1 DoD Renewable Energy: Focus on Army RFP August 6, 2012 Robert E. Tritt ©2012 McKenna Long & Aldridge LLP

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DoD Renewable Energy:Focus on Army RFP

August 6, 2012

Robert E. Tritt

©2012 McKenna Long & Aldridge LLP

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• Context In Which RFP Arises

• Underlying Legal Authorities

• Status of RFP

• Essential Terms of RFP

• Regulations Imposed by RFP


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• Status of RFP




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• EPACT 2005 Renewable Mandate for Electric Energy3% 2007-2009

5% 2010-2012

7.5% 2013 and beyond

• DoD must produce or procure not less than 25% of the electric energy it consumes by 2025 [10 USC § 2911(e)]

• White House Announcement – 1 GW each• Air Force by 2016• Navy/Marines by 2020• Army by 2025

DoD Requirements


2011 ADC ANNUAL CONFERENCE| PAGE 5

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Renewable Energy Goal DoD Progress Towards 10 USC 2911(e)

DoD produced or procured 9.6 TBTU of renewable energy in 2010. DoD needs to increase this amount to 17 TBTU to meet the 2025 goal.

FY 2011DoD Reported 8.5%

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How to Procure 1 GW

• At Nellis Air Force Base size (14.2 MW) need 70 projects

• 1GW= $4 billion in investment, more or less

• Inherent complexity requires specialized knowledge and centralized administration, at least of larger projects

• Look for a mix of publicly bid projects, with negotiated agreements with utilities and municipalities

• Expect most deals to be centrally approved but still some opportunities for small projects at base level


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Source of Money

• Limited Milcon Money

• Private sector designs, builds, owns, finances, and operates projects

• DoD buys energy from private sector under long-term contracts

• DoD leverages off private sector’s capital and tax benefits

• DoD uses appropriated utilities money to make payments


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• Status of RFP




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Authority Needed

Long-term Real Estate Authority

• Always needed if facility built on base

Long-term Power Purchase Authority

• Not needed if DoD not buying power


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Enhanced Use Leasing (10 USC § 2667)• Underutilized Assets• Up to 50 years• In-kind consideration

But Also – Easements• 10 USC § 2668 (Fort Bliss – El Paso Desalination Plant)• 40 USC § 1314 (Air Force Academy – Photovoltaic Project)• 43 USC § 961• 10 USC § 2688

Real Estate Authority


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FAR 41.103• 10 year, renewable at government option

Western Area Power Authority• At least 20 year authority• Western states

Energy Savings Performance Contracts (42 USC § 8287)• 25 years• But revenues only from savings

Power Purchase Authority


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Utilities Privatization (10 USC § 2688)• Up to 50 years• Cost effective requirement

Utility Energy Service Contract• 10 years• Only local utility

10 USC § 2922(a) (formerly 10 USC § 2394)• 30 years• Sec Def approval, now delegated to Deputy Under Secretary

of Defense

Power Purchase Authority (cont’d)


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Secretary of military departments may enter into contracts for up to 30 years

• Under 10 USC § 2917 (geothermal); AND

• Operation of energy production facilities on real property under the Secretary’s jurisdiction…and the purchase of energy produced from such facilities

• But requires approval of Secretary of Defense (now delegated)

CONJUNCTIVE VS. DISJUNCTIVE

10 USC § 2922(a)


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• Status of RFP




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Status of RFP

• USACE issued draft RFP February 24, 2012

• More than 800 comments/questions

• Army/AF Air Force Day June 13, 2012

• July 26, 2012 – notice posted – expecting release in two weeks

• Release Date …


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Role of MATOC

• One vehicle (relying on 10 USC 2922(a)) to purchase power

• Not exclusive vehicle (not used for any of four announced Army projects)

• Can be used by other services/departments


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• Status of RFP




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What Will RFP Look Like?• 92 pages, $7 billion in energy purchases over 10 years

• Relies on 10 USC § 2922(a)

• Calls for the award of multiple IDIQ contracts – to all qualified parties, but see experience requirements

• Selects companies in one or more of 4 categories (wind, solar, biomass, and geothermal)

• Leaves open (for now) procurement of full needs of base or multiple bases in one award

• Enables purchase of power, not related issues like microgrids which may be better accomplished under better authority/vehicles


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• Status of RFP




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But What Are These 150 Plus Regulations?

• Not all equally applicable, burdensome or relevant

• But don’t assume joint venture or special purpose entity will avoid them

• Minimum Wage Requirements• Davis-Bacon Act• Contract Work Hours and Safety Standard Act• Service Contract Act

• Equal Employment Opportunity Requirements


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But What Are These 150 Plus Regulations?

Other Notable Compliance Obligations

A. Permission to sell power to other customers and most favored customer pricing

B. Contractor code of business ethics and conductC. Small business subcontracting requirementsD. Price reduction for defective certified cost or pricing

dataE. Employment Eligibility Verification (E-Verify)F. Restrictions on certain foreign purchases


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Absent But InterestingBuy American Provisions

• Rule (became final 5/21/2012) that photovoltaic devices must comply with Buy American. DFAR 252.225-7017

• Applies to an energy savings performance contract, a utility service contract or a private housing contract awarded by DoD

• DoD deemed to own if reserved for exclusive use of DoD for full economic life

• Must be manufactured or assembled in U.S. – but substantial transformation exceptions

• Purchases from 21 countries meet requirements; plus Korea


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• Status of RFP



Summary


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Robert E. Tritt

[email protected]

www.mckennalong.com

Albany, Atlanta, Brussels, Denver, Los Angeles, New York, Orange County, San Diego, San Francisco, Washington DC


mailto:[email protected]

http://www.mckennalong.com/

Documents

1 DoD Renewable Energy: Focus on Army RFP August 6, 2012 Robert E. Tritt ©2012 McKenna Long & Aldridge LLP