Energy, environment opportunities grow despite DOD belt-tightening

Matt Kier oversees a showroom of advanced energy technologies.

There's a concentrated solar array whose curved mirrors move to follow a light that mimics the passing sun. There are a pair of small buoys that show how energy from waves can be converted to electricity and sent back to shore through underwater coils. And there's a model of a town and military outpost that demonstrate how micro-grid technology can better manage energy use and reroute supplies during outages.

Kier doesn't work for a alternative-energy startup. He's an engineer for Lockheed Martin, one of the country's largest defense contractors. And the display room, which the company calls its Energy Solutions Center, is nestled near fighter, space, electronics and cybersecurity displays just down the road from the Pentagon.

Over the past two and a half years, the Department of Defense has undertaken an ambitious effort to cut its energy use, start tapping renewable sources and understand the impact of climate change on its operations. Each military branch has laid out energy targets and has goals for reducing fuel use in vehicle fleets and feeding bases with alternative energy. For example, the Navy has committed to getting half its energy from alternative sources by 2020 and by then expects it will use 8 million barrels of biofuel a year.

As the military gears up to meet its energy goals, it will rely on defense companies to help plan, engineer and build a leaner, greener force.

Alternative-energy projects and climate change planning represent much-coveted opportunities for growth for military contractors anxious about promised DOD budget cuts.

Fiscal concerns and an executive order requiring federal agencies to reduce their energy footprints have played a role in spurring DOD commitments, but contractors say it all comes back to the mission.

Military brass see energy as a security issue. Shipping fuel to troops on the front lines in Iraq and Afghanistan is not only an expensive and dangerous logistical feat; it is also a strategic vulnerability.

"The Department of Defense's need for power is central to its war-fighting operations," said Richard Goffi, a principal at Booz Allen Hamilton and a leader of the firm's energy business. "Being efficient with energy and water use in the field can be much more valuable than just the cost of fuel."

Speaking at an alternative-energy conference in Washington yesterday, Navy Secretary Ray Mabus said relying on fossil fuels from volatile regions of the world creates both strategic and tactical vulnerabilities for his forces.

"We would never allow these regions to produce our ships, our aircraft, our land vehicles," Mabus said, "but because of their good fortune of having fossil fuel reserves, these very same regions get a say in whether our aircraft fly, whether our ships sail, or whether our ground vehicles operate."

The Pentagon is making investments so quickly that the size of the defense-energy market is difficult to gauge, even in ballpark terms.

But the ambitious military energy goals and the speed with which DOD has moved to make investments have convinced contractors that these changes aren't just tied to the price of oil. They are the future of the defense industry.

Executives at the largest defense companies say they have hired new energy staff, reorganized their teams to ensure that energy is considered across their work, purchased businesses that fill in gaps in their capabilities, funded research and development at universities and partnered with promising startup companies.

"This is going to be a substantial growth area," said Michael Mondshine, vice president at SAIC, where he manages energy and climate issues. "These are important areas for the military as they try to do more with less going forward, and they are really putting their money where their mouth is."

Nick Cook, a longtime aerospace editor at the trade publication Jane's Defence Weekly, has started a company aimed at mobilizing the industry on energy and climate challenges. The strategy behind companies' current investments in the energy and environment field, he said, is remarkably similar to the strategy that prompted their investments 25 years ago in stealth technology, a major defense breakthrough of the late 20th century.

"Lockheed Martin made the decision to invest in stealth when it was looking at data not dissimilar to what we're looking at now with energy, environment and climate change," Cook said. "I see the seeds of that same decisionmaking in its environmental decisionmaking today."

Size matters

Pentagon officials say they are looking far and wide for new ideas and technologies, and have been reaching out to venture capital companies and startups.

DOD recently set up a website that compiles its green business opportunities. But navigating federal contracting can be a Herculean chore for small businesses that lack the manpower and connections to get in front of defense customers and lack the accounting systems that government guidelines require.

"Federal contracting is one of the most mundane, mind-numbing processes ever invented," Jeff Marqusee, director of the Pentagon's Environmental Security Technology Certification Program, told entrepreneurs at yesterday's Clean Economy Summit. "It is a challenge working with the DOD as a startup company."

Instead, many small businesses seek partnerships with established contractors that have decades of experience working for the government and the resources and staffs to tweak proposals so they hit the exact right notes for Pentagon decisionmakers.

"We've partnered with several small, little companies that were having issues with scale," said Cathy Snyder, vice president for energy and environment at Lockheed Martin. "When these companies go back to their investors, the words we hear are 'We liked you before, we liked the technology before, but we like you with your friends better.'"

Large defense companies are also able to transfer the knowledge and capabilities, which are often proprietary, that they have acquired from other government projects.

For instance, back in the 1970s, Lockheed Martin began researching technology that would convert the temperature difference between warm surface water and deep cold water into electricity -- a technique called ocean thermal energy conversion. But building and transporting a pipe that could reach thousands of feet into the ocean to collect cold water was a stumbling block, and the company abandoned the research when energy prices fell.

When Lockheed Martin picked it back up again recently, its researchers found that the composite materials the company had developed for space shuttle parts allowed them not only to build a stronger pipe, but to build at sea. The company now has a $4.4 million contract to with the Navy to pilot the technology off the coast of Hawaii.

The military is primarily looking for drop-in replacements to meet its energy goals, since its aircraft and ships last for decades. But energy efficiency targets are also beginning to make their way into equipment contracting. The Air Force included fuel efficiency specifications when it asked for bids on its next-generation aerial refueling tanker, the KC-X aircraft.

"What I expect in a few years is they will become more specific about energy efficiency," said Robert Brammer, vice president and chief technology officer at Northrop Grumman. "But right now, it is absolutely considered to be an advantage if you can provide a more energy-efficient design."

Systems integration may be the key

But Cook, a veteran defense analyst who is among the few tracking the defense industry's work in the energy field, says the greatest opportunity exists in the defense sector's ability to pull together giant networks and merge data from multiple sensors into one real-time picture. That capability, called system-of-systems by the industry, could have massive payoffs if applied to energy and climate.

This would be a natural extension of the defense and energy sectors' shift to a foundation set on information technology.

With tools like "smart meters" that allow individuals to use electricity more wisely and "smart grids" that enable informed decisions for systemic energy use, they tout the ability to become more efficient through information.

Cook sees the potential for defense companies to develop systems like those for ballistic missile defense, but applied to managing energy systems and predicting climate changes.

Last November, Northrop Grumman announced a project that is a step in that direction. The company partnered with the Rocky Mountain Supercomputing Center in Montana to power a tool that builds models using vast databases of wind and solar data to help renewable energy developers choose an ideal site. The technology builds on tools Northrop Grumman had already developed to help the Defense Department choose locations for its facilities.

At the back of Lockheed Martin's Energy Solutions Center is an interactive LCD screen like those used by television news programs to display poll results on election night.

The screen, which is built by Perceptive Pixel and has been used by the military, is loaded with data about the nation's electric grid, weather, renewable energy projects, fossil fuel production and nuclear power sites. With a touch of the finger, weather data can be overlaid on renewable power projects, helping managers pinpoint the precise angle to face wind turbines and the exact moment when solar arrays should be turned on and off.

Technology developed by the defense sector often makes its way into commercial use. Global positioning systems and the Internet are favored examples. And defense officials say they expect this trend to hold true for energy and climate technologies, as well.

Cook frames it even more pointedly: "Looking at the big, scoped challenges out there that need to be tackled at not just the military level, but the national, regional, global levels ... it's really only one sector that's able to do that -- the defense sector."