Defense Logistics Agency Energy is building cost-cutting strategies into its primary mission to provide comprehensive energy solutions to the Defense Department and other federal agencies. The field activity is helping to do its part in meeting DLA Director Navy Vice Adm. Mark Harnitchek’s broader goal for the agency to save $10 billion over five years. DLA Energy already has programs and initiatives in place to perform its mission with more cost effectiveness in mind, officials said.
“DLA Energy has pushed the initiative to convert from JP8 to commercial grade Jet A aviation turbine fuel in the continental U.S. as a cost-saving initiative for several years,” said Lee Oppenheim, deputy director of DLA Energy Americas at San Pedro, Calif.
Working with service control points and engineering support activities, DLA Energy assisted in obtaining approval for military aircraft to unconditionally use Jet A, he explained. Air Force testing shows almost no issues with this change, and the service authorized DLA to procure Jet A for many of its locations.
DLA Energy Americas is moving forward with a plan to convert current customers in the continental U.S. using JP8 to commercial Jet A fuel. Within the DLA Energy Americas at San Pedro region, several employees foresaw this change and implemented changes within the infrastructure to accommodate Jet A use.
Robert Short, then-chief of bulk fuel distribution; Bowdoin Swenson, chief of the distribution division; and Michael Koury, chief of the quality division, began modifying defense fuel support points to accommodate commercial-style filtration and providing the sites with the capability to inject military-required additives.
“With that accomplished, implement-ation within the region will not require long lead times to retrofit the terminals before converting to Jet A,” Oppenheim said. “Almost all Air Force weapon systems have been approved to use Jet A as an equal with the military-specification JP8.”
Army and Navy organizations are in the process of considering Jet A as an equal fuel, he said.
The Air Force, Navy and Army represent DLA Energy’s top three customers, with sales of more than $18 million.
“The basic goal is to allow suppliers to maintain a single aviation turbine fuel stock at production and within the supply chain until DLA Energy purchases it,” Oppenheim said. “By eliminating separate production, storage and transportation for military-specification product, DLA and the warfighter will reap the benefits of eliminating suppliers’ additional expense. Jet A customers anticipate a savings, once fully implemented in three years, of 2 to 3 cents per gallon.”
According to the most recent figures available, DLA Energy had net sales of 1.25 billion gallons of JP8 within the continental United States in fiscal 2011. A 2- to 3-cent savings per gallon would realize a total savings of between $25 million and $37.5 million.
Natural Gas Program Proves to be Cost Effective
Another program in place that has cost effectiveness in mind is DLA Energy’s Natural Gas Program.
This DLA Energy Installation Energy program helps provide coal, natural gas, electricity, renewable energy and energy-conservation measures for DoD facilities.
The program focuses on providing cost-effective, reliable energy solutions in support of the DoD mission.
“The DLA Energy Natural Gas Program was established in 1990 for the purpose of competitively acquiring direct supply natural gas for military services,” DLA Energy Installation Energy Director Pam Griffith said.
The Defense Department requires that the natural gas program be cost effective and have the same degree of supply reliability as other practical alternative energy sources, Griffith said.
Since the program’s inception, DLA Energy has netted participating customers more than $850 million in cost avoidance when compared to local utility rates.
On average, this represents an 8 to 15 percent savings beyond what customers would otherwise pay their local utility, she said.
“In the past three years, we’ve improved our cost avoidance for customers to more than 20 percent through various process improvement initiatives aimed at ensuring our contracts were representative of best commercial practices, properly balancing risks and streamlining of our processes,” she added.
The total DoD cost avoidance for fiscal 1991-2011 has exceeded $656 million, according to DLA Energy’s Fact Book.
Griffith explained that DLA Energy, as DoD’s central procurement agency for direct supply natural gas, is actively managing multiyear contracts valued in excess of $500 million for the supply of more than 110 million dekatherms, a form of measurement for energy.
DoD requirements, which come from about 140 military installations, represent more than 75 percent of the overall contract quantity. The remaining contracts support federal civilian agencies, including the Bureau of Prisons, NASA, and the departments of Energy, Agriculture, Homeland Security, and Health and Human Services, Griffith said.
“Inclusion of the federal civilian agencies helps balance our load profiles and improve our buying power, enabling us to negotiate better deals for our DoD customers,” Griffith said.
Demand Response Programs Net Millions in Energy Savings
Another cost-savings program in DLA Energy is its Electricity Demand Response Program.
The program is designed to enable customers to contribute to energy-load reduction during times of peak demand.
“Our mission is to provide federal agencies with comprehensive energy solutions that are effective and efficient, and demand-response services go a long way in helping us meet that goal,” said Larry Fratis, chief of the DLA Energy Electricity and Renewables Division.
In exchange for an installation reducing its electricity load, the independent system operator or the utility distribution company provides financial incentives to participating customers in the form of credits to their utility bills, he explained. These credits have the effect of reducing the price the government pays for a kilowatt of electricity.
“DLA Energy’s customer participation in the various demand-response programs has grown exponentially and netted customers millions of dollars in energy costs savings,” Fratis said.
The Electricity Demand-Response Program is a cost-saving, energy-management initiative that can help customers save money on their utility bills, Griffith said. The DLA Energy program has supported customer participation in various demand-reduction programs available across the U.S., in both regulated and de-regulated market areas, netting customers more than $10 million in financial credits on their utility bills from the program’s inception in fiscal 2008.
Contracts Produce Savings and Reduce Environmental Impact
Energy savings performance contracts are another energy-savings vehicle used by DLA Energy.
ESPCs are alternatively financed contracts that leverage private-sector capital and expertise, allowing the government to achieve mandated energy- and water-conservation goals without up-front capital costs, Griffith said.
She explained that under ESPCs, contractors are paid from energy cost savings that result from energy conservation measures implemented by the contractor.
The Energy Independence and Security Act of 2007 and Executive Order 13423 set new federal energy intensity goals that are implemented by ESPCs, she said.
EISA and E.O. 13423 require DoD to cut energy use, compared to 2003, by 3 percent per year from 2007 to 2015, according to information available on the Department of Energy’s website.
Defense Reform Initiative Directive 21, dated January 1998, directed DLA to assist the military services in using tools such as ESPC contracts to decrease energy demand.
DLA Energy has been procuring and administering ESPC contracts since 1999 and has awarded contracts with a total value of $430 million, Griffith said.
Part of DoD’s core strategy when it comes to facility energy is to reduce demand through energy efficiency and conservation measures, Griffith said. She added that officials have seen a significant increase in customer energy conservation requirements over the past 12 months, particularly given the president’s directive to achieve $2 billion in investment in these efforts by December 2013, Griffith said.
Facility energy is important to DoD when it comes to mission assurance, cost and environmental impact, Griffith said.
“Our goal at DLA Energy is to ensure reliable energy supplies are delivered to our installations in the most cost-effective manner and to implement energy-reduction measures,” she added.
The cost savings realized under DLA Energy programs can then be reallocated by customers to support mission priorities, and the energy savings help reduce the department’s impact on the environment, she said.