The Defense Department spent more than $117 million of stimulus funds on hastily planned renewable energy projects that promised lackluster returns on investments and now face major delays -- if they're built at all, according to a Greenwire review of DOD inspector general audits and other documents on the projects.

Consider the Air Force's $14.1 million plan to build three wind turbines at radar stations in Alaska. The service bulled ahead without fully assessing the potential for wind at the turbine sites, the IG found. Now, one turbine is scheduled for cancellation because of "sporadic" wind at its proposed location. Meanwhile, the two other turbines are moving ahead with weak return-on-investment numbers that fail to meet DOD standards -- they are likely to take more than 15 years to pay for themselves -- the audit found.

Such tainted projects have gobbled up more than a third of the $335.7 million that the stimulus provided for renewable power efforts at military bases, the IG reports say. Those findings don't surprise officials with experience in DOD energy ventures.

"Energy programs never had that kind of money before, and suddenly this huge deluge of money comes in," said retired Army Col. Dan Nolan, who is now CEO of the energy security company Sabot 6. "If you want it bad, you get it bad. And that's exactly what happened, because people didn't have time to go through the processes you normally would."

The Pentagon's problems with green power are coming to light as congressional Republicans are investigating federal investments in renewable energy following the bankruptcy of solar company Solyndra, which received a $535 million loan guarantee from a stimulus-backed Department of Energy program. Recent reports indicate the Navy considered contracting with the doomed California company before learning of its looming bankruptcy (Greenwire, Oct. 14).

Renewable energy was front and center in the Pentagon's plans for the more than $7 billion it received under the stimulus law, the 2009 American Recovery and Reinvestment Act, which was aimed at jump-starting a stalled U.S. economy and putting unemployed Americans back to work. The law gave big funding boosts to modest DOD programs that were already installing and researching next-generation energy technology and provided cash for a $4.3 billion fund to upgrade aging bases that put a premium on integrating renewable energy.

But the military was not equipped to handle such a massive cash infusion for energy projects, audits show.

Preparations for the stimulus began in the waning days of the George W. Bush administration, but by the time money arrived, top-level Pentagon environmental posts were open or had interim leaders as the new Obama administration lined up appointees.

Meanwhile, guidelines for calculating returns on investment and picking promising energy projects had not been written, according to a series of reports by DOD's inspector general.

Project planners appeared confused about the need for the cost-effectiveness of energy ventures, the reports say, even though the 2007 defense authorization and an executive order issued that year require that green energy projects be cost-effective -- producing power that is worth more than what was spent to build them.

A former Navy public works officer whose base won stimulus funds for several energy ventures said solar projects are particularly hard to justify under federal rules.

"Ninety percent of them won't meet the return on investment that was advertised," said the official who asked not to be identified because he is still in the Navy and not authorized to speak to the media. "There are ways to cook the numbers with these projects."

Beat the clock

The stimulus deadlines left little time for scrutiny.

Projects were approved in two separate timelines based on two appropriation tracks that separate "military construction" -- projects costing more than $750,000 -- from facilities maintenance and restoration funds. Those on the military construction track had 30 days to wind their way through multiple layers of approval and onto the spending proposal that the Defense secretary would send Congress. Projects funded out of the second major Pentagon pot of money had 60 days.

Under the administration's guidelines for the stimulus, only projects that were already planned and ready to break ground were supposed to be proposed for funding. The concern, military energy experts say, is that it would otherwise take years to move projects through the red tape.

So the services -- which were facing stiff mandates to generate larger percentages of power from renewable energy sources -- rushed to launch projects.

In addition to the Air Force's troubled Alaska turbine projects, the IG audits also pointed to other problematic green-power ventures:

• The Navy and Marine Corps launched three photovoltaic projects with a total $75.1 million price tag at 12 sites in California and Hawaii, including Camp Pendleton and the Naval Post Graduate School, without considering costs and paybacks. The IG found none of those projects met the cost-effectiveness test -- with the Navy expecting it would fail to recover nearly half its $50.8 million and the Marines losing 61 percent of their $8.4 million. Moreover, the report says, base managers in California failed to claim utility rebates that were worth a potential $3.34 million.

• The Air Force paid $18.3 million upfront to a local electric utility for a solar array at the Air Force Academy in Colorado Springs, Colo., leaving the service with no leverage when the project fell months behind schedule. If the Air Force had paid just the $1.2 million that was required at the start of the project, the government would have earned more than $676,000 in interest on the remaining funds by last year, the IG calculated.

• The Navy awarded contracts to start a $9 million geothermal project in Nevada before doing research to confirm the drilling sites were likely to have geothermal resources. An IG review of technical papers found that only two of the six sites had a high potential for such resources.

• The Navy awarded $1 million for a solar and lighting project at Naval Station Norfolk, Va., that it now calculates would take more than 447 years to pay for itself, the IG found. The Navy has declined to cancel the project, despite the poor payback.

Questions about how costs and paybacks were calculated appear frequently in the IG reports, and in many cases staff was unable to back up the numbers submitted in funding proposals.

The former Navy public works officer, who spoke on the condition of anonymity, said this is hardly surprising.

"Basically, there were a lot of rosy projections," he said. "People calculated that they'd never have to do maintenance, that equipment would always work, that the sun would shine 12 hours a day."

He also described projects being bundled to get money for high-profile projects and hide projected poor financial returns.

Focus on renewable energy

Current military-energy officials are careful to distance themselves from the stimulus projects, which they say were largely planned and implemented before they took their posts.

But some argue the usual cost-effectiveness rules did not apply to projects funded by the Recovery Act.

"Nowhere in there was this, in my interpretation, intended to be applying the cost-effectiveness criteria that we've had in the Navy for more than 20 years," said Tom Hicks, the Navy's deputy assistant secretary for energy. "The intent behind [the Recovery Act] was to preserve and create jobs, to promote recovery ... and to really focus on infrastructure investment."

The law, however, included no provision exempting DOD from legal requirements and department policies on the books that require renewable energy projects be estimated to produce more in savings than they cost.

In the two-and-a-half years since the stimulus projects were chosen, the military has heightened its focus on energy issues and the Obama administration made it a priority when it appointed officials with energy expertise to top-level posts. Hicks' office, for example, was newly created by the administration.

Jack Spencer, a fellow at the Heritage Foundation, said the military should not be held to cost-effectiveness rules for mission-critical projects, but he questions whether renewable energy meets that definition.

"Military investment should be driven by operational capacity -- whether something gives the military better or new capabilities," he said. "The problem here is that neither of those things are what drive renewable investment in the military. Instead it's a political agenda. It's this desire to promote renewable energy sources."

For their part, military leaders now rarely talk about energy mandates and instead describe renewable projects as an element of energy security, a way of providing power to bases and critical missions even if the civilian electric grid goes down.

Pointing to energy security, several of the services have set aggressive goals for renewable power. The Navy aims to get at least half of its on-shore energy from renewables by 2020, and the Army is looking to add enough renewable projects to its land to produce 2.1 million megawatt-hours by 2025.

"Our installations support combat operations more directly than ever before," Dorothy Robyn, DOD's deputy undersecretary for installations and environment, told a House panel this spring. Battlefield operations, like the flights of drones and unmanned bombers, she said, are put at risk by grid trouble.

"We have a multifaceted strategy [to counter this]: Reduce demand, expand supply of alternative energy sources, and improve our energy security," she said. "These efforts -- I just want to reiterate -- they will green our military installations, but that's not the reason we're doing them."

Financing

The Pentagon is aware, given federal budget woes, that it is going to need creative ways to fund energy projects.

The services are increasingly looking to third-party financing to help transform how their bases are powered. The Army, for instance, hopes to attract $7.1 billion in private capital to reach its goals (E&ENews PM, Aug. 10).

But private investment does not free DOD from the responsibility of showing its projects bring a financial payback, Army Undersecretary Joseph Westphal said last week.

"We know that we need return on our investment fairly quick," Westphal said. "Sometimes that's not easily achievable."

As the military aims to do this, Congress will be watching closely.

At a hearing this spring, Rep. Randy Forbes (R-Va.), chairman of the House Armed Services' readiness subcommittee, pointed to the Navy solar project at Naval Station Norfolk as an example of defense energy projects that miss the mark.

And in a March 23 op-ed in The Hill newspaper, Forbes said Congress must "hold the DOD's feet to the fire on cost-benefit."

"There must be demonstrable savings showing a strong return on investment over a reasonable amount of time ... [and] the project must contribute to increased national security," he wrote, "especially in terms of the direct safety of our troops and sustainability of missions."

Click here to read the IG report on Navy solar projects in California and Hawaii.

Click here to read the IG report on the Air Force solar project in Colorado.

Click here to read the IG report on Air Force wind turbines in Alaska.

Click here to read the IG report on the Navy geothermal project in Nevada.

Click here to read the IG report on the Navy solar and lighting project in Virginia.