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A recent white paper from Arizona State University
notes that, with more than 300,000 buildings and two billion square
feet of building space, the Department of Defense ("DOD")
consumes more than three-quarters of the energy used by the federal
government (by comparison, the white paper notes that Wal-Mart has
only 4,200 buildings and approximately 700 million square feet of
space in the United States). According to DOD, buildings and fleet vehicles represent
roughly 40 percent of DOD's greenhouse gas emissions.
In this context, the United States Government Accountability
Office ("GAO") issued a report in April 2012 on renewable energy
project financing at DOD. The GAO report comes as DOD continues to
push for ways to improve energy efficiency. For example, DOD
intends to produce or procure from
renewable energy sources not less than 25 percent of the total
energy consumed within its facilities during fiscal year 2025 and
each year thereafter.
The GAO reviewed DOD's current approach to financing
renewable energy projects and recommended that, among other things,
DOD provide additional guidance for considering the business case
for each project as well as the costs and benefits of different
financing approaches. According to the GAO report, DOD should
develop guidelines for choosing between "up-front
appropriations" that rely on government funds versus
"alternative financing" options that tap private
capital.
The GAO report suggests that alternative financing, such as
Energy Savings Performance Contracts and Utility Energy Service
Contracts, have been used primarily for energy-efficiency projects
rather than renewable energy. In the past, DOD has used a limited number of Power
Purchase Agreements to fund projects such as the 14-megawatt solar
array located on Nellis Air Force Base. Alternative financing also
includes "enhanced-use leases," where the military
services enter into long-term leases with private entities. For
example, at Fort Irwin, the Army has proposed to lease land to a
contractor to build a 500-megawatt solar array.
DOD has embraced a majority of the GAO report's
recommendations, pledging to develop comprehensive guidance on the
full range of financing options, public and private. Moreover,
DOD's Strategic Management Plan aims to expand
the use of private capital for energy efficiency and renewable
energy projects by 15 percent in 2012 and 2013. To put this goal in
context, in fiscal 2010, DOD awarded $323 million in contracts for
energy efficiency and renewable energy projects financed with
Energy Savings Performance Contracts and Utility Energy Service
Contracts.
"Project SolarStrong" represents
another avenue for private capital to finance renewable energy
installations for the military. The project, which is led by
SolarCity and proposes to build $1 billion in solar power projects
for privatized U.S. military housing communities, has recovered
from the U.S. Department of Energy's decision to cancel a conditional loan
following the Solyndra LLC bankruptcy. In March, SolarCity joined
with U.S. Bancorp to launch a renewable energy tax equity fund
to support SolarStrong. This comes on top of $350 million in debt financing SolarCity
already has received from another large commercial lender.
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In a recent and much anticipated decision by both natural gas producers and landowners, the Pennsylvania Supreme Court finally cleared up confusion about who owns the mineral rights to shale gas in Butler v. Powers Estate.
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