and 2008, (2) identified the challenges that may
affect DOD's ability to meet the renewable energy goals, and (3)
assessed DOD's plans to meet the renewable energy goals.
To determine whether DOD met the three key goals for consuming
renewable energy in its domestic installations in fiscal years 2007 and
2008,[Footnote 10] we reviewed DOD and service guidance and Department
of Energy (DOE) guidance applicable to DOD and the services to identify
the goals, and we compared the goals to DOD's renewable energy
consumption data from DOD submissions to DOE for use in DOE's Annual
Report to Congress on Federal Government Energy Management and
Conservation Programs for fiscal years 2007 and 2008. To determine the
reliability of these data, we interviewed officials at each level of
data collection, aggregation, and review: those responsible for
entering this information into data collection templates at the
facilities level, for summarizing it and checking for accuracy at the
headquarters level for each of the services, and for combining the
services' data into a total for DOD and assessing the accuracy of this
total. We determined that these data were sufficiently reliable for the
purpose of determining the extent to which DOD met the renewable energy
goals.
To identify the challenges that may affect DOD's ability to meet the
renewable energy goals, we reviewed key documents--such as a DOD
assessment of installations' potential for renewable energy
development--and interviewed officials from the Office of the Secretary
of Defense (OSD) and the services (U.S. Army, U.S. Navy, and U.S. Air
Force) who are responsible for managing DOD's renewable energy efforts.
[Footnote 11] Because DOD told us that aggregated data on DOD's
renewable energy projects were unavailable, we asked OSD to collect
data on the location, size, and type of renewable energy projects using
a data collection instrument we provided. To determine the reliability
of these data provided by OSD, we checked them against previously
identified information about a selection of projects, and when we found
inconsistencies, we discussed the inconsistencies with OSD and the
services and made corrections. We also visited five installations to
determine the practical effect of the challenges to meeting renewable
energy goals. We selected these installations because they represent
each of the services, have different types and sizes of renewable
energy projects, and operate in three states.
To assess DOD's plans for meeting the renewable energy goals, we
obtained and reviewed OSD and service plans to determine the extent to
which they exhibited elements generally found in effective strategic
planning documents. We also assessed the information systems the
services use to track their renewable energy generation and
consumption. Because two of the three services had not developed
adequate information systems for monitoring or reporting their use of
renewable energy, we did not use data from those systems to determine
our findings, and we discuss the limitations of these systems further
in our report. Our analysis of DOD's renewable energy production and
consumption relied on the annual template reports submitted to OSD and
a data collection instrument we developed, and not on the data logged
into the services' information systems. In addition, we met with
renewable energy experts at DOE's National Laboratories, selected
nongovernmental organizations, and the public utility commissions of
the states where we also visited DOD installations. We conducted this
performance audit from October 2008 to November 2009, in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Background:
The U.S. Renewable Energy Market:
Three characteristics of the U.S. renewable energy market are key to
understanding DOD's renewable energy activities: (1) the generally
higher cost of renewable energy compared with nonrenewable energy in
the United States; (2) renewable energy certificates; and (3) state
standards, mandates, and financial incentives.
Higher Cost of Renewable Energy:
According to DOE, in the United States renewable energy is generally
more expensive than energy derived from nonrenewable sources.[Footnote
12] We have previously reported that renewable energy technologies have
typically generated more expensive energy than nonrenewable sources
because of renewable energy technologies' relatively high up-front
capital costs and the fact that they operate intermittently, which
results in less generation for every megawatt of installed generation
capacity.[Footnote 13] For example, solar energy can only be generated
during daytime hours and wind energy can only be generated during
periods of sustained wind activity.
Renewable Energy Certificates:
Federal efforts to increasingly rely on renewable energy are taking
place within the context of a renewable energy commodities market for
buying and selling this energy through renewable energy certificates.
In the United States, renewable energy production essentially creates
two products: the energy itself and an associated commodity, called a
renewable energy certificate. Each renewable energy certificate
represents a certain amount of energy generated using a renewable
resource.
According to the Environmental Protection Agency, these certificates
represent the environmental attributes of renewable energy generation
(e.g., 1 megawatt hour of wind power) that has been produced by private
or public entities and can be sold to other parties,[Footnote 14]
including DOD and the services.[Footnote 15] According to DOE's
National Renewable Energy Laboratory, the certificates provide
renewable energy producers with an extra stream of revenue that helps
to offset the higher cost of renewable energy projects.[Footnote 16]
Bought and sold in a fashion similar to stocks and bonds, renewable
energy certificates are a commodity with fluctuating prices. According
to DOE's Pacific Northwest National Laboratory, the relative
instability of the price for renewable energy certificates is a result
of fluctuations in demand for these certificates.[Footnote 17] In
addition, these certificates facilitate the buying, selling, and
trading of renewable energy without the need to actually transmit the
electricity to each customer holding a certificate.
However, under DOE guidance for implementing the 2005 Act goal to
obtain 3 percent of electricity from renewable sources and the 2007
Executive Order goal to obtain an amount equal to half of the
statutorily required renewable energy from sources placed into service
after January 1, 1999, an agency can count renewable energy
certificates toward these goals only if the certificate is retained by
the agency, retired, or precluded from transfer to a third party.
[Footnote 18] This is because, according to the DOE guidance for
implementing these two goals, if more than one party owns the same
certificate, the credibility of the certificates in the general market
could be jeopardized. Thus, if the federal agency does not retain,
retire, or preclude the transfer of the certificate, it cannot claim
the renewable energy that certificate represents toward the 2005 Act
and 2007 Executive Order goals.
In order to follow this guidance, an installation or service buying
renewable energy has two options: buy both the energy and the
certificate or buy just the certificate. Purchasing the energy and
certificate together is referred to as buying "bundled" renewable
energy. When a purchaser buys only the certificate, the renewable
energy associated with the certificate is sold to another consumer
without the certificate, and is known as buying "unbundled" energy. For
instance, at one Air Force installation we visited, Air Force officials
explained that the owner of a photovoltaic array located on the
installation sells the project's certificates to the local utility and
sells the unbundled energy to the installation. DOD often buys only the
certificate, to avoid the cost of developing its own projects.[Footnote
19] Another reason a federal agency, such as DOD, would purchase
certificates is that according to DOE guidance pertaining to the goals
in the 2005 Act and 2007 Executive Order, purchasing and retaining
these certificates is one way for an agency to get credit toward
meeting these two renewable energy goals. This allows DOD installations
that do not have renewable resources to contribute to achieving the
renewable energy goals to which DOD is subject. However, it is
important to note that if DOD buys only the certificate, the department
is not purchasing actual energy that it can use to run its
installations. This means that if DOD purchases just the certificate,
the department still needs to buy actual energy at an additional cost.
For instance, a DOD installation without any renewable energy projects
could purchase a certificate for 1 megawatt hour of renewable energy
generated elsewhere--for example, from utility-owned wind turbines in a
different state. According to the DOE guidance implementing the 2005
Act goal to obtain 3 percent of electricity from renewable sources and
the 2007 Executive Order goal to obtain an amount equal to half of the
statutorily required renewable energy from sources placed into service
after January 1, 1999, DOD's ownership of a renewable energy
certificate is the key requirement if energy is to count toward either
of these goals. For example, an agency can count energy toward the
goals in the 2005 Act and 2007 Executive Order by purchasing a
certificate for 1 megawatt hour of renewable energy plus the actual
energy (that is, by purchasing bundled renewable energy), by using one
megawatt of renewable energy from a project on federal land or owned by
a federal agency and retaining or retiring a certificate, or by
purchasing just a certificate for 1 megawatt hour of renewable energy
generated elsewhere. In each case, the key qualification for counting
the energy toward these two goals is that DOD retains or retires a
renewable energy certificate. However, it is important to note that if
DOD buys only the certificate, the department is not purchasing actual
energy that it can use to run its installations. This means that if DOD
purchases just the certificate, the department still needs to buy
actual energy at an additional cost.
Further, for the purposes of the 2005 Act goal, a bonus equivalent to
doubling the amount of renewable energy used or purchased is available
for qualified renewable energy sources generating electricity on
federal or Indian lands, when that electricity is consumed at a federal
facility, and the renewable energy certificates are not transferred to
a party outside the federal government.[Footnote 20] For example, at
one Marine Corps installation we visited, Marine Corps officials
explained that the installation consumes renewable electricity from a
photovoltaic solar array located on-site, and because DOD owns the
array, it also owns the certificates associated with the project's
renewable electricity. In this case, because the project is located on
federal land, DOD consumes the electricity, and DOD retains the
certificates, the department can claim the bonus, counting the
project's total amount of electricity twice toward the goal in the 2005
Act. However, if the agency is operating such a project that otherwise
qualifies for the bonus and then transfers the renewable energy
certificates to a party outside the federal government, the agency
gives up its right to count that amount of renewable energy for its
goal, as well as its right to claim the bonus.
If an agency wishes to transfer the renewable energy certificates to a
party outside the federal government and still count the project's
energy toward the goal in the 2005 Act, the agency must purchase
renewable energy certificates from another source, effectively
replacing the project's original certificates that the agency
transferred. For the purposes of this report, we call these additional
certificates replacement certificates. According to DOD data, the
department has been able to utilize this approach. For instance, in
fiscal year 2008, 190,964 megawatt hours of renewable energy
certificates purchased by DOD were eligible to be used as replacement
certificates by the department. Because DOD had renewable energy
projects for which it had not retained the original certificates, it
was able to use these replacement certificates to claim 190,964
megawatt hours of renewable energy toward the 2005 Act goal to obtain 3
percent of electricity from renewable sources.
State Standards, Mandates, and Financial Incentives:
Many states have established policies that promote renewable energy.
Specifically, according to the Database of State Incentives for
Renewables and Efficiency,[Footnote 21] as of September 2009,
* 34 states and the District of Columbia have established renewable
portfolio standards requiring or encouraging that a fixed percentage of
the electricity consumed in the state be generated from renewable
sources;
* 40 states and the District of Columbia have established
interconnection rules for electric utilities to connect renewable
energy sources to the power transmission grid, which in some cases
allows non-utility power producers to receive credit for excess
generation; and:
* 48 states and the District of Columbia offer tax credits, grants, or
rebates to stimulate the development of renewable energy projects.
Federal law requires DOD to comply with state laws governing the
provision of electric utility services when using appropriated dollars
to purchase energy.[Footnote 22] Certain types of state laws can affect
DOD renewable energy projects. For example, the energy manager at a
Navy installation we visited told us that because of a fee called a
departing load charge, the installation had decided to reduce the size
of a planned solar project from an estimated 15 to 20 megawatts to 5
megawatts. At the time this decision was made, utilities in the state
where this installation is located could charge a customer this type of
fee if the customer self-generated a portion of its electricity,
reducing the amount of electricity the customer would purchase from the
utility. According to Public Utilities Commission officials in this
state, fees like the departing load charge exist so that utilities can
recoup their investment in the energy infrastructure the utilities
initially built to supply 100 percent of their customers' electricity
demand. In the case of the Navy installation we visited, once the
proposed solar project began operating, the installation would have
purchased less electricity from the utility because a portion of its
electricity needs would be satisfied by the solar project. According to
Navy officials, concerns about the impact of the departing load charge
influenced the decision to reduce the size of the solar project.
Sources of Funding for Renewable Energy Projects:
DOD has funded renewable energy projects on its installations using
both up-front appropriated dollars and various types of agreements with
private sector entities.[Footnote 23] DOD primarily uses funding from
two kinds of appropriation accounts to develop renewable energy
projects. First, DOD uses a military construction account to pay for
the Energy Conservation Investment Program--funding that Congress
provides directly to OSD and that OSD, in turn, allocates to each of
the services. Program funds are specifically directed toward energy
conservation and renewable energy projects. Second, the services'
annual operation and maintenance appropriations provide funding that
many installations have used to support small renewable energy
projects.[Footnote 24]
DOD has also joined with private sector entities, entering into various
types of arrangements to develop renewable energy projects. Because
these different arrangements with the private sector provide DOD with
an alternative to using only up-front appropriations to fund renewable
energy projects, we refer to these arrangements as alternative
financing approaches. For the purposes of this report, we define an
alternative financing approach as any funding arrangement other than
projects in which total project costs are funded only through full up-
front appropriations. DOD has entered into several different types of
these approaches that have resulted in renewable energy projects.
Roles of OSD and the Services in DOD's Renewable Energy Activities:
According to DOE guidance implementing the 2005 Act goal to obtain 3
percent of electricity from renewable sources and the 2007 Executive
Order goal to obtain an amount equal to half of the statutorily
required renewable energy from sources placed into service after
January 1, 1999, as well as the 2007 Defense Authorization Act goal
that 25 percent of electricity consumed by DOD come from renewable
sources in 2025,[Footnote 25] DOD as a department--rather than each of
the services--is responsible for meeting the goals. However, within
DOD, the activities required to meet these goals are carried out by
both OSD and the services. DOD Instruction 4170.11 specifies that the
Office of the Deputy Under Secretary of Defense (Installations and
Environment) acting under the authority, direction, and control of the
Office of the Under Secretary of Defense (Acquisition, Technology and
Logistics) oversees the military services' renewable energy activities,
is responsible for implementing policies and providing guidance to
manage installation energy resources, and is responsible for providing
annual programming guidance and overseeing the achievement of the
energy goals and objectives.[Footnote 26] The services are responsible
for implementing OSD's guidance to meet the goals. The services do so
by purchasing bundled renewable energy, unbundled renewable energy
certificates, and developing renewable energy generation projects on
their installations.
DOD Met the 2007 Goals, Missed a 2008 Goal, and Overstated Reported
Progress in Both Years toward the 2007 Defense Authorization Act Goal:
DOD Met Both Goals in Fiscal Year 2007:
According to DOD's fiscal year 2007 submission for DOE's Annual Energy
Management Report, DOD met both of the goals regarding its
installations' consumption of renewable energy in fiscal year 2007. In
fiscal year 2007, 5.5 percent of DOD's total electricity consumption
was from renewable sources, exceeding the 2005 Act goal of obtaining 3
percent of electricity from renewable sources. In the same year, 3.3
percent of the renewable energy consumed by DOD was "new," exceeding
the 2007 Executive Order goal to obtain an amount equal to half of the
statutorily required renewable energy from sources placed into service
after January 1, 1999.
DOD Narrowly Missed a Goal in Fiscal Year 2008:
According to DOD's fiscal year 2008 submission for DOE's Annual Energy
Management Report, DOD met only one of the two applicable goals
regarding the consumption of facility renewable energy in fiscal year
2008. Specifically, in fiscal year 2008, 2.9 percent of DOD's total
electricity use was derived from renewable sources, thus falling just
short of the 2005 Act goal of obtaining 3 percent of electricity from
renewable sources. In the same year, 1.8 percent of the renewable
energy consumed by DOD was "new"--exceeding the 2007 Executive Order
goal to obtain an amount equal to half of the statutorily required
renewable energy from sources placed into service after January 1,
1999.
DOD missed meeting the 2005 Act goal in fiscal year 2008 because the
price of renewable energy certificates increased significantly from
fiscal year 2007 to fiscal year 2008, and as a result, DOD purchased
fewer of these certificates. In fiscal year 2007, DOD relied on
unbundled renewable energy certificates for almost 90 percent of the
renewable energy that it purchased. In that year, DOD purchased
certificates that allowed it to claim credit for approximately 0.88
million megawatt hours of energy. However, in fiscal year 2008, the
price of the certificates rose almost 185 percent. Responding to the
increase, DOD bought substantially fewer renewable energy certificates
that year--purchases that allowed DOD to claim credit for 0.32 million
megawatt hours. According to an OSD official, that fiscal year 2008
decrease in the amount of renewable energy that DOD could claim caused
the department to miss the 2005 Act goal of obtaining 3 percent of
electricity from renewable sources. As a result, DOD's total
consumption of renewable energy, including that claimed through
renewable energy certificates, decreased, and DOD missed the 2005 Act
goal for fiscal year 2008.
DOD Overstated Its Fiscal Years 2007 and 2008 Progress toward the
Defense Authorization Act Goal for Fiscal Year 2025:
DOD's fiscal years 2007 and 2008 progress toward the fiscal year 2025
goal--reported in DOD's submissions to DOE for the Annual Energy
Management Report--was overstated because DOD counted nonelectric
renewable energy that under the 2007 Defense Authorization Act, DOD
should not have counted. It is important to note that the National
Defense Authorization Act for Fiscal Year 2010 contains several
amendments to the language defining the goal in the 2007 Defense
Authorization Act that change the goal's requirements.[Footnote 27] For
example, DOD will be able to count nonelectric renewable energy toward
the 2025 goal. However, regardless of changes in the goal's
requirements, DOD overstated its progress toward the goal in fiscal
years 2007 and 2008.
A key OSD official acknowledged that DOD incorrectly included
nonelectric energy in its reported progress toward the 2007 Defense
Authorization Act goal of having 25 percent of its total electricity
consumption during fiscal year 2025 come from renewable energy sources.
According to this official, beginning in fiscal year 2007, DOD adopted
an internal policy goal to obtain at least 25 percent of its
installations' total energy from renewable resources by fiscal year
2025. Under this internal DOD policy, all types of renewable energy
counted toward the goal. However, Congress incorporated a similar
statutory goal into the fiscal year 2007 Defense Authorization Act. At
that time, Congress specified that only renewable electricity could be
counted toward this statutory goal. But, according to OSD and service
officials, in fiscal years 2007 and 2008 the Army, Navy, and OSD did
not adapt their calculations to the act's new definition of what type
of renewable energy counts toward the goal, incorrectly adding
nonelectric renewable energy to electric renewable energy in their
calculations of progress toward the goal.
OSD Has Not Issued Guidance to Clarify What Should Be Included in Its
Calculations of Progress toward the 2025 Goal Found in the 2007 Defense
Authorization Act:
According to the 2007 Defense Authorization Act, DOD's goal was to
"produce or procure not less than 25 percent of the total quantity of
electric energy it consumes within its facilities and in its activities
during fiscal year 2025 and each fiscal year thereafter from renewable
energy sources."[Footnote 28] Previous GAO work has shown that
performance measures should be clearly stated and the definitions of
key terms should be consistent with the methodology used for
calculating the measure.[Footnote 29] In calculating its progress
toward the 2025 goal, DOD utilized an accounting method that includes
renewable energy where DOD "facilitates the production, but does not
directly consume the renewable energy." However, OSD has not issued
guidance that provides a clear explanation of this methodology and its
legal rationale for how its accounting method is consistent with the
language of the statute. In particular, OSD has not defined several key
terms in the act, including "produce" and "consumes." Without
additional information on DOD's accounting method,[Footnote 30] it is
unclear whether renewable electricity where DOD has "facilitated
production" on DOD land--but has not "directly consumed" such renewable
energy--should properly be included in OSD's calculation of progress
toward the goal. Further, without such clarification from OSD, it is
unclear how the services are to properly implement the 2007 Defense
Authorization Act goal.
DOD has utilized an accounting method in calculating its progress
toward the 2007 Defense Authorization Act goal where "the Department
facilitates the production, but does not directly consume the renewable
energy."[Footnote 31] Pursuant to this accounting method, in its fiscal
years 2007 and 2008 submissions for DOE's Annual Energy Management
Report, OSD reported DOD's progress toward the 2007 Defense
Authorization Act goal by using a calculation that included renewable
electricity from a power plant that uses a renewable resource on DOD
land but does not supply renewable electricity to DOD. Specifically,
OSD included the renewable electricity produced at one geothermal power
plant located on a Navy installation toward the 2007 Defense
Authorization Act goal, although the Navy did not use or purchase the
renewable electricity produced at this location. Given that the statute
stated that it shall be DOD's goal to "produce or procure not less than
25 percent of the total quantity of electric energy it consumes within
its facilities and in its activities during fiscal year 2025 and each
fiscal year thereafter from renewable energy sources" (emphasis added),
DOD's legal rationale for how this accounting method is consistent with
the language of the statute is unclear.
When DOE issued guidance on the implementation of the 2005 Act and the
2007 Executive Order, it provided extensive information to federal
agencies on the implementation of the goals and the definition of
terms. Specifically, the DOE guidance provides several paragraphs as to
how projects and purchases qualify as "consumed" electricity in order
to be counted toward the 2005 Act requirement, and addresses the
requirements for use of renewable energy certificates in that context.
[Footnote 32] However, OSD has not issued guidance that provides a
clear explanation of its methodology for calculating progress toward
the goal contained in the 2007 Defense Authorization Act, including an
explanation of how its accounting method is consistent with the
language of the statute. For example, DOD's April 2008 report stated
that DOD "produce[s]" energy that meets the terms of the statute when
it "facilitates the production" of renewable energy, but the
circumstances under which DOD has "facilitate[ed] the production" of
renewable energy to such an extent as it may be considered "produced"
by DOD, as the statute specifies, are unclear.[Footnote 33] As another
example, DOD's April 2008 report stated that DOD counts energy toward
the 2007 Defense Authorization Act goal when it does not "directly
consume" such energy. However, the circumstances under which DOD has
indirectly consumed such energy are unclear, as is the extent to which
this indirect consumption is consistent with the statute's requirement
to consume such energy. Because OSD has not provided such guidance on
its method of accounting for renewable energy use, it is unclear
whether OSD's inclusion of renewable geothermal electricity that DOD
neither directly produced nor "directly consumed" in its calculation of
progress toward the goal is consistent with the act. Further, without
such clarification from OSD, it is unclear how the services are to
properly calculate progress toward the 2007 Defense Authorization Act
goal.
This lack of clarity is significant because whether electricity from
this geothermal power plant is properly included may have a serious
effect on how much progress OSD reports to Congress in meeting the 2007
Defense Authorization Act goal. Because this plant generates nearly
three-fourths of the total domestic renewable energy produced on DOD
land, by including the plant's electricity as part of the total amount
of electricity that qualifies for the 2007 Defense Authorization Act
goal, OSD calculated that DOD achieved substantial progress toward the
goal in fiscal years 2007 and 2008. In contrast, if OSD does not
include the plant's electricity in its future reporting, it could
likely report significantly less progress toward the 2007 Defense
Authorization Act goal.
Without providing a clear definition of either the key terms in the act
or a methodology for calculating progress toward the goal, OSD cannot
ensure that the information on its progress toward meeting the goal is
consistent or can be compared to past years' information. Further, in
the absence of such clarification from OSD, it is unclear how the
services are to properly implement the 2007 Defense Authorization Act
goal. Thus, until OSD addresses this lack of clarity, DOD will not be
able to accurately measure its own progress toward the goal or
accurately report on its progress to Congress.
DOD Faces Three Key Ongoing Challenges to Its Ability to Meet the
Renewable Energy Goals:
Development of Renewable Energy Projects Is Not Always Compatible with
the Primary Mission of a DOD Installation:
According to a 2005 DOD study,[Footnote 34] renewable energy projects
may sometimes be incompatible with installations' needs for land use to
meet primary mission objectives. Officials from DOD and most of the
state public utility commissions with which we met told us that when
renewable projects and an installation's primary mission are in
potential competition, it is possible to develop these projects while
maintaining mission effectiveness. This balance has been achieved when
installation officials have found accommodations that enable a project
to be developed without compromising primary mission objectives.
However, OSD officials have acknowledged that OSD has not provided
guidance indicating when it is appropriate for installation officials
to develop such accommodations. Thus, DOD may not be availing itself of
potential opportunities for renewable projects on its land.
The 2005 DOD study determined that the potential impact of a project on
an installation's mission reduces DOD's ability to fully utilize all of
the renewable resources on its installations. According to data
included in the study's implementation plan, while DOD had the
potential to annually obtain enough renewable energy to equal 20
percent of DOD's total facility electricity use,[Footnote 35] the
incompatibility between renewable energy projects and the primary
mission of some installations would likely prevent DOD from fully
realizing this potential. Officials at four of the five installations
we visited explained that they had decided not to encroach on the land
used for core mission activities in order to meet the renewable energy
goals. For example, a Marine Corps installation we visited conducted an
assessment of wind resources that determined there were sufficient
prevailing winds to install wind turbines to generate electricity.
However, the location of this resource was designated for training
activities involving rotary-wing aircraft and live-fire exercises--
activities that installation officials determined to be incompatible
with the siting and operation of wind turbines. DOD may also identify
renewable energy projects outside its installations as incompatible
with the installations' primary mission objectives. For example, an Air
Force installation commander requested that the Department of the
Interior's Bureau of Land Management withdraw permits for a planned
solar thermal plant 20 miles from the installation. The request noted
that the tower required for the solar thermal plant would hamper
installation operations, including the operation of military radar.
In addition, the transmission and distribution infrastructure required
to convey power from renewable energy projects to an installation's
buildings or to the utility grid can sometimes be affected by an
installation's mission. For example, officials at a Navy installation
we visited told us that they were planning to install a solar
photovoltaic system adjacent to the installation's existing geothermal
plant, to allow the geothermal plant to run more efficiently by
providing power to cool the plant's turbines. However, if the
installation was to use the power generated by the solar and geothermal
plants, the power lines required to distribute the power to the
installation would have to be routed around areas designated for
testing of live ordnance. The installation energy manager told us that
the additional cost to route the power lines around the testing areas
would make the project too costly to implement.
However, it is sometimes possible to develop renewable projects while
maintaining mission effectiveness even when there is potential
incompatibility between the two. For example, at one Air Force
installation we visited, the installation officials were restricted in
their ability to install a photovoltaic array due to concerns from the
air operations staff that reflections from the array could disrupt
training. A resolution to the incompatibility of installation needs was
found by placing the array in a location that did not conflict with
training, yet had an adequate solar resource. In another example,
representatives from federal land management agencies, the services,
and county officials worked with DOD installations to develop a map
that indicates the height of wind turbines that require DOD review. In
a certain part of the map colored red, all turbines over 200 feet need
to be reviewed by DOD to ensure compatibility with the installations'
mission. In other areas, colored green, no DOD review is required.
According to the officials responsible for drafting DOD's energy
security strategy, decisions about specific renewable energy projects
should be made at the installation level because of the differing
specifics of each project. But, according to these officials, DOD's
draft energy security strategy does not provide guidance to enable
installation officials to develop the accommodations that may be
possible and required to develop renewable energy projects that do not
affect an installation's primary mission. While many states have
established goals requiring or encouraging that a fixed percentage of
the electricity consumed in the state be generated from renewable
sources, state government officials we interviewed said that they have
removed DOD installations from consideration as possible sources for
the renewable energy required to meet these state goals because of a
lack of guidance specifying where renewable energy projects can be
located on DOD lands. A senior OSD energy official has acknowledged
that base commanders need to do a better job "compromising" between the
two goals of primary mission execution and renewable energy project
development and that OSD needs to do a better job of providing guidance
to these commanders on their consideration of such projects. At the
time of our report, the services were conducting assessments to
determine which installations can most cost effectively develop locally
available resources. However, the lack of OSD guidance indicating when
it is appropriate for installation officials to develop such
accommodations to establish a balance between renewable energy projects
and an installation's mission may delay or impede the development of
renewable energy projects on and around DOD installations.
Purchasing or Generating Renewable Energy May Conflict with DOD Policy
and DOE Guidance to Invest in Renewable Energy Cost Effectively:
Both DOD policy and DOE's guidance implementing the 2005 Act goal to
obtain 3 percent of electricity from renewable sources and the 2007
Executive Order goal to obtain an amount equal to half of the
statutorily required renewable energy from sources placed into service
after January 1, 1999, encourage agency investment in renewable energy
projects when it is cost-effective.[Footnote 36] DOD requires its
facilities to use life-cycle cost analysis to determine whether a
planned energy project is cost-effective relative to the status quo,
and the DOE guidance notes that agencies should develop certain on-site
renewable energy systems when "life-cycle cost-effective" to do so.
However, as we have previously reported, energy from renewable sources
generally costs more than energy from nonrenewable sources, such as
fossil fuels.[Footnote 37] According to our analysis of DOD data, most
DOD installations would need to spend more money to generate or
purchase renewable electricity than they would to purchase conventional
electricity offered by their local utilities. That is because the cost
of renewable electricity is often greater than the cost of conventional
electricity, the latter of which makes up the majority of the
electricity sold by utilities.[Footnote 38] Furthermore, in most
states, DOD's installations pay below-average rates for nonrenewable
electricity.[Footnote 39] That means that most domestic DOD
installations are even more likely to pay a higher price for renewable
electricity than for the nonrenewable electricity provided by their
local utilities. Thus, it may be challenging for DOD to develop on-site
renewable energy systems that qualify for the goals while also
attempting to follow DOD policy and DOE guidance that encourage
investment in renewable energy projects when cost-effective.
One way for DOD to partially mitigate the challenges posed by higher-
cost renewable electricity may be to purchase or generate nonelectric
renewable energy, which DOD officials explained is more cost-effective
than electric sources. Our analysis of DOD data indicates that a
sizable proportion--26 percent--of DOD's total on-site domestic
renewable energy production comes from nonelectric renewable energy
sources. Ground source heat pumps are an example of nonelectric
renewable technology; they provide nonelectric heating and cooling by
using the constant temperature of the earth.[Footnote 40] These heat
pumps are used in 5 of the 10 largest renewable energy projects on
domestic DOD installations. According to DOE documentation, after 5 to
10 years, installations that install these pumps would save enough
money through the pumps' operation to repay the financing used to
purchase and install them.[Footnote 41] In contrast, according to Navy
officials, an installation that installs a renewable electric
technology, such as a photovoltaic solar array, could have a
substantially longer payback period--up to 35 years. However, according
to the guidance and law that implement and establish the renewable
energy goals, nonelectric renewable energy sources only qualified
toward one of the three goals--the goal found in the 2007 Executive
Order stating that an agency is to obtain an amount equal to half of
the statutorily required renewable energy from sources placed into
service after January 1, 1999. As discussed earlier in this report, the
National Defense Authorization Act for Fiscal Year 2010 amends the
language defining the goal in the 2007 Defense Authorization Act. For
example, DOD will now be able to count nonelectric renewable energy
toward the 2007 Defense Authorization Act goal. However, as discussed
earlier in the report, OSD has provided neither a clear definition of
key terms in the act nor a methodology for calculating progress toward
the goal. As a result it is unclear what effect these changes will have
on the amount of progress DOD will be able to claim toward meeting this
goal.
Another example of the challenge faced by DOD to implement cost-
effective renewable energy projects involves the use of renewable
energy generation as a source of backup power on DOD installations.
According to DOD officials, it is particularly difficult to develop on-
site renewable energy for backup power that is cost-effective because
this use of renewable energy presents two technical challenges that
make it expensive relative to conventional sources of backup power.
* First, because certain renewable energy technologies,[Footnote 42]
such as solar and wind, provide intermittent power, they require
batteries to store the energy they produce or supplementary,
conventional generation to ensure uninterrupted power. For example,
because solar energy can only be generated during daylight hours, the
average solar project operates approximately 20 percent of the hours in
a year, according to industry standards. According to DOD officials,
the battery technology needed to store a solar project's electricity is
currently too expensive for most installations to install. At one
installation we visited, batteries and supplementary conventional
power--to be used during the night and on cloudy days--would be
necessary if the installation used its solar array as source of backup
power. However, according to installation officials, this additional
equipment would cost an estimated $50 million, increasing the original
cost of the project by about 50 percent.
* Second, technical and safety challenges require special controls to
integrate the on-site renewable energy generation with an
installation's existing electrical infrastructure and operate the
renewable technology safely during a power supply disruption. The
technology required for coordinating an on-site generation project--
renewable or nonrenewable--with power delivered by the utility grid is
costly. For example, at one installation we visited, DOD officials
explained that using either of the two on-site renewable energy
projects as a source of backup power would require upgrades to the
installation's energy distribution network that would allow the
installation to switch from grid-delivered power to on-site power.
These officials told us that such upgrades would be prohibitively
expensive. Further, because of safety concerns, an installation's
interconnection agreement with its utility company requires that any on-
site generation be switched off during utility grid outages external to
the installation, to ensure that external utility wires are not
electrified during repairs. Only one of the five installations we
visited had installed a renewable energy system that allowed part of
the installation to operate during an off-installation utility outage.
That installation designed its distribution system to enable a solar
photovoltaic system to power certain buildings during power outages,
but this system relies on natural gas backup, increasing the total
project cost.
DOD officials explained that because renewable energy has a relatively
higher cost than conventional alternatives, it is less feasible as a
source of backup power for domestic installations. As a result of the
high costs associated with using renewable energy as a source of backup
power, installations generally rely on diesel generators for backup
power. Because DOD policy requires energy projects to be cost-effective
over their life cycles, and renewable energy projects are generally
more expensive than nonrenewable energy projects, renewable energy
projects are rarely selected to provide backup generation on military
installations.
Alternative Financing Approaches Are Potentially Beneficial, but DOD
Faces Three Key Obstacles in Implementing Them:
According to DOD officials, entering into alternative financing
approaches to develop renewable energy projects offers three main
advantages to DOD. First, certain alternative financing approaches may
be more cost-effective than DOD-funded and DOD-owned development of
larger renewable energy projects. According to DOD officials, entering
into alternative financing approaches to develop renewable energy
projects may increase the likelihood of developing these projects on
DOD land. This is because private developers have more options than DOD
when it comes to obtaining project financing. For instance, developers
can sell either the project's energy or renewable energy certificates
to a third party, such as the local utility. However, DOD officials
stated that DOD cannot make these types of sales. In addition,
according to DOD officials, in some cases, private developers are able
to accept renewable energy incentives, such as tax credits, that DOD
cannot claim.
The second advantage, according to DOD officials, is that the
government can realize significant benefits when renewable energy
projects are owned by private developers because the contractor may
provide operation and maintenance of the equipment. For example,
officials at an Air Force installation we visited explained that their
maintenance staff does not have anyone with the expertise to operate
and maintain the installation's renewable projects, and because
contractors perform these functions, the installation does not need to
hire additional staff to perform these tasks.
Finally, although the services use up-front appropriated funding to
develop smaller renewable energy projects, DOD officials explained that
up-front appropriated funding may be a poor fit for developing the
larger, higher-cost renewable projects that a key official says are
necessary to achieve the renewable energy goals. According to GAO
analysis of DOD project data, the services primarily use two types of
up-front appropriated funding for smaller renewable projects: the
Energy Conservation Investment Program, funded with a military
construction account, and the operations and maintenance accounts.
Because the total amount of annual Energy Conservation Investment
Program funding is divided among the services, officials explained that
they are limited in the amount of resources they can commit to a high-
cost project from that account. According to DOD, OSD generally grants
Energy Conservation Investment Program funding for potential renewable
projects based on analysis of the project's life-cycle costs; the less
an installation's energy costs, the less likely it may be to receive
funding from that account. Because many DOD installations pay low rates
for utility-delivered electricity, their proposals for Energy
Conservation Investment Program funds to develop renewable projects are
often not selected, increasing the challenge DOD faces in funding
projects that meet the criteria for funding.
According to DOD officials, operations and maintenance funding may also
be difficult to use for the development of the large, higher-cost
renewable projects that the services plan to develop to meet DOD's
renewable energy goals. For instance, according to an Army official,
the service considered building a 35-megawatt concentrated solar
thermal plant. If completed, this project would be one of the largest
on DOD land. According to this official, the Army estimated that the
project would require an estimated $1.8 billion in appropriated
funding. Because annual allocations of operations and maintenance
funding are typically limited to $750,000 per project,[Footnote 43]
these funds may not be sufficient to fund such large, costly projects.
Although DOD has developed many small renewable energy projects with up-
front appropriated funding, it has relied on alternative financing
approaches for its relatively few large renewable energy projects. For
example, GAO analysis of DOD data indicates that while the majority--74
percent--of renewable energy projects are funded using up-front
appropriations, these projects only generate 13 percent of renewable
energy produced on DOD land. In contrast, while only 18 percent of
projects are funded using alternative financing, these projects
generate the majority--86 percent--of renewable energy produced on DOD
land.
Because alternative financing can supplement up-front appropriated
funding, the services have encouraged the use of such approaches, in
which a private developer provides much or all of the funding required
to develop an energy project that uses a renewable source on, or close
to, DOD land. We determined that although these approaches can make
more funding available for DOD renewable energy projects, DOD needs to
overcome the following three key obstacles to implementing these
approaches.
* First, specific, local circumstances at installations can limit
financing options for renewable energy projects and limit DOD's ability
to develop a departmentwide strategy for financing projects.
* Second, DOD has a relatively small community of officials with the
necessary expertise to develop and manage these approaches.
* Third, under DOE guidance, unless agencies meet two criteria, the
agencies cannot count renewable energy from projects built at federal
facilities or owned by a federal agency but located on private property
toward the goal in the 2005 act goal of obtaining 3 percent of their
electricity from renewable sources and the 2007 Executive Order goal to
obtain an amount equal to half of the statutorily required renewable
energy from sources placed into service after January 1, 1999.[Footnote
44] The first criterion is that the renewable energy be produced and
used on-site by a federal agency, or the renewable energy be produced
by a project owned by a federal agency but installed on private
property. The second criterion is that the agency retain or replace the
renewable energy certificates associated with the energy produced.
Thus, because alternative financing arrangements often require agencies
such as DOD to permit the private developer to take possession of the
renewable energy certificates, DOD would not be able to count the
energy produced by alternatively financed projects toward the 2005 Act
and 2007 Executive Order goals.
Limitations Caused by Local Conditions at Installations:
If installation officials wish to use an alternative financing
approach, they could use one of several types, including Energy Savings
Performance Contracts and Utility Energy Service Contracts.[Footnote
45] However, in practice, the type of approach chosen by an
installation can depend on the specific financing options locally
available to that particular installation. For example, an official at
an Air Force installation we visited told us that the installation has
only been able to use Energy Savings Performance Contracts. This is
because the local electric utility has not offered a Utility Energy
Service Contract, as in this type of contract the utility usually earns
a profit only after demonstrating that it has saved its customer money
by decreasing the amount of money the customer spends on energy.
Because the installation's electricity prices are already low, it would
be difficult for the utility to further lower the installation's energy
costs. While an installation official stated that the installation is
interested in developing additional renewable energy projects, he
explained that the installation has already developed the projects that
are most cost-effective when using an Energy Savings Performance
Contract. The official explained that if the installation decides to
develop additional renewable energy projects, it may need to find a new
contract and financing vehicle.
The specific, local circumstances surrounding the financing of
renewable energy projects have made the creation of a DOD-wide strategy
for funding these projects challenging. According to DOD officials, the
market conditions that may make a potential renewable energy project
attractive to private developers are often location and time specific.
For example, another Air Force installation we visited partnered with a
developer that financed and built one of the nation's largest solar
photovoltaic arrays on the installation's land. The installation was
able to negotiate a contract for low electricity prices with the
developer because the Air Force provided the developer with the
project's renewable energy certificates. At the time of negotiation,
this was possible because of the renewable energy certificates' high
price in the state's electricity market. However, according to Navy
officials, when the Navy subsequently attempted to replicate this
project development model at an installation in the same state, the
price of renewable energy certificates had decreased significantly, and
the Navy's potential private sector partners declined the project
because they did not want to retain the now-less-valuable renewable
energy certificates. A key OSD official explained that because
alternative financing approaches depend on these types of specific,
local conditions, a departmentwide strategy for financing these
projects is not likely to be feasible. Rather, according to the OSD
official, the more feasible approach would be to have an installation's
energy management staff--experts on these local circumstances--develop
the approaches.
Shortage of Staff with Expertise for Developing Alternative Financing
Approaches:
According to DOD officials with whom we spoke, the department has a
shortage of officials with the necessary expertise to develop and
manage alternative financing approaches. GAO has previously reported
that if an agency is to effectively and efficiently implement these
types of approaches, agency officials with adequate contracting
expertise are critical to the success of the agency's efforts and to
protecting the government's interest in regard to government financial
resources committed to these approaches.[Footnote 46]
During our review, we found that DOD installations have varying human
capital resources and expertise for developing alternative financing
approaches. For example, according to Army officials, trained and
qualified energy managers are in "short supply" at Army installations,
most of the Army's contracting officers are generalists and have not
been trained in contracting for renewable energy projects, and the Army
also lacks personnel sufficiently trained in the legal requirements for
authorizing the development of renewable energy projects. Officials
from the Navy had similar concerns, explaining that when it comes
Energy Savings Performance Contracts, the Navy does not have the
expertise to define its own contract requirements or compare the
renewable energy project proposals to determine which of the potential
contractors to hire. Air Force officials stated that because of the
shortage of trained energy managers in the Air Force, most of the
personnel serving in this capacity have an installation management
workload that is two or three times larger than it should be. The
officials explained that when personnel have workloads this large, they
will usually not have enough time to fully execute their multiple
responsibilities.
Despite DOD guidance requiring that all installations have trained
energy management personnel, we have previously reported that energy
managers at some DOD installations lacked the expertise required to
negotiate contracts for complex alternative financing approaches, and
DOD has not adequately trained these managers in negotiating these
contracts.[Footnote 47] In the course of our review, a shortage of
trained energy managers was evident at some of the installations we
visited. For example, some energy managers were not aware of certain
strategies and contracting methods for renewable energy project
development because they had not received relevant training. At one
installation we visited, the energy management staff were largely
unfamiliar with alternative financing because they had not received
training on the subject. According to service officials, energy
managers are sometimes "dual hatted," serving as both the energy
manager and the utility manager, giving an energy manager two complex
jobs to do at the same time. At another installation we visited, the
utility manager told us that because he was dual hatted, he did not
have time to develop additional alternative financing approaches. Army
officials told us that it was increasingly difficult to recruit and
retain qualified energy managers because of increasing competition with
other government entities and private sector employers. To address this
challenge, service officials said that they plan to hire additional
staff to support efforts to meet the renewable energy goals. However,
this hiring is not expected to be completed until fiscal year 2013, at
the earliest.
As we explained earlier in this report, DOD expects to rely
increasingly on alternative financing approaches to meet the renewable
energy goals. For DOD to effectively implement these approaches, the
department will require energy management staff who have the relevant
expertise for implementing the approaches. However, because we found
that the services and their installations' staff often lack expertise
in developing alternative financing approaches, DOD may by limited in
its ability both to use these approaches to develop renewable energy
projects and to do so in a manner that adequately protects the
government's financial resources committed to these approaches.
Much of the Energy Generated May Not Qualify for Meeting the Renewable
Energy Goals:
According to DOD officials, in most cases, private developers are
generally interested in partnering with DOD in order to sell the
projects' unbundled energy or associated renewable energy certificates
to a third party. These officials explained that the generally accepted
business model for these types of approaches includes a renewable
energy resource on or near DOD land that is harnessed by a project
financed, built, and operated by third-party developer that then sells
the unbundled energy to DOD or other customers and typically retains
ownership of the project's renewable energy certificates.[Footnote 48]
However, under such approaches, DOD often would neither consume the
renewable energy nor retain the renewable energy certificates. When DOD
does not consume the renewable energy, a developer would provide some
other form of compensation for the use of the renewable resource on DOD
land. For example, in the largest renewable energy project on DOD land,
DOD does not consume the energy but instead receives financial
compensation based on the sale of the project's energy. If DOD neither
consumes the renewable energy nor retains the renewable energy
certificates, a serious challenge may be posed to DOD's ability to meet
the renewable energy goals. That occurs because, according to DOE's
guidance on implementation of the 2005 Act and the 2007 Executive
Order--guidance designed to preserve the integrity of the renewable
energy certificate market--for an agency to count a project's renewable
energy toward these goals, the project must meet two requirements.
First, the renewable energy must be produced and used on-site at a
federal agency or the renewable energy must be produced by a project
owned by a federal agency but installed on private property. Second,
the agency must retain or replace the renewable energy certificates
associated with the energy produced. In addition, as we discussed
earlier, unlike DOE, DOD has not issued guidance that provides a clear
explanation of its methodology for calculating progress toward the
fiscal year 2025 goal under the 2007 Defense Authorization Act,
including DOD's definition of "consumption" and the treatment of
renewable energy certificates in that context.
When DOD consumes the unbundled energy from a project built at a
federal facility and does not retain the certificate--as is the case
with one of the largest renewable energy projects on DOD land--DOD has
two options: to not count the energy toward the renewable energy goals
or to obtain new renewable energy certificates to replace those
retained by the private developer.[Footnote 49] If DOD plans to count
the energy toward the goals, it would need to choose the second option,
since under DOE guidance, DOD would need to consume the energy and own
renewable energy certificates in order to count the energy toward the
renewable energy goals. If DOD chose to purchase replacement renewable
energy certificates, then it would generally pay a higher price for the
energy consumed because DOD would need to purchase two products--the
renewable energy and the replacement certificates. In short, while
alternative financing approaches supplement DOD's appropriated funding
and cost DOD less up front, if DOD intends to count projects' energy
toward the renewable energy goals,[Footnote 50] DOD generally faces
additional costs to purchase replacement certificates.
OSD Lacks a Long-Term, Departmentwide Plan to Meet the Renewable Energy
Goals:
OSD Has Not Developed a Departmentwide, Long-Term Plan to Meet the
Renewable Energy Goals:
Previous GAO work has shown that long-term plans can help agencies
ensure that they meet their goals by identifying potential challenges
agencies face in meeting their goals, coordinating the actions of
agencies' components in pursuit of the goals, laying out performance
measures for achieving those goals, aligning agency activities and
resources to attain the goals, and providing the data agencies need to
accurately assess progress against these performance measures.
Although DOD guidance states that offices within OSD are responsible
for providing guidance and oversight for meeting DOD's energy goals,
OSD has not developed a plan for meeting the renewable energy goals.
DOD's draft energy security strategy that OSD was developing at the
time of our review does address some issues relevant to DOD
installations' use of renewable energy, according to an official
representing OSD. For instance, the official explained that the draft
strategy recognizes that renewable energy technologies tend to be more
costly than nonrenewable energy generation. However, the draft strategy
focuses on energy security without specifically addressing the
renewable energy goals or presenting a plan to achieve them. For
example, the draft strategy does not specify how DOD is to coordinate
the services' renewable energy activities, according to officials from
OSD.
Because OSD has not developed a long-term, departmentwide plan to meet
DOD's renewable energy goals, DOD instead relies on OSD's current
approach to managing the services' renewable energy efforts as the
means for achieving the goals. A senior OSD official who plays a key
role in OSD's renewable energy activities explained that under OSD's
current approach, each of the services plans, budgets, and implements
an individual renewable energy effort. He explained that by following
this approach, DOD intends to achieve--or nearly achieve--the renewable
energy goals in most years. However, we found four reasons that this
approach may not be effective in helping DOD meet the renewable energy
goals. Specifically, the approach (1) does not identify key challenges
to meeting the goals or contain solutions for mitigating those
challenges; (2) relies on the services to develop individual approaches
to meeting the goals, which may not be effective; (3) lacks accurate
performance measures with which DOD could assess progress toward the
goals; and (4) may not be effectively aligning DOD's resources toward
achieving the goals.
First, OSD did not identify the key challenges we discussed earlier in
this report. Specifically, OSD did not identify as a key challenge its
dependence on renewable energy certificates--a commodity with
fluctuating prices--to meet the renewable goals. When the price of
renewable energy certificates increased significantly from fiscal year
2007 to fiscal year 2008, DOD purchased fewer of these certificates,
and DOD missed meeting the 2005 Act goal of obtaining 3 percent of
electricity from renewable sources in fiscal year 2008. When this
occurred, OSD had neither a plan identifying this key challenge nor a
solution for mitigating the challenge, such as relying more on sources
of renewable energy with more stable pricing. For instance, according
to an analysis by DOE's Pacific Northwest National Laboratory,
purchasing renewable energy from a wind turbine project is generally
less risky than purchasing renewable energy certificates in a volatile
market.[Footnote 51] Because OSD lacked such a plan or solution, DOD
was unprepared to compensate for the decrease in the amount of
renewable energy that it claimed toward the goals when it purchased
fewer certificates.
Second, we found that if the services separately pursue their own
courses with regard to renewable energy efforts, their individual
approaches may not be effective in helping DOD meet its renewable
energy goals. While the three services are developing renewable energy
plans, their plans lack key elements. For example, the Air Force's plan
lacks accurate cost estimates and complete data on how much funding has
been allocated to renewable energy projects. In addition, the Army's
plan is preliminary in nature and cannot yet be considered complete.
For instance, according to its plan and Army officials, the Army still
needs to develop implementation strategies, establish and coordinate
performance measures, and begin the "significant job" of executing the
plan. Finally, the Navy's plan is also preliminary; does not explain
how the Navy will align its organizations' renewable activities to
attain the goals; does not discuss what type, or amount, of resources
the Navy will commit to these activities; and does not address the
Navy's need for better management of its energy data.
Third, OSD's current approach lacks accurate performance measures with
which to assess DOD's progress toward meeting the 2007 Defense
Authorization Act goal. GAO has previously reported that by specifying
performance measures, agencies are better able to monitor progress made
and hence better able to achieve the goals. While OSD has established
performance measures to assess DOD's progress toward meeting the 2007
Defense Authorization Act goal, those performance measures are based on
inaccurate calculations. Specifically, according to a key official, OSD
assumed that DOD's renewable energy consumption would increase by
roughly 1 percent annually. In its fiscal year 2010 Budget Request
Summary Justification (published in May 2009), DOD included renewable
energy consumption targets for fiscal years 2009 and 2010, based on
this assumption. However, as we discussed earlier in the report, DOD
overstated its fiscal years 2007 and 2008 renewable electricity
consumption by incorrectly including nonelectric renewable energy
toward this goal. Because DOD's renewable energy consumption targets
for fiscal years 2009 and 2010 were based on these previous, inaccurate
calculations, the fiscal years 2009 and 2010 targets were also
overstated and hence similarly unlikely to be achieved.
As discussed earlier in this report, the National Defense Authorization
Act for Fiscal Year 2010 amends the language defining the goal in the
2007 Defense Authorization Act. However, at the time DOD published the
targets, the original requirements of the 2007 Defense Authorization
Act goal were still in effect. This means that--regardless of the
subsequent changes to the 2007 Defense Authorization Act goal--DOD's
renewable energy consumption targets for fiscal years 2009 and 2010
were based on calculations that were inaccurate at the time DOD
published the targets.
Finally, the services may not be effectively aligning DOD resources in
pursuit of the renewable energy goals. According to DOD Instruction
4170.11, offices within OSD are responsible for providing oversight for
the achievement of the renewable energy goals. However, OSD is not
coordinating the services' allocation of resources in pursuit of the
DOD-wide renewable energy goals, as evidenced by the fact that the
services' cost estimates include projects that generate renewable
energy that would not count toward at least two of the renewable energy
goals. Specifically, officials from each of the services explained that
their estimates on the total cost of meeting the renewable energy goals
are based on the assumption that at least a portion of the renewable
energy will be generated through alternative financing approaches on
DOD land. However, if the private developers sell the associated
renewable energy certificates to third parties, and DOD does not
replace the certificates, DOD cannot count the energy toward the goals
in the 2005 Act or 2007 Executive Order. Further, as discussed above,
in the absence of additional guidance from OSD, it is unclear how the
services are to properly count production of unbundled energy toward
the 2007 Defense Authorization Act goal. If OSD's lack of oversight
continues, the services' cost estimates may continue to include
projects whose energy would not count toward these two goals.
Lacking a coordinated, DOD-wide plan for achieving the renewable energy
goals, OSD has instead relied on an approach that has not identified
key challenges or potential solutions, established accurate performance
measures, or aligned DOD's resources in pursuit of the goals. This
means that OSD has relied on the services to develop individual
approaches. As a result, OSD has relied on the services' incomplete
plans for achieving these goals, and lacks a coordinated DOD-wide plan
to meet the challenging goal contained in the 2007 Defense
Authorization Act.
OSD Lacks Visibility on Renewable Energy Projects, and Services Lack
Adequate Information Systems for Tracking Renewable Energy Use:
GAO has previously reported that strategic information management
provides agencies with the data they need to improve program
effectiveness and ensure consistent results. However, OSD does not have
a system in place to track individual renewable energy projects or key
information about these projects. Thus, while OSD is responsible for
coordinating the services' renewable energy activities in pursuit of
the goals, it does not have adequate visibility over the services'
renewable energy efforts. For example, at the time of our review, OSD
had neither a list of the renewable energy generation projects
operating in DOD installations nor key information on the projects,
such as their location, the type or amount of energy they produce, or
the amount of funding required to develop the projects. In order to
complete our review, we gathered various data on these types of
projects from DOD to develop our own data set. According to a key OSD
official responsible for DOD's energy management, the data set we
created was the first of its kind.
Although DOD policy requires all of the services to collect and manage
data on the procurement and use of energy on their installations, at
the time of our review, two of the three had not developed adequate
information systems for monitoring or reporting their use of renewable
energy. Specifically, the software that these two services use to
manage their energy data does not reflect the sources of renewable
energy that are eligible to be counted toward the renewable energy
goals. For example, at two installations we visited, installation
officials explained that the software they use to report their
renewable energy production and consumption can only record the use of
one category of energy: wind. However, both installations used forms of
renewable energy other than wind. As a result, one installation had to
use complex calculations in a lengthy process of conversion,
transforming its data from these other technologies into units that it
could report as wind energy. According to service officials, the Air
Force and Navy were in the process of addressing several of the issues
that we have identified in this report. For instance, an Air Force
official told us that the Air Force is working on updating its system
for managing energy information. However, the Air Force official was
unable to provide us with a date by which the service was planning to
complete the update of its energy management software.
As a result of the lack of adequate data management in the services and
OSD, DOD lacks accurate, complete, and consistent data for effectively
managing its renewable energy resources in pursuit of the renewable
energy goals. Lacking such data, OSD cannot effectively coordinate
service efforts in pursuit of the renewable energy goals, and DOD may
not be able to accurately assess its performance against the goals.
Conclusions:
DOD met both the 2005 Act and 2007 Executive Order goals in fiscal year
2007 and met the 2007 Executive Order goal in fiscal year 2008.
However, in that same fiscal year, it missed the 2005 Act goal, and in
both fiscal years overstated its progress toward the 2007 Defense
Authorization Act goal. Furthermore, DOD does not have all the elements
in place to enable it to maximize its progress toward meeting these
goals. First, because the services lack OSD guidance that provides a
methodology for calculating progress toward the 2007 Defense
Authorization Act goal and OSD's legal rationale for how its accounting
method is consistent with the language of the statute, when the
services calculate their progress toward the 2007 Defense Authorization
Act, they cannot be sure whether including electricity generated on DOD
lands but not consumed by DOD is consistent with the act. Such guidance
would better enable OSD to both accurately measure DOD's progress
toward the goal and accurately report on this progress to Congress.
Second, OSD lacks guidance that could assist installation officials in
developing accommodations to resolve potential incompatibilities
between renewable energy projects and an installation's primary
mission. Guidance would assist DOD in its development of renewable
energy projects on and around DOD installations. Third, DOD lacks a
sufficient cadre of qualified officials trained to effectively
implement alternative financing approaches. With a sufficient number of
officials qualified to effectively implement these approaches, DOD
would improve its opportunities for developing renewable energy
projects while protecting the government's financial resources
committed to these projects. Fourth, OSD lacks a long-term, DOD-wide
plan containing strategies for coordinating the services' renewable
energy activities, establishing accurate performance measures for
achieving the renewable energy goals, and effectively aligning DOD
resources in pursuit of these goals. Such a plan would strengthen DOD's
ability to meet future annual goals for renewable energy consumption.
It is important to note that the fiscal year 2010 Defense Authorization
Act amended the 2007 Authorization Act. However, because OSD lacks a
clear methodology for calculating progress towards the 2007 Act's goal,
determining the effect of the amendments on the amount of renewable
energy the department can claim toward that goal is uncertain.
Moreover, there are other key challenges we have identified in this
report. Thus, a long-term, DOD-wide plan would still strengthen DOD's
ability to meet these goals. Fifth, OSD lacks a system for tracking
individual renewable energy projects DOD-wide, and two of the three
services do not have adequate data systems for monitoring or reporting
their use of renewable energy. With an OSD system that tracks projects
across DOD and service systems that adequately monitor and report data
on their renewable energy use, DOD would be better able to effectively
coordinate service efforts in pursuit of the renewable energy goals,
monitor and report service use of renewable energy, and accurately
assess DOD's performance against the goals.
Recommendations for Executive Action:
To enhance DOD's ability to achieve the renewable energy goals
consistent with the need to maximize cost-effectiveness, follow
existing federal guidance, and increase oversight of DOD's renewable
energy activities, we recommend that the Secretary of Defense direct
the Under Secretary of Defense (Acquisition, Technology and Logistics)
in conjunction with the secretaries of the services to take the
following five actions:
* Develop and issue guidance specifying how to accurately report DOD's
annual progress toward the 2007 Defense Authorization Act goal, as
amended by fiscal year 2010 Defense Authorization Act. Among other
things, this guidance should clearly define how the services are to
apply the terms "produce" and "consume" to their implementation of the
goal and how OSD is to apply the terms to its reporting of DOD's
progress toward the goal.
* Develop and issue guidance to assist the services in determining how
to balance the use of land for renewable projects with their
installations' primary missions, thereby assisting installation
commanders and potential investors in knowing which land on the
installations may be available for renewable energy projects,
consistent with the installations' mission capabilities.
* Facilitate the successful implementation of alternative financing
approaches and help ensure that DOD can maximize its opportunities for
completing cost-effective renewable energy projects by (1) determining
the adequate number of energy managers, contracting officials, and
other officials with the necessary expertise to administer these
complex transactions and (2) determining and providing the appropriate
level of training to these employees.
* Develop a long-term, DOD-wide plan to assist DOD in effectively and
efficiently meeting the renewable energy goals over the long term. At a
minimum, this plan should identify key challenges--such as the higher
price of renewable energy compared with conventional energy and
volatility in renewable energy certificate markets--that DOD faces in
meeting the goals and ways to mitigate those challenges. The plan
should also coordinate the services' renewable energy activities,
contain realistic performance measures for DOD and the services so that
OSD can accurately assess annual progress, and align DOD's resources in
pursuit of the renewable energy goals.
* Develop information systems or processes that will enable OSD to have
visibility over DOD renewable energy projects, allow the services to
monitor and coordinate the services' consumption of renewable energy,
and guide DOD toward achievement of the renewable energy goals.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD concurred with our
recommendations to develop (1) guidance on reporting progress toward
the goal to obtain 25 percent of its facilities' energy from renewable
sources by 2025, (2) guidance on balancing installations' renewable
energy goals with the installations' missions, (3) a plan to meet
renewable energy goals, and (4) information systems improving
visibility over service progress toward the renewable energy goals. DOD
partially concurred with our recommendation that OSD work with the
secretaries of the services to facilitate the successful implementation
of alternative financing approaches and help ensure that DOD maximizes
opportunities for completing cost-effective renewable energy projects
by (1) determining the adequate number of energy managers, contracting
officials, and other officials with the necessary expertise to
administer these complex transactions and (2) determining and providing
the appropriate level of training to these officials. In its comments,
DOD acknowledged that sufficient personnel with appropriate skills are
necessary to execute third-party finance actions. However, DOD also
stated that implementing the recommendation is the services'
responsibility because DOD Instruction 4170.11 requires the services to
designate and assign adequate staff to satisfy statutory energy
management mandates, and manage the number and skills of these
officials. While we recognize that the instruction specifies that the
military services are to designate and assign energy management staff
to their facilities, our report clearly stated that the Army, Navy, and
Air Force had not fully implemented the instruction since each of these
services continue to experience shortages of qualified energy
officials. Moreover, the instruction assigns to an office within OSD
the responsibility of conducting oversight of the services'
implementation of the instruction, and OSD's activities to date have
similarly not led to sufficient numbers of trained energy officials at
the installations. As a result, we continue to believe that our
recommendation has merit, and consequently we reiterate the
recommendation. DOD's comments are reprinted in appendix II of this
report.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to interested congressional committees; the Secretaries of Defense,
Energy, the Army, the Navy, and the Air Force; the Commandant of the
Marine Corps; and the Director, Office of Management and Budget. The
report also will be available at no charge on GAO's Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions concerning this report, please
contact Mark Gaffigan at (202) 512-3168 or gaffiganm@gao.gov or Brian
J. Lepore at (202) 512-4523 or leporeb@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Key contributors to this report are
listed in appendix III.
Signed by:
Mark Gaffigan, Director:
Natural Resources and Environment:
Signed by:
Brian J. Lepore, Director:
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
Our objectives were to (1) determine whether the Department of Defense
(DOD) met three key goals for consuming renewable energy in fiscal
years 2007 and 2008; (2) identify the challenges that may affect DOD's
ability to meet the renewable energy goals; and (3) assess DOD's plans
to meet the renewable energy goals.
To determine whether DOD met the Energy Policy Act of 2005 (the 2005
Act) and Executive Order 13423 (the 2007 Executive Order) goals for
consumption of renewable energy in its facilities in fiscal years 2007
and 2008, we analyzed data on DOD's performance toward these goals from
the department's annual energy management reports for fiscal years 2007
and 2008. These reports were submitted by DOD to the Department of
Energy (DOE) for use in DOE's Annual Report to Congress on Federal
Government Energy Management and Conservation Programs. For fiscal
years 2007 and 2008, we considered DOD to have met the 2005 Act goal if
it obtained at least 3 percent of the electricity it consumed from
renewable sources as defined in section 203 of the act, and considered
DOD to have met the 2007 Executive Order goal if it obtained equal to
half (or 1.5 percent) of this energy from new renewable sources as
defined in section 2(b) of the executive order. In addition, we met
with officials from DOE's Federal Energy Management Program--which
prepared guidance for agencies to follow when meeting the goals--to
gain their perspective on how progress toward the goals is calculated.
We also met with officials from the Office of the Under Secretary of
Defense (Acquisition, Technology and Logistics), the Facility Energy
office of the Office of the Deputy Under Secretary of Defense
(Installations and Environment), and each of the military services to
discuss how DOD and the services calculated their progress toward the
goals. To determine DOD's progress toward the National Defense
Authorization Act for Fiscal Year 2007 goal for consumption of
renewable energy, we reviewed DOD's reported progress toward the goal
included in the fiscal years 2007 and 2008 annual energy management
reports and data provided by the services to the Facility Energy office
of the Deputy Under Secretary of Defense (Installations and
Environment) for preparation of the report. We also reviewed the legal
language that established the goal and discussed our interpretation of
this language with officials in the Office of the Secretary of Defense
(OSD) General Counsel's office.
The data used by DOD to determine its progress toward the three goals
are assembled using a data collection instrument that is separate from
the information systems used by the military services to manage energy
data. This data collection instrument is an electronic template created
by DOE's Federal Energy Management Program and disseminated to the
federal agencies to use to assemble data for their annual energy
management reports. To determine the reliability of the data used by
DOD to report its progress toward the three goals, we interviewed
officials at each level of data collection, aggregation, and review:
those responsible for preparing the data collection tool sent to energy
managers at the military facilities; for entering this information into
data collection tools at the facility level; for summarizing it and
checking it for accuracy at the headquarters level for each of the
services; and for combining the services' data into a departmentwide
total and assessing the accuracy of this total. We also obtained the
data submitted by the services to OSD, and compared the two data sets
for completeness and accuracy. We did not find discrepancies between
the data submitted by the services to OSD and the department's annual
energy management report data. We determined that these data were
sufficiently reliable for our purpose, which was to convey the progress
DOD made toward the three key goals for consumption of renewable energy
in its facilities.
To identify the challenges that affect DOD's ability to meet these
goals in the future, we met with officials at the Facility Energy
office of the Deputy Under Secretary of Defense (Installations and
Environment), each of the military services' headquarters, and offices
within each military service with responsibility for renewable energy
projects, and obtained and analyzed relevant documentation from these
officials. Using a data collection instrument, we also collected data
on the location, size, type, and financing of renewable energy projects
at DOD. We used this data collection instrument because DOD does not
have a central, comprehensive list of renewable energy projects. We
sent the instrument to OSD with instructions in December 2008, and OSD
sent the instrument to each of the services for each facility with
relevant projects to complete the instrument. The initial data
collection instrument, which we received from OSD in February 2009,
accounted for all renewable energy projects from relevant DOD
facilities, but was incomplete in that information on funding
mechanisms was not provided for all projects. We made a follow-up
request to OSD to clarify the missing elements of the data. These
elements were incorporated into the original response from OSD. To
determine the reliability of these data, we checked them against
previously identified information about the projects and, when
inconsistencies were found, discussed them with OSD and the services
and made corrections when relevant. We determined these data were
sufficiently reliable for our purpose, which was to establish how much
renewable energy DOD produced from electric and nonelectric renewable
energy and from projects financed through each type of financing
approach. We also visited five military facilities to determine the
practical effect of the challenges to meeting renewable energy goals on
the facilities. We selected these installations because they represent
each of the military services, have different types and sizes of
renewable energy projects, and operate in three different states. At
these locations, we interviewed the facility energy managers and other
relevant officials; confirmed data we had received about the
facilities' renewable energy projects; viewed renewable energy projects
at the facilities; and obtained relevant documents, including contracts
for renewable energy projects, energy reports generated from on-site
data management systems, and utility invoices. We systematically
reviewed these interviews with OSD, military service, and facility
officials to determine what primary challenges DOD faces and the tools
the department uses to meet the renewable energy goals.
For our review of DOD's plans to meet these goals in the future, we
reviewed planning documents obtained from OSD and military service
officials as well as planning documents from DOD officials that
summarized DOD's limited plans to achieve the renewable energy goals
from fiscal year 2010 through fiscal year 2025. We also met with DOD
officials to discuss efforts to develop a departmentwide, long-term
plan to meet the renewable energy goals. We systematically reviewed
these documents and interviews to determine whether DOD's plans
contained key elements as identified by our past work.[Footnote 52] To
assess the information systems used by the military services to manage
their energy data, we met with officials at each of the military
service headquarters with responsibility for managing these systems,
and obtained and analyzed relevant documentation about these systems.
We also asked energy managers at the military facilities we visited
about their use of these systems. We determined that there are problems
associated with the systems used by two of the services. Specifically,
the Navy's central Web-based data system to manage energy data has been
unavailable since December 2007, and the Air Force's data system is
unable to manage renewable energy data, requiring the use of
spreadsheets directly e-mailed from installations to Air Force
headquarters. We discuss these problems in more detail in our findings.
In addition to audit work described above, we also met with renewable
energy experts at DOE's National Laboratories, selected nongovernmental
organizations--including the National Association of Regulatory Utility
Commissioners and the Interstate Renewable Energy Council--and the
public utility commissions of the states where we conducted site
visits. We also participated in DOE webcast training on alternative
financing mechanisms for renewable energy projects and attended
GovEnergy, an energy training workshop and exposition for federal
agencies.
We conducted this performance audit from October 2008 to November 2009
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition, Technology, and Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
December 8, 2009:
Mr. Brian J. Lepore:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington; DC 20548:
Dear Mr. Lenore:
This is the Department of Defense (DoD) response to the GAO draft
report GAO-10-104. Defense Infrastructure: DoD Needs To Take Actions To
Address Challenges In Meeting Federal Renewable Energy Goals," dated
November 5, 2009 (GAO Code 351274). Detailed comments on the report
recommendations arc enclosed.
The Department appreciates the opportunity to respond to your draft
report and looks forward to working with you.
Sincerely,
Signed by:
Brian J. Lally:
Director:
Facility Energy and Utilities Privatization:
Enclosure: As stated:
[End of letter]
GAO Draft Report ” Dated November 5, 2009:
GAO Code 351274/GAO-10-104:
"Defense Infrastructure: DoD Needs To Take Actions To Address
Challenges In Meeting Federal Renewable Energy Goals"
Department Of Defense Comments To The Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense (Acquisition, Technology and
Logistics) in conjunction with the Secretaries of the Services to
develop and issue guidance specifying how to accurately report DoD's
annual progress toward the 2007 Defense Authorization Act goal of
obtaining not less than 25 percent of DoD's total electricity
consumption during FY 2025. and each fiscal year (hereafter, from
renewable energy sources.
Among other things. this guidance should clearly define how the
Services are to apply the terms "produce" and "consume" to their
implementation of the goal and how OSD is to apply the terms to its
reporting of DoD's progress toward the goal.
DOD Response: Concur. The Department recognizes the need the clarify
the accounting differences between renewable projects that meet the
2005 Energy Policy Act goals as adjusted Executive Order 13423 and the
renewable energy goals contained in the 2007 National Defense
Authorization Act as modified by the 2010 National Defense
Authorization Act. This will be addressed in the FY 2010 Annual Energy
Management Report.
Recommendation 2: The CIAO recommends that the Secretary of Defense
direct the Under Secretary of Defense (Acquisition, Technology and
Logistics) in conjunction with the Secretaries of the Services to
develop and issue guidance to assist the Services in determining how to
balance the use of land for renewable projects with their installations
primary missions, thereby assisting installation commanders and
potential investors in knowing which land on the installations may he
available for renewable energy projects, consistent with the
installations' mission requirements.
DOD Response: Concur. The Department agrees that it is necessary to
implement the renewable energy goals contained in the 2005 Energy
Policy Act and 2007 National Defense Authorization Act in a manner that
integrates renewable energy projects with installation missions. This
guidance will be overarching, yet sufficiently flexible to allow
each installation to manage its own specific renewable energy
opportunities and mission requirements.
Recommendation 3: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense (Acquisition. Technology and
Logistics) in conjunction with the Secretaries of the Services to
facilitate the successful implementation of alternative financing
approaches and help ensure that DoD can maximize its opportunities for
completing cost-effective renewable energy projects by: (I) determining
the adequate number of energy managers, contracting officials, and
other officials with the necessary expertise to administer these
complex transactions and (2) determining and providing the appropriate
level of training to these employees.
DOD Response: Partially concur. The Department agrees that sufficient
personnel with appropriate skill sets arc necessary to execute third-
party finance actions. In DoD Instruction 4170.11 (9 Sep 2009), the
Department requires its components to designate and assign adequate
staff to satisfy statutory energy management mandates. Determining the
specific quantity and skill set of the staff is a component.
responsibility.
Recommendation 4: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense (Acquisition, Technology and
Logistics) in conjunction with the Secretaries of the Services to
develop a long-term, DoD-wide plan to assist the Department in
effectively and efficiently meeting the renewable energy goals over the
long term. At a minimum, this plan should identify key challenges ”
such as the higher price of renewable energy compared with non-
renewable energy and volatility in renewable energy certificate
markets ” that DoD faces in meeting the goals and ways to mitigate
those challenges. The plan should also coordinate the Services'
renewable energy activities: contain realistic performance measures for
DoD and the Services do that OSD can accurately assess annual progress:
and align DoD's resources in pursuit of the renewable energy goals.
DOD Response: Concur. The Department believes that a single energy
security plan (which would integrate renewable energy) can satisfy
recommendations 2 and 4.
Recommendation 5: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense (Acquisition, Technology and
Logistics) in conjunction with the Secretaries of the Services to
develop information systems or processes that will enable OSD to have
visibility over DoD renewable energy projects, allow the Services to
effectively monitor their production of renewable energy, coordinate
the Services' consumption of renewable energy, and guide DoD toward
achievement of the renewable energy goals.
DOD Response: Concur. The Department will identify the required
personnel and funding resources to accomplish this goal over the long
term.
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Mark Gaffigan, (202) 512-3168 or gaffiganm@gao.gov Brian J. Lepore,
(202) 512-4523 or leporeb@gao.gov:
Acknowledgments:
In addition to the contacts named above, Terrel Dorn, Director; Susan
Irving, Director; Carol Henn, Assistant Director; Ernie Hazera,
Assistant Director; Harold Reich, Assistant Director; John Van Schaik,
Assistant General Counsel; Leslie Bharadwaja; Kenneth Cooper; Pamela
Davidson; Cynthia Grant; Sarah Jones; Foster Kerrison; Ron La Due Lake;
Katherine Lenane; Brian Mullins; Carol Shulman; Vasiliki
Theodoropoulos; Jason Trentacoste; Christopher Turner; Cheryl Weissman;
Sherie Walker; Michael Willems; Ignacio Yanes; and Kimberly Young made
key contributions to this report.
[End of section]
Related GAO Products:
Defense Critical Infrastructure: Actions Needed to Improve the
Consistency, Reliability, and Usefulness of DOD's Tier 1 Task Critical
Asset List. [hyperlink, http://www.gao.gov/products/GAO-09-740R].
Washington, D.C.: July 17, 2009.
Federal Energy Management: Addressing Challenges through Better Plans
and Clarifying Greenhouse Gas Emission Measure Will Help Meet Long-term
Goals for Buildings. [hyperlink,
http://www.gao.gov/products/GAO-08-977]. Washington, D.C.: September
30, 2008.
Defense Management: Overarching Organizational Framework Needed to
Guide and Oversee Energy Reduction Efforts for Military Operations.
[hyperlink, http://www.gao.gov/products/GAO-08-426]. Washington, D.C.:
March 13, 2008.
Advanced Energy Technologies: Budget Trends and Challenges for DOE's
Energy R&D Program. [hyperlink,
http://www.gao.gov/products/GAO-08-556T]. Washington, D.C.: March 5,
2008.
Transmission Lines: Issues Associated with High-Voltage Direct-Current
Transmission Lines along Transportation Rights of Way. [hyperlink,
http://www.gao.gov/products/GAO-08-347R]. Washington, D.C.: February 1,
2008.
Advanced Energy Technologies: Key Challenges to Their Development and
Deployment. [hyperlink, http://www.gao.gov/products/GAO-07-550T].
Washington, D.C.: February 28, 2007.
Department of Energy: Key Challenges Remain for Developing and
Deploying Advanced Energy Technologies to Meet Future Needs.
[hyperlink, http://www.gao.gov/products/GAO-07-106]. Washington, D.C.:
December 20, 2006.
Renewable Energy: Increased Geothermal Development Will Depend on
Overcoming Many Challenges. [hyperlink,
http://www.gao.gov/products/GAO-06-629]. Washington, D.C.: May 24,
2006.
Energy Savings: Performance Contracts Offer Benefits, but Vigilance Is
Needed to Protect Government Interests. [hyperlink,
http://www.gao.gov/products/GAO-05-340]. Washington, D.C.: June 22,
2005.
National Energy Policy: Inventory of Major Federal Energy Programs and
Status of Policy Recommendations. [hyperlink,
http://www.gao.gov/products/GAO-05-379]. Washington, D.C.: June 10,
2005.
Meeting Energy Demand in the 21st Century: Many Challenges and Key
Questions. [hyperlink, http://www.gao.gov/products/GAO-05-414T].
Washington, D.C.: March 16, 2005.
Capital Financing: Partnerships and Energy Savings Performance
Contracts Raise Budgeting and Monitoring Concerns. [hyperlink,
http://www.gao.gov/products/GAO-05-55]. Washington, D.C.: December 16,
2004.
Geothermal Energy: Information on the Navy's Geothermal Program.
[hyperlink, http://www.gao.gov/products/GAO-04-513]. Washington, D.C.:
June 4, 2004.
Budget Issues: Alternative Approaches to Finance Federal Capital.
[hyperlink, http://www.gao.gov/products/GAO-03-1011]. Washington, D.C.:
August 21, 2003.
Agencies' Strategic Plans Under GPRA: Key Questions to Facilitate
Congressional Review. [hyperlink,
http://www.gao.gov/products/GAO/GGD-10.1.16]. Washington, D.C.: May
1997.
Executive Guide: Effectively Implementing the Government Performance
and Results Act. [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118]. Washington, D.C.: June
1996.
[End of section]
Footnotes:
[1] In this example, we used DOD's total facility electricity use for
fiscal year 2007.
[2] DOD divides its energy consumption into two main categories:
mobility energy and facilities energy. We have previously reported that
mobility energy is required for moving and sustaining DOD's forces and
weapons platforms for military operations, while facilities energy is
consumed at fixed installations. This report focuses on facilities
energy. For previous work on mobility energy, see GAO, Defense
Management: Overarching Organizational Framework Needed to Guide and
Oversee Energy Reduction Efforts for Military Operations, [hyperlink,
http://www.gao.gov/products/GAO-08-426] (Washington, D.C.: Mar. 13,
2008).
[3] Section 203 of the 2005 Act directs the President, acting through
the Secretary of Energy, to achieve these goals on behalf of the
federal government as a whole. Furthermore, Department of Energy (DOE)
guidance implementing this statutory goal directs each federal agency
to meet this goal.
[4] This example is based on DOE information concerning the 2007
average residential consumption in the United States and DOD
information concerning its fiscal year 2007 facility electricity
consumption. We use the example only to provide a sense of the amount
of electricity required to meet the goal in the 2005 Act. Because the
goal is calculated as a percentage of DOD's annual electricity use, the
actual amount of electricity that it represents will likely change
annually, along with DOD's electricity consumption.
[5] DOE guidance directs each federal agency to meet the goals in the
2005 Act and the 2007 Executive Order. DOE, Office of Energy Efficiency
and Renewable Energy, Renewable Energy Requirement Guidance for EPACT
2005 and Executive Order 13423 (Jan. 28, 2008).
[6] Pub. L. No. 109-364, § 2852(a)(1) (2006) (codified at 10 U.S.C. §
2911). The law directed DOD "to produce or procure not less than 25
percent of the total quantity of electric energy it consumes within its
facilities and in its activities during fiscal year 2025 and each
fiscal year thereafter from renewable energy sources (as defined in
section 203(b) of the Energy Policy Act of 2005)." As explained below,
this goal was amended by the National Defense Authorization Act for
Fiscal Year 2010, Pub. L. No. 111-84, § 2842 (2009).
[7] Although not required to do so at the time, DOD reported its
progress toward achieving this goal in both fiscal years 2007 and 2008.
However, DOD is now required to report its progress toward achieving
this goal by the National Defense Authorization Act for Fiscal Year
2010, Pub. L. No. 111-84 § 332 (2009).
[8] This example is based on DOE information concerning the 2007
average residential consumption in the United States and DOD
information concerning its fiscal year 2007 facility electricity
consumption. We use the example only to provide a sense of the amount
of energy required to meet the goal in the 2007 Defense Authorization
Act. Because the goal is calculated as a percentage of DOD's annual
electricity use, the actual amount of electricity that it represents
will likely change annually, along with DOD's electricity consumption.
[9] While there are DOD overseas installations that use renewable
energy, this report addresses renewable energy use in DOD installations
located in the 50 states.
[10] In this report, we define "renewable energy" as energy generated
from solar; wind; biomass; landfill gas; ocean (including tidal, wave,
current, and thermal); geothermal (including ground source heat pumps
and electric generation); municipal solid waste; or new hydroelectric
generation capacity achieved since 1999 from increased efficiency or
additions of new capacity at an existing hydroelectric project.
[11] In this report, we define "services" as the U.S. Army, U.S. Navy,
and U.S. Air Force because the Department of the Navy manages both the
Navy's and Marine Corps' renewable energy programs.
[12] DOE, Energy Information Administration, Annual Energy Outlook
2009, DOE/EIA-0383 (Washington, D.C., March 2009).
[13] GAO, Advanced Energy Technologies: Budget Trends and Challenges
for DOE's Energy R&D Program, [hyperlink,
http://www.gao.gov/products/GAO-08-556T] (Washington, D.C.: Mar. 5,
2008), and Advanced Energy Technologies: Key Challenges to Their
Development and Deployment, [hyperlink,
http://www.gao.gov/products/GAO-07-550T] (Washington, D.C.: Feb. 28,
2007).
[14] A watt is the basic unit used to measure electric power. A watt-
hour is equal to a watt of power applied for 1 hour. A kilowatt-hour is
1,000 watt-hours, and a megawatt-hour is 1,000 kilowatt-hours.
[15] According to the Environmental Protection Agency, one example of
an environmental attribute is the avoided carbon emissions from
renewable energy generation, compared to nonrenewable generation. The
renewable energy certificate associated with a specific source of
renewable energy generation and the reporting rights to the avoided
emissions associated with the certificate are also considered an
environmental attribute.
[16] DOE, National Renewable Energy Laboratory, Emerging Markets for
Renewable Energy Certificates: Opportunities and Challenges, NREL/TP-
620-37388 (Golden, Colo., January 2005).
[17] DOE, Pacific Northwest National Laboratory, Purchasing Renewable
Power for the Federal Sector: Basics, Barriers, and Possible Options,
PNNL/16485. (Richland, Wash., April 2008).
[18] DOE, Office of Energy Efficiency and Renewable Energy, Renewable
Energy Requirement Guidance for EPACT 2005 and Executive Order 13423,
§§ 3.2.1, 3.3.1.
[19] Although DOD purchased a substantial amount of unbundled renewable
energy certificates in fiscal years 2007 and 2008, it is important to
note that according to DOD data, there are 217 renewable projects
located on or near DOD's installations in the 50 states; we discuss
these projects throughout the report. In fiscal years 2007 and 2008,
the renewable energy DOD claimed toward the goals came from each of the
applicable categories: production of bundled renewable energy from such
projects; purchases of bundled renewable energy; and purchases of
unbundled renewable energy certificates.
[20] According to the DOE guidance, this bonus equivalent is available
if any of the following conditions are met: (1) the renewable energy is
produced and used on-site at a federal facility; (2) the renewable
energy is produced on federal lands and used at a federal facility; (3)
the renewable energy is produced on Indian land and used at a federal
facility; or (4) the electricity produced on-site at a federal facility
is sold to a third party, but the power purchase contract explicitly
states that the federal agency retains ownership of the related
renewable energy certificates and nonenergy attributes, the energy
buyer is precluded from representing that such purchased energy is
"renewable" for any purpose, and all renewable energy and nonenergy
attributes must be retained on-site. Further, nonelectric energy from
renewable sources is not eligible for the bonus. DOE, Office of Energy
Efficiency and Renewable Energy, Renewable Energy Requirement Guidance
for EPACT 2005 and Executive Order 13423, § 3.4.
[21] This database is available at [hyperlink, http://www.dsireusa.org]
and is maintained by staff at the North Carolina State University in
partnership with the Interstate Renewable Energy Council, and is funded
by the DOE.
[22] Section 591(a) of Title 40, U.S. Code. In addition, DOD must
comply with state utility commission rulings and electric utility
franchises or service territories established under state statute,
state regulation, or state-approved territorial agreements.
[23] In this report, we define appropriated funding as "up-front" when
DOD has sufficient funding to pay for the full cost of the renewable
energy project before a commitment is made for the project, instead of
the funding DOD uses to make payments on capital borrowed through
certain types of alternative financing approaches. We have previously
reported that full up-front appropriations are the best way to maintain
governmentwide fiscal control. See GAO, Budget Issues: Alternative
Approaches to Finance Federal Capital, GAO-03-1011 (Washington, D.C.:
Aug. 21, 2003).
[24] For purposes of this report, we define "small" renewable energy
projects as those under 1,000 million British thermal units of
renewable energy production per year.
[25] DOE, Office of Energy Efficiency and Renewable Energy, Renewable
Energy Requirement Guidance for EPACT 2005 and Executive Order 13423,
and Section 2911(e) of Title 10, U.S. Code.
[26] DOD Instruction 4170.11, Installation Energy Management, enc. 2 §
1 (Dec. 11, 2009).
[27] Pub L. No. 111-84, § 2842 (2009).
[28] In the act, "renewable energy sources" are those resources defined
as renewable in section 203(b) of the Energy Policy Act of 2005 (42
U.S.C. 15852(b)). As explained above, the 2025 goal in the 2007 Defense
Authorization Act was amended by the National Defense Authorization Act
for Fiscal Year 2010, Pub. L. No. 111-84, § 2842 (2009).
[29] GAO, Agencies' Strategic Plans Under GPRA: Key Questions to
Facilitate Congressional Review, [hyperlink,
http://www.gao.gov/products/GAO/GGD-10.1.16] (Washington, D.C.: May
1997).
[30] Because of this lack of clarity, in June 2009, we requested that
DOD's Office of General Counsel provide us with DOD's legal rationale
for counting renewable energy not consumed by DOD toward the 2007
Defense Authorization Act goal. We also asked several questions related
to DOD's interpretation of the act, including DOD's definition of key
terms and the extent to which DOD's current methodology is consistent
with the plain language of the act. As of December 2009, DOD had not
responded.
[31] DOD, Report to Congress on Renewable Energy (Washington D.C.,
April 2008), 4.
[32] DOE, Office of Energy Efficiency and Renewable Energy, Renewable
Energy Requirement Guidance for EPACT 2005 and Executive Order 13423, §
3.
[33] It is unclear, for example, whether DOD would consider energy that
is generated by a private developer on DOD land where DOD is not
directly involved in the production and distribution of that renewable
energy as "produced" by DOD.
[34] DOD, Report to Congress: DOD Renewable Energy Assessment Final
Report (Washington, D.C., Mar. 14, 2005).
[35] This calculation was performed using the amount of electricity
consumed by DOD installations in fiscal year 2006. The scope of the DOD
study included generation of renewable energy on installations,
generation of renewable energy on land near installations, and
purchases of renewable energy.
[36] Further, the language of the 2005 Act goal itself directs
fulfillment of the goal to obtain a certain percentage of energy from
renewable sources "to the extent economically feasible and technically
practicable."
[37] GAO, Department of Energy: Key Challenges Remain for Developing
and Deploying Advanced Energy Technologies to Meet Future Needs,
[hyperlink, http://www.gao.gov/products/GAO-07-106] (Washington, D.C.:
Dec. 20, 2006), and [hyperlink,
http://www.gao.gov/products/GAO-07-550T].
[38] According to GAO analysis of DOE data, almost all of the
electricity generated in the United States comes from nonrenewable
sources. For instance, in 2008, 91 percent of U.S. electricity
generation came from power plants using nonrenewable sources of fuel,
such as coal, natural gas, and nuclear material.
[39] We compared prices paid by DOD installations to the average price
for utility-delivered electricity in the states in which the
installations were located.
[40] According to the Environmental Protection Agency, these heat pumps
are underground coils used to transfer heat from the ground to the
inside of a building. See [hyperlink,
http://www.epa.gov/OCEPATERMS/gterms.html].
[41] The payback data were obtained from the DOE Energy Efficiency and
Renewable Energy: Energy Savers Web site at [hyperlink,
http://www.energysavers.gov/your_home/space_heating_cooling/index.cfm/my
topic=12640].
[42] Certain types of renewable electricity generation technologies--
such as geothermal and biomass--can provide uninterrupted power, but
because of certain limitations, relatively few DOD installations can
use these types of renewable energy. For example, the distribution of
these types of resources is limited to certain parts of the country.
[43] 10 U.S.C. § 2805(c).
[44] DOE, Office of Energy Efficiency and Renewable Energy, Renewable
Energy Requirement Guidance for EPACT 2005 and Executive Order 13423, §
3.2.1, 3.2.2.
[45] Energy Savings Performance Contracts allow federal agencies to
hire a contractor to develop energy conservation or renewable energy
projects with the expectation that the annual savings from the project
will fund the project's annual costs. We have previously reported the
Energy Savings Performance Contracts are likely to be more expensive
over the long run than using full upfront appropriations to purchase
assets; see GAO, Capital Financing: Partnerships and Energy Savings
Performance Contracts Raise Budgeting and Monitoring Concerns,
[hyperlink, http://www.gao.gov/products/GAO-05-55] (Washington, D.C.:
Dec. 16, 2004). Utility Energy Service Contracts are contracts between
a federal agency and the local utility to provide comprehensive energy
improvements, such as an energy efficiency or renewable energy.
[46] In our previous work, we have found that these contracts offer
some benefits and challenges similar to those we discuss in this
report. See GAO, Energy Savings: Performance Contracts Offer Benefits,
but Vigilance Is Needed to Protect Government Interests, [hyperlink,
http://www.gao.gov/products/GAO-05-340] (Washington, D.C.: June 22,
2005).
[47] GAO, Federal Energy Management: Addressing Challenges through
Better Plans and Clarifying the Greenhouse Gas Emission Measure Will
Help Meet Long-term Goals for Buildings, [hyperlink,
http://www.gao.gov/products/GAO-08-977] (Washington, D.C.: Sept. 30,
2008).
[48] Although DOD has relatively few projects that follow this model,
according to DOD officials, the department plans to enter into more
alternative financing approaches that follow this model.
[49] According to the DOE guidance, a federal agency can obtain
replacement certificates in two different ways. It can trade with
another federal agency or purchase the certificates from another
source. DOE, Office of Energy Efficiency and Renewable Energy,
Renewable Energy Requirement Guidance for EPACT 2005 and Executive
Order 13423, § 3.2.2.
[50] In such cases, it is unclear whether DOD must purchase replacement
certificates to count the renewable energy toward the fiscal year 2025
goal under the 2007 Defense Authorization Act. As discussed earlier in
the report, DOD has not developed guidance that could clarify this
issue.
[51] DOE, Pacific Northwest National Laboratory, Purchasing Renewable
Power for the Federal Sector: Basics, Barriers, and Possible Options.
[52] [hyperlink, http://www.gao.gov/products/GAO/GGD-10.1.16].
[End of section]
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