We didn't leave the Stone Age for the lack of stones, and we will not leave the Carbon Age for the lack of carbon. Like it or not, green is in, and going green can provide investors with returns.
Green is about benefiting the environment and conserving natural resources. And green got a boost from President George W. Bush when he signed Executive Order 13423, entitled "Strengthening Federal Environmental, Energy and Transportation Management." His order codified clean-energy provisions found in the Energy Policy Act of 2005, the National Defense Authorization Act of 2007 and the Energy Independence and Security Act of 2007.
Bush's order applied to all federal agencies, including the military. It accelerated investments in a wide variety of green projects. If a contractor wants to win a government bid, it better have a green component in their proposal. If it doesn't and its competitor does, it will lose its bid.
Major government integrators such as Lockheed Martin (LMT), Northrop Grumman (NOC), General Dynamics (GD), Booz Allen Hamilton Holding (BAH) and even smaller companies are rushing to add as many green components as possible into their federal proposals. Some are offering green in obscure and creative ways. One example is adding solar power to a propeller manufacturing facility so as to embed a green component into each propeller delivered.
Counterintuitively, the military is leading the way toward a greener government. The uniform services adopted green as a priority, and they actively seek projects that provide them with energy efficiency, renewable energy and energy security.
The U.S. Navy is leading "drop-in fuel" technologies. Drop-in fuel is a substitute for conventional fuel that is completely interchangeable and compatible. Today, biofuel is not just an idea, it's already incorporated into the Navy's supply chain. For example, the Navy is currently purchasing 450,000 gallons of biofuel for Navy Air. More will be purchased for the Great Green Fleet Carrier Strike Force.
According to Signal magazine, the Great Green Fleet, a strike group powered largely by biofuels, is scheduled to participate in a demonstration of drop-in fuels this year, and a full deployment is slated for 2016. As Rear Admiral Philip Cullom, USN, director, Fleet Readiness Division, explains, "We are engineering the fuel; we are not re-engineering the ships."
Part of the Great Green Fleet is already green; it already has a fleet of nuclear-powered aircraft carriers and submarines. Nuclear power is carbon-free and does not produce greenhouse gases; it's green. Some might argue about nuclear waste, but that's more of an issue with civilian reactors.
The U.S. Army is leading with "green power." Green power is electricity produced from green fuels, including biomass, hydroelectric, hydrokinetic, nuclear, wind, solar and other sustainable technologies.
But power is a tricky issue for the Army. Up to now, each military base was largely powered by its local utility. However, the naval bases in San Diego have lost power because of wide area blackouts. Now the military is having second thoughts about relying on local utilities; it needs a secure grid.
Self-generation provides one level of energy security. It makes sense that military bases would want to add independent generation capability. It also makes sense that some of that generation would be in the form of green energy. That is why the military is seeking Requests for Information.
The twist is that the military is not planning to purchase new generators. It is signing long-term power-purchase agreements and providing independent power producers (IPPs) with acreage on their bases through Enhanced Use Leases. With a long-term power agreement from a bankable partner, IPPs can monetize their federal contracts and finance their capital costs to earn a modest margin. The net cost to government is zero; it was going to buy the power anyway.
The military's green initiative is sparking all sorts of new and creative technologies. One is the micro-grid, which manages energy supply as if the base were a stand-alone utility. Micro-grids are already used in planes and ships, but their deployment on large bases is orders of magnitude more complex. Siemens (SI) and Boeing (BA) are developing micro-grid technology, and they have organized to take advantage of the opportunities in the military.
Other technologies are focused on waste. The military wants to minimize waste disposal. One private company, LEEP Holdings, has developed patented technologies to separate waste into biogenic products, metals, glass and plastics, and it monetizes each of those waste streams. Now, municipal solid waste is becoming a valuable commodity. Military and other communities are even considering mining landfills for cash.
Innovation is sprouting up everywhere in the land of green. But very little originates from the energy industry.