The Army Opens a New Front in the Battle for Renewables: A $7 Billion RFP for Renewable Energy to Serve Army Bases
On August 7, the U.S. Army issued a long-anticipated Request for Proposals, seeking up to $7 billion worth of renewable energy to serve U.S. Army bases. The RFP is part of larger initiative launched by the Department of Defense (“DOD”) to produce one gigawatt of power on defense bases by 2025. Responses to the RFP are due by October 5, 2012. The Army will accept comments on the RFP from interested parties through August 24.
The RFP seeks offers from renewable energy producers for projects to be constructed on private lands or lands controlled by the DOD. Rather than seeking ownership of the generation projects, the Army will simply purchase output from the projects under Power Purchase Agreements (“PPAs”) similar those generally used in the utility sector. The project owner will be expected to finance, construct, own, and operate the generator.
The Army will use a two-step process to obtain PPAs. Initially, producers will be required to submit an “Indefinite Delivery/Indefinite Quantity” (“ID/IQ”) offer, which is designed to identify not only relevant price terms, but also each offeror’s experience and qualifications in constructing renewable energy projects, and the offeror’s capacity to finance the generation facilities it proposes to construct and operate. Once a field of qualified producers is identified through the ID/IQ process, the Army will then award “task orders” to a subset of generators selected through the ID/IQ process. Hence, only suppliers that are awarded task orders will sell power to the Army.
A few additional items arising under the RFP are worth noting. First, the Army intends for 50% of the contracts to be awarded to small businesses (defined as entities engaged in the distribution, generator, or transmission of electric power that sell less than 4 million MWh per year). Second, standard provisions requiring the payment of prevailing wages under the Davis-Bacon Act will apply, although it may be possible to escape these requirements for projects built on private land. Third, the Army recognizes that it may be necessary for developers to form LLCs or other special purpose entities in order to finance projects and the RFP makes allowance for that. Finally, the contract recognizes that, under the Energy Policy Act of 2005, the Army must honor state laws governing utility service territories. Accordingly, prospective sellers should carefully consider whether these state laws restrict their ability to serve targeted Army bases.
The Army anticipates selecting potential contractors through the ID/IQ process by the end of 2012, with task orders to follow early in 2013.