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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
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Summary

The potential for energy resource development on Department of Energy (DOE)-managed lands remains a topic of interest within DOE, Congress, and with private developers interested in siting projects on DOE lands. Several previous studies have estimated the energy resource development potential using various approaches and methodologies—with some DOE sites having undergone more extensive review than others. Preliminary studies concluded that such potential exists, pointing to the need for further analysis.

The National Renewable Energy Laboratory (NREL) was tasked by the DOE Office of Legacy Management (LM) in 2013 with conducting a study to further refine and build upon previous analyses and to assess energy resource development potential on these lands. The NREL study scope called for a high-level analysis of “techno-economic potential”1 at DOE sites and a somewhat detailed analysis of that same potential at the most promising sites. The resulting NREL report, Large-Scale Power Production Potential on U.S. Department of Energy Lands, completed in June 2016 (Kandt et al., 2016),2 attempted to refine earlier analysis and be a more definitive barometer of energy resource development potential on DOE lands.

DOE has varying degrees of responsibility over 164 sites in 32 states, many of which are in active use, including the 17 national laboratories. Other sites are not in active use and are under DOE jurisdiction, either for remediation of contamination onsite from prior use or for continued monitoring post-remediation. Other DOE lands have a more complicated ownership structure and were deemed not under DOE control for purposes of the NREL study. The resources studied included solar photovoltaics (PV), concentrating solar power (CSP), wind, biomass, landfill gas (LFG), waste to energy (WTE), geothermal, fossil fuels, and uranium or thorium resources for nuclear power production. NREL conducted the analysis of renewable energy potential and contracted with the Colorado School of Mines (CSM) to conduct the fossil fuel and nuclear analyses.

The National Academies of Sciences, Engineering, and Medicine3 was tasked by DOE with reviewing and commenting on the NREL study. Overall, the Committee on Energy Resource Potential for DOE Lands found that the NREL study further defines and characterizes selected DOE sites and, to the extent site-specific information was developed, provides valuable insights on the energy resource types having the greatest potential to be developed at those sites. However, the committee concluded that other methods and approaches to the analysis suggested by the committee and referenced in this report might reasonably have led to different conclusions and provided more meaningful results. The committee’s reasoning and specific observations follow. The committee undertook its review of the analysis with knowledge of the constraints imposed by the limited funding.

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1 The calculation of system size and operating characteristics, along with levelized cost of energy (LCOE), comprise the estimate of techno-economic potential of the resource.

2 A final version of the report, reflecting editorial corrections, was given to the committee in November 2016.

3 Effective July 1, 2015, the institution is called the National Academies of Sciences, Engineering, and Medicine. References in this report to the National Research Council are used in a historical context and refer to activities before July 1.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
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COMMITTEE ASSESSMENT OF NREL/CSM ANALYSIS

The geography and topology, remnants from previous use, and access to renewable and fossil energy resources—like wind, solar, geothermal, and coal, for example—varies greatly among the DOE lands studied. Many DOE sites have restrictions (e.g., security considerations, mission-related uses, and environmental contamination) that might significantly impact the extraction of energy resources or the construction of on-site, large-scale energy generation projects. Access to existing energy infrastructures for transporting and delivering energy to end-use markets also varies by site. As a result of these variations, it is difficult to apply a single criterion to evaluate energy resource development potential on these sites—rather, a variety of criteria are needed. The cost to develop and operate an energy resource is a necessary and important factor, as is the market value of the resource. Site-specific costs, such as environmental remediation, if necessary for the lands to be developed; land preparation; and on- and off-site energy and related infrastructures needed to transport the energy to market, must also be considered. Lastly, unless DOE is going to develop a resource itself, developer risks must be identified and managed, particularly if development costs require financing. In some cases, developer risk can result in a risk premium being paid to developers to interest them in developing the resource.

As a first step in considering whether energy projects were feasible and economic, DOE identified 148 of the 164 sites for study by NREL.4 From that list, NREL performed an initial screening on the feasibility of adding an energy project at the site. The list was subsequently reduced to 55 sites. The techno-economic analysis of each site included an estimate of the levelized cost of energy (LCOE) of the technology proposed for each site, which provided the basis for down-selecting technologies for further analysis.5 NREL then considered qualitative information regarding project development challenges at the sites, such as availability of electric transmission and distribution infrastructure. An exception to the reliance on LCOE was that, for geothermal resource potential, the ranking was based predominately on hydrothermal viability, a literature review, and expert judgment by NREL staff.

The analysis used to determine the resource potential of the energy projects differed by the resource and technology proposed—making any real comparison nearly impossible. Each technology for a particular resource (e.g., to make electricity) has a different life expectancy, risk profile, and performance characteristics. (Perhaps for this reason, normalizing LCOE for technologies and resource potential—according to project size, life-expectancy, and risk—for equivalency is a generally accepted practice in financial economic analysis.) And because NREL chose to consider all the energy resources for potential development such that all were represented in the analysis, the selection criteria did not screen out more costly resources in favor of lower-cost resources. In addition, each energy resource identified for development at a site precluded any other resource from being considered for that same site. So, for example, wind, solar, or geothermal could not be co-located at a site, regardless of the real-world feasibility of doing so or of the economics of doing so.

For its analysis of non-renewable resources, CSM did not screen all 148 DOE sites originally furnished to NREL; rather, it started with the 55 sites identified by DOE following NREL’s initial screen. The potential for development of fossil resources on the 93 sites that were discarded was not evaluated. CSM analysts examined DOE sites and compared their locations to maps of natural gas, oil, and uranium resources obtained primarily from U.S. Geological Survey (USGS) sources. Sites’ proximities to resource claims or active resource development were used as a criterion to rank sites more highly than those without nearby activity. This assumption rests on the availability of nearby infrastructure for energy

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4 Alicen Kandt, “DOE Large-Scale Power Production Study: May Meeting with NAS,” presentation to the committee, May 20, 2015.

5 The levelized cost of electricity (LCOE) calculation used in the analysis takes into account the size of the resource to be located at each site; the total land available, excluding consideration of topographic or land-use considerations; assumed system performance; and the construction and operating costs of the resource. LCOE does not estimate the market value of the energy produced; hence, it does not consider whether a resource could be developed commercially.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×

development on said sites. No comprehensive quantification of available resources was undertaken; rather, a list of top sites was identified on the basis of proximity to actual resource activities.

The CSM analysis considered the 55 DOE sites for their potential to produce oil and gas for sale off-site. The initial screening of these sites focused on size, the likelihood that the site will be released for alternative use, and location in a sedimentary basin.

The CSM high-level evaluation of coal resource development relied extensively on a presentation made to the committee by Peter Warwick and Steven Cahan of USGS. The committee sought its own information on the development potential of coal resources on DOE lands when it learned that CSM had not conducted its own such analysis.

CSM also conducted a high-level assessment of the potential for uranium or thorium extraction on DOE lands considered to be primarily a function of proximity to existing mines, mining claims, mining prospects, and sampling sites. CSM then eliminated 36 of the 55 potential sites from consideration for nuclear resource development due to their long distance from known resources. Of the remaining 19 sites, CSM down-selected to 5 sites based on production history of the sites and adjacent mining operations.

NREL, for its part, examined a number of technologies used for generation of renewable electricity for export off-site; it did not focus on the use of electricity on-site (Kandt et al., 2016, p. 14) nor on any associated cost savings that would accrue to the DOE site from avoiding purchases of retail electricity. Data inputs to the Renewable Energy Planning and Optimization (REopt) model included site area and latitude and longitude, renewable energy resource data available from other studies or estimated for immediate purposes, technology effectiveness and cost assumptions, and relevant government policies and availability of financial incentives for renewable resource development. A sensitivity analysis was conducted—with varying input parameters to define upper and lower bounds of the analysis for potential variations in inputs, but it provided little additional or meaningful information and did not affect the study results. For many of the sites that were analyzed in some depth, additional site-specific characteristics were qualitatively considered to inform the analysis. Nonetheless, data limitations constrained the analysis. Both NREL and CSM were unable to obtain robust data characterizing the existing energy infrastructure located nearby for delivering electricity to customers, such as high-voltage transmission lines or electricity substations. Yet, where such information was publicly available, it was considered.

NREL noted that the analysis conducted and results provided do not offer sufficient evidence to support a decision to go forward to develop a particular resource on a particular site but can help prioritize those DOE lands with relatively high or low techno-economic potential. The committee agrees with the conclusion that the results provide limited decision support and more generally believes that the NREL analysis provides little in the way of new evidence to support development on DOE lands.

NREL also conducted a qualitative market barriers and opportunities analysis, which included consideration of common project development considerations, such as site availability, potential for a purchase agreement to sell power off-site, permitting, and other economic constraints. Based on the market barriers and opportunities analysis, NREL concluded that even the sites that showed the greatest techno-economic potential would have significant challenges for development.

COMMITTEE OBSERVATIONS

The committee believes that the NREL study further defines and characterizes selected DOE sites and, to the extent site-specific information was developed, provides valuable insights on the energy resource types having the greatest potential to be developed at those sites. The committee recognizes that the amount of funding provided severely curtailed the study effort and limited its usefulness in advancing sites for development. NREL and CSM were each funded with $150,000 for analyses of renewable energy resource development potential and fossil energy and uranium resource development potential, respectively.6 The committee appreciates the fact that NREL and CSM took on a difficult project with

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6 An additional $50,000 was given NREL for project management and report compilation.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×

very limited funding. The funding imposed some limitations on the rigor of the analysis and subsequent results and conclusions. The committee undertook its review of the analysis with knowledge of the constraints imposed by the limited funding. However, the committee concluded that other methods and approaches to the analysis suggested by the committee and referenced in this report might reasonably have led to different conclusions and provided more meaningful results. Engaging DOE site personnel early in the study to collect data and information to more completely characterize a site and its surrounding infrastructure, and interviews with potential developers to shed light on site-specific considerations and costs for energy resource development, might have better informed the analysis and led to different conclusions. Meetings with resource developers would have been informative in allowing NREL and CSM analysts to better understand the myriad of considerations and criteria for site development from resource developers’ perspectives. Among other criteria, developers identified Environmental Impact Statements and proximity to infrastructure, such as electricity interconnects, as key criteria for suitability for development. While CSM did not use a model to estimate potential for fossil energy development, it would have benefited from similar outreach to the private sector. As an example, CSM relied heavily on the assessment of coal potential presented by invited speakers during the open session of the committee’s meetings. To provide a more useful ranking of sites for developers, the Department of Energy should adopt a more robust approach featuring early outreach to developers, use of screening criteria other than levelized cost of electricity, and use of lessons learned at other DOE and similar federal sites. (Recommendation 2.2)

The committee agrees that NREL’s REopt tool may be a useful tool for estimating LCOE, but it does not appear to be most suitable for the analysis called for by Congress. The use of LCOE is not compulsory for determining techno-economic potential because many other widely used methods are available, including more rigorous site analysis, discounted cash flow analysis, and utility-scale integrated resource planning and dispatch models. (See the section, “Renewable Energy Screen” in Chapter 2.) While LCOE did not serve as the primary screening criterion—there were other factors considered in determining the techno-economic potential— it influenced the process of down-selecting sites and renewable energy technologies for further study. Had the study considered the cost of environmental remediation needed in order to develop sites safely, the costs of bringing electricity to market (e.g., cost of transmission and necessary distribution system upgrades), and complementary technologies (e.g., renewable energy with storage on-site), the results could have been much different.7 The information resulting from the analysis in the NREL report is insufficiently robust to completely address the goal of the overall project to identify energy resource potential on DOE lands. Complicating the interpretation of the NRL/CSM findings is that, while LCOE was calculated for all renewable energy projects (save geothermal), it was not used for down-selecting non-renewable technologies, creating an uneven playing field.

Early in the process, there were missed opportunities for NREL and CSM to learn about DOE or other federal sites that already have developed energy resources and to engage with the energy industry development community. Case studies of energy resource development already under way at DOE properties could have better informed the NREL analysis. DOE sites have already demonstrated that renewable energy projects can be developed successfully and continue to operate today. Solar PV projects at Brookhaven National Laboratory (BNL) and NREL, a wind project at Pantex, and a biomass project at the Savannah River Site are examples of third-party developers planning and developing projects. With the exception of PV at BNL (which exports all power off-site), the purpose of these projects is to meet onsite energy loads or serve research purposes, neither of which was evaluated in the NREL report. The analysis did not consider the BNL, Pantex, or Savannah properties as potential sites for development. It would have been instructive to see if the NREL study approach would have identified these sites for development, using the screening criteria for down-selecting sites for development.

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7 A further consideration might have been that some, though not many, states value or monetize renewable energy credits (RECs).

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×

The database created for the NREL/CSM analysis, as a repository of REopt output, has limited utility owing to the construct of the analysis and overreliance on LCOE for screening. As such, the committee finds the database to be of limited use for identifying specific projects at specific sites for development. The information may be of interest to potential energy project developers who may be interested in studying DOE properties further for energy resource development.

The identification of top sites for energy resource development should be guided by the most relevant criteria for development as identified by developers or other practitioners, such as need for environmental studies and proximity to grid infrastructure. (Recommendation 2.1)

Because DOE site responsibilities and stewardship are disparate and spread across a number of offices and programs within DOE, a secretary-level program office might be necessary to coordinate the overall effort of developing DOE lands. Without such a coordinated and single-purpose effort, development opportunities will likely go untapped.

While other governmental agencies, such as the Department of the Interior, have used their Secretary’s office to facilitate the marketing of opportunities to promote renewable resource development by examining program opportunities on public lands, DOE, by contrast, appears to have done much less. But with DOE’s depth and breadth of skills and technical capabilities with energy resources, it too could leverage such opportunities and play a major role in forging private-public partnerships in DOE land development serving the national interest.

DOE should place a higher priority on developing an accurate and actionable inventory of those DOE-owned or -controlled properties that can be leased or sold for energy development; one option for implementing this would be to establish a program management office tasked with developing and executing a plan to work with developers on property planning, development or leasing, and disposition of selected DOE-managed lands. (Recommendation 4.2)

The committee recommends that DOE follow a sequence of activities designed to implement a value-based approach to management of its lands. This sequence would in its first phase include interacting with developers of energy projects and infrastructure to internalize commercial practices into its (DOE’s) management of the disposition of its lands. This would be followed by a second phase in which DOE puts in place the administrative procedures needed to make these lands available to developers and generate revenue (lease payments, royalties and so forth), modeled after the methods used by the Department of the Interior. Third, DOE should use the information adduced from the prior phases to improve its estimates of the costs and benefits of developing its properties for energy projects, net of (i.e., relative to) the cost of maintaining properties in their current status, and should conduct case studies of select projects. Lastly, having identified the properties with the most promising cost-benefit profile, DOE should solicit commercial input, pursuant to the administrative procedures established in the second phase, to begin the actual development of energy projects on the properties. (Recommendation 4.3). Such a sequenced approach will support the single-purpose alignment of existing personnel and resources to realize and monetize the inherent value of DOE lands for energy development.

On a cautionary note, the committee suggests that DOE establish the energy project development of the department’s lands as a Secretary-level priority and provide appropriate direction to the full range of DOE programs and offices, provided that sufficient funding is provided by Congress or DOE to prioritize viable project opportunities. Otherwise, DOE should remain open to opportunities to allow private development of DOE lands on a case-by-case basis, as is currently the case, but should not create a program office as suggested by the committee.

As an overarching summary observation, the committee concluded that the use of LCOE as the primary determinant of energy resource development potential on DOE lands is flawed. This is due to the need to conduct a site-specific analysis for individual technologies and resources because the unique circumstances of each individual project will determine whether a project, designated for a given site and use, will be essential to an investor’s decision to develop the project. The NREL study does identify sites for development and provides an indication of the technology or resource that might have the greatest development potential but with limited confidence. Due to the fact that investors and developers would

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×

make their own decisions, an important aspect of the NREL report would have been to publicize and prioritize the following: the DOE lands that are available, the known restrictions which might inhibit their development, and the terms under which the lands would be made available to them.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2017. Utilizing the Energy Resource Potential of DOE Lands. Washington, DC: The National Academies Press. doi: 10.17226/24825.
×
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The potential for energy resource development on Department of Energy (DOE)-managed lands remains a topic of interest within DOE, Congress, and with private developers interested in siting projects on DOE lands. Several previous studies have estimated the energy resource development potential using various approaches and methodologies.

The National Renewable Energy Laboratory (NREL) was tasked by the DOE Office of Legacy Management in 2013 with conducting a study to further refine and build upon previous analyses and to assess energy resource development potential on these lands. Utilizing the Energy Resource Potential of DOE Lands reviews and comments on the NREL study.

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