Wednesday, July 18, 2012

Navy’s Great Green Flop

Let me start with the official story: In 2009, Secretary of the Navy Ray Mabus announced five aggressive energy goals to reduce the Department of Navy’s consumption of energy, decrease its reliance on foreign sources of oil, and significantly increase its use of alternative energy. The purpose of these energy goals is to improve our combat capability and to increase our energy security by addressing a significant military vulnerability: dependence on foreign oil.

One of the five energy goals is to demonstrate and then deploy a “Great Green Fleet” a Carrier Strike Group fueled by alternative sources of energy. The demonstration takes place off Hawaii during the Rim of the Pacific Exercise (RIMPAC), the world's largest international maritime exercise, which has started on July 17th. The demonstration is intended to evaluate the performance of “drop-in replacement” advanced biofuel blends and certain energy efficient technologies in an operational setting. A larger strike group of 11 ships will follow in 2016.
The ships and aircraft will be powered by alternative fuel, either nuclear or advanced biofuel blends. The biofuel blends are 50-50 mixtures of biofuel (made from used cooking oil and algae) and petroleum-based marine diesel or aviation fuel.

For this purpose, some 450,000 gallons of 100% “neat” biofuel were purchased in November 2011 from Dynamic Fuels, LLC (a joint venture between Tyson Foods, Inc. and Syntroleum Corporation) at a cost of $12 million, the single largest purchase of biofuel in government history.
·    Navy surface ships are powered using 350,000 gallons of hydroprocessed renewable diesel (HRD-76) blended with an equal amount of marine diesel (F-76).
·    Navy aircraft burn 100,000 gallons of hydroprocessed renewable jet fuel (HRJ-5) blended with aviation fuel (JP-5).

Both the Navy and the Air Force have been investing hundreds of millions of dollars to test alternative fuel mixes in several types of ships and aircraft for the past several years. The biofuels enthusiasm has slowly faced increasing criticism, including this blog you are reading. Below I would like to list several reasons.

Groundless arguments: We read or hear the following statements all the time:
“DOD wants to wean itself off of fossil fuels and foreign oil.” “This fuel often comes fom foreign countries that are hostile to our way of life.” “Investments in an alternative to foreign sources of fuel will help the Navy and the US become less dependent on foreign oil, and less subject to volatility in oil prices.” “Developing these alternatives is the only way that the U.S. can get rid of our dependence on oil.”

“This is putting our troops in harm’s way to defend oil interests overseas.“ “The U.S. spends between $67 billion and $83 billion each year to defend shipping lanes [according to estimates from RAND Corporation] in hostile waters, so we can protect our access to foreign oil.”

Now let’s look what the authorities say. The U.S. dependence on imported oil has declined since peaking in 2005. According to Annual Energy Outlook 2012 of the Energy Information Administration U.S. imports of liquid fuels is expected to continue to decline due to increased production of gas liquids and biofuels as well as greater fuel efficiency. This means that U.S. dependence on imported petroleum will decline.
Note that Canada is the United States' leading oil supplier. If Obama administration were smart and serious about reducing imports from unfriendly nations, they would do something about the Keystone XL pipeline, remove restrictions and prohibitions put on offshore (recent weeks there is progress on this front, including a House bill and a program), and develop shale gas to liquids industry among others. And for the US military should reconsider using commercial jet fuel (like Jet A1 instead of JP-8 in USAF aircraft and diesel instead of JP-8 in ground vehicles and generators).
Mixing oranges with apples: Admiral Cullom argues that “think back to the price tag on the first Blue Ray player you saw just a few short years ago. When introduced in 2006, those devices sold for about 500 dollars. Today they sell for well under 100 dollars. The same can be expected to happen with some biofuels and other forms of alternative energy.” In fact, everybody agrees that the price of biofuels will drop. But they will far more expensive than petroleum-based fuels in the foreseeable future. Besides, as  Cliff Claven reminds us “It takes more than twice as much fossil fuel to make a gallon of biofuel than a gallon of gasoline, and the price of biofuels (e.g., bio-ethanol) is more volatile with respect to both sugar prices and oil prices than is gasoline (check the markets). “

Misinterpreted Congress decision: In early May 2012, the U.S. Senate and House of Representatives have recently made moves to prevent the Department of Defense from purchasing advanced biofuels. They regard the DOD’s push for biofuels as wasteful and disconnected from military needs. See my previous blog highlighting part of it. But the House and Senate bill is mostly misunderstood by many (for instance see, US warplanes can fly faster, carry additional weapons load using advanced fuels and biofuels: new data, MILITARY LEADERS URGE SENATE COMMITTEE TO SUPPORT ALTERNATIVE FUEL USE, House Armed Services Committee Threatens Shut Down of Successful Biofuel Development). Did they really read all the House and Senate Bill text?
Biofuels and a few extra cents: Some people argue that this [House and Senate decision on the DoD’s biofuel use] is a misguided attempt to save the few extra cents per gallon that biofuels cost over petroleum-based fuels and an irresponsible use of public policy. Well, DoD paid $26.7 a gallon for biofuels to burn during the RIMPAC exercise, almost 10 times the average price of petroleum-based commercial jet fuel nowadays. Effective July 1, 2012, DLA Energy price for JP-5 is $2.33 a gallon. Do the math: If the Navy used conventional oil instead of biofuels during the RIMPAC, it would have spent $1.2 million, and not $12 million. Is the difference ($10.8 million) a few extra cents? This is indeed irresponsible use of public money.

Twisting the truth: Navy news reports that “This fuel was blended with equal amounts of conventional petroleum-based fuel, producing a total of 900,000 gallons of a 50/50 alternative fuel blend. When the fuel was blended with equal amounts of conventional fuel, the cost of the 50/50 blends amounted to approximately $15 per gallon, less than half the cost of the advanced biofuels purchased in 2009.” The math is above. You decide.
“Alternative fuels for the Navy is not about being green, it’s about combat capability,” said Navy Cmdr. James Goudreau, director of the Navy Energy Coordination Office.

Here is a reader comment (by Cliff Claven) on National Defense Magazine: Combat capability is not improved by spending 10, 20, or 200 times more for fuel. You do the math: The Navy bought 20,055 gallons of Solazyme HRD-76 diesel oil for $8,574,022 = $427.53 a gallon or $17,956 a barrel. Go to fbo.gov and search the archives for "Solazyme" and "BAA040008." Don't forget that DOE also chipped in $210M to Solazyme for a refinery. Dilute it with regular fuel all you want, one gallon of biofuel still only displaces one gallon of regular fuel and any rational person will realize the price per gallon is not reduced by mixing.
Biofuels and oil price volatility: Deputy Assistant Secretary of the Navy for Energy Tom Hicks argues that investments on biofuels “will help the Navy and the nation become less dependent on foreign oil, and thus less subject to volatility in oil prices that directly affect our readiness." Any person who makes such kind of claims should know a bit how oil market functions.

Biofuels and DOD’s priorities: In May, Sen. John McCain told National Journal Daily that “adopting a ‘green agenda’ for national defense of course is a terrible misplacement of priorities.” Well, it depends what he means with green agenda. Better use or less use of energy is in my book not a green agenda. But expensive biofuels are. Therefore, I completely agree with Kevin Geiss, the Air Force’s Deputy Assistant Secretary for Energy, who stated in a Wired article that  “The challenge with petroleum fuels is that it’s a commodity. You’re trying to jump into a commodity market.” That’s not a place for the government to be.”
Exaggerated claims as a scare tactic: In an op-ed piece in The Christian Science Monitor Lt. Gen. Norman Seip, US Air Force (retired) says that “cutting investments in long-term solutions like alternative fuels and energy efficiency will cost the military and all of us dearly in the future – in money and in lives.” Energy efficiency maybe, but the part on biofuels has nothing to do with saving lives. The convoys in Afghanistan will still be attacked whether they carry biofuels or conventional oil. The US Department of Defense can meet its fuel supply needs more effectively by using petroleum products more efficiently and protecting major transit corridors than by embracing synthetic fuels, the RAND researchers concluded in the June 19 report.

The list goes on but this article has become too long. So, I stop here. To be continued, perhaps.
By the way, in early July 2012, USAF A10 Test Flight Powered by Gevo Inc’s (, a Colorado biofuels company) Alcohol-to-Jet Fuel came with a price tag of $59 a gallon. 11,000 gallons purchased were so expensive because they were from a small demonstration plant which only produces 7,500-8,000 gallons a month. For some, only a few cents extra!

As I repeatedly argued on my blog the US military should get its energy priorities right. As far as biofuels are concerned it might be doing the right thing but unfortunately for wrong or unjustifiable reasons at a wrong time with too much money.

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