December 2, 2016

Trump Transition and Sustainable Energy: Department of Defense Programs Provide Strong Foundation for Energy Independence

Holland & Knight Government Energy Finance Blog
Taite R. McDonald

On December 1, President-elect Trump nominated retired General James Mattis as Secretary of Defense. Although Trump’s environmental and energy policy positions still lack specifics and nearly everything remains unknown, this is a notable development for sustainable and innovative energy providers that work with the Department of Defense (DoD) as retired General Mattis intimately understands the operational impact of energy dependence. He has publically noted that our military’s petroleum dependence remains a vulnerability and it is imperative to “unleash us from the tether of fuel.” In addition to this nomination, Trump has also begun to soften his tone on abandoning the international climate accord reached last year in Paris.

Given President-elect Trump’s recent actions combined with the statutory underpinning of DoD energy programs and value of these initiatives to our services and U.S. taxpayers, it is likely that DoD initiatives associated with sustainable energy will largely remain in place and may even expand under the Trump Administration. Contrary to popular belief, this may be the case even if President Obama’s federal sustainability executive orders (EOs) are no longer in place.

Underlying Regulatory and Policy Landscape

Currently, EO 13693 from 2015 requires federal agencies to consume 30% renewable electricity by 2025. The EO broadly aims to reduce the federal government’s greenhouse gas (GHG) emissions by 40% by 2025 and includes measures that aim to promote sustainability regarding building energy intensity, thermal energy, water utilization, waste management, and fleet vehicle procurements. The Obama Administration recently reinforced its commitment to EO 13693 when it committed the civilian agencies to collectively procure 1 gigawatt of renewable energy by 2021. The DoD has also committed the Navy, Army, and Air Force to each procure 1 gigawatt of renewable energy or 3 gigawatts in total by 2025. The General Services Administration (GSA) – which serves as the acquisition and procurement arm of the federal government – has independently committed to procuring 100% renewable power by 2025, which includes power for GSA facilities and power procured on behalf of other agencies.

Rescinding Obama’s Executive Orders

Were EO 13693 rolled back, as Trump promised during the campaign, the policy framework remaining would constitute a patchwork of Bush-era and Obama-era statutes from 2005, 2007, and 2010. Specifically, civilian agencies would have a 7.5% target by 2013 in place with the DoD at 25% by 2025. Indeed, the DoD’s mandate to develop energy resiliency and security at its mission critical assets would also remain statutorily in place. The central energy program offices at the Navy, Army, and Air Force – the Renewable Energy Program Office (REPO), Office of Energy Initiatives (OEI), and Office of Energy Assurance (OEA) respectively – have been established as well-funded and enduring offices into the foreseeable future.

Example Projects to Date

It is most important to note that all solar, wind, and biomass projects executed by the offices above to date provide sustainable energy solutions at costs lower than incumbent energy costs via third-party financing. In instances where an Enhanced Use Lease (EUL) project does not provide power to an installation, the value proposition for the U.S. military is even more significant. In such instances, energy resiliency solutions such as backup power or high-efficiency fuel-flexible generators are being provided to the installation in exchange for the use of underutilized military land for utility-scale solar projects. Accordingly, these projects, and the contracting structures that enable them, ultimately garner bipartisan support.

Congressional Support

The recent House and Senate reports on from the FY 2017 National Defense Authorization Act (NDAA) along with this week’s conference report supports these DoD-related initiatives, as funding saved through these procurements is being utilized to enhance mission assurance and to provide onsite resiliency. While the FY 2017 NDAA conference report formally requires the military to prioritize energy security and mission assurance over the climate-related provisions of EO 13693, the implications of this provision will be minimal-to-none given the increased mission and security focus of the DoD energy offices over the past two years.

Outlook for 2017

Although this reality may not compel the preservation of President Obama’s EO’s, the significant benefits associated with DoD’s sustainable energy projects may encourage the Trump Administration to utilize the existing DoD energy offices in a manner that more closely aligns with his campaign promises. Furthermore, Trump may utilize the EO process and existing energy offices to drive military infrastructure improvements, energy cost savings, increased combat capability, and offshore energy independence.

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