The Pentagon, the federal government's largest user of oil and historical early adopter of cutting-edge technologies, has quietly placed its next big energy bet on plug-in electric vehicles.
The bet isn't as big as the Navy's wager on advanced biofuels, which sparked a congressional battle that lasted for the better part of last year. But industry experts say it could be a game changer for a section of the market still trying to find its footing.
The Defense Department plans to spend $20 million in the first year of a pilot program testing a fleet of plug-in electric trucks, buses and related infrastructure that will allow them to communicate with the power grid. Such "vehicle-to-grid" (V2G) technology uses the vehicles' batteries as storage, moving power back and forth between parked vehicles and power lines based upon the utility's needs -- something companies are willing to pay a pretty penny for.
The Pentagon predicts that the revenue generated by providing these services will quickly offset the higher price of electric vehicles, which often cost twice as much as their combustion-engine counterparts. And after 10 years, the military calculates, money saved through such a system would cover the upfront investment in charging infrastructure and pioneering software needed to manage the fleet.
"We believe we can bring plug-in electric vehicles into DOD's nontactical fleet in such a way that we reduce our overall fleet expenses and increase our mission capabilities while achieving our energy and environmental objectives," said Camron Gorguinpour, special assistant to the assistant secretary of the Air Force for installations, environment and logistics.
The initial phase of the project aims to have as many as 500 V2G-capable electric vehicles deployed at six installations later this year. Most of the vehicles will be trucks and buses -- classes of vehicles that represent a sliver of the current electric vehicle market. None will be tactical vehicles like tanks or Humvees, which the Pentagon purchases through a separate track.
Companies with large corporate fleets, including FedEx Corp., Frito Lay Inc. and UPS Inc., have been interested in electric vehicles, but so far the market hasn't grown enough to give them the options -- or the price -- they want.
"One of the big things that they all cite as a real obstacle to doing more is there's a fairly limited supply in the marketplace -- you only have a handful of companies that are providing these vehicles," said Sam Ori, director of policy for the Electrification Coalition, a nonprofit that advocates for policies to speed the mass deployment of electric vehicles.
"If DOD, over a period of three or five years, can put in an order for several hundred or more commercial trucks ... that's a game-changing investment," he said.
Vehicle-to-grid technology hinges on the willingness of utilities and grid operators to pay for "ancillary services" that help them stabilize the grid and match supply with demand.
Instead of telling a power plant to increase or decrease its production on a minute-by-minute basis, for instance, a system operator will pay for access to energy storage that allows it to push power on and off the grid in response to these variations -- a service called frequency regulation. An electric sedan in Southern California could earn $150 a month by allowing the grid operator to use its battery for this during the 73 percent of the time it is not in use, according to a DOD case study.
Frequency regulation appears to be the surest stream of revenue, researchers say, but they are also looking at providing peak power shaving and spinning reserves as additional sources of revenue.
The projections, however, are all couched in big "ifs." The Pentagon's pilot project will be the largest demonstration of V2G technology to date, and will require technologies and software that have not yet been developed.
Home hobbyists have been tinkering with V2G for years, and so far a scattering of demonstrations have been done with a handful of vehicles connected to the grid or to buildings, providing a proof of concept on both the technology and the revenue stream. The University of Delaware in 2010 completed the first commercial V2G demonstration in the country, working with independent system operator PJM Interconnection.
But utilities and independent system operators are typically only interested in scenarios that would offer them significant power -- usually 1 megawatt or greater. That would require orchestrating a system with about 100 passenger vehicles, something that has never been done.
"There's an enormous amount of potential here, but this simply hasn't been done before on this scale," said Bill Ross, energy lead for the Massachusetts Institute of Technology's Lincoln Laboratory, who is providing analysis to DOD for the project.
Making this work at cost parity with conventional vehicles will be absolutely critical, Ross said. That's no small feat, given that the technologies for allowing power to flow in two directions between the vehicle and the grid, and for capturing data and managing a fleet of vehicles' plug-in schedules so they are available for use when they're needed, don't yet exist for this purpose.
"I think there are ways to solve the connectivity to the grid that are cost-effective, but I don't necessarily see those solutions on the shelf," Ross said. "It's a hardware and a software problem."
The military says it doesn't know how much all this will cost. It has put out several requests for information to industry and says it has heard a lot of interest but does not yet have hard numbers.
Some of those numbers will depend on location. The Pentagon carefully selected the six installations that will participate in the pilot project to get a picture of how V2G technology works in different utility markets and under different conditions.
The six participating installations: Los Angeles Air Force Base and Naval Air Weapons Station China Lake in Southern California, Joint Base Andrews in Maryland, Fort Hood Army Base in Texas, Marine Corps Base Hawaii Kaneohe Bay, and Joint Base McGuire-Dix-Lakehurst in New Jersey.
The Pentagon, like all federal agencies, is driven by executive order to shrink its petroleum use and reduce greenhouse gas emissions.
It is also desperate to find ways of cutting its energy bill. In fiscal 2011, the Defense Department spent about $17 billion on fuel for ships, planes, tanks and nontactical vehicles. Moreover, when oil prices spike, the department faces having to raid other accounts to cover the extra costs.
This makes the cost savings and lessened oil dependence potentially offered by V2G technology very attractive to the Pentagon.
But perhaps most exciting to the military's energy chiefs over the long term will be the security benefits that V2G technology may offer.
The Pentagon is increasingly aware that its bases are vulnerable to power outages because they get 99 percent of their electricity from the civilian grid. Energy officials have been zeroing in on microgrids -- which would allow installations to direct the limited power available during an outage to the highest-priority jobs, and could feed in power from renewable sources -- but still have to work out the financials before deploying them widely (Greenwire, Jan. 16, 2012).
V2G-capable electric vehicles could provide key energy storage -- one of the top drivers of cost -- to a microgrid. They could also be used to store extra power that can't currently be captured from solar and other renewable power systems on bases.
And they could provide a boost to the diesel backup generators that bases currently rely on during outages. Every building, or part of a building, that is deemed critical to a base's mission has a backup generator attached to it. But when those generators are needed, they're often needed only at a fraction of their capacity. The problem is that generators are most efficient when they're operated at full capacity. In times of crisis, efficiency is key because bases store only a limited amount of diesel fuel on site.
The military is experimenting with the idea of hooking a V2G-capable vehicle up to the generator, allowing it to run at full capacity and fill up the battery, then turning it off and running off of the stored power.
"If you can add 20, 30, 40, 50 percent efficiency to the generator using the battery as a buffer, not only does that save you money and reduce emissions, but you're effectively extending the time that you can operate with a given fuel supply," said Gorguinpour, the Air Force environmental official.
If the project goes as planned, the next step will be to expand to as many as 1,500 vehicles at 30 installations.
That could happen only if the vehicles earned and saved enough money to cover their higher cost. But even then, the project would still need funding to cover the cost of the charging infrastructure and the software systems to manage the fleet. And it would need it at the worst possible moment, as the Pentagon faces steep budget cuts and strict congressional oversight of any program thought to be nonessential.
Gorguinpour acknowledged it will be difficult to find extra funding but said the money doesn't necessarily have to come out of a DOD budget line.
The Defense Department has been increasingly turning to third-party financing for investments at its installations. Nearly all of the large renewable energy and energy efficiency projects being built at bases are funded by businesses that front the initial cost and then get a slice of the savings. Gorguinpour said a similar model could be used with V2G systems, whereby a company would build the infrastructure in exchange for a contract with DOD to use its software to operate the system and a service fee.
No businesses are currently offering such a deal, but they're interested, Gorguinpour said.
"That's why the demonstration is important," he said. "V2G has never been demonstrated. But once it's been demonstrated, folks would see what their potential profit margins would look like, and hopefully, that would be compelling enough to build a case for third-party financing. That's a big part of why we're doing the demonstration ... not just for our own knowledge, but to share with industry."