Security, predictability, climate change, safety – all of these are cited by the U.S. Department of Defense as motivating factors for its embrace of energy-efficient and renewable technologies. But a new report from the Pew Charitable Trusts puts just as much emphasis on another factor that might come as a surprise: cost.
First, make no mistake, the military is going green. The Pew study said that over a two-year period – from fiscal year 2010 to fiscal year 2012 – the number of “energy saving and efficiency projects” at military installations more than doubled, going from 630 to 1,339. Renewable energy projects increased at a slower rate, but still rose from 454 to 700 during the same period. Solar is a big part of this renewable energy expansion.
But how exactly do solar projects save the military money?
Well, the cost of producing electricity from renewable sources has been falling fast – the asset management firm Lazard reported last year that the levelized cost of energy from wind power had plunged by more than 50 percent in four years, and utility-scale solar PV had seen a similar drop. This reality, paired wth federal and state incentives, is luring third-part money into the renewables game with contracts that allow the military to spend little up front while saving over the long term.
An example of this is the development of a big solar power system at Davis-Monthan Air Force Base in Tucson. From the Pew report:
In June 2013, construction began on a 14.5-MW solar array at Davis-Monthan Air Force Base in Tucson, AZ. When completed, it will be the largest solar project in the Air Force’s renewable energy portfolio, surpassing the 14-MW facility at Nellis Air Force Base, NV.
The SunEdison solar company will finance, construct, operate, and maintain the project over the course of a 25-year power-purchase agreement. The Davis-Monthan base will buy the power produced at the facility at a rate lower than current electric prices. As a result, the project is estimated to save the base about $500,000 per year in energy costs while providing 35 percent of its electricity needs.
When the project is completed in late 2013, Davis-Monthan will have 20.5 MW of solar power capacity. The Soaring Heights housing community on the base already has 6 MW of ground- and roof-mounted solar in operation.
The 4.5-cents/kWh PPA the Air Force got here is a stunner, a solid indicator of large-scale solar’s competitiveness. But let’s be honest: no doubt this price is helped along by a couple of factors – a 30 percent investment tax credit (which still might be eligible to be taken as a cash grant under the 1603 program from the Obama stimulus), and Arizona’s requirement that utilities source 15 percent of their generation from renewables by 2025. According to the North American Development Bank, which is financing the Davis-Monthan solar with a $35 million loan to SunEdison, Tucson Electric Power gets the renewable energy credits generated from the plant “aiding TEP in its compliance with Arizona’s Renewable Energy Standard.” And helping SunEdison (or whatever entity ultimately owns the project; these deals often become quite complex) lower the cost of the electricity sold to the Air Force.
The Pew study said that this kind of third-party-funded PPA is expected to be behind 80 percent of the DoD’s future renewable energy projects. “These PPAs rely on private developers to finance, build and maintain projects while saving the military money over the life of the contract,” Pew said.
According to a SunEdison release from 2010 [PDF], when this project was initially awarded, the 130-acre array was expected to produce 31.5 million kilowatt-hours of electricity annually, a capacity factor of around 25 percent.