Securing Army Installations with Energy that is Clean, Reliable and Affordable

1. Securing Army Installations with Energy that is Clean, Reliable and Affordable Presentation by LTC Kevin J. Lovell, PMP To Washington, DC SAME Post March 21, 2012

2. Agenda • Strategic Energy Situation • Army’s Energy Needs and Performance • Army’s Sustainable Focus on its Utility Needs • Energy Initiatives Task Force

3. The Last 11 Years…

4. Army Energy Consumption United States Federal Government DoD U.S. Army 1% 80% 23% • Facilities • Vehicles & Equipment • (Tactical & Non-tactical) • FY10 Highlights • $2.5+B Operational Energy Costs • $1.2 B Facility Energy Costs • +64% fuel costs in Afghanistan - not counting cost to deliver and secure • +$400 million increase in fuel costs expected in FY11 across DoD in Afghanistan U.S. = 98,079 Trillion Btu Fed Gov = 1,096 Trillion Btu (FY09) DoD = 819 Trillion Btu U.S. Army = 189 Trillion Btu Sources: Energy Information Agency, 2010 Monthly Energy Review; Agency Annual Energy Management Data Reports submitted to DOE's Federal Energy Management Program (Preliminary FY2010) UNCLASSIFIED

5. Army Energy Outlook Path to 25% Renewable Energy by 2025 - Notional Energy Efficiency Reaching Army energy goals will require significant number of large scale renewable energy projects Traditional Energy Renewable Energy NDAA 2010: 25% by 2025 • Major Issues for Army Large Scale Renewable Energy Projects • Declining Budgets/Incentive Leverage • Need for third party financing • Specialized Expertise • Requires financial, regulatory, environmental, and real estate expertise • Enterprise Strategy • To define the most efficient path to reach Army goals Renewable Energy EP Act 2005 7.5% by 2013 % Renewable Energy of Total Energy Army Progress: .5% in 2011 from 168 different projects UNCLASSIFIED 5

6. Strategic Overlook Key Strategic Documents OE Campaign Plan Army Campaign Plan 13 Jan09 29 Jul 11 Army Energy Security Implementation Strategy (AESIS) Operational Energy - Initial Capabilities Document (ICD) Army Operational Energy Campaign Plan TBP Dec 11 CENTCOM Operational Energy Documents Draft 16 Aug 11 Army Power and Energy White Paper 24 Sep 10 & Tactical Fuel and Energy Implementation Plan ACP 2012 (Draft) Campaign Objective 2.0 Provide Facilities, Programs & Services to Support the Army and Army Families 2-8 Institutionalize Contingency Basing Campaign Objective 8.0 Improve Energy Security and Sustainability Major Objective 8-2 Enhance Operational Energy Effectiveness & Operational Sustainability Draft v0.2, 30 Jul 11 1 Apr 10 CB Campaign Plan Contingency Basing Campaign Plan Leader Development And Training Change Culture 22 Feb 11 13 Oct 10 DICR’s and Joint ICD 19 Aug 10 13 Oct 10 19 Aug 10 Operational Energy

7. Army Energy Initiatives Task Force Energy Initiatives Task Force (EITF) established by the Secretary of the Army on September 15, 2011. • EITF serves as the central management office for partnering with Army installations to implement cost-effective, large-scale, renewable energy projects, leveraging private sector financing. • Projects greater than 10MW • Will coordinate with installations for 1-10MW opportunities • Potential for projects that exceed Army requirements • Solar, Wind, Biomass/WTE and Geothermal technologies • Potential to support resource validation, environmental permitting, regulatory approval and other project requirements • Will use DoD land-use and third-party financing authorities • Potentially over 1 GW of projects to satisfy Army requirements. Secretary of the Army John M. McHugh Unclassified

8. EITF Organization John Lushetsky Executive Director Heidi Hansen Office of General Counsel Kathleen Ahsing, Director Jeff Smith LTC Kevin Lovell Planning Division Execution Division Alan King, Director Douglas Waters Erich Kurre Jon Powers, Director Outreach Division Partnerships U.S. Army Corp of Engineers Defense Logistical Command Department of Energy National Renewable Energy Lab Pacific Northwest National Lab Department of Navy Department of Air Force Department of Interior Note: The EITF reports to the DASA IE&E (E&S), Mr. Richard Kidd, IV Unclassified

9. The EITF and the Army Campaign Plan Achieve Energy Security & Sustainability Objectives ASA (IE&E) Staff Coordination: ACSIM Core Enterprise: SICE 8-1 Adapt / Execute Installation Energy Security and Sustainability Strategies ACSIM The EITF is leading efforts to deploy large scale renewable energy projects in fulfillment of ACP Objective 8-1 Unclassified

10. EITF Enabling Authorities The EITF will leverage existing Army authorities to meet sustainability and renewable energy goals: • Utility Energy Services Contracts (10 USC 2913) • Enhanced-use Leasing (10 USC 2667) • Easement authority (40 USC 1314) • Acquisition of Utility Services (FAR Part 41) • Power Purchase Agreements (10 USC 2922a) • Energy Savings Performance Contracts (42 USC 8287 ) • Cooperative Agreements (31 USC 6305) • Sale of electrical power from alternative energy and co-generation facilities (10 USC 2916) • Environment, Energy and Water Efficiency, Renewable Energy Technologies, Occupational Safety, and Drug-Free Workplace (FAR Part 23) Unclassified

11. Planning and Execution Process The EITF is producing a process for developing large-scale renewable energy projects that is clear, consistent and transparent. This process will be described in a Renewable Energy Project Development Guidethat will detail the five phases of project development. • “Identify and Prioritize Opportunities” • Target: 90 Days • Conduct GIS Screening to ID installations w/ RE potential • Analyze maturity of effort • Assess top level economics • Identify sites on installations w/ master plans • Visit installation and confirm data on sites • Assess Environmental and Operational Issues • Conduct Go/No Go Assessment • Prioritize sites in portfolio on Army RE goals • Sign MOU with installations • “Developing an Opportunity Into a Project” • Target: 90-180 Days • Conduct initial legal and regulatory review • Initiate NEPA assessments • Provide full Economic Case Analysis (ECA) • Coordinate Off-Take and other Stakeholder Input • Define Real Estate strategy • Define System Integration approach • Assess Mission Operation and Security Impacts • Obtain Required Approvals and Clearances • Define Acquisition Approach • “Getting a Binding Agreement” • Target: .5-1 Years • Current: 1-3 Years • Develop Acquisition Requirements and Evaluation Criteria • Solicit Proposals from Industry • Select “Highest Ranking Offeror” • Obtain Required Approvals and Clearances • Finalize Business Arrangements • Award Contract or Execute Lease • “Constructing Assets; Structuring Services” • Target: 1-3 Years • Monitor and Enforce performance, quality, schedule and warranty commitments • Structure and Implement Support Service Agreements to Developer • Structure and Account for Lease Payments or In-Kind Consideration • Structure and Account for Power Purchase Payments • Structure and Implement Service Agreements with Developer • Structure REC transactions and accounting mechanisms • “Managing the Operation and Transition to Closure” • Target: 10-30 years • Track PPA Payments • Track REC management • Conduct enforcement of performance, quality, and warranty commitments with operator • Conduct validation of O&M activities vs O&M plan/schedule (case by case) • Manage Counterparty Risk (credit monitoring) • Develop transition/maintenance/de-commissioning plan • Update installation energy plan Current: 1-3 years Unclassified

12. Our Evaluation Process In tandem with the “enterprise view”, we are constantly responding to ideas coming from industry and installations Phase 1 Opportunity Identification Phase 2 Project Validation Phase 3 Acquisition Process Phase 4 Construction Phase 5O&M and Closure Systematic Enterprise Approach Previous Studies Phase 1 Opportunity Identification Screening and Prioritization based on Mission, Regulatory, Legal, and Economic Suitability Phase 2 Project Validation Prioritization & Slotting 600 Projects MOU Signed Intake Process Unclassified

13. A Balanced Approach EITF seeks to create a balanced pipeline of opportunities that will serve three driving principles • Energy Security • Surety (access) • Survivability (resilience) • Supply (alternative sources) • Sufficiency (adequacy for missions) • Sustainability 24x7 supply for critical assets Price Stability Life Cycle Cost Deployment Speed Capacity Factor • Mandates • NDAA – 25% by 2025 • EPAct – 7.5% renewable electricity consumption by 2013 • EO 13514– 34% GHG reduction by 2020 • Economic Benefits • In-kind revenue • Reduced/stable energy bills Unclassified

14. Systematic Enterprise Approach We have screened the entire Army enterprise to identify a strong bench of opportunities Where is Energy Security critical? Where is best potential for Large Scale RE? 96 Sites, 179 Opportunities (180 Sites Total) Security Tier • Where are other factors to consider? • Additional off-take • Existing utility relationships • Access to transmission • Well defined environmental issues Where could RE be cheaper than grid power? 90 sites for wind 39 sites for solar 10 sites for biomass Unclassified

15. RE sites potentially below grid-price

16. Project Risk Assessment Template Project Risk Assessment Mission/ Security • How does project enhance energy security on Installation? • What are the possible impacts to Installation operations? Project Risk Factors are reviewed on a weekly basis to identify roadblocks and key issues for successful project development Economics • What is the estimate of the baseline capital cost? • Have all other development costs been included? • What is the value of any REC’s? • Is resource validation required? What is the status? • What is existing utility rate and alternative tariffs? • Does Economic Case Analysis (ECA) show cost savings for Army considering current and project utility rates? Real Estate • What is the approach and what authority is being used? • What are issues to obtaining required BLM agreement? Regulatory (Legal) • What are the regulatory limits for interconnection, net-metering? • What is the status of getting required PUC approvals? Off-Take • How much does installation use now and is this sufficient to consume all electricity? • If power is to be sold off the installation, have off-takers been identified? • What is the status of state RPS to drive demand? Integration (Technical) • What are the technical issues to connect to grid (e.g., substation, line capacity, etc.)? • What is the status of required interconnect or flow studies? NEPA • What are the major NEPA issues? • Who will implement NEPA and what is the timeline? Acquisition • What is acquisition strategy and timeline to implement? • What performance risks are there with the developer or other partners? Unclassified

17. Sample of Key Renewable Energy Stakeholders, Their Relevance & Impact ACSIM / IMCOM DASA (E&S) & (I&H) USACE • ACSIM: Review Reports of Availability for consistency with DA requirements for those outgrants on Army-controlled military real property requiring approval by higher authority. Approves distribution of funds from EUL • IMCOM: Coordinates and processes EUL Actions. Ensures EULs are recorded and documented in the RPI. Recommends distribution of funds from EUL • Through Chief Appraiser, establishes appraisal standards, ensures certification of DA appraisers, and reviews or delegates review of contractor or staff prepared appraisal of real property • Contracts for Environmental Baseline Surveys • Oversees Report of Availability • Administers lease compliance, in-kind considerations, and REC/Utility bill management • DASA (E&S): To determine Army Facilities energy policy • DASA (I&H): Chairs Real Estate Business Clearance Process and provides policy, programming and oversight for the full lifecycle of real estate programs and actions AEC ASA (ALT) Renewable Energy Project • Provides environmental expertise to leaders, commands, Soldiers, and communities • Contracts for and oversees environmental analyses • Provide our Soldiers a decisive advantage in any mission by developing, acquiring, fielding, and sustaining the world's best equipment and services and leveraging technologies and capabilities to meet current and future Army needs Army G-3/5/7 • Determines project compatibility with mission requirements MICC ASA (FM&C) • Formulate submit and defend the Army’s budget to the American people; provide timely, accurate and reliable information to enable leaders and managers to incorporate cost considerations into their decision making • Plans, integrates, awards, and administers contracts throughout the ARFORGEN Cycle supporting the Army Commands (ACOMs), Direct Reporting Units (DRUs), USARNORTH and other organizations DLA • Leader in DoD’s efforts to supply the military services with alternative fuel and renewable energy solutions UNCLASSIFIED

18. Rapid Improvement Event Accomplishments • Validated the current state process • Including documented DLA and USACE acquisition timelines for ESPC, UESC, and PPA awards • Answered outstanding issues (use of commander’s site license, RGB purview, OMB scoring, DoDSiting Clearing House, Phase 1 data sources • Created dialogue amongst different stakeholders and socialized the need to centralize processes within the EITF to generate 1 project per quarter

19. Rapid Improvement Event Next Steps • Distribute Executive Summary and After Action Report of Session Recommendations • Adjust process maps to reflect recommendations • Incorporate recommendations into draft of Project Development Guide • Distribute draft of Project Development Guide to participants for review and comment

20. EITF Acquisition Approach Multi-Award Task Order Contract (MATOC) • The EITF will develop a multi-pronged acquisition strategy that can provide required flexibility beyond the Task Force term. • We expect to utilize multiple contracting offices, potentially including the Army Corp of Engineers and Defense Logistics Agency, as well as DOE contracting authorities (WPA, BPA, TVA). • The EITF anticipates leveraging a Multi-Award Task Award Contract (MATOC) for PPA’s being developer through USACE-Huntsville. • Draft RFP was issued for comment on February 24, 2012 Solar, Wind, BioMass, Geothermal Companies • Qualification based on demonstrated experience to develop and finance RE projects • 3-5 Companies per Technology • Initial 3 year contract with 1 year options • On-Ramp and Off-Ramp Provisions • Target release of 3Q12 Qualification/ Downselect Qualified Developers RE Project PPA Project Specific Task PPA Order Qualified Projects • SBA and Unrestricted based on Project Size • $5B total ceiling for 30 years’ payments EITF Due Diligence RE Project Opportunities Unclassified

21. Questions? • If you have questions or want to do business with the Army’s Energy Initiative Task Force, please register at • WWW.USARMYEITF.COM Or contact: LTC Kevin J. Lovell, PMP Kevin.J.Lovell4.mil@mail.mil (O):571-256-0509 Unclassified

22. ARMY STRONG UNCLASSIFIED