Navy Renewable Energy Market Overview – The Best is Yet to Come
In 2015, the U.S. Department of Navy (Navy) undoubtedly led Department of Defense (DoD) renewable energy procurement efforts by meeting its goal to procure over one gigawatt (GW) of renewable energy. Specifically, the Navy released over 20 Requests for Proposals (RFPs) and over 20 notices to award a contract in 2015 alone. Although initial success once led to rumors of dwindling opportunities, the Navy’s late-2015 action and 2016 plans prove contrary.
In 2016, the Navy expects to continue to deploy renewable energy project while simultaneously leveraging its success to realize energy resiliency and mission assurance. The Navy is uniquely positioned to do such, as the Navy has key champions in top leadership roles and a Renewable Energy Program Office (REPO) that’s well equipped to utilize its three renewable energy contracting models and other procurement mechanisms to accommodate energy resiliency solutions.
The three different contracting models for renewable energy procurement that Navy REPO is currently pursuing are as follows:
- On-base development of new renewable generation assets, owned and operated by a developer, under a Power Purchase Agreement (PPA) where the Navy offtakes the power.
- Procurement of renewable energy from new generation assets developed off-base where the Navy offtakes via a Renewable Energy Supply Agreement (RESA).
- The development of new renewable generation assets on-base, which the Navy does not offtake but instead receives an in-kind consideration (IKC) that enhances the energy security posture of the installation—in lieu of cash payments for the land—from the developer under an Enhanced Use Lease (EUL). The developer is responsible for finding an offtaker for the power.
In addition to continuing to utilize these models in a traditional manner, the Navy is beginning to integrate resiliency solutions such as energy storage and microgrids into its renewable energy procurement contractual models. Although it is not financially feasible in all geographic regions, the Navy can utilize the PPA model in geographic regions where energy costs are high and EUL models in geographic regions where the policy landscape is attractive and land is at a premium. Moreover, preliminary analysis conducted by the Navy and industry shows that a broader set of contractual models could become available to commercially finance energy resiliency solutions in 2016 and beyond.
To encourage industry engagement, the Navy routinely issues Requests for Information (RFIs) to industry and other stakeholders to explore and assess potential project opportunities on specific installations. Moreover, the Navy remains open to developers directly bringing them potential project concepts that can drive future RFPs.
It is important to remember that every Navy procurement of renewable energy is conducted in a fully-competitive manner, except in regulated utility markets which require sole-sourcing the project to the local utility company. In such projects, the utility company often issues an RFP themselves or deals directly with an internal list of pre-approved developers. It is possible to court such a utility and get onto the pre-screened list, but such efforts may not necessarily be fruitful.
Overall, we encourage industry to first engage with the Navy in its market research efforts and familiarize themselves with the current Navy project pipeline on its website or by attending industry events. If an initial review or past experience suggests that Navy opportunities may be a fit for your company, we recommend developing a strategy to pursue the market in a streamlined manner that aligns with your company’s resources and that meets the needs of both your company and the Navy; otherwise, pursuing this significant market opportunity can become a burdensome and daunting process.