Why federal renewable mandates challenge U.S. utilities (and what they can do)
By: SGN Staff
Utilities: one of your largest customers is under legal obligation to use less energy. Way less energy. If you're not figuring out how to cope, you'd better start now, as this timely article from EnerNex Vice President Stuart McCafferty makes clear. -- Jesse Berst
By Stuart McCafferty
By the end of 2013, the federal government’s 7.5% renewable energy consumption mandate will be in full effect for all federal installations. At least half of this renewable energy must come from NEW renewable resources. Some government agencies, such as the Department of Defense (DoD), have created even more demanding mandates, with renewable consumption requirements reaching 25% by 2025.
Coupled with the additional Energy Independence and Security Act (EISA) of 2007 requirements for reducing federal building fossil fuel consumption in half by 2030, utilities face a daunting challenge with one of their largest consumers having a legal obligation to use less traditional energy in staggering quantities.
The federal government accounts for approximately 56 terawatt-hours (TWH) of annual electricity usage, with over half that being DoD, according to the U.S. Department of Energy Annual Report to Congress on Federal Government Energy Management and Conservation Programs Fiscal Year 2007, January 27, 2010.
A back of the envelope calculation with 25% renewable penetration by 2030 shows an expected generation capability of over 14 TWH - assuming consumption remains flat. The government has frankly been a bit slow in responding to these mandates, but they are quickly gaining traction. The DoD is actively experimenting with renewable energy installations and has released RFPs at several military bases. Energy efficiency audits and improvements are being enacted at federal facilities everywhere. You cannot walk onto any federal campus these days without seeing public notices or active construction reducing consumption and/or increasing renewable energy production.
For utilities with federal customers that represent a sizeable chunk of their revenue stream, this creates both problems and opportunities. As government agencies add their own renewable generation and microgrid solutions, utilities must ensure these new systems play nicely with the utility network. By closely coordinating with these agencies through Power Purchase Agreements (PPAs), the utility can supplement its own power and ancillary service needs, which could offset much of the anticipated revenue losses. But, more profoundly, it offers progressive utilities the opportunity to work hand-in-hand with these federal agencies and help them meet the mandates by either supporting their efforts or meeting the renewable energy directives within their own networks. After all, there are no requirements forcing agencies to meet these mandates on their own.
Some examples of how utilities can engage with federal agencies include:
1. Schedule a workshop with the local federal installation lead and discuss:
o Current renewable energy and microgrid activities and plans
o Primary energy-related goals for the installation (energy surety, meeting renewable energy mandates, meeting energy efficiency mandates, electricity cost reductions, market participation, etc.)
2. Assess current and future installation energy capabilities and potential impact to business:
o Can current/future installation assets be used to supplement utility needs (generation, ancillary services, load shedding, and storage)?
o What effect will these assets have on the distribution grid?
o What are anticipated energy usage and revenue losses?
3. Coordinate activities with federal installations
o Support installation activities
Â§ Ensure safety and distribution grid service are not compromised
Â§ Provide project oversight for larger efforts
Â§ Purchase or build renewable energy to meet some or all of the federal renewable energy mandates
o Financial coordination
Â§ Negotiate mutually-beneficial (PPAs)
Â§ Work with Energy Service Companies (ESCOs) to develop, design, and arrange financing for projects the federal government and utility cannot fund
The ultimate utility solution for federal customers will be one that provides the renewable generation mix that already meets the federal mandates, allowing the feds to focus on other key energy issues such as efficiency and resiliency. It will be exciting to watch smart utilities and federal agencies invent clever, win-win solutions to the renewable energy mandate challenge.
Stuart McCafferty is VP of Energy Technology Consulting for Enernex Corporation and a business leader executive, program manager and system engineer professional with over 25 years of experience, with specialized expertise in smart grid technologies, managing complex technical projects, system architecture design, software development and implementation, real-time data acquisition and Program Management Offices (PMOs). He is a certified Project Management Professional (PMPÂ®) from the Project Management Institute (PMI).