Navy Contractors Want to Know: Where’s the Money in Green Energy?

10/15/2010
By Sandra I. Erwin
When Navy Secretary Ray Mabus last fall unveiled the “green fleet” initiative — along with an ambitious energy reform agenda — many contractors saw the potential for new business opportunities.
A year later, companies are still not sure how they are going to make money in the military clean-energy market.
The green fleet effort has generated some excitement in the nascent biofuels industry, which is hoping to capitalize on the military’s anticipated large purchases of alternative fuels.
But for most of the traditional supplier base, it has been hard to identify the “requirements” or the “budget lines” which typically provide cues to contractors on the military’s planned investments.
“It is difficult to get a picture of Navy energy investments,” an industry executive told Chief of Naval Operations Adm. Gary Roughead last week at the Navy’senergy forum, in Washington, D.C.
For an industry that is accustomed to the traditional acquisition modus operandi, the energy business so far has been rather fuzzy.
Roughead told the executive that energy investments will not be about big-ticket purchases but rather about “small things” that incrementally will amount to significant energy savings. The Navy, for example, wants to equip existing ships with hybrid-electric drives and is looking to outfit destroyers with stern flaps, which help move ships through the water with less drag. Incandescent bulbs will be replaced with LED lights.
Reducing the current dependence on oil could take many years because it calls for a different way of doing business, Roughead said. Small reductions of 1 to 3 percent in fuel consumption every year, over time, will begin to add up, he said.
That may be a disappointment to companies that were expecting investments inwhiz-bang technologies. But, as the CNO pointed out, the energy business is different.
Also speaking at the energy forum, Navy Secretary Ray Mabus called for industry’s support in realizing the Navy’s goal of generating half of its energy from alternative sources by 2020.
But companies looking to help are still waiting for clear direction on how to go about it, industry executives told Mabus. They noted that they haven’t seen specific energy requirements in any requests for proposal (RFPs).
Mabus and his acquisition chief Sean Stackley assured business representatives that the Navy is aware of their concerns and used the forum to unveil a new webpage for business opportunities related to alternative energy.
The “Green Biz Opps” page has been added to the Navy’s acquisition website and can be accessed by clicking a tab at acquisition.navy.mil. The page will be the sole source for all clean-energy acquisition opportunities, Mabus said.
However, he cautioned, some energy requirements won’t appear on an RFP.
“It’s like the F/A-18,” Mabus said. “It’s using the same engine no matter what fuel we burn. You’ll see an RFP for biofuels but you won’t see a change in the engine.”
This past spring the Navy flew an F/A-18 it called “the Green Hornet” on a 50-50 blend of traditional jet fuel and biofuel from the camelina plant. Last week saw the first operational tests of a combat boat running on algae-based biofuel.
The engines on the jet and boat didn’t know the difference, Mabus said. The Navy next will begin testing biofuels on an SA-60 helicopter, he added.
The Navy in September ordered an additional 150,000 gallons of algae-based fuel from a San Francisco-based company, Solazyme. The new agreement is seven times the size of the initial 20,000-gallon contract awarded last year.
The pursuit ofalternative fuels must begin in earnest now, Mabus said. The United States imports more gasoline into Afghanistan than any other item, and there is no safe way to move petroleum to front-line troops, he said.
A soldier or Marine is killed or wounded for every 24 fuel convoys that enter Afghanistan, according to Army statistics. Six Marines were wounded in the last three months while guarding convoys.
“That is simply too high a human price to pay for imported energy,” Mabus said.
The secretary has reached out to industry, academia and venture capitalists to help the Navy reach its energy goals. He recently signed a memorandum of understanding for energy-related cooperation with the Department of Agriculture and this week signed another with the Small Business Administration. The latter will lead to contract opportunities for small businesses, Mabus said.
Small businesses so far have been hesitant to participate in these efforts because of the time-consuming and confusing military procurement process, he said.
Stackley created the “Green Biz Opps” page in an attempt to ease the acquisition pain. The department has not yet included energy as part of performance specifications in the design of new weapon systems, but that will change, Stackley said.
“This is a change in the way we’ve done business,” he said. “We’ve got a long way to go on this.” In the past, the Navy knew exactly what it wanted and asked industry to deliver it. Energy performance was never a consideration, Stackley said. “Today it is.”
—by Eric Beidel and Sandra Erwin

Topics: Business Trends, Doing Business with the Government, Energy, Alternative Energy

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