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By Eric Beidel

A Defense Department official compared the process of finding federal funding for green energy projects to a night out on Bourbon Street.

“It’s colorful, mysterious, tempting and sinful all at the same time,” said James Galvin, program manager of the Defense Department’s Environmental Security Technology Certification Program, a relatively new initiative that provides a test bed for green products coming out of the private sector.

But some industry representatives might add “cheap” to that list of adjectives.

Government officials and contractors agree that military energy efforts need more funding. But while Pentagon officials call for greater private-sector investment, industry leaders say they are waiting for the government to also prove it will commit resources to such programs for the long run.

During a presentation at a conference in New Orleans titled, “Where to Find Federal Funding for Energy Projects,” Galvin spoke about a series of programs offering anywhere between a few hundred thousand dollars to $5 million for projects lasting as long as five years.

His program so far has funded a $1.2 million project to build an environmentally friendly fire, police and emergency response station at Fort Bragg, N.C.; a $2 million effort by General Dynamics to help install a microgrid at the Marine Corps’ 29 Palms base in California; and Virgina Tech’s $567,000 effort to install LED street lights at a naval station in Carderock, Md.

These are all commendable efforts, industry representatives said, but they don’t represent the big bucks needed to fund game-changing energy projects.

“This reticence by government to finance large-scale energy projects has created a funding vacuum that is dependent upon the private sector to make sizable investments in a market that has not enjoyed overwhelming support,” said Paul “Bo” Bollinger, general manager of government solutions at The Boeing Co.’s energy division.

Modernizing the electric grid is a case in point. Beyond policy impediments, there are the technological challenges associated with 160,000 miles of transmission lines covering the country’s antiquated electric grid, Bollinger said at the National Defense Industrial Association’s annual energy symposium, the same conference at which Galvin spoke.

There are more than 3,200 power-producing utilities governed by commissions and state laws that can severely limit the amount of renewable energy that can be independently produced and consumed, Bollinger noted. Even if government and industry agree that the technological tools exist to achieve energy security, Bollinger said, “where will the estimated $1.4 trillion required to upgrade the nation’s transmission system come from in this economic environment?”

Today’s energy debate is not new or unique, Bollinger said. “President Obama and every president before him, starting with President Nixon, has proposed a national energy policy to move the country away from its addiction to oil and toward energy independence.” Little has changed despite these efforts, he said.

A smart electric grid — a web of hundreds or thousands of interconnected micro-grids — could revolutionize the way Americans, including the military, use energy, Bollinger said. Standards must be developed to ensure capability and a level of security to protect the grid from hackers, terrorists and natural disasters. A smart grid would allow consumers to monitor their usage and “power up or power down based on their unique needs and to save money,” he said.

The Pentagon has shown an interest in microgrid technology, but there still is no specific funding at the installation level for energy security, Bollinger said. Boeing has added smart-grid systems at several company locations, helping to reduce its energy use by 32 percent. The technology could be the tool the United States needs to achieve energy independence, and the military can kick off this revolution, he said.

“The DoD has the ability to serve as the market initiator for large-scale renewable and clean energy projects,” but it also requires more investment from the government, Bollinger said. The Defense Department is seen as torch-bearer for leading the country to a future of less dependence on foreign oil. As the largest energy consumer, it has a bull’s-eye on its back, he said.

The Army, immersed in two lengthy wars, may feel like the biggest target. The service is lagging behind the others when it comes to new energy mandates piling up across the Defense Department. In fiscal year 2010, the Army had a goal of reducing its energy intensity — a measure that compares the amount of energy used against military effectiveness — by 15 percent. It was able to reduce it by just 8 percent. The Army also missed its goal to have renewable energy account for 5 percent of its total use.

“The Army is not doing great in the energy performance arena right now,” said Caroline Harrover, a senior policy analyst at Current Technologies Corp. and a support contractor for Army energy partnerships.

Now the service is looking to attract private investments for green projects, Harrover said at the energy symposium.

The Army has more than 120 renewable energy projects under way, but they only account for 2 percent of its entire usage. “The Army has had some success with the low-hanging fruit,” Harrover said, but fulfilling policy mandates would require an investment of $134 billion into energy projects between 2012 and 2016, Harrover said. That’s 11 times the amount the Army currently spends on such initiatives.

“What the Army is trying to do is reposition to attract that private sector investment, particularly in renewable energy development,” Harrover said. At the top of the list is the Army’s “net zero” goal of making installations produce as much energy on site as they use in a given year. The service has selected more than a dozen installations to participate in a pilot program.

The Army is looking at a few different alternative methods to finance its energy-related projects. One, an energy savings performance contract, involves a partnership with a private company that designs, builds and monitors the savings from a project. Another called an “enhanced use lease” would have the Army renting out underused land for development of a renewable energy venture. This doesn’t create any additional energy for the service, which could buy some of the power through a power purchasing agreement. The Army so far is running about 135 projects under performance contracts. But it has only ever executed one PPA at Fort Carson, Colo.

The Army would like to migrate some of the green initiatives from its stateside installations to combat zones, where most of the Defense Department’s fuel is spent. Units are using foam insulation on tents, micro-grids and rucksacks with rechargeable solar power. There are about 100 of the latter in use right now.

“The Army has had some success in small-scale renewable energy development — solar on rooftops, things like that,” Harrover said. “But the Army really needs to position to attract that large-scale renewable energy development. To do that, it’s going to need that alternative financing from the private sector.”

The service is looking to bring in more than $7 billion in private funding for development projects by 2022. The plan is to reach out to state and local governments, streamline acquisition processes and invest some capital up front, Harrover said.

A more detailed report on the Army’s strategy for energy efforts and avenues for financing them will be rolled out in August, she said.

Defense Department goals to reduce energy demand have proved to be more difficult to achieve than previously thought. Growing demand for fuel and other forms of power in combat zones are among the culprits, officials said, but energy use on installations also needs to be curbed.

The Pentagon is counting on two programs, the Strategic Environmental Research and Development Program and the Environmental Security Technology Certification Program, to spark innovation in green projects, said Dorothy Robyn, deputy undersecretary of defense for installations and environment.

“The technology that exists today will only get us part of the way there,” Robyn said at the energy symposium. The first initiative is a partnership between the Defense Department and Environmental Protection Agency to invest in basic and applied research, as well as advanced development.

The certification program essentially offers a test bed for the technologies that come out of such efforts. The lack of operational testing on new products often deters those who need them and otherwise would adopt them, Robyn said. The certification program allows these technologies to be field tested on military installations. Up to this point, it has been operating on a pilot basis thanks to funds from other programs.

Robyn is seeking $30 million for the program in fiscal year 2012. Potential projects include work with smart microgrids and renewable energy and many of the solicitations received involve the Army, she said.

Companies seeking to take advantage of the program should pitch projects up to about $1 million, Galvin said. They should not be tempted “to submit a $300 million wind project,” he said. “That won’t fly because there’s not enough money to take care of something like that.” The program is primarily concerned with taking a look at technologies beyond the prototype level that are ready for demonstration and are newly commercialized or on the cusp of commercialization.

Galvin offered other suggestions for industry to seek money for green projects throughout the federal government. Most programs he mentioned either have shallow pockets or are so big that energy is often an afterthought of a project.

Companies working on green initiatives are longshots for the big money but in need of more funding than the testing initiative and other energy-related programs can provide, industry executives said. When asked if his program may begin to fund larger projects, Galvin suggested that officials were heading in that direction.

“I’m not aware of any initiative that says, ‘We need to do $20 million projects,’” he said. “I’m sure that will come up, and we’re thinking along the same lines. There is a limit to what we do with only a couple of million dollars.”

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