The U.S. military could save hundreds of millions of dollars each year by switching its bases from diesel backup generators to more efficient microgrids. Furthermore, the military can enhance security against the threat of grid outages from extreme weather or cyberattacks, achieve its efficiency and renewable energy commitments, and even make money from microgrid-generated power in some states.

That's according to a new report entitled Power Begins at Home, which earned accolades from outgoing military officials at a presentation last week in Washington, D.C. In one of their final public events, assistant secretaries for the Army, Navy and Air Force made the case for continuing investments in military energy security and efficiency -- and opening partnerships between bases and surrounding utilities and communities -- to an incoming Trump administration that’s likely to be more focused on cost savings than on promoting clean energy.

“I cannot comprehend an administration that would say, ‘Increase your costs, consume more energy and water…and be less resilient and less ready to deploy our troops,’” Katherine Hammack, assistant secretary of the Army for Installations, Energy and Environment, said at Thursday’s unveiling of the report, which was commissioned by the Pew Charitable Trusts and conducted by the nonprofit research firm Noblis.

The U.S. military is already the country’s leader in microgrid development, with roughly one-third of U.S. capacity expected through 2020, according to GTM Research. But the potential remains far greater, the report noted. With threats of cyber-induced or weather-related outages on the increase, it’s an issue that's becoming more pressing as well.

A backup generator landscape ripe for microgrid replacement

The Department of Defense has more than 284,000 buildings in the U.S., and consumes about 1 percent of the country’s electricity, or almost $4 billion worth of power a year. Of that load, a certain subset deemed critical -- anything having to do with “housing, safety and health, public safety, communications, environmental systems, and critical mission support” -- is backed up with diesel-fired generators, often hundreds of these per base, each hard-wired to an individual building.

“Standalone generators have endured as the military’s strategy for energy security because of the high degree of operator control they afford and because they are affordable. However, the limitations of the current strategy are becoming increasingly problematic,” the report stated.

For example, each generator is oversized to at least 200 percent of its estimated peak load, and sometimes higher, “resulting in higher capital costs, excessive fuel use, and unnecessary wear and tear.” These high costs limit the number of buildings per base that can receive backup power.

At the same time, many of these generators may not be ready to perform their mission, the report warned. Only 60 percent of bases perform the required testing to ensure they’re up and running. This same inadequate maintenance and testing “causes standalone generators to fail at a higher than expected rate,” the repot noted.

Dennis McGinn, assistant secretary of the Navy for Installations, Energy and Environment, said that the Navy and Marine Corps have 41 different diesel generators operating at its bases. “Some of them are great, state-of-the-art,” in terms of efficiency and reliability, he said. “But I can’t say that for all 41. The majority of them, in fact, probably aren’t as reliable as we expected, or as they were guaranteed to be when we bought them.”

Microgrids, by contrast, use fewer central generators that are far easier to operate and maintain, along with a networked architecture that allows for more reliability and flexibility as bases add or remove loads.

They can also be properly sized to cover an entire base’s annual peak critical loads. "Excess generation is almost always available and can serve any load to which the microgrid is connected, including those loads whose priority falls between ‘critical’ and ‘non-critical,'” the report states. This could include covering the power needs of a much larger portion of the base -- or, perhaps, serving the energy needs of local utilities, or selling power back to the grid at large.

The regional costs and benefits for microgrids vs. backup generators

As for the cost comparisons between the two options, Noblis modeled a hypothetical large military installation with a peak demand of 50 megawatts, of which 20 megawatts are critical loads, across three regional electricity markets -- the mid-Atlantic/Northeast, the Southeast and California. 

Using 160 generators to cover that critical load costs between $80 and $85 per kilowatt of critical load per year, the report found. That cost is the same across all three markets, since the fundamental capital, operations and maintenance costs of diesel generators don’t change much from region to region.

The cost-benefit analysis for microgrids, by contrast, varies greatly depending on the mix of grid energy and prices across different regions. But by any measure, a microgrid using a dozen large diesel generators is much cheaper to operate and maintain than using hundreds of generators. The comparable cost figure ranges from $31 per kilowatt per year in the mid-Atlantic/Northeast to $61 per kilowatt per year in California, offering savings from $8 million to $20 million over the 20-year life of the microgrid.

Using large-scale diesel to replace grid energy is far less cost-effective, the report noted, although military microgrids could make use of them to shave peak loads and reduce demand charges, or earn demand response revenue streams in markets where they’re available, such as the mid-Atlantic and Northeast, the report noted.

For its second microgrid case study, Noblis modeled a “hybrid microgrid” using both diesel and natural-gas generators. This option is not only cleaner than diesel alone in terms of emissions, but also “may be preferable to an all-diesel microgrid because it spreads the risk of a disruption in the supply of either type of fuel.”

This kind of microgrid would be designed to replace a greater portion of the base’s grid power needs, and has a much different cost-of-power profile, depending on the grid power being supplied in different regions. For the mid-Atlantic/Northeast and Southeast markets, those prices are higher than standalone generators -- $93 and $195 per kilowatt per year, respectively -- due to the low cost of power in those regions.

“By contrast, in California, this microgrid alternative is not only less expensive than the base case, its net cost is negative,” due to the state’s higher grid power costs, the report noted. “The result means that at an installation in California, the military could protect its critical load for free and create additional savings of $80/kW, or $1.6M, a year.” [Italics in original.]

FIGURE: The Annual Net Cost of Protecting Each Critical Load

Beyond microgrids: Enabling “energy-security-as-a-service”

The report also highlighted that the military could gain up to $1 billion per year in energy efficiency savings, if it took the steps to modernize on-base energy delivery and management systems in ways that could support the switch to microgrids.

Noblis came up with that figure by comparing the efficiency of Department of Defense (DOD) buildings, commercial buildings, and buildings owned by the federal General Services Administration. “Based on our analysis, we estimate that DOD could reduce its energy consumption by 15 [percent] to 35 percent. Taking the midpoint of that range as our point estimate, we conclude that DOD is leaving $1 billion a year (25 percent of its $4 billion-a-year utility bill) on the table.”

The challenge for the military in getting more efficient with its buildings is twofold, the report noted. First, the services haven’t invested in advanced metering infrastructure -- only about one-quarter of DOD energy load is being captured by advanced metering infrastructure (AMI). The second reason is “the constraints that Congress and DOD place on the process for investing in building upgrades,” the authors wrote. Specifically, “the inability to combine third-party financing from energy-savings contractors with funding for capital improvements.”

Hammack noted that the DOD has spent roughly $1.2 billion on energy performance contracts over the past five years, yielding significant decreases in energy intensity, including last year’s record-breaking drop of 4.5 percent. “If we had the money to implement more of these programs, we would," she said.

On that front, the Pew report recommends opening military base microgrid development to third parties, through the use of what it dubs “energy security as a service.” Going this route will allow the DOD to gain from the commercial expertise in microgrid design, contracting and deployment, as well as the operation of microgrid systems to optimize revenues and minimize costs among different energy markets. It will also open up the opportunity for third-party financing, 

McGinn noted one example of how the Navy is partnering with outside groups on its energy plans. At the Marine Corps Air Station Yuma, in Arizona, utility APS has sited a 25-megawatt natural-gas-fired peaker plant “inside the fence line” of the base, improving the security of the facility, while providing more than enough electricity for all the base’s needs. Likewise, in San Diego, Calif., the Navy is linking three microgrids into a system that could help balance the grid needs of utility San Diego Gas & Electric.

“We look not only at resilience at our installations,” although that’s of utmost concern, “but also in terms of regional resiliency," McGinn said. "We work very closely with our private-sector partners, in the form of utilities, to say, what can we do to be a better partner, a better customer, to help the whole region maintain resilience of power?”

Opening up third-party microgrid partnerships can also help the Army, Navy and Air Force meet their current goals of achieving 1 gigawatt of renewable energy apiece -- if this remains a priority under a new administration and a Republican-controlled Congress.

While the report didn’t model out anysolar-powered or battery-equipped microgrids as part of its cost-effectiveness calculations, it did note that it’s very difficult to incorporate these technologies into a base without moving from lots of backup generators to an integrated system.