US Defense Department should seek private investors for solar power

The US Department of Defense (DoD) needs to engage private investors if it wants to tap the more than 7 GW of solar energy potential on its California properties, according to a study by consultancy ICF International.

However, the window is closing for the DoD and potential developers to take advantage of vital federal tax incentives, ICF said. ICF was asked by the DoD to evaluate the solar potential of nine military installations, in response to a Congressional request.

The study found that projects funded by the government are not viable given the current costs of solar technology and the nature of federal solar incentives.

“They can’t and shouldn’t use their own money,” said Robert Kwartin, vice-president of ICF and co-author of the study.

Only privately developed projects on DoD lands are economically viable because private investors can access federal and state tax-based incentives such as the investment tax credit (ITC) for solar that permit them to earn an attractive rate of return, with no capital investment required from the DoD, the study found.

“The headline result is only third-party financing works,” he said during a webinar on Tuesday.

The ITC is the most important federal solar tax incentive and is not scheduled to expire until the end of 2016, but it is possible that legislative action in the interim could eliminate this incentive, which would make private project investment less viable, the authors warned.

“There’s an argument to move more expeditiously,” Kwartin said.

The analysis assumed that all construction would occur in 2015 to allow the DoD sufficient time to complete programme planning, site studies and procurement actions.

The study also assumed that photovoltaic (PV) panel prices would fall about 20% from their spring 2011 levels by then.

Solar panels have dramatically decreased in price and significantly increased in performance in recent years, although the technology will likely not achieve wholesale grid parity in the next year or two, except in certain locations, he said. “I think the trend is certainly favourable,” Kwartin said.

However, concentrating solar power (CSP) technology prices in 2015 were assumed to remain level with 2011 prices and those technologies studied were not economically viable in most cases due to their higher installed costs, the analysis found.

More than 7GW of solar energy development is technically feasible and financially viable at several DoD installations in the Mojave and Colorado Deserts of California. However, Kwartin said that installation at such a scale is unlikely.

There are a range of technical, policy and programmatic barriers that can slow or, in some cases, stop solar development, according to the study. The lack of transmission capacity, for example, is the single largest barrier to large-scale solar development on the DoD’s California installations.

The DoD would also have to clarify its policy on renewable energy certificate (REC) ownership and accounting because in the third-party finance model that will likely dominate renewable energy development on military installations, it is the developer, not the installation that is the initial owner of any RECs generated by a project.

“While an added expense, the DoD will likely have to join the larger renewable energy market in retaining or purchasing RECs in order to make progress towards complying with its renewable energy mandates,” according to the study.

But the federal government could potentially receive about $100 million per year from these projects in the form of rental payments, reduced cost power and other fiscal benefits.

Most of the installations featured in the study already have 1-2MW solar energy systems in operation. Nellis Air Force Base is host to the largest PV system sited on a US military facility, a 14.2MW solar PV system completed in 2007.

Gloria Gonzalez,