Army Enlists For Renewables

The US Department of Defense (DOD)'s targets for 1GW of renewable energy by 2025 received a boost in late August when contracts were awarded to 22 utilities for solar projects under the US$7bn 'Renewable and Alternative Energy Power Production' for DoD Installations. While this is n ot entirely surprising, given that the contracts represent one of the least controversial elements of Obama's greener energy agenda, we do believe it yet again highlights the US' growing conviction towards its renewables agenda.

Under the contracts, the 22 selected companies (including a number of local subsidiaries of European firms, such as Enel Green Power North America , Acciona Energy North America Corp and Siemens Government Technologies Inc ) will compete to agree power purchase agreements (PPAs) with the US Army; providing 'reliable, locally generated, renewable and alternative energy for DoD installations'. Solar technology is the second of four renewable energy technologies (geothermal, wind and biomass) to be phased in under the programme, with geothermal contracts awarded in May.

The US Army's commitment to energy security, energy efficiency and renewable technology is clearly strengthening, in line with the Army's C ongressionally - mandated goal of achieving 25% of energy production and consumption from renewable sources by 2025. The move also brings the Army, and the wider Defense Department, closer to fulfilling the aim of having 3GW of installed renewable capacity across DOD installations by 2025 (of which 1GW will be for the US Army). Although the capacity target was first established in April 2012, the US$7bn 'Renewable and Alternative Energy Power Production' scheme and the recently awarded contracts are an important and clear indication that the US government is intent on expanding its renewables industry's profile from within the government itself, and reinforce s the Obama administration's conviction towards the country's green energy agenda - something that we have been witnessing since Obama's re-election for a second term in November 2012 .

Softening Stance Towards Renewables

The sheer size of the US' renewables industry is undeniable, both in terms of installed capacity and generation. We forecast total non-hydro renewables installed capacity to reach over 86GW by end-2013, second in the world after China. A high level of investment, encouraged by government subsidies and state level renewable energy targets, has enabled the sector to expand rapidly over the past decade, driving the country to become a global renewables powerhouse. However, the lack of a federal regulatory framework for renewables and the high level of uncertainty surrounding the country's subsidy programmes led us to question the long-term sustainability of this growth.

US Renewables Powerhouse
Non Hydro Renewables Capacity, By Country, (MW), 2013f and US Non-Hydro Renewables Capacity, By Type (MW), 2013f and 2022f

That said, we have been closely monitoring the US energy sector over the last year and believe that there has been a gradual shift towards a more pro-renewables agenda. This was clearly evidenced during Obama's speech on climate change at Georgetown University in late June , where he outlined plans to establish policies to limit coal use, boost energy efficiency across facilities, industries and appliances and also to encourage investment in the green energy sector (see, 'Obama Bolsters US Green Credentials', July 9).

Furthermore, we have seen the US government take steps to fulfil this pledge and demonstrate that it was more than just rhetoric; not only with t he recent announcement by the Do D, but also by backing plans to curb investment in highly polluting foreign ventures by deciding not to make US Export-Import Bank financing available to a 1,200MW power plant in Vietnam (see, ' Obama Has Conviction, But Vietnam Has Coal ', July 22). These steps are not entirely surprising, as we expected Obama to push the least controversial el ements of the initiative first; involving government spending and projects located on land owned or under the jurisdiction of the government. We maintain our belief that Obama will continue to back plans that can by-pass Congress, thus avoiding delays and contestation.

This article is tagged to:
Sector: Renewables
Geography: United States

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