Combined Heat and Power Plant Overview

The existing combined heat and power plant at Clear Air Force Station is  owned by the Air Force and became operational in 1961. For Options Considered in the Feasibility Study, Some Plant-Closure Costs Were Not Fully Developed, but Adding This Information Would Not Have Materially Affected the Outcome

In reviewing the cost estimates for the five options for the plant, we found  there were some items and associated costs that were not fully  developed in the feasibility study but were later more fully developed as  the Air Force took steps to carry out its plans. While adding this information is unlikely to have  materially affected the Air Force’s decision to close the plant, fully  developing those costs in the feasibility study would have provided  decision makers with more complete information and a better  understanding of the proposed actions. Several Noneconomic Goals Significantly Influenced the Air Force’s Decision Concerning the Power Plant

The Air Force identified goals other than cost savings in relation to the  power plant at Clear Air Force Station. These included the
Air Force goal of no longer operating and maintaining the plant  because the Air Force does not consider power generation to be a  core competency,
Air Force goal of reducing energy costs at Clear Air Force Station,
Air Force need to ensure reliable power for current and future  mission-critical facilities and supporting facilities. The Air Force Considered Several Alternatives to Closing the Power Plant but Did Not Find Them to Be Economical, and Some Options Were Not Fully Evaluated

The Air Force considered and evaluated several options before selecting  the option to close the plant after first connecting to the local grid and  building a separate heat system. Officials said that they obtained ideas for  the options they considered from stakeholders, including Clear Air Force  Station, 21st Space Wing, and power plant employees, and fully  evaluated some of the options that looked more promising. Still other  options were considered but were not fully evaluated in formal studies  because they did not generate as much savings or the Air Force did not  consider them to be economically feasible. For example, the Air Force did  not fully assess the costs of more incremental changes to current  operations of the existing plant, such as retaining ownership of the plant  but downscaling its operations, because extensive capital improvement  costs would remain (although the costs of coal would be reduced). The feasibility study also found that the  utilities privatization option would generate slightly greater savings than  an enhanced-use lease and that the option to close the plant would  generate the most savings for the Air Force compared to the status quo.The feasibility study concluded that the Air Force should pursue the  enhanced-use lease in order to obtain realistic valuations of the plant  from potential lessees, or, if the lease project were unsuccessful, close  the plant. 1. 2. Agency Comments and Our Evaluation

In written comments on a draft of our restricted report, the Air Force  concurred with our observations. Appendix I: Scope and Methodology

To determine the extent to which the Air Force has evaluated options for  the Clear Air Force Station combined heat and power plant, we reviewed  the documentation for the project, including the 2010 feasibility study,  contract data, Department of Defense (DOD) and Air Force guidance, and  the Air Force analyses used to document and support the service’s final  determination for the plant, including the environmental assessment and  subsequent finding of no significant impact for the tie-in to the local grid  and construction of a new heat system. To determine what other options, if any, the Air Force considered before  deciding on the alternative power source it selected, we reviewed the Air  Force’s analyses on the options it considered, including the concept  opportunity study, which first laid out some options for the plant, and the  feasibility study. The costs that make up the Government Should Cost  Estimate are summarized in table 4 below, which represents the  estimated costs of continuing to operate and maintain the existing plant  for the next 50 years.
Why GAO Did This Study

Clear Air Force Station, located in the interior of Alaska where temperatures can drop as low as -60 o Fahrenheit, currently generates its own heat and power from a coal-fired combined heat and power plant. The station performs a critical radar mission for the Department of Defense, for which it is vital to have reliable sources of heat and power. Air Force Space Command has determined that the existing 50-year-old plant is operating inefficiently, and the Air Force plans to close the existing plant, after first connecting to the local power grid for electricity and constructing a new heat system for the administrative and residential areas of the installation. GAO was asked to review the Air Force's feasibility study and analyses of alternatives before the Air Force closes the plant.
This report addresses (1) the extent to which the Air Force evaluated options regarding the Clear Air Force Station combined heat and power plant and (2) what other options, if any, the Air Force considered before deciding on the alternative power source it selected. GAO reviewed the feasibility study; Department of Defense and Air Force guidance; and other analyses, contract information, and documentation related to the power plant.
GAO also issued a restricted version of this report, which includes additional details on some estimated costs. In written comments on a draft of the restricted report, the Air Force concurred with GAO's observations.

What GAO Found

The Air Force's decision to close the existing power plant at Clear Air Force Station is based, in part, on a 2010 study examining the feasibility of implementing alternative power sources at the installation in order to reduce operating costs while ensuring reliable power for the installation's mission. This study, along with other associated studies and analyses, initially led the Air Force to pursue leasing the plant to a private-sector entity or public utility. When no lease proposals were submitted, the Air Force pursued the option to close the plant, finding that the estimated costs of closing it were significantly less than the estimated costs of continuing to operate and maintain it. GAO found that the Air Force generally followed its own guidance for preparing cost estimates and analyses of alternatives. However, in the plant-closure option considered in the feasibility study, some costs—such as labor costs for operating and maintaining the new heat system—were not fully developed. While it is unlikely that adding this information would have materially affected the final outcome, more fully developing those costs would have provided decision makers with more complete information and a better understanding when considering the proposed options. In addition to economic factors, several noneconomic goals significantly influenced the Air Force's decision concerning the power plant, including the goals of no longer operating and maintaining a power plant, reducing energy costs, and ensuring reliable power for current and future missions.
The Air Force considered and evaluated several options for the plant's future before selecting the option to close the plant after first connecting to the local power grid and building a separate heat system. Officials said that they obtained ideas from stakeholders for the options they considered and evaluated in detail some of the options that looked more promising. Still other options were considered but were not fully evaluated because they did not generate as much savings or the Air Force did not consider them to be economically feasible. For example, the Air Force looked in detail at options for leasing the plant but did not fully assess the costs of more incremental options, such as retaining ownership of the plant but downscaling its operations. For the options that the Air Force evaluated in detail, it found that some generated significantly more savings than others and that some were not feasible from the Air Force's perspective.