OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE
WASHINGTON, DC 20301-8000
March 19, 1991
PRODUCTION AND
LOGISTICS
(L/EP)
DEFENSE ENERGY PROGRAM POLICY MEMORANDUM (DEPPM) 91-2
MEMORANDUM FOR DESIGNATED ENERGY OFFICES OF THE OFFICE OF THE
SECRETARY OF DEFENSE, ORGANIZATION OF THE JOINT
STAFF, MILITARY SERVICES, AND DEFENSE AGENCIES
SUBJECT:
Implementing Defense Energy Management Goals
This memorandum establishes guidelines for implementing a
comprehensive energy resource management program in the Department of
Defense for the accomplishment of goals established by the Deputy
Secretary of Defense.
As part of the continuing review of Defense management, the
Deputy Secretary approved Defense Management Review Decision 907,
which directs a formal program to reduce facilities energy use and
cost. On March 13, 1991, the Deputy Secretary established specific
goals and actions as required by the fiscal year 1991 Defense
Authorization Act, section 2851. The guidelines enclosed provide
implementing details for developing DoD component programs. Please
furnish this office a copy of your implementing instructions within
90 days of this memorandum
Diane K. Morales
Deputy Assistant Secretary
(Logistics)
Attachment
Implementing DoD Energy Management Goals for the
1990’s
Detailed Guidance on Implementing Goals of Enclosure to DepSecDef Policy (Enclosure 1):
Program Elements
•
Improved Operations and Maintenance (O&M). Components are requested to
perform O&M type surveys of facilities to establish priorities for improving operator
training and maintenance of energy production, distribution and related systems.
Defense Components are encouraged to evaluate the applicability of O&M type service
contracts for their installations. The Navy, for example, has initiated an indefinite
quantity, delivery order type contract, called “Operations and Maintenance Energy
Services” (OMES), for the identification and completion of specific pre-defined and
pre-priced generic conservation actions. This contract mechanism allows rapid and
relatively easy administrative accomplishment of many very high payback projects under
one competitively solicited contract document.
The following is an apportionment by Defense Component of the Operations and
Maintenance funds identified in Defense Management Review Decision (DMRD) 907 to be
available for any operations and maintenance effort necessary to support the
accomplishment of these goals:
FY91
FY92
FY93
$0.6
Army
Navy
.9
.1
USMC
.8
Air Force
.6
Def Agencies *
3.0
$0.6
.9
.1
.8
.6
3.0
$0.9
1.3
.2
1.0
.6
4.0
-
•
$Millions
FY94
FY95
$0.9
1.3
.2
1.0
.6
4.0
$0.9
1.3
.2
1.0
.6
4.0
FY96
FY97
$1.1
1.8
.2
1.3
.6
5.0
$1.1
1.8
.2
1.3
.6
5.0
These funding targets are estimated to be the minimum to achieve the goals of
this effort. Defense components will support all necessary actions to accomplish
the program goals. * Defense Agencies fund figures include $0.5 million annually
for OSD program support.
Capital Investment. Defense Components are requested to identify all energy
conservation projects of military construction scope with simple paybacks of ten years
or less and establish a plan to fund projects by Fiscal Year 1997, at the pace directed in
DMRD 907 and details of this document. Projects which are appropriate for Operations
and Maintenance funding should be given high priority and the resultant savings should
be retained and used in accordance with 10 USC 2865 (Enclosure 2.) Plans should
prioritize projects by highest auditable energy and/or cost savings projected and not
solely by shortest payback. Rebates or other financial incentives offered by utility
companies should be included in the economic analysis.
Military Construction scope Energy Conservation Investment Projects (ECIP).
Components will furnish line-item detail, according to levels prescribed in DMRD 907,
and implementing budget guidance, for inclusion in the President’s annual budget
submission. Projects shall be reviewed and included in the budget submission to
Congress on the basis of estimated energy payback, technical validity proposed savings
verification methodology. The following are ECIP funding targets for the Defense
Components based on the savings estimate rationale of DMRD 907:
Army
Navy
USMC
Air Force
Def Agencies
FY91
FY92
$Millions
FY93 FY94
FY95
$2.6
3.8
.5
2.9
.2
10.0
$7.7
11.6
1.5
8.9
.3
30.0
$12.8
19.3
2.5
14.9
.5
50.0
FY96
$12.8 $12.8 $12.8
19.3
19.3
19.3
2.5
2.5
2.5
14.9
14.9
14.9
.5
.5
.5
50.0
50.0
50.0
FY97
$12.8
19.3
2.5
14.9
.5
50.0
-
These funding targets are believed to be minimal to achieve the goals of this
effort. It is hoped that Defense components will provide additional discretionary
funding to accomplish all cost effective energy projects which result in rapid
payback, reduced energy supply disruption vulnerability and improved
environmental and facilities support quality.
-
Congress is interested in the Department’s rapid action in implementing this
increased energy conservation program. Defense Components should submit
candidate projects for use of funds made available through FY 1991 Military
Construction Appropriations Act no later than March 29, 1991 to the Office of
the Assistant Secretary of Defense (Production and Logistics) (ASD {P&L}).
Project submission should contain all necessary backup information and detail
required for Energy Conservation Investment Program projects, with the addition
of detailed explanation of the procedures to be used to verify savings. Projects
should be at or near the 35% design level normally expected for Military
Construction projects. Given the very short time for preparation of these
projects, Committee staff may allow funding of Operations and Maintenance
type projects. Components are encouraged to submit such projects in
sufficient detail for staff review, if MILCON projects are insufficient.
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•
-
Because of the rapidly approaching deadline for review by Congress, Defense
Components should submit candidate projects for the FY 1992 Military
Construction Program no later than March 29, 1991 to the OASD (P&L).
Project submissions should contain all necessary backup information and detail
required for Energy Conservation Investment Program projects, with the addition
of detailed explanation of the procedures to be used to verify savings. Projects
should be at or near the 35% design level normally expected for Military
Construction projects.
-
Candidate projects for the Fiscal Year 1993 Military Construction program
should be submitted no later than September 15, 1991 to the OASD (P&L).
Candidate projects for subsequent program years shall be submitted in accordance
with the Military Construction program schedule.
Public Utility Programs. Component installations are requested to actively participate
in electricity demand side management (DSM) and conservation programs when and
where such programs are offered by regulated public utilities.
The Secretary of the Army has been directed to coordinate with the
Secretaries of the Navy and Air Force and with the heads of Defense Agencies to
develop an integrated strategy for all Components within the service territory of
each utility to coordinate activity and maximize savings. The strategy should be
completed by September 1, 1991. Components are requested to establish and
identify to the Director, Energy Policy, Office of the Deputy Assistant Secretary
of Defense (Logistics) focal points for this coordination process by March 29,
1991.
Many of these programs are time sensitive and immediate action should be taken
to participate to the maximum extent even prior to the development of the
integrated strategy. Defense Components are authorized and encouraged to: (1)
enter into agreements with utility companies or utility company-approved,
competitively selected, contractors which provide facility energy conservation
audits, at no cost or obligation to’ the government, (2) apply for and accept
approved financial incentives, such as energy efficient equipment rebate or project
feasibility study cost sharing, offered by utility company programs, (3) enter
into direct negotiation with utility companies or utility company-approved,
competitively selected, contractors for the installation of energy efficient,
demand reduction or power reduction equipment where utility incentives cover a
portion or the entire implementation costs.
•
Shared Energy Savings Contracting (42 USC 8287 {Enclosure 3}). Each Military
Department is requested to initiate a minimum of three shared energy savings contracts
per year, beginning in Fiscal Year 1991.
3
The Secretary of the Navy, in coordination with the Secretaries of the Army
and the Air Force and the Directors of the Defense Agencies, has been directed to
develop a simplified contracting process, including contractor prequalification
standards and selection procedures, in accordance with 10 USC 2865.
Components are requested to establish and identify to the Director, Energy
Policy, Office of the Deputy Assistant Secretary of Defense (Logistics) focal
points for this coordination process by March 29, 1991.
Defense Components are authorized by 10 USC 2865 to conduct direct
negotiations of shared energy savings contracts, authorized by 42 U.S.C. 8287,
with firms that have been competitively selected and approved by the utility
company serving a defense facility. Each Defense Component should establish a
centralized program consisting of technical, contractual and legal resources to
provide the expertise and continuity needed to execute these public/private
ventures to maximize results at the lowest administrative cost to the Government
and the industry.
•
•
Lighting Systems. The Director, Defense Logistics Agency, has been directed to
coordinate with the Military Services, the General Services Administration, the
Department of Energy (Federal Energy Management Program Office), lighting equipment
manufacturers and others, as needed, to improve the quality of information available to
federal managers on selecting efficient lighting systems and equipment. A plan for
development and dissemination of appropriate guidance for replacement lighting
equipment selection at the installation level should be developed and reported to the
Office of the Assistant Secretary of Defense (Production and Logistics) by April 15,
1991. Components are requested to establish and identify to the Director, Energy
Policy, Office of the Deputy Assistant Secretary of Defense (Logistics) focal points for
this coordination process by March 29, 1991. The information to be developed should
include:
-
Guidance on selection and installation of higher efficiency lighting bulbs and
equipment for routine replacement of existing equipment;
-
Changes in cataloguing information to improve cross referencing from older, less
efficient bulbs and equipment to more efficient ones;
-
Simplified economic analysis guidelines to facility managers on determination of
cost-effectiveness of low cost items such as lamps and bulbs.
Energy Management and Control Systems (EMCS). Congress has been particularly
interested in the application of energy management and control systems at Defense
facilities. Components should take particular care to assure that this technology is
given comprehensive application review, that all new and existing system expansion
applications found to be cost effective are diligently pursued and that installed systems
4
are provided necessary operation and maintenance support to maintain efficiency and
resultant savings. EMCS implementation using shared energy savings contracts, which
provide continuous operation and maintenance through the contract term, is an option
to assure adequate operation and maintenance support.
•
Alternative, Renewable, and Clean Energy. Defense Components are requested to
actively seek out life-cycle cost effective applications for alternative, renewable and clean
energy sources in order to satisfy new and replacement energy requirements.
The Secretary of the Army has been directed to coordinate with the
Secretaries of the Navy and the Air Force and, as needed, with the Heads of
Defense Agencies, in the development of strategies for the selection, installation,
use, and conversion to alternative, renewable, and clean energy sources, with the
exception of solar and geothermal energy. Components are requested to
establish and identify to the Director, Energy Policy, Office of the Deputy
Assistant Secretary of Defense (Logistics) focal points for this coordination
process by March 29, 1991.
The Secretary of the Navy has been directed to be the lead in solar and
geothermal technology application and resource development. All components are
encouraged to participate in demonstration programs of the Department of
Energy when cost effective and compatible with installation mission.
Components are requested to establish and identify to the Director, Energy
Policy, Office of the Deputy Assistant Secretary of Defense (Logistics) focal
points for this coordination process by March 29, 1991.
To the extent conversions to these types of fuels and fuel systems replace
conventional energy use on the installation and reduce costs, the reductions
should be reported, in dollars and BTU equivalents for the conventional energy
replaced at the individual installation at which the renewable application has been
installed OASD(P&L) shall credit this on-site renewable energy substitution
against the Component’s energy reduction goal.
•
Use of Coal. The Secretary of the Army has been directed to coordinate with the
Secretaries of the Navy and the Air Force, as required, to develop a coordinated Defense
plan and to provide the ASD(P&L) with an annual update on progress toward meeting
this goal. Components are requested to establish and identify to the Director, Energy
Policy, Office of the Deputy Assistant Secretary of Defense (Logistics) focal points for
this coordination process by March 29, 1991.
5
Program Implementation Procedures
•
Environment (see DepSecDef guidance). All energy conservation activities should be
undertaken in a manner that complies with all pertinent environmental regulations and
Defense environmental policy.
•
Life-Cycle Cost Analysis. All life-cycle analysis of energy dependent projects should be
performed using the latest energy projections and discount rates provided by the
National Institute of Standards and Technology in support of the Department of Energy
responsibilities under 10 Code of Federal Regulations part 436 subpart A (latest
revision October 1990.) Life-cycle cost analyses procedures used to evaluate energy
dependent projects should follow the criteria and standards contained in the “Tri-Service
Memorandum of Agreement on Criteria/Standards for Economic Analysis/Life Cycle
Costing for MilCon Design.”
•
Financial Management. Sound financial management practices must be established and
followed in the areas of energy savings identification, retention and reinvestment in
support of the energy resource management program.
Identification of Energy Savings. At the end of each Fiscal Year, activities should
determine the energy cost savings attributed to conservation projects, energy systems
maintenance activities, energy load management, command leadership or other specific,
discrete measures implemented during the year. Ideally energy savings should be
verifiable through metering. However, if meters are not available to establish a baseline
usage prior to an energy conservation action, professionally acceptable engineering
models and estimates should be used. All savings should be determined by comparing the
energy used at the installation for the year (or portion of the remaining year) following
completion of the project to the energy used at the installation during the preceding
year or comparable portion.
Energy savings determination procedures should take into consideration changes in
uncontrollable energy use constraints such as weather (comparison of marginal energy
use changes caused by weather variation), physical facility condition (e.g. demolition,
addition or transfer of buildings, and change of use pattern such as from warehouse to
administration space), and facility operation tempo which can be directly attributed to
specific product output or mission support change.
The total energy cost savings will be determined by multiplying energy use quantities
reduced, by energy type, by the actual average unit cost of the energy used by the
installation. Care must be taken to use actual unit cost data for the specific energy
purchased for use by the installation rather than any average stock fund price.
Financial incentives provided as a result of participation in public utility conservation or
demand side management programs should be retained as authorized by 10 U.S.C. 2865.
6
Retention of Savings. As authorized by 10 USC 2865, energy cost savings shall
remain available for investment during the fiscal year following the fiscal year for which
the funds were appropriated, without additional authorization or appropriation.
Subsequent annual savings may continue to be retained in this way for the life of the
project, or a shorter accounting period as determined appropriate by the Component.
Defense Components, using input from both technical and budgeting staffs, are
requested to develop and prescribe procedures for implementing the provisions of the
National Defense Authorization Act for Fiscal Year 1990 section 331 with respect to
measurement, reporting, retention and use of savings from shared energy savings
contracts, and 10 USC 2865 with respect to retention and use of savings from energy
conservation projects generally. Since shared energy savings contracts have been
authorized under separate legislation, the following savings retention and use guidance
pertains:
-
For the first five years of a shared energy savings contract, the activity initiating
the contract is authorized by the National Defense Authorization Act for Fiscal
Year 1990, section 331, to retain the Government’s share of the energy cost
savings. These savings may be retained by the activity with one half to be used
for further energy conservation projects and one half for Morale, Welfare and
Recreation or other minor construction projects at the activity.
-
After the first five years of the contract, retention and use of the savings will be
the same as that for other energy conservation projects as directed by 10 USC
2865.
Energy Savings Reinvestment. The National Defense Authorization Act for Fiscal Year
1990 section 2851 (codified as 10 U.S.C. section 2865) states that two-thirds of
actual energy cost savings achieved in energy conservation projects shall remain available
for obligation through the end of the fiscal year following the fiscal year for which the
funds were appropriated, without additional authorization or appropriation.
Component heads are requested to direct their subordinate organizations on compliance
with this provision of law in a way that assures savings retention and continuing
incentive for energy conservation at the installation level. The amount computed as
resulting from specific conservation measures should be reported to the Component
head through channels for disposition as follows:
-
DMRD 907 has directed a reduction in Service/Agency O&M accounts for FY91
through FY97, in an amount equal to one third of the estimated Component-wide
total savings achievable under DMRD 907. These funds have already been
removed from Component top lines.
-
Components are requested to assure that, funds equal to one-third of the amount
saved or estimated to have been saved shall remain available for obligation,
7
through the end of the fiscal following the fiscal year for which the funds were
appropriated, at the installation reporting the savings for: military family
housing, other minor construction requirements and any other morale, welfare or
recreation facility or service of benefit to the personnel or their dependents on
the installation, consistent with applicable law and regulations.
-
Components are requested to assure that funds equal to another one-third of the
Component’s total conservation savings be applied to further energy conservation
measures at facilities belonging to its major commands and claimants. Component
heads are requested to direct the use of funds for maximum benefit in achieving
further savings.
Reimbursement-funded Activities. Activities funded with working capital, or revolving,
funds, are requested to develop conservation and non-conservation minor construction plans
that conform to the funds control procedures applicable to the fund involved.
•
Program Coordination The Director, Energy Policy, Office of the Deputy
Assistant Secretary of Defense (Logistics) will facilitate implementation and
coordination through the Defense Energy Policy Council (DoDD 5126.47). The Military
Departments and Defense Agencies are requested to apply appropriate funding, personnel
resources and management priority to assure accomplishment of these goals and
strategies.
•
Progress and Reports. DoD Components are requested to report their aggregate
facility energy use quarterly. DoDD 5146.47, Defense Energy Information System,
(RCS: DD(P&L-AR 1313)) governs this report.
The annual program progress report should be submitted to the Office of the Assistant
Secretary of Defense (Production and Logistics) no later than April 15 of each year,
beginning in 1992, and should address each of the specific goals and activities listed in
the DepSecDef memorandum and above.
Components are requested to verify their administrative energy use baseline for FY
1985, and establish an industrial facilities energy use baseline for FY 1985.
Where alternative means are used to achieve energy savings established as specific goals
(e.g. shared savings contracts), these should be described for each project. Components
are also requested to furnish summaries, by project type, of energy conservation
activities financed by operations and maintenance or other fund sources. In addition,
the annual reports should contain installation summaries, by project type, of use of
funds retained under the reinvestment provisions of the National Defense Authorization
Act for Fiscal Year 1990, section 331 (shared savings contracting) and 10 USC 2865.
Audit trails of savings retention and reinvestment should be maintained at installation
level detail.
8
Defense Components are requested to address program progress as a special interest
item on all major command/claimant and Inspector General inspections within twelve
months after the date of this DEPPM and include any pertinent findings in the annual
report.
Definitions:
•
Administrative and similar buildings: Administrative buildings are those buildings owned
or leased by the Department, used predominantly for non-industrial activities, such as
headquarters operations, training (except simulator facilities), accounting and
recordkeeping, laboratories, dining halls, hospitals, and housing. Excluded are industrial
facilities.
•
Alternative, Renewable, and Clean Energy: These types of energy include energy from
all unconventional sources, energy recovered from conversion, and energy producing low
emissions. Examples include solar energy, photovoltaics, wind energy, geothermal
energy, landfill methane, fuel cells, hydrogen combustion, etc.
•
Competitively Selected Firms: As applicable to utility company conservation and demand
side management programs, means a certification or statement by the utility that their
normal competitive procedures were used to select firms for implementation of these
programs.
•
Demand Side Management (DSM): DSM consists of limiting power and energy demands
on the utility system by conservation and/or shifting loads to off-peak periods. DSM
may or may not reduce energy use. DSM is primarily designed to reduce costs by
“averaging” daily electrical demands to reduce a utility’s requirement to invest in
facilities and equipment to satisfy peak period demand.
•
Energy Conservation: Energy conservation consists of actions such as improving
operations and maintenance, installing materials, devices, instruments, or equipment, or
eliminating energy loads, to reduce the amount of energy needed in a facility.
Conservation actions would include upgrading the efficiency of lighting equipment,
heating, ventilation and cooling systems, building insulation, glazing, improved
maintenance, etc. For the purpose of measuring progress towards the program goals
purchased electricity will be reported on the basis of “site” energy content, that is
3,412 btus per kilowatthour.
•
Industrial facilities: Industrial facilities are those used predominantly for manufacturing,
maintenance, overhaul, warehousing, and similar processes, including
Government-Owned, Contractor-Operated facilities. Energy support to ships in port
and aircraft on the ground is excluded.
9