The Government Accountability Office on Sept. 8 issued a report on Department of Defense (DOD) efforts to work with private developers that are using a variety of alternative financing mechanisms to develop renewable energy projects greater than 1 MW.
According to DOD officials, DOD works with private developers because doing so gives DOD several advantages. For example, private developers have access to tax incentives that can significantly lower the overall costs of developing projects compared to what those costs would be if DOD developed the projects on its own.
DOD used various approaches to analyze the financial costs and benefits of the 17 renewable energy projects GAO has examined, but project documentation was not always clear or complete, GAO noted. In particular, project documentation did not always clearly identify the value of land used and compare that to any compensation DOD received.
Specifically, for eight projects, DOD received little or no financial compensation for the use of its land, but the documentation did not clearly compare the value for granting use of DOD land to the value of what DOD received for it. As a result, DOD contributed potentially valuable land—in some cases, over 100 acres—for the development of a project without including this as a cost in project documentation.
GAO’s 2009 cost-estimating guide states that one basic characteristic of a credible cost estimate is the recognition of excluded costs, so any excluded costs should be disclosed and a rationale provided. However, DOD guidance does not specify that project documentation should include a comparison of the value of land and any compensation received. By clarifying its guidance to call for project documentation to include a comparison of land values and any compensation it would receive, DOD would have greater assurance that its officials have credible information about projects’ financial costs and benefits before approving them.
Some of the 17 projects GAO reviewed advanced DOD’s renewable energy goals and energy security objective (e.g., for access to reliable supplies of energy during an outage of the commercial grid), but project documentation was not always clear about how projects did so, GAO found. For example, officials told GAO they believe that all the projects contributed to DOD’s energy security objective, but this view was not reflected in the documentation for the 17 projects. GAO found that only two projects would immediately be able to provide electricity to an installation in the event of a grid outage. Five other projects would require additional investment, such as the installation of batteries or other energy storage, before they would be able to deliver electricity during an outage, and project documentation did not always reflect this information.
By law and executive order, DOD is to pursue goals for the production and consumption of renewable energy. Also, DOD policy calls for investing in cost-effective renewable energy and improving energy security—addressing risks such as disruption of electricity grids serving military installations.
The Joint Explanatory Statement for the National Defense Authorization Act for Fiscal Year 2015 included a provision for GAO to examine how DOD determines the costs and benefits of a sample of renewable energy projects.
GAO is making eight recommendations, including that DOD should clarify guidance to call for project documentation to include: a comparison of the value of the land used and the compensation DOD is to receive for it; and information on projects’ contributions toward DOD’s energy security objective. DOD fully concurred with GAO’s recommendations.