1. 1 | Energy Efficiency and Renewable Energyeere.energy.gov NCPPP and the Association of Defense Communities: Federal Guidance on the Development of Energy Projects on Federal Lands December 10, 2013 Timothy D. Unruh PhD, PE, CEM Program Manager DOE FEMP

2. 2 Agenda  FEMP Role  Mission (1 Minute)  Renewable Energy (1 Minute)  Federal Markets (1 Minute)  Methods to Accomplish Projects( 7 Minutes)  The Large-Scale RE Guide (15 Minutes)  AFFECT ( 3 Minutes)  Questions

3. 3 Mission FEMP works with key individuals to accomplish energy change within organizations by bringing expertise from all levels of project and policy implementation to enable Federal Agencies to meet energy related goals and to provide energy leadership to the country.

4. 4  Works to increase the proportion of renewable energy in the Federal government’s energy mix  The program does this by providing:  Web-based Knowledge and Tools  Direct Project Technical Assistance  Interagency Coordination  Renewable Energy Guidance and Reporting Requirements  Direct Technical Assistance supports:  Distributed-scale RE projects (smaller than 10 MWs)  Large-scale RE projects (larger than 10 MWs)  Renewables in green building construction or major renovations FEMP Renewable Energy

5. 5  Federal goals:  7.5% of total electricity must come from renewable electricity by 2013 and beyond  20% consumption of renewable electricity by 2020  28% reduction in greenhouse gas emissions by 2020  DOD goal: Produce 3 GWs of renewables by 2025 Federal Market for Large-Scale RE Projects

6. 6  Appropriations  Energy Savings Performance Contracts (ESPC)  Utility Energy Service Contracts (UESC)  Enhanced Use Leases (EUL)  Power Purchase Agreements (PPA)  Federal and State energy incentive programs  FEMP strives to:  Make performance contracting business as usual  Develop the ESPC Enable program for small projects  Automate processes, reduce process delays  Consolidate project data  Standardize documents Methods to Accomplish Federal Facility Energy Projects

7. 7  Agency direct investment  Military Construction (MilCon)  Sustainment, Restoration, and Modernization (SRM)  Energy specific programs like the Energy Conservation Investment Program (ECIP)  RDT&E – demonstration and evaluation projects  Cooperative agreements / Memorandums of Understanding  DOE/DoD MOU  AFFECT grants Appropriations

8. 8 Effective Use of Appropriations and Alternative Finance to Fund Energy Efficiency Projects, John Shonder, Oak Ridge National Laboratory, 2012 Study on Funding Sources Each appropriation dollar used to fund short-payback ECMs reduces total investment by $2.83 Private financing possible No private financing possible

9. 9 Energy Savings Performance Contracts (ESPC)  Purpose: Achieve energy savings & ancillary benefits  Funding by any combination of private financing & appropriated funds is authorized  No agency payments until new equipment is operating  Cost savings are guaranteed to exceed payments  Performance of energy conservation measures (ECMs) is guaranteed  ESCO is responsible for maintenance and repair of installed equipment  Measurement & Verification is required  Maximum term 25 years  Agencies may not arbitrarily limit terms for their sites to under 25 years, per EISA 2007, Sec. 513

10. 10  Utility Energy Service Contract is a broad term for a collection of contracting mechanisms which allow utilities to provide to their Federal customers:  comprehensive energy and water efficiency improvements; and  demand reduction services  The Utility:  assesses the opportunities  designs and implements the accepted Energy Conservation Measures  MAY provide financing for the project  The Agency repays the Utility:  from appropriations at acceptance; or  over time when projects are financed  May include energy, water and renewable energy measures  May be any size  May include commissioning  May not be available to all facilities  Utility is a long term partner Utility Energy Service Contracts (UESC) Jan 1993 – Jan 2011

11. 11  Military authority under 10 USC §2667  Leverage assets that are currently available, but not excess to military needs  Short or long term leases of land and/or buildings  Must receive full market value income or services in kind  Must be of direct benefit to the United States, promote the national defense and/or be in the public interest, and must be compatible with current and anticipated future military activities at the installation.  Generally must use competitive procedures to select a lessee for any lease. The leases provide the exclusive right to possess and use specified real property for a specified period of time in exchange for fair market value consideration. Enhanced Use Lease (EUL)

12. 12  On-site renewable PPAs allow Federal agencies to fund on- site renewable energy projects without up-front capital costs.  A developer installs a renewable energy system on agency property with agreement that the agency will purchase the power. The developer owns, operates, and maintains the system for the life of the contract.  Agency benefits:  No up-front capital costs  Ability to monetize tax incentives  Typically a known, long-term energy price  No operations and maintenance responsibilities  Minimal risk to the agency  http://www1.eere.energy.gov/femp/financing/power_purch ase_agreements.html Power Purchase Agreements (PPA)

13. 13 The Guide provides a general resource that:  Develops Federal employee and private sector awareness and understanding of each other’s operating environment, goals, language, and process  Creates a methodology to:  Build strong business cases  Define and mitigate risks  Establish good project characteristics So that the private sector will:  Respond to the Federal competitive process  Invest in and develop the projects Introduction to the Large-Scale RE Guide

14. 14  DOE is applying the Guide in its implementation support to the DOE Pantex 11.5 MW ESPC wind farm  Army  Energy Initiatives Task Force (EITF) has adapted much of the process for Army-specific practice (the Guide is a companion document to the EITF process and internal Army guidance)  Committed to partnering with FEMP to meet 1 GW goal  EITF supporting Fort Irwin (15 MW PV), Fort Detrick (15 MW PV), Fort Drum (28 MW Biomass), and Fort Bliss (20 MW PV) projects  Navy  Incorporated many elements of the Guide into its project development process  Looking for FEMP assistance to fine-tune its process Use of the Large-Scale RE Guide

15. 15  Federal agencies and private developers both want to deploy significant amounts of large-scale renewable energy projects on Federal lands using private financing.  Federal perspective is often limited to the specific authorities granted by the law and regulations.  Private sector perspective often seeks do accomplish something that is not strictly prohibited by the law or regulations. A Common Goal With Varied Perspectives

16. 16 TIME Project Development Framework Project Fundamentals ID OpportunityProject ValidationProject Acquisition Project ImplementationContract Management Concept Approval Acquisition Approval NEPA Solicitation PPA LUA AwardAcceptance Payments Federal Agency Market & Portfolio AnalysisPre-DevelopmentDevelopment ConstructionOperations Screening Developer Financial Close (FC) Commercial Operation Date (COD) ID Opportunity Market & Portfolio Analysis Project ValidationProject Acquisition Pre-DevelopmentDevelopment ID Opportunity Market & Portfolio Analysis Project ValidationProject Acquisition Pre-DevelopmentDevelopment Project Fundamentals and Project Development Framework

17. 17 TIME ID OpportunityProject ValidationProject Acquisition Project ImplementationContract Management Concept Approval Acquisition Approval NEPA Solicitation PPA LUA AwardAcceptance Payments Federal Agency Market & Portfolio AnalysisPre-DevelopmentDevelopment ConstructionOperations Screening Developer Financial Close (FC) Commercial Operation Date (COD) ID Opportunity Market & Portfolio Analysis Project ValidationProject Acquisition Pre-DevelopmentDevelopment Site Resource Off-take Permits Technology Team Capital Incremental Investment Decision Iteration Federal investment in early stage development Private investment in later stage development Transition Process (RFP) Identifiable stages Common understanding of important project characteristics Government leads investment to ID good projects Developer completes and operates project Solicitation and developer selection Consistency = lower risk = attractive projects Iterative, disciplined process for investing Consistency = lower risk = attractive projects Iterative, disciplined process for investing Common, Reliable, Repeatable Process

18. 18 TIME Market & Portfolio Analysis Development ConstructionOperations Screening Developer ID OpportunityProject ValidationProject Acquisition Project ImplementationContract Management Concept Approval Acquisition Approval NEPA Solicitation PPA LUA AwardAcceptance Payments Federal Agency Market & Portfolio AnalysisPre-DevelopmentDevelopment ConstructionOperations Screening Developer Development Equity Construction Finance Re-Finance or Permanent Financing Financier Financial Close (FC) Commercial Operation Date (COD) Federal Agency $ Project Finance: The Third Perspective

19. 19  Risk: An important driver of project development.  The Guide acknowledges risk; a framework and process for managing projects in a risk environment is introduced. Pre-DevelopmentDevelopment ID OpportunityProject ValidationProject Acquisition Project ImplementationContract Management Acceptance Payments Federal Agency Market & Portfolio Analysis ConstructionOperations Screening Developer TIME Development Equity Construction Finance Re-Finance or Permanent Financing Financier Financial Close (FC) Commercial Operation Date (COD) Government $ Risk Developer $ Risk Construction $ Risk Asset $ Risk Solicitation Unknowns A Process that Acknowledges Risk

20. 20 Develop- ment Equity Construction Finance Re-Finance or Permanent Financing Financier Federal Agency $ Financial Close (FC) Commercial Operation Date (COD) Development Costs Capital Investment Cash Flows and Tax Benefits Year Cash Flows in Time

21. 21  Section I: Language and Terms  Section II: A Reliable Repeatable Development Process  The Commercial Process  Project Fundamentals  Project Development Framework  Section III: Application of Project Development by a Federal Agency - The Federal Process  Appendices Guide Structure

22. 22 A New Opportunity for Agencies: AFFECT  Assisting Federal Facilities with Energy Conservation Technologies  Will provide direct funding to Federal agencies for capital projects. Agencies are expected to significantly leverage FEMP funds using agency-appropriated funds or alternative financing mechanisms (ESPC, UESC, PPA, etc)  Two topics  Combined Heat and Power  Renewable Energy  A Notice of Intent has been distributed widely. FEMP is offering technical assistance to all Federal agencies in anticipation of the funding opportunity to identify opportunities  Award Levels  Target Award for CHP is $500K  Total available funding: $5.0M (FY13 and FY14)

23. 23 AFFECT Schedule  Notice of Intent: July 9, 2013  FOA Issued: November 5, 2013  Submission Deadline for Letter of Intent: December 10, 2013  Submission Deadline for Full Applications: February 18, 2014  Expected Date for EERE Selection Notifications: April 29, 2014  Expected Date for Award Initiation: June 10, 2014

24. 24 Questions? Federal Energy Management Program Contact Information Dr. Timothy Unruh Timothy.Unruh@ee.doe.gov 202-586-5772

25. 25 Backup

26. 26 Project Fundamentals

27. 27 Project Development Framework