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The Navy Needs More Comprehensive Guidance for Evaluating and Supporting Cost-Effectiveness of Large Scale Renewable Energy Projects (Redacted)

DODIG-2016-130

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Objective

Our audit objective was to determine whether the U.S. Navy was adequately assessing the cost-effectiveness of large-scale renewable energy projects in the U.S. Pacific Command area of responsibility.

Finding

Navy personnel conducted cost-effectiveness assessments for the three U.S. Pacific Command large-scale renewable energy projects included in our audit: Solar Multiple Award Contract (Hawaii), Guam Photovoltaic Renewable Energy, and West Loch Photovoltaic Power (Hawaii). However, Navy personnel could not provide adequate documentation to support the assumptions and calculations made in their assessments. Without that documentation, we could not determine the accuracy of the assessments.

Navy personnel could not support the assumptions and calculations made in their assessments because Navy guidance does not include specific steps for evaluating the cost-effectiveness of renewable energy projects and does not require that supporting documentation be maintained. As a result, the Navy lacks assurance that cost-effectiveness assessments for its large-scale renewable energy projects are accurate, and that appropriate investment decisions are made.

Recommendations

We recommend that the Assistant Secretary of the Navy for Energy, Installations, and Environment:

  • develop new, or modify existing, Navy guidance to include comprehensive steps to evaluate and document the cost-effectiveness assessments for large-scale renewable energy projects; and
  • once new or modified guidance is issued, determine whether approved renewable energy projects are cost-effective based on those policies and procedures, and take appropriate action based on that determination.

Management Comments and Our Response

The Principal Deputy Assistant Secretary of the Navy for Energy, Installations, and Environment, responding for the Assistant Secretary of the Navy for Energy, Installations, and Environment, agreed with the recommendations. However, the Principal Deputy’s responses only partially addressed the recommendation to develop new, or modify existing, Navy guidance. Specifically, his comments did not indicate that the updated guidance would include comprehensive steps to evaluate and document the cost-effectiveness assessments for large-scale renewable energy projects. We request that the Assistant Secretary of the Navy for Energy, Installations, and Environment provide additional comments on how this recommendation will be fully addressed.

The Principal Deputy’s responses addressed all the specifics of the recommendation to determine whether approved renewable energy projects are cost-effective based on new or modified guidance and to take appropriate action based on that determination. The Principal Deputy stated that the Department of the Navy plans to establish parameters for a later review of renewable energy projects to provide data for analytical or business improvements. We obtained clarification from an official with the Assistant Secretary of the Navy for Energy, Installations, and Environment, who stated that the Department of the Navy will oversee its renewable energy projects, including a review of renewable energy projects to confirm that the projects are cost-effective, and consider a full range of options if the Department of the Navy determines that any executed renewable energy projects are no longer in the best interest of the Government. No further comments are required for this recommendation.

We request that the Assistant Secretary of the Navy for Energy, Installations, and Environment provide comments on the other recommendation by September 23, 2016.