[CPEO-MEF] ENERGY: GAO report on financing of Defense renewable energy projects

[Lenny Siegel <LSiegel@cpeo.org>]

RENEWABLE ENERGY PROJECT FINANCING
Improved Guidance and Information Sharing Needed for DOD Project- 
Level Officials

Government Accountability Office
GAO-12-401, April 4, 2012

What GAO Found

To finance renewable energy projects, the military services use up- 
front appropriations, such as operation and maintenance funds, and  
alternative-financing approaches that generally rely on private  
capital, such as arranging financing and implementing a project with  
a private developer or utility. The military services have funded  
about 85 percent of nearly 600 projects that were in design, under  
construction, or operating in fiscal year 2011 with up-front  
appropriations, but financed 8 of the 9 large-scale projects and 19  
of the 57 medium-scale projects with alternative financing. Several  
factors affect the military services’ use of financing approaches,  
including perceived benefits and drawbacks such as how long it takes  
to obtain funding.

The military services have established methods to help ensure good  
value and advantageous contract terms and to manage the risks of the  
various financing approaches, but the services have not issued  
comprehensive guidance on how and when to prepare analyses for  
renewable energy projects. For example, headquarters and installation  
officials said that military services use business case or other cost  
analyses to help maximize benefits and mitigate drawbacks of the  
selected financing approach. However, GAO found examples of  
installations’ not developing cost analyses or not analyzing  
different financing approaches for projects, as well as uncertainty  
about how to account for some benefits in the analyses, because the  
military services generally do not have guidance to ensure that  
business case analyses are completed and that analyses fully consider  
the costs and benefits of different financing approaches. As a result  
of not having processes and comprehensive guidance in place, the  
military services cannot ensure that decision makers select the  
financing approach that maximizes benefits and mitigates drawbacks or  
risks of available financing approaches.

The Department of Defense (DOD) and other agencies have made  
available guidance, training, and other resources to assist officials  
in selecting certain financing approaches for renewable energy  
projects, but some guidance on the approaches is inconsistent and  
information sharing at the installation level is ad hoc and not  
formalized. DOD, the Department of Energy, and the military services  
have developed an increasing amount of guidance on the available  
financing approaches; however, GAO found instances where different  
interpretations of some guidance affected the approaches the services  
used because DOD has not issued overarching guidance on using these  
approaches. As a result, the military services may not be taking full  
advantage of the various approaches available to finance projects to  
meet renewable energy goals. Additionally, DOD personnel were  
generally satisfied with training they received on the financing  
approaches, but DOD does not have a formalized process to share  
information and best practices on the approaches among project-level  
officials across the military services at the installation level. As  
a result, DOD cannot ensure that officials responsible for selecting  
a financing approach have timely access on an ongoing basis to  
information on approaches that their counterparts from other services  
have used and their experiences with those approaches. Such  
information could assist the officials in selecting a financing  
approach that maximizes the benefits and minimizes the drawbacks or  
risks of that approach.

...

For the entire Summary and a link to the full report, go to
http://www.gao.gov/products/GAO-12-401

--

Lenny Siegel
Executive Director, Center for Public Environmental Oversight
a project of the Pacific Studies Center
278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org

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