Department of Defense Energy Initiatives Update: What's Next? How Will the Election Impact Energy Programs?

by Wilson Sonsini Goodrich & Rosati
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Hundreds of industry representatives from companies of all types and sizes spent countless hours over the summer preparing submissions to the U.S. Army's $7 billion Renewable and Alternative Energy Power Production for Department of Defense (DoD) Installations Multiple Award Task Order Contract (MATOC). Now that submissions are in and the onus is on the Army officials overseeing the program to review applications and qualify bidding teams, industry representatives are left questioning what to do next. Unfortunately for those responsible for navigating DoD energy opportunities, the answer is neither clear nor straightforward, since the other services are not expected to operate in the same unified and publicly vocal manner as the Army has.

Thus, each company's strategy for pursuing non-MATOC DoD project opportunities with the Army and the other services cannot be determined using a "one size fits all" approach. Moreover, the looming election further complicates this landscape, as some energy-related initiatives are a product of the Obama Administration, while other programs were in place prior to the current president taking office. Below we outline key information regarding the Army Energy Initiatives Task Force (EITF) and the Air Force and Navy energy offices, in addition to thoughts on how the election will impact DoD energy initiatives.

Army: EITF

While the U.S. Army Corps of Engineers' (USACE's) staff in Huntsville, Alabama, is largely dedicated to MATOC submission review, that is not the only job they will be tasked with for the remainder of the calendar year. Army EITF officials intend to release at least four power purchase agreement (PPA) opportunities prior to announcing the parties qualified to bid on opportunities released through the MATOC. To ensure that PPA contracting goes smoothly, the Army EITF (technically via USACE) hopes to release a form PPA for industry comment. Although it will not be an opportunity for funding or contracting, the Army EITF hopes that the Request for Information (RFI) can play a critical role in helping it uncover unknown obstacles in the contracting process and, eventually, streamline the process dramatically.

Ideally, the EITF would like to have at least one of the first four opportunities referenced above under contract in the coming months. Several more base-specific opportunities may be released prior to the announcement of MATOC awardees; however, that may no longer be feasible, considering the limited amount of time between now and the time the MATOC awardees are expected to be announced (either late Q1 or early Q2 2013).

Air Force: AFCEC

The Air Force is currently integrating its three agencies with jurisdictional authority over energy into one central contracting office, much like the Army's EITF. The Air Force Civil Engineering Center (AFCEC) will now act as the main point of contact for Air Force facility energy opportunities and industry representatives seeking to engage in Air Force energy projects.

This office will contract opportunities, but also will likely play an expanded role in vetting and preparing new Air Force Bases (AFBs) for solicitation. This structure will allow the AFCEC the flexibility to utilize MATOC-like contracting vehicles or base-by-base opportunities as applicable from its proposed headquarters in San Antonio.

Navy: NAVFAC

The Department of Navy (DON) has set up a One Gigawatt Task Force to determine how best for DON to meet its 1 gigawatt (GW) goal. However, DON has elected not to pursue a MATOC or broad-scale applicant certification process for its energy opportunities through this office. Rather, both DON facility managers and other properly positioned parties can propose projects directly to the Naval Facilities Engineering Command (NAVFAC) or solicit project ideas through base-level RFIs like the one China Lake released last summer.

While DON will be achieving a large portion of its renewable energy goals from expanding renewable energy production at facilities such as China Lake, NAVFAC has expressed interest in projects that can serve the smaller, consolidated baseloads of its many local and regional clusters of facilities. This approach allows DON to aggregate opportunities into larger megawatt projects for industry to develop a more cost-competitive rate.

Outlook on Current DoD Energy Initiatives

In our previous alert announcing the Obama Administration's goal to deploy 3 GWs of renewable energy at DoD facilities (http://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/wsgralert-dod-renewable-energy-update.htm), we outlined the energy goals that serve as the foundation for DoD's current energy initiatives. As discussed, the administration's 3 GW goal does not provide an opportunity for the development of renewable energy beyond DoD's previous goal of producing or procuring 25 percent of its total electricity consumption from renewable energy sources by 2025, which is codified in the National Defense Authorization Act of 2007.

If Governor Romney is elected and the 3 GW goals are no longer supported by the services, the 2007 goals originally driving the development of facility-level renewable energy efforts will remain in place. Moreover, since the energy policy offices currently are run by career civil servants and not political appointees, the renewable energy efforts currently underway are likely to move forward. Transition in the senior ranks eventually will impact these offices, but in the short term the programs are likely to proceed in a relatively seamless manner.

Alternatively, if President Obama is re-elected, these programs are not only guaranteed to proceed, but likely will be expanded both directly and indirectly, through DoD's collaboration with DOE and other agencies. Therefore, it is worthwhile to recognize that no matter the outcome of the election, these DoD renewable energy procurement initiatives are long-standing and sustainable initiatives that will proceed, but on varying timelines and to varying degrees.

Conclusion

Project opportunities and methods of engagement will vary by service and by base, which means that it can be overwhelming for industry representatives to engage each office and each base on the right project timeline. Rather than waiting for each DoD branch central office to announce opportunities or begin to blindly engage with bases, companies should target potential bases and projects that align with their regional strengths, technological advantages, project development experience, and current corporate relationships.

After targeting a handful of projects that appear to be cost-competitive for DoD and mutually beneficial for the company and a particular base, the company should begin the process of appropriately collaborating with the various levels of DoD officials responsible for overseeing the development and execution of renewable energy projects for that base. Proactively developing and executing DoD strategies in this manner ensures that companies are pursuing attractive, high-potential projects and not just needlessly exhausting resources pursuing these sustainable yet long-term initiatives.

For more information or assistance in developing a DoD strategy for your company, please contact Taite McDonald (tmcdonald@wsgr.com), Chris Groobey (cgroobey@wsgr.com), or Todd Glass (tglass@wsgr.com).

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Wilson Sonsini Goodrich & Rosati
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