Defense energy: market holds promise, and plenty of caveats.

• Author: Erwin, Sandra I.
• Position: Energy

A recent Army-Air Force "Renewable Energy Industry Day" drew more than 800 participants from the private sector. The record attendance was welcomed by Pentagon officials as a sign that companies are enthused about the opportunities in the military energy business.

The Defense Department's green energy business, however, is far from guaranteed gold.

The big daddy of military renewable energy projects is the Obama administration's directive for the U.S. military to deploy 3 gigawatts--enough to power 2 to 3 million homes--of renewable energy, including solar, wind, biomass and geothermal, by 2025. Each service will be seeking 1 gigawatt worth of clean electricity at facilities across the United States.

But the Pentagon's budget has zero dollars for this effort. The plan is to lure private-sector investment to build renewable energy plants on Army, Navy and Air Force bases, with the promise of more than $20 billion worth of power purchases over three decades. Those are funds that the military would spend on electricity regardless.

Industry will bear the upfront cost but can expect long-term returns, said John Lushetsky, executive director of the Army Energy initiatives Task Force.

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Each gigawatt of electricity from renewable sources could generate $7 billion to $8 billion in utility payments over 30 years.

Lushetsky said hundreds of companies have submitted questions and comments in response to an Army Corps of Engineers' draft request for bids.

None of this will be easy money, however, officials warned at the Army-Air Force conference. The relatively low cost of coat and gas could deter investors, said Terry Yonkers, assistant secretary of the Air Force for installations, environment and logistics. "The challenge for industry is how to do this in today's environment when fossil fuels are still pretty darn competitive."

Another caveat for potential contractors--especially commercial energy firms and utilities that might not be familiar with the Defense Department--is that each branch of the military manages renewable energy programs differently, Yonkers said. "To do business with the Defense Department you have to learn three different systems," he said. Senior officials from the three services are looking to standardize requests for bids, contracts and evaluations, but that could take a long time. "We are looking at how we can put one face to the private sector," Yonkers said.

The Army's upcoming bids for large-scale...