Addressing the U.S. Department of Defense Mission Assurance Concerns and Renewable Energy Mandates

Transcription

1 Addressing the U.S. Department of Defense Mission Assurance Concerns and Renewable Energy Mandates Rick Tempchin Executive Director, Retail Energy Services Edison Electric Institute NARUC International Relations Staff Subcommittee Conference Call February 29, 2012

2 Agenda Department of Defense Energy Priorities Energy Security Plans at Installations Emerging State Policy Issues Are there parallels outside the U.S.?

3 Edison Electric Institute Investor-Owned Electric Companies Membership includes 200 US companies, Regulated companies Some with unregulated affiliates in retail market US members Serve more than 95% of the ultimate customers in the investor-owned segment of the industry and Nearly 70% of all electric utility ultimate customers Our mission focuses on advocating public policy and providing strategic business information

4

5 Emerging Technologies and the Electric Industry

6 The Smart Grid

7 Distributed Energy Resources EVs DRES Fossil DG Advanced Controls Batteries DR

8 Generating Capacity: Central Station vs Distributed 2009: Central station 1,120,162 MW DG - 24,476 MW CAGR: Central Station 1.20% DG % At these rates, DG ~ 20% of supply by 2020, 50% by 2025 Source: Energy Information Administration, EIA-861 Annual Electric Power Industry Report

9 EPRI s Perspective A New Operating Paradigm Grid Operating System 1.0 Generator-based controls implemented with first Pearl St. generators System s to present Supervisory Control and Data Acquisition (SCADA)-based system that has evolved from manual to computer-based controls, and more recently, to integrate merchant generators and ever growing numbers of transactions Current system not designed for intermittent resources Oriented to central station resources

10 EPRI s Perspective Con t System 3.0 Tomorrow s system must handle twoway flow of electricity and info, to automate controls for a widely distributed energy delivery network No longer primary dependence on central station power and one-way flow to power Increased dependence on distributed and central station renewables / storage

11 DEPARTMENT OF DEFENSE ENERGY PRIORITIES

12 Department of Defense U.S. Army, Navy, Marines, and Air Force Over 500+ permanent installations in 38 countries 300,000 buildings worldwide, 182 additional structures Largest single energy consumer in the world Accounts for slightly less than 2% of US energy consumption and more than 93% of total US government consumption Mobility fuels (e.g., oil) account for 75% of DoD consumption Electricity = 11% or $3.5 billion per year

13 Massive Land Owner: Several Installations in Renewable Rich Regions

14 DoD Energy Priorities Lower energy costs Lower carbon bootprint Increase energy resiliency

15 Concerns and Policies DoD Perceptions about a fragile grid to accomplish mission Islanding being studied at critical installations; microgrid projects are proposed according to Pentagon leadership 229 Renewable projects in the pipeline (6500 wind turbines, 30 large solar) Very aggressive renewable energy goals with motivated leadership to accomplish those goals: Executive Order 13423: 50% of renewable energy consumed in federal facilities should come from new renewable sources on federal lands Executive Order 13514: Implement renewable energy on DoD property to reduce GHG With new Congress make-up, DoD making stronger arguments that Renewables = Energy Security Policy directive: DoD should serve as a test bed for renewables, microgrids, energy efficiency and emerging technologies. Increasing need for improved reliability, cyber security and physical security Test technologies at installations for use in theater

16 Why the Emphasis on Renewable Energy (RE)? Improve carbon bootprint Increase resiliency of installations in the event of outages, especially if integrated with energy storage and microgrid technologies Also integrate electric vehicles with renewables Reduce resiliency on foreign fuel and the risks associated with transporting fuel supplies in theater Mitigate oil price volatility and supply disruption risks Troop safety Develop biofuels to replace traditional aviation and fuels for ships, tanks, etc. Take advantage of buying power of the DoD to pull renewable market

17 Examples of DoD Initiatives: Microgrids Smart Power Infrastructure Demonstration for Energy Reliability and Security (SPIDERS) Objective: Reduce the unacceptably high risk of extended electric grid outages by developing the capability to island installations while maintaining operational surety, security & cyber defense Demonstration Approach: Pearl/Hickam (HI): Circuit level demonstration using renewables with hydrogen storage & fuel cells Ft Carson (CO) microgrid including renewables, vehicle-to-grid storage, energy management, cyber defense Camp Smith (HI) complete installation smart grid, islanding, battery storage, cyber defense

18 Examples of DoD Initiatives: US Navy Smart Power Partnership Initiative Develop a Smart Power Cluster: Group geographical proximate installations into regional smart grids capable of sharing power and responding to local distribution and transmission needs Will leverage existing and near term infrastructure capabilities (i.e., smart metering) and will seek to integrate RE and conventional generation capabilities across the grid. Initial areas of focus: Where the Navy has a large presence: San Diego, CA Washington, D.C. area Seattle, WA Jacksonville, FL

19 Examples of DoD Initiatives: Ft. Irwin (CA) Solar Project Concept Utility Scale on-site generation: would produce 500+ MW solar Performed under an Enhanced Use Lease By way of a Power Purchase Agreement (PPA) Estimated $1 billion for full development of plan Transmission constraints are a significant a barrier

20 Utility Outreach to DoD

21 DoD and Utilities have An Alignment of Goals/Concerns DoD Energy Priorities Energy Security: protect critical assets Aggressive EE policies and targets Carbon reduction Smart meter/grid Renewables Demand Response Electrification of fleet and SG integration Utility Priorities Solutions to siting Gen. &Transmissions Significant EE investments and targets Federal and state regulation/mandates Significant SG investments RPS/RES mandates Demand Response EVs

22 CEO Task Force EEI Outreach to DoD Engagement with Pentagon leadership Recommendations to enhance communications with one another to improve energy security Emphasize the importance of working closely with utilities for microgrid and grid-scale renewable energy Ensure operational issues are known and addressed Siting utility owned assets (i.e., rate based) on military land if it improves energy security posture and deemed beneficial to all utility customers

23 Siting Utility Owned and Operated Assets on Military Land Modeled after Warner-Robins (GA) & Tinker AFB (OK) Utility and Installation would enter into a land lease and operating agreement whereby: The utility would develop, build, and operate a conventional or renewable power generation plant on installation land The DoD installation would remain on the tariff rate Plant would be considered a regulated asset, thus must be approved through normal regulatory channels During normal times, the kwh produced at the site goes into the grid But in declared emergencies, the installation s load and nearby community could be isolated from larger parts of the grid (i.e., police stations, water pumping facilities, hospitals, etc.)

24 Utility Option Benefits Addressing DoD Energy Security Needs Operational and technical risks to the military and all ratepayers are responsibility of the utility Can t walk away if the project goes south from technical, fuel volatility, or business environment. Utilities have an obligation to serve and maintain healthy financials franchise depends it! Plant can be sized to accommodate essential services in surrounding community (e.g., hospitals, pumping stations, etc). To build beyond an installation s load needs, an IPP developer would need to have a long term contract with other third parties for the output. Reduces risk of a very large customer leaving system and raising cross-subsidization, stranded cost issues No potential conflict with state retail electricity laws in non-restructured markets

25 EMERGING STATE ISSUES

26 Emerging Issues: Conflicting Policies Differing state rules. Federal law requires the DoD installations to abide by state electricity laws. DoD is authorized to enter long term Power Purchase Agreements with 3 rd parties. Third parties could build power plants on or near installations But in some states, those 3 rd parties would be considered a utility, subject to PUC regulation Finally, if DoD determines that the franchised utility is deemed to be unable or unwilling to provide for the unique needs of the DoD, the military can circumvent state authority

27 Issues Systems are planned based on anticipated future load and the costs are recovered by all over a given period of time for these assets What happens when a large customer like the DoD leaves system, permanently or temporally (e.g., when their generators aren t working)? Will this lead to cross subsidization? Does renewable energy really equate to energy security? How are other customer affected if a DoD projects goes bad? Conversely, how should utilities optimize the potential of the emerging microgrid and renewable market?

28 Discussion Rick Tempchin (202)