Biofuel Producers Waiting for Pentagon to Show Them the Money

The biofuels industry is seeing promising signs from Washington. President Obama in his inauguration speech tied green energy to economic growth. Congress agreed to allow the Pentagon to continue to buy alternative fuels. And presumptive defense secretary Chuck Hagel, if confirmed, is a former senator from Nebraska who consistently protected the interests of ethanol producers.
The big question now is whether the money will follow the policy trends. Although the Pentagon only accounts for 1.5 percent of the nation’s fuel consumption, biofuel investors and green-energy advocates have looked at the Defense Department as the preferred catalyst for a massive expansion of alternative fuel production in the United States. They recognize that biofuels become a much easier sell if they are tied to national security priorities.
The industry is “ready to deploy” advanced biofuels to meet not just the Pentagon’s demands but commercial market needs as well, declares anew report titled, “Advanced Biofuels and National Security,”by the American Security Project, a nonpartisan think tank that supports the idea that climate change and energy dependence constitute dangers to U.S. national security.
“The military is an important first market for advanced biofuels,” says the ASP report released Jan. 29. “By 2020, if the military services’ goals are attained, there would have to be at least 770 million gallons per year of new advanced biofuels capacity added.”
By comparison, the Defense Logistics Agency in 2011 procured 450,000 gallons of advanced drop-in biofuels from Dynamic Fuels and Solazyme Corp. That was, according to ASP, the “largest government procurement of biofuels in history.”
Unlike corn-based or sugar-based ethanol, which is a low-density fuel that is mixed with gasoline, the advanced biofuels sought by the Defense Department must be drop-in substitutes for conventional diesel, jet fuel or gasoline. They also must be made from low-carbon, sustainable feedstocks. In tests over the past several years, the military has shown many of its aircraft and ships can run with a 50-50 blend of conventional and alternative fuels.
Ramping up to 770 million gallons per year would require billions of dollars in both public and corporate funding, writes Andrew Holland, ASP senior fellow for energy and climate.
Over the next three years, the Defense Department plans to spend $170 million to support advanced biofuels, with matching amounts from both the Department of Agriculture and the Department of Energy for a total of $510 million in government funding, says Holland. “This investment will take place under the legal authority of the Defense Production Act, which allows the government to directly invest in an industry that is deemed to be important for national security.” Government dollars could be matched with equal or more funding from private investment.
“Rapid advances in advanced biofuel technology and expanding economies of scale will come from government and private sector investments,” he says. “The long-term potential for this industry means that it could become a key part of America’s entire fuel supply, reducing America’s dependence on oil and increasing our national security over the long run.”
By the end of this decade, says Holland, a “significant portion of the U.S. military’s transportation fuel will derive from feedstocks other than oil, at a price that is competitive with traditional petroleum-based fuels.”
Holland, who previously worked as an energy and environmental policy aide to then Sen. Hagel, says his former boss is likely to continue to back renewable energy programs at the Defense Department. Although Holland no longer advises Hagel, “having worked with him, I can say that he does understand the challenges of energy security, he understands the problem of our military's dependence on oil,” he tells National Defense. “Hagel has been involved in these issues since his retirement from Congress in 2008,” Holland says.
Hagel is a “farm state guy,” which made him attuned to the economic benefits of alternative fuels, Holland says. “I took a lot of meetings for him from ethanol supporters and companies. While he supported it he also knew that what we need are alternatives that are just as good as oil.”
The Defense Department consumes 375,000 barrels of oil per day at a cost of $17 billion a year, which makes it the world’s largest user of liquid fuels. Biofuels today cost far more than fossil counterparts, although manufacturers have promised that they can achieve cost parity once the Pentagon starts buying large quantities.
What Hagel would to as defense secretary, however, is still unknown. Environmentalists do not see him as an ally because Hagel was the architect of the policy that led to the United States not ratifying the 1997 Kyoto Protocol that called for curbing global greenhouse gas emissions.
For renewable energy groups and suppliers, a more significant boost is the 2013 National Defense Authorization Act. “It is a pretty strong vote of support for the program,” says Holland.
In her monthly newsletter, Assistant Secretary of Defense for Operational Energy Plans and Programs Sharon Burke praises the Senate for striking House-supported language that would have restrained Pentagon investments in alternative fuels. “Moving forward, DoD will continue to leverage the expertise and resources of the Department of Energy and Department of Agriculture as they work to develop future fuels,” Burke writes. “These efforts are in support of DoD's July 2012 policy on alternative fuels, which states that DoD can buy these fuels in bulk when they are cost-competitive with petroleum fuels.”
Phyllis Cuttino, director of the Pew Environment Group's clean energy program, says she expects both Congress and the administration to continue to bolster alternative fuels. These programs, she points out, enjoy bipartisan support. The military biofuels initiatives began in 2007 under the Bush administration.
The NDAA vote, she says, “was a strong signal to opponents.” Nonetheless, she expects the new chairman of the Senate Armed Services Committee, Sen. James Inhofe, R-Okla., to challenge future clean-energy efforts. “I'm sure we'll have more conversations about advanced biofuels,” Cuttino says.
The ASP report identified several feedstocks that would be best suited for advanced biofuels. They include:
Algae: Algae are actually the original source of the earth’s crude oil. Over millions of years, dead algae on seafloors were turned by a combination of heat, pressure, and time into crude oil. Producing algae biofuels recreates and speeds up this process.
Animal Fats and Vegetable Oils: Waste animal fats like beef tallow, chicken fat, greases, and even post-consumer oils provide useful feedstocks for renewable diesel or biodiesel because they have a chemical composition that is fairly close to crude oils.
Grasses and Wood: “Woody biomass” is a widely available fuel source for a biofuels. Trees and grasses are a lignocellulose product that must be broken down via various processes before it is converted into ethanol via fermentation or into a liquid fuel by other processes.
Municipal Waste: Solid waste is garbage or refuse, including solid, liquid, semi-solid, or contained gaseous material that results from industrial, commercial, mining, food, agricultural operations, and everyday activities. This non-recyclable waste destined for landfills is full of carbon that can be chemically recycled into biofuels.
Sugars: The vast majority of the biofuel produced in the U.S. today is derived from sugar or starch-based feed stocks. For starch-based feedstocks like corn the starches are complex sugars that can be broken into simple sugars, and then fermented. Sugar feedstocks are easily fermented into ethanol, but other processes can turn them into different fuels.
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Topics: Energy, Alternative Energy, Climate Change, Energy Security, Power Sources