Senators show yellow card to DOD biofuels

SInce the beginning of this year the Department of Defense was going full speed with its "greening" efforts, particulary with biofuels. Then two US senators have shown the courage to question it.

Here is what happened in the past month.

Towards the end of February the US Air Force has been conducting extensive field tests of a 50-50 blend of camelina biofuel and regular JP-8 jet fuel. Two F-16s from the 180th FW fleet have been designated to test the 50/50 blend of Jet Propellant-8 petroleum and Hydroprocessed Renewable Jet fuel derived from the camelina plant.

Several important things happened until mid-March.

On 1 March 2012, the American Security Project released a FACT SHEET: Bio Fuels and National Security. ASP says that “Dependence on oil is one of America’s most critical threats to long-term national security because of concerns about its availability and the strategic need to secure fuel sources in unstable regions. The U.S. Department of Defense understands this threat better than anyone else, and that is why they are investing in developing a domestic biofuels industry that can compete with oil. This factsheet shows the importance of that project.”

ASP also hosted a briefing, “Biofuels for National Security: Air Force and Navy Progress on Renewable Fuels.” Listen to the podcast HERE. The guests were Commander James Goudreau, Director in the Navy Energy Coordination Office and Carol Ann Beda, Director of Energy Policy in the Office of the Assistant Secretary of the Air Force for Energy. Both speakers underlined that the move away from petroleum-based fuels was not at all political or about being “green”. Instead, a move to biofuels was all about increasing mission combat capability. There were two common, and related, reasons cited for moving towards biofuels: budgetary and energy security. Senator John Warner (R-VA), the former Secretary of the Navy and Chairman of the Senate Armed Services Committee, who also attended the event, expressed concern that Congress’s short termism could undercut the ability of the military to support the biofuel industry.

On 2 March 2012, USS Ford (FFG 54) successfully transited from the ship's homeport in Everett, Washington to San Diego using 25,000 gallons of a 50/50 algae-derived, hydro-processed algal oil and petroleum F-76 blend in the ships LM 2500 gas turbines. Its voyage on the algal blend marks the first demonstration of the alternative fuel blend in an operational fleet ship. (USS Ford Conducts Operational Transit on Alternative Fuel Blend). Note that on 24 Jan 2012, Naval Surface Warfare Center Panama City Division (NSWC PCD) scientists and engineers successfully demonstrated the ability to run a small two-cycle outboard engine an algae-based diesel fuel. This type of engine is used to propel combat rubber raiding craft. (NSWC PCD Successfully Runs Biofuel in Multi-Fuel, Outboard Engine).

As you may know, the Navy will sail a “green” carrier strike group around Hawaii using a 50% biofuel blend during the coming summer’s Rim of the Pacific Exercise (RIMPAC). Until then all Navy ships will have been tested on biofuel blend. Four ships will sail under the biofuel blend, along with a nuclear-powered aircraft carrier. All the aircraft will fly on the same mix. A larger strike group of 11 ships, dubbed Great Green Fleet, will follow in 2016.

On 6-8 March 2012, Cmdr. James Goudreau, director of the Navy Energy Coordination Office, explained the critical role of energy at the 7th Annual Military Energy Alternatives Conference in Falls Church, Va. (Energy Programs Showcased at 7th Annual Military Energy Alternatives Conference).  Here are his important remarks:

"First and foremost, Navy energy is about the warfighter. Our reason to pursue these initiatives is to deliver greater combat capability. Reduced consumption of energy and increased use of alternative energy comprise the Navy's two-pronged approach to improving combat capability and achieving energy security."

"Energy efficiency reduces consumption and is achieved by modifying the current fleet, changing the acquisition process to consider energy in future weapons platforms, and changing Navy's culture to value energy as tactical, operational, and strategic assets."

On 9 March 2012, The U.S. Army announced that it is testing a fleet of 16 General Motors hydrogen fuel cell vehicles in Hawaii to demonstrate the practicality and applicability of hydrogen fuel cell technology. Lt. Gen. Francis Wiercinski, commanding general of U.S. Army, Pacific, said “These fuel cell vehicles will help move the U.S. Army in the Pacific toward a sustainable path that reduces energy security challenges and strengthens our energy independence.” The vehicles are funded by the Army Tank Automotive Research Development Engineering Center, Office of Naval Research and Air Force Research Laboratories. The vehicles travel up to 200 miles on a single charge, refuel in five minutes and produce zero emissions. (Army Unveils World’s First Military Fleet of Fuel Cell Vehicles). Not surprisingly I haven’t seen any cost figures in any report related to this subject. Are these vehicles free of charge?

On 9 March 2012, the DOD released an implementation plan for cutting energy consumption in military operations. (Defense Department Releases Energy Conservation Roadmap). The plan outlines a three-part strategy of reducing the demand for energy, securing diverse options beyond fossil fuels, and building energy security considerations into all military planning. The plan creates a Defense Operational Energy Board to oversee the department’s progress. I will write on this in a separate piece.

On 12 March 2012, The Navy hosted a field hearing for the Senate Energy subcommittee on energy and water policies being implemented by Department of the Navy operations and facilities. The hearing was held aboard multipurpose amphibious assault ship USS Kearsarge (LHD 3), moored at Naval Station Norfolk, March 12. (see, SUBCOMMITTEE ON WATER AND POWER FIELD HEARING: U.S. Navy Energy and Water Policies). Navy Secretary Mabus praised again biofuels and defended the Navy's green energy initiatives. (see also the Navy news report) http://www.navy.mil/search/display.asp?story_id=65848)

On 12 March 2012, the US President Obama released a progress report, for the administration's progress report for the Blueprint for a Secure Energy Future. One year ago, the President put forward a plan in the Blueprint for a Secure Energy Future that outlined the Administration’s all-of-the-above approach to American energy. There is a complete section on the US military in this report.

Then came 16 March 2012. What happened on that day? Nothing! It was just one month after 16 February 2012! What happened on that day? In my opinion, that day should be marked as the first serious challenge for the “greening” of the military.

On 16 February 2012, Congressman Randy Forbes questioned Secretary of the Navy Ray Mabus at a Hosue Armed Forces Committee hearing  in regard to the Navy’s mismatched priorities during an era of extreme budgetary constraints.  Forbes expressed his concern that in a time of fiscal uncertainty and shifting priorities to the Asia-Pacific, the Navy appears to be prioritizing alternative energy investment rather than concentrating on building and sustaining its fleet. Video of Congressman Forbes' exchange with Secretary Mabus is below.

Wow, he was really tough. Here are some punchy ones "I understand that alternative fuels may help our guys in the field, but wouldn't you agree that the thing they'd be more concerned about is having more ships, more planes, more prepositioned stocks… I love green energy. I’m not against it. …It’s a matter of priorities..Shouldn't we refocus our priorities and make those things our priorities instead of advancing a biofuels market?..... You're not the secretary of the energy. You're the secretary of the Navy."

Fast forward to 15 March 2012.

On 15 March 2012: John McCain said in a Senate hearing that the Navy’s push to develop biofuels to run its fleet of planes and warships could devolve into a “Solyndra situation” for the Pentagon. “Using defense dollars to subsidize new energy technologies is not the Navy’s responsibility. Nor is it sufficiently related to the Service’s core mission to justify such expenditures,” said McCain, at the hearing.

The Navy’s green-energy agenda has been under spotlights since President Obama highlighted the issue in his State of the Union address in January 2012. Obama and senior military officials have largely been praised for their efforts on greening the economy and military. Only some journalists and a few bloggers (including myself and DOD Energy Blog) have been critical for some of the DOD’s ‘green’ efforts. Now even these two US senators (Forbes and McCain) have started to question the Navy’s green energy agenda. Interestingly they (so far, to my knowledge) haven’t questioned the Air Force or Army for their “green” gadgets.

Using energy more efficiently and wisely, eliminating energy waste, and energy conservation are three important weapons the US military must widely use. Nobody is against that. But wasting scarce financial resources for creating an industry is not the military’s job.  Right, the US military developed the Internet, GPS or even flat-screen TVs. But the aim was not to create a market. I repeat, beware of military-‘green’ industry complex.

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Toward Government-Renewable Energy Industry Complex

In 1961, President Eisenhower warned of an expanding “military-industrial complex”. Now the danger is government-renewable energy industry complex. Consumers and Taxpayers must be warned!

The problem is not only specific to the US military. It is a US wide problem which started with biofuels. The commercialization of first-generation biofuels relied heavily upon government programs such as Renewable Fuels Standard, biofuels tax credits, agriculture research and rural development programs, and biomass initiatives. They bolstered ethanol and biodiesel.

A recent Oil and Gas Journal editorial makes it clear: “A growing mandate for sales of something nonexistent shows yet again why Congress must correct its errors on biofuel.” True, the Environmental Protection Agency requires the sale of 10.45 million gallons of cellulosic ethanol, already a much lower amount that the US Congress stipulated for 2012 in the Energy Independence and Security Act of 2007. “Even at the drastically reduced level, however, the required amount of cellulosic ethanol probably won't be available. Despite volumetric mandates and generous subsidies, the substance has proven difficult to produce at commercial scale.” Then why Congress admits the error or repair the damage? Well, ask the congressmen. Why the US government institutions, particularly DOD, should be pushed to spend millions of dollars to industries that end up with failure. When praising these failed adventures the US officials should not say anymore that “it won’t cost taxpayers a dime.”

Another OGJ article (Renewable energy stool) looks at the recent failures:

The recent closing of Range Fuel Corp.'s cellulosic ethanol plant in Soperton, Ga, is an example. After 4 years (since November 2007) and more than $300 million in taxpayer and private investment, the plant was unable to produce quantities of ethanol from wood chips and other cellulosic material because there is no effective cellulose-to-ethanol, large-scale production process.

There is also little light for subsidized programs in solar energy, as illustrated by the $500 million taxpayer loss on Solyndra Corp., the result of going to market with a noncompetitive technology and process.

In the Nevada desert near the town of Ivanpah, ground was broken recently on a 4,000 acre Concentrated Solar Power project using a $1.6 billion taxpayer guaranteed loan.

The Obama administration is being accused of "picking specific winners" in energy technology instead of leaving the decision to the marketplace. That's not the real problem. The real problem is spending billions to prematurely push unworkable and uneconomic programs into production.

In the wake of failed federal loan guarantees for green companies such as Solyndra and Range Fuels, the alternative-energy industry is looking for solutions that decrease government risk and elicit bipartisan support.

Is the situation in the European Union different? No. Consumers and taxpayers are paying a premium for the ill-defined European energy policy.

European Union policies to promote the use of biofuels for transportation will cost consumers as much as 126 billion euros ($166 billion) between now and 2020, according to two environmental groups. Two reports released by the Friends of the Earth and ActionAid campaign groups contend that biofuels do little to combat climate change, while pushing up prices for European motorists, who stand to pay an additional €18 billion a year for petrol and diesel as a result. The research predicts that by 2020, bioethanol would be €0.19-€0.41 more expensive than petrol per litre, and biodiesel €0.35-€0.50 dearer. Yet the authors identify government agricultural subsidies for biofuels production in Germany alone amounting to some €370 million. 

The European Commission said that while biofuels cost more than fossil fuels, it’s “reasonable” for motorists to pay extra. So, for high salaried officials it is easy to say “reasonable.”

A draft Commission impact assessment, obtained by EurActiv indicates that the greenhouse gas emissions from biofuels such as palm oil, soybean and rapeseed may exceed those of fossil fuels when wider factors are considered. This is because tropical forests and wetlands are often cleared to compensate for lands taken to grow biofuels elsewhere, a process known as indirect land use change, or ILUC. “consumers and taxpayers are paying the price for a flawed green policy that delivers no environmental benefits,” said Robbie Blake, biofuels campaigner for Friends of the Earth Europe. “Motorists and the environment will bear the brunt of these ill-conceived biofuel targets – with higher prices at the pump and higher CO2 emissions.

A Bloomberg New Energy Finance’s report says that producers based on edible feedstocks have the potential to produce aviation fuel at US$1.20/litre if they move to large-scale production, on the basis of current vegetable oil prices. This is well above current jet fuel prices, which are around US$0.85 in early 2012. (Biofuels could be competitive as aviation fuel by 2020).

We like it or not, we have to live with fossil fuels for a long time. No matter what we do they will not only be with us but will account majority of the energy we will consume in the decades to come. This means we have to focus more on greening of fossil fuels. Financial resources are better spent on renewables research and development. In the meantime, new combined cycle natural gas plants can replace coal with greatly reduced environmental impact. The immense shale gas resources in the US could be used to produce liquid fuels at surely competitive prices.

The US government and military can use purchasing guarantee mechanism to boost the renewable energy industry. This is quite normal, as long as the purchase price is competitive and not more expensive than conventional fuel. Any additional benefit to the industry should get the approval of tax payers.

This is why I call all this government-renewable energy industry complex. Remove all kinds of subsidies that are paid from the pocket of consumers! (in Europe, especially the ones on agriculture).

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PS. A separate issue, US Government Accountability Office released a report on January 31, 2012 (GAO-12-336R) summarizing the 8 required energy efficiency reporting issues in the DOD’s Annual Energy Management Report for FY2010. GAO found that: On Issue 2, DoD did not address cost.On Issue 4: DoD did not assessed costs. On Issue 7, DoD assessed the feasibility of net-zero installations but costs were not assessed.

Good effort GAO. Do not let the DOD to hide costs.  

DOD's Green Chaos

A US congressional “super committee” has been assigned to develop a plan to reduce the federal deficit by more than $1.2 trillion over the next 10 years. This amount is more or less equals to the war expenses in Afghanistan and Iraq in the past 10 years.

Today, the US Department of Defense (DOD) is under “devastating” budget cuts but it continues to play the proud role of leader in the country’s green energy transition. Some of the main goals of this vision are reducing dependence on imports, increasing dependence on clean energy technologies, improving energy efficiency and conserving energy through culture change. This transition is deemed necessary and urgent by the DOD senior management.

We have heard many times by DOD officials that there are also many energy related threats to national security. Climate change, high priced and unsure supplies of imported oil coming from “unfriendly” nations, dependence on civilian electricity infrastructure, brining fuel to forwards operating bases are only a few but much publicized examples.

All these understandable intentions backed with unjustified arguments have been disturbing me for a while. Let’s take the argument of being dependent on oil imports from “unfriendly” countries.

If you go to the Energy Information Administration website, you will read the following: “Some may be surprised to learn that 49% of U.S. crude oil and petroleum products imports came from the Western Hemisphere (North, South, and Central America, and the Caribbean including U.S. territories) during 2010. About 18% of our imports of crude oil and petroleum products come from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates. Top Sources of Net Crude Oil and Petroleum Product Imports: Canada (25%), Saudi Arabia (12%), Nigeria (11%), Venezuela (10%), Mexico (9%).” I interpret the term “unfriendly” countries as OPEC countries in general and the countries in the Persian Gulf in particular.

The fact is that the US imports less and less crude oil from the Persian Gulf. Now let us have a look at the Annual Energy Outlook 2011 of the Energy Information Administration (released in April 2011). Table A11 (Liquid fuels supply and disposition) tells us that EIA expects US crude oil imports to decline from 9 million barrels per day in 2009 to 8.24 mb/d in 2030. If you include petroleum products the numbers will change but the picture will remain the same. Share of net oil imports (crude oil + petroleum products) in total oil supply will decline (from 52% in 2009 to 42% in 2035). (see data here).

The share of crude oil imports from the Persian Gulf in total crude imports is expected to decline from 24% in 2008 to 18% by 2035 (or from 2.34 million barrels per day in 2008 to 1.45 million barrels per day in 2035, see the table below). Even if the US imported very small volumes of crude oil from the Persian Gulf, it would remain sensitive to the impact of any halt in supplies from that region would have on oil prices. So, the DOD officials should not mix the level of oil imports with price setting in world oil markets.

I wonder how the DOD senior management would answer the following question: Does this justify the massive US military presence in the Gulf in the future? So, the arguments like protecting the flow of oil from the Persian Gulf is not a convincing reason anymore. Here is the logic the Pentagon tries to impose on people’s small brains: We have to protect the flow of oil from the Persian Gulf because it is vital to the US national security. Therefore the US military has to be there. On the other hand, the US has to reduce its reliance on oil imports from the region. This is one of the reasons why pushing for biofuels is important.

Ethanol has been used as fuel in the U.S. since at least 1908 and has been subsidized since 1978. A century later we are still told that biofuels has a bright future and will be costs competitive. Well, let me tell you one thing. People may be naïve but not necessarily stupid.

Pentagon's quest to "unleash us from the tether of fuel" is transparent nonsense under the current reality. Pushing for “green” energy to make the world safer because climate change poses a “serious threat” to America's national security (towards the end of this century) is another bogus argument. If we want to make the world safer we should show this same vision down the throat of the billions of the world’s poor who today risk death because of starvation and disease. Of course, the DOD has the authority to make its own energy choices but not at the expense of tax-payers.

DOD’s energy costs in 2010 were over $15 billion. Almost $12 billion of it was for oil. According to my rough estimates the DOD’s energy expenses in 2011 will exceed $18 billion, around $15 billion of which for oil. Yes, this is a large sum. Well, instead of trying to find ways to reduce its oil expenses the DOD buys more expensive biofuels, and then it complains that increasing oil costs will have negative impact on its capabilities.

Let me remind you what the current Secretary of Defense Leon E. Panetta wrote in Monterey County Herald on May 7, 2006: “It is not government but consumers that hold the key to smart energy policy in the future. What all of the presidential pledges of the past failed to do, the price of gas may just accomplish. It may not be pleasant to confront the prospect of $5.00 or higher a gallon gasoline but if that high price can ultimately create a demand for less oil and more alternative fuels like ethanol, then perhaps this high price may not just be a curse but a blessing.” Today, Mr Panetta is the Secretary of Defense. He should remember his words when the DoD services ask for extra funds to cover their oil costs.

The DOD should be responsible for the energy policy decisions it takes and accountable for the resulting consequences. The DOD’s current energy goals and policies are too expensive, too ambitious. They lack realism and coherence. The negative results of DOD’s unsustainable and chaotic green energy policy will soon show its face which will lead to the downsizing or abandonment of several plans.

Let me be clear. I am not against renewable energy sources. I am only against the blind push for them, for the sake of pretending “green”.

If the Pentagon is serious about its energy problem, it should first know how much energy it uses (paid for and unpaid for), where and how. I would like to ask a simple question to DoD senior energy officials: How do you explain the discrepancy concerning the DOD’s annual energy consumption documented in the EIA’s Annual Energy Review and DoD’s Federal Energy Management Report (for any given year)?

Moreover, the vague terms like operational energy and installation energy do not mean anything. For years I have been repeating the same question: How much energy does the DOD consume in continental US and how much outside continental US? My point is that the Pentagon must first get the facts right.

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Worries about DOD's Green Biofuels

On 1 September 2009, DLA Energy , which oversees procurement of biofuel for the Navy, awarded to San Francisco-based company Solazyme a contract worth $223,500 for delivering 1,500 gallons of algae derived jet fuel (Hydrotreated Renewable HRJ-5) for testing and certification by the US Navy. This makes $149 per gallon.

The DLA Energy, in early 2010 awarded a $2.7 million contract to Sustainable Oils of Seattle and Bozeman, Mont. for 40,000 gallons of the camelina-based fuel. This makes $67.5 per gallon.

The media was quite after these awards.

Secretary of the Navy Ray Mabus and U.S. Department of Agriculture Secretary Tom Vilsack announced on 5 December 2011 the Defense Logistics Agency signed a contract to purchase 450,000 gallons of advanced drop-in biofuel. The contract is the largest government purchase of biofuel in history, and provides $12 million to suppliers Dynamic Fuels LLC (a joint venture of Tyson Foods, Inc. and Syntroleum Corporation) and Solazyme. Solazyme’s biofuel is algae-based, while Dynamic’s is made from used cooking oil and non-food-grade animal fats.  (this makes $26.6 per gallon).

I don’t understand why now there is big news coverage and fuzz about the government grants to unprofitable “green” projects in general and Navy’s biofuel deal in particular.

Some call it even Jet-Fuel Gate arising from “green” fanaticism. I guess this has a lot to do with (again so called) SolyndraGate (the $535 million Obama stimulus loan guarantee to solar panel maker Solyndra on the eve of its Chapter 11 bankruptcy).

An interesting article by J.E. Dyer at Hot Air provides extensive details of Solazyme: T.J. Glauthier “strategic advisor” at Solazyme, worked on the energy part of Obama’s trillion-dollar stimulus bill. Then Solazyme gets a $21.8 million grant from the stimulus bill and uses this money to open the largest biofuel plant in North America, located in Louisiana. And now the company (together with Dynamic Fuels LLC) is given $12 million contract to provide biofuels to US Navy.

Investors Business Daily put a harsh editorial on the subject adding that “You can save the Earth and make money too! Provided you have the right political connections to get your hands into taxpayer wallets, of course."

All these make many people skeptical about the DOD’s green biofuels hysteria.

Wired.com ran a story on 5 December 2011 with a catchy title: Navy’s Big Biofuel Bet: 450,000 Gallons at 8 Times the Price of Oil. (by the way, it was not 8 times the price of oil, $26.6 per gallon compared to $3.95 per gallon) The article itself may be not original but the comments indeed underline many of the pros and cons of military use of biofuels. These comments show that people want to see other things beyond the costs.

Here are some of them:

“Why would we want to build infrastructure to produce a product that is less energy dense, is more expensive to produce, and is not in supply worldwide. “

“It's not the Pentagon's job to choose what the next fuel source should be. There is plenty of value in R&D, but R&D doesn't require the operational fleet to buy Bio Fuels in bulk at substantial price premium to better fuels for no purpose. Why do we need an entire strike group running on bio fuel, other than entertainment? What's the purpose? It's more expensive, will require more frequent refueling, and increase maintenance costs.”

Many things have been said against new fuel for ships: - Coal (....but the wind works just great and is cheaper). - Oil (...but coal works just great and is cheaper). - Nuclear (....but diesel works just great and is cheaper).

BUT “Bio isn't any better than JP-5, in fact, it isn't as good. It doesn't perform as well per pound. Nuclear doesn't need to refuel as much. Oil is much easier to move and handle than coal, and powered ships steam faster than wind. Each of those steps had a value delivered. What is the performance value improvement of bio fuel over JP-5. What is the reason to justify the 10x cost differential?”

“the National Security strategies from the last 30-50 years and see that the Gulf area is listed as an "vital national interest" - and it wasn't because of the fishing.”

“If they really wanted to get us off foreign oil then they would turn to hydrogen as the "New Fuel".

Time has come to make a reality check for some of the claims advanced by the green fuels industry and the US military officials. My skepticism to the DOD biofuels endeavor would change only if I could see hard facts on these points, not empty talks and promises.

Capt Michael Cole, Deputy Chief, Lab Division AFPA/PTPLA had an interesting analogy in his presentation on 9 May 2011. He says “If it looks like a duck, quacks like a duck and walks like a duck, it's a duck.” SO, he says, “If it looks like ‘on spec’ fuel, smells like jet fuel and burns like jet fuel, it’s jet fuel.” Well, not necessarily.

In order to be considered a viable alternative, any JP-8 challenger must closely approximate or be better in all the criteria I list below.
·         First, it must meet current petroleum based JP-8 and F-76 energy density standards.
·         Second, it must be drop-in fuel (that no modifications to the engines are required to burn the fuel.)
·         Third, it must meet military demand in terms transportability and stability (making use of the existing delivery infrastructure and storage capacity)
·         Fourth, it must be cost competitive
·         Fifth, it must be produced in large quantities preferably in the US.
·         Sixth, it must allow the aircraft to continue to operate with commercially available fuel supplies.

Take the first item, energy density, which in my opinion is the most important.

An ideal alternative fuel would minimize both mass and volume for a given energy content since this will have major impact on the vehicle range. Pound for pound, wood as a fuel contained more energy than the human muscle-based carbohydrate economy it displaced; coal contained twice again as much; oil raises the ante twice again and nuclear sources many times more. In this context, biofuels are less dense. Less energy density at a higher cost doesn't sound like the roadmap to success for the reality. (Aviation Biofuels: Real or Green Fantasy?) If we want to pick up a winner to replace oil then the replacement should be better or equivalent in energy density and cost to crude oil based fuels.

Energy content can be expressed either gravimetrically (energy per unit mass of fuel) or volumetrically (energy per unit volume of fuel). Energy content is assessed by comparing the energy of the fuel per unit volume, but must also be assessed by comparing the energy per unit weight. In order to meet JP-8 fuel density standards, an alternative fuel must meet both criteria.

Let me give you one example. Ethanol for instance only delivers three-quarters as much energy per gallon of petroleum derived gasoline, meaning significantly lower miles per gallon, necessitating more frequent fill-ups. Navy Secretary Mabus tells in every occasion that US naval vessels are most at risk during refueling, as the USS Cole was when it was attacked in 2000 in the Yemeni port of Aden. He should demonstrate and prove that Navy alternative fuels will require less refueling.

I would like to make a suggestion to media reporters and DOD officials. Please don’t focus solely on the cost aspect of the biofuels. That is only one part of the story. Better focus on whether the DOD is doing the right/wrong thing for right/wrong reasons.

LMI Study on DoD Use of Renewable Fuels

A new report entitled “Opportunities for DoD Use of Alternative and Renewable Fuels: FY10 NDAA Section 334 Congressional Study” conducted by LMI was released recently.

This LMI study is different in quality from another LMI study (in 2007) entitled “Transforming the Way DoD Looks at Energy: An Approach to Establishing an Energy Strategy,” which I described as Much Ado for Nothing. The 2011 report is much better, but not as much one would expect from a $419,592 price tag.

The report assesses renewable fuel supply (anticipated feedstock availability, production capacity and production) and demand (projected fuel quantities based on the military Services’ requirements and plans) through 2020.

Here are its major findings:

Increased DoD renewable fuel use helps advance U.S. strategic energy security interests, achieve the Services’ goals, and gain some limited military utility (such as lower freeze points, cleaner combustion).

At present, these fuels command a price premium, but it is anticipated to decline significantly as the market develops. Despite that, the Services’ renewable fuel goals could still impose $2.2 billion in additional estimated annual fuel costs by 2020.

The Services’ 2020 goals for renewable jet fuel alone far exceed even the high-end projected domestic supply.

 DoD would require more than 40 percent of the total projected U.S. drop-in renewable fuel supply (regardless of fuel type) in 2020, just to meet the military Services’ stated demand for 745 million gallons.

Camelina appears to be a promising renewable feedstock for producing hydrotreated renewable jet (HRJ) fuel, but annual production capacity for camelina-based HRJ is projected at only 68–98 million gallons by 2020.

Third generation renewable fuels production systems, such as photosynthetic algae, are unlikely to supply significant quantities of feedstock oil by 2020.

The additional costs and potential adverse effects of creating a new DoD commodity class outweigh the potential benefits.

Many of these fuels are expensive to produce, and how rapidly their costs will drop over time is unclear. Drop-in renewable fuels are expected to cost more than their petroleum counterparts: the estimated price premium will be between $1.43 and $5.24 per gallon in 2015. Given the Services’ goals, mid-range estimates suggest that DoD’s drop-in renewable fuel use would represent an additional annual fuel cost of $865 million by 2015 and $2.2 billion by 2020, which represents a 10– 15 percent increase over just conventional petroleum fuels.

Without a medium-term guaranteed demand and price floors for renewable fuels, many renewable fuel products lose their cost competitiveness (even with incentives) because of the short 5-year period that investors need to recover their capital investment costs.

In conclusion, increased DoD renewable fuel use contributes to U.S. national security interests, achieves Service energy security goals, and offers some limited military utility. However, the projected supply of drop-in renewable fuels will not be sufficient to meet anticipated DoD demand for renewable jet fuel products. Also, price premiums for drop-in renewable fuels and the budgetary implications associated with meeting renewable fuel goals may be considerable. Further action by DoD and Congress could help to promote renewable jet fuel production and address the price premiums necessary for the Services to achieve their renewable fuel goals.

Almost all these conclusions are supported with convincing (although some production cost data are outdated) calculations. What is missing is a thorough comparison, a chart or table, with conventional fuel.

What the report also does not say or question is the fact that the DOD will never ever be short of fuel supply. SO, all these fuel supply security arguments are void. You will have the same problems with nonpetroleum alternative liquid fuels as well. If the aim is to reduce the amount of imported oil, then the US should simply open Outer Continental Shelf to exploration. OR better produce liquid fuels from shale gas. If the aim is to generate income for renewable energy industry then the DOD is right. It should continue spending millions of tax payers’ dollars.

The exaggerated focus of DOD on biofuels as if it is a remedy is nonsense. Subsidising them is even bigger nonsense. Here is what I suggest. Give the companies a guarantee to buy large amount of biofuels at the price of conventional petroleum based fuel per gallon in the next 10 years, whatever the conventional fuel price may be in the future.  If they can produce cheaper, they can pocket all the difference as profit. Let them take some risk. Guaranteed business over many years with large profits is a common practice in countries where corruption is widespread.

Navy Gives Another Push for Biofuels

On 16 August 2011, the US President Obama announced that the Departments of Agriculture, Energy and Navy will invest up to $510 million during the next three years in partnership with the private sector to scale up the industry for next-generation biofuels by producing advanced drop-in aviation and marine biofuels to power military and commercial transportation. Back in June 2011, the secretaries of the three Departments mentioned above had signed a memorandum of understanding for that.

President Obama and the Department secretaries proclaimed once again that biofuels are an important part of reducing America’s dependence on foreign oil and it will pave the way to energy independence. As usual, no mention about the costs to tax payers due to generous subsidies.

Nevertheless, again as usual, Navy Secretary Ray Mabus reiterated his claim that “America’s long-term national security depends upon a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving Sailors and Marines tactical and strategic advantages....Today’s announcement not only leverages our home grown fuel sources to support our national security, but it also helps advance the biofuels market, which ultimately brings down the cost of biofuels for everyone.” He is even quoted as saying that "I can think of nothing more vital to national security than to diversify our forms of energy".  However, he never says when the costs will get down. The US government points out clearly that it will continue to use the weight of the military to commercialize (drop-in) biofuels.

The plan is to build commercial-scale pioneer biofuel refineries in different locations for a diverse feedstock supply. To participate in the program, commercial companies will have to invest at least as much as the government (at least a one to one match). Funding for the program will be split equally among the three agencies. The Navy will act as a customer for production and define technical requirements for aircraft and vessels.

In any case, this announcement will make the biofuel industry very happy. The remarks made by Michael McAdams, president of the Advanced Biofuels Association (ABFA) make this clear: “No waiting for the day when costly changes are made on car assembly lines or gas stations… The Administration's investment in commercializing advanced biofuels is a matter of national security. … our nation's defense is at the mercy of the market just as much as we are when we pull up to the gas station."

Already, in June 2011,  Secretary of Energy Steven Chu had announced up to $36 million to fund six small-scale projects in California, Michigan, North Carolina, Texas, and Wisconsin, that will advance the technology improvements and process integration needed to produce drop-in advanced biofuels and other valuable bio-based chemicals. Also, in December 2009, Secretary Chu and Agriculture Secretary Tom Vilsack had announced the selection of 19 integrated biorefinery projects to receive up to $564 million from the American Recovery and Reinvestment Act to accelerate the construction and operation of pilot, demonstration, and commercial scale facilities.

While this biofuel hype continues in Washington DC UK company Altona Energy believes it can supply vehicle ready diesel at $53 a barrel ($1.25 per gallon), with a coal to liquids plant, incorporating carbon capture for underground carbon storage, with financial support from China ( Diesel from CTL with carbon capture at a cost of $53 / barrel). And yet, Coal to Liquids are no more mentioned in the US, a country rich in coal.

Thunderbirds fly on biofuel blend

The U.S. Air Force's Air Demonstration Squadron, the Thunderbirds, marked the DoD's latest green initiative as they burned bio-fuel at the Joint Services Open House on 20-21 May 2011. More than 3,000 gallons of bio-fuel was mixed with 3,000 gallons of JP-8 for use by the Thunderbirds for the 2011 Joint Service Open House.

The fuel was provided by Sustainable Oils, LLC, one of DLA Energy’s alternative fuel suppliers. Their product was blended with petroleum-derived fuel to obtain a 50/50 blend. The camelina was grown and harvested in Montana, and refined into renewable jet using technology from UOP LLC, a Honeywell company. Sustainable Oils has provided nearly 500,000 gallons of camelina-based HRJ to multiple branches of the US military for its certification programs, making it the most heavily tested alternative fuel feedstock.

UOP LLC had announced on 20 May 2011 that Honeywell Green Jet Fuel™ made from Camelina would power two Air Force F-16 aircraft as part of a Thunderbirds demonstration at Joint Base Andrews in Maryland.  (Honeywell Green Jet Fuel™ Powers U.S. Air Force Thunderbirds Demonstration)

Camelina Sativa plant requires very little water or nitrogen and doesn’t compete with food crops. It is often used in rotation with wheat crops to help regenerate soil and thrives in un-irrigated fields where other crops won’t grow. 
 Its eeds yield high quantities of oil (35-38% of the seeds is oil) which are exceptionally rich in Omega-3 fatty acids.

Honeywell UOP produced 400,000 gallons of Green Jet Fuel for alternative fuels testing and certification. The final fuel delivery under this program took place in early May 2011. The Air Force held its first demonstration flight with Honeywell Green Jet Fuel in an A-10 Thunderbolt II in March 2010. It expects to achieve fleet-wide certification by 2013.

Honeywell UOP was the prime contractor or subcontractor on DLA-E contracts to produce almost 600,000 gallons of renewable jet fuel for the U.S. Navy and Air Force in October 2009. Working with feedstock partners Sustainable Oils, Solazyme and Cargill, Honeywell UOP process technology was used to produce 190,000 gallons of fuel for the Navy and 400,000 gallons for the Air Force from animal fats, algae and camelina.

According to the Undersecretary of the Air Force Erin Conaton “Right now, biomass fuel is about 10 times the cost of JP-8, the current military aviation jet fuel in use.”

Questioning the certification process

In accordance with the Secretary of the US Air Force's Assured Fuels Initiative, all Air Force aircraft was supposed to be tested and certified to fly on a domestically-produced synthetic fuel blend by early 2011. This was the PR used by the Department of the Airforce since 2007.  

In the following years this message was modified from early 2011 to fiscal 2011. “The entire fleet is scheduled to be certified by fiscal 2011, but not every airframe will need to undergo the same sets of rigorous tests.”

Then the goal became “to test and certify all USAF aircraft against the 50/50 synthetic fuel blend by 2011.”

Now we are told that “fleetwide certification is on track for completion in 2013.”

Air Force should clarify this issue. What is the time frame to test or certify what? Do we now have a distinction between synthetic fuel blend and biofuel fuel blend? If yes, what do USAF officials mean with alternative fuels as far as certification program is concerned?

(The Air Force has, to date, tested and certified biofuel as a 50-percent blend with regular jet fuel in the A-10 Thunderbolt II, the F-15 Eagle, the C-17 Globemaster III, and the F-22 Raptor.)


 

Economics of Navy's Green Fuels

According to the Navy officials, going green is not just about natural security. It is about strengthening national security, combat capability and assuring mobility.[1] Towards that end the goal of Navy is to be an early adopter of new technologies and fuels. In my previous post I mentioned about Navy's Key Achievements in Biofuels

Both the Navy and the Air Force have launched multimillion-dollar test programs to demonstrate that their aircraft and ships can run on blends of alternative fuels and conventional oil. They continue to certify their vehicles to operate with these green fuels.

So far, both services have made excellent public relations campaigns. They demonstrated how well their vehicles run on these green fuels. But when it comes to the economics both services are quite silent. They assume that they will give the right signal to investors to make the necessary investments so that when produced in large enough quantities these green fuels will be no more expensive than conventional fuel. I do not share their wishfull thinking but I do hope that I am proven to be wrong.

Here is some of the economics for the Navy acquired green fuels.

In 2009 the Naval Air Systems Command has asked for 40,000 gallons of Hydrotreated Renewable HRJ-5 only (JP-5 jet fuel from bio-based feedstocks) in a request for proposal issued by the Defense Energy Support Center (now called DLA Energy). Initial laboratory analyses and rig testing is planned to consume 1,500 gallons; the static engine tests, 16,500 gallons; and the flight tests, 22,000 gallons.

On 31 August 2009 the DLA Energy awarded to Sustainable Oils $2,664,000 for delivery of 40,000 gallons (base quantity) and 150,000 gallons (option quantity - to be exercised at the Government's option) of Hydrotreated Renewable HRJ-5 only. This makes $67 per gallon. Another source says the DLA Energy awarded in early 2010 a $2.7 million contract to Sustainable Oils of Seattle and Bozeman, Montana, for this 40,000 gallons of camelina-based fuel. This makes $67.5 per gallon. For camelina, the current price tag is said to be 30-something dollars per gallon.[1]

On 1 September 2009, DLA Energy awarded to San Francisco-based company Solazyme a contract worth $223,500 for delivering 1,500 gallons of algae derived jet fuel (HRJ-5) for testing and certification by the US Navy. This makes $149 per gallon.

On 24 September 2009, the Navy paid to Solazyme $424 per gallon for the acquisition of 20,055 gallons of renewable algae derived F-76 Naval distillate fuel for use in Navy ships. The contract price included Research and development costs. The cost of the fuel is now estimated to be around 60- some dollars a gallon. [1]

Associated Press news on 29 October 2010 reported that the U.S. Navy in September 2010 ordered more than 150,000 gallons of algal derived HRF-76 fuel for the U.S. Navy's testing and certification program in 2010-2011. But Solazyme’s announcement didn’t mention anything about the money. Meanwhile in August 2010 the U.S. Department of Energy - whose goal is to scale up production of commercially viable biofuels - awarded the company $21.8 million under the American Recovery and Reinvestment Act to expand its biggest production facility at Cherokee Pharmaceuticals in Riverside, Pa.

For the companies involved it seems that this green fuel push is a very lucrative business.

Based on its announced goals, Navy is estimated to need 8 million barrels of biofuels (236 million gallons), 4 million of each of F76 and JP5 by 2020. Similarly the Air Force has set a goal of acquiring half of its annual domestic aviation fuel requirement via alternative blends derived from locally sourced feedstocks. Estimated requirement for the alternative fuel amounts to 400 million gallons of JP8 by 2016.

Until mid 2010, DESC has procured about 450,000 gallons of bio-derived fuels for the services’ testing purposes. The challenge is how to procure these fuels in mass quantities. DESC typically awards one year contracts and only has the authority to award five-year contracts with up to five, one year option. But because the alternative fuels market is just starting to develop manufacturers are looking for much longer term contract terms, probably 15-20 years, to give them the time and incentive to build the infrastructure required to produce these fuels. Environmental legislation is another issue. Under section 526 of the Energy Independence and Security Act, federal agencies can only procure alternative fuels that do not produce more lifecycle greenhouse gases –from the time the products are extracted from the ground until they are consumed by a vehicle- than would be produced using petroleum based products. (Sara Moore, Powering Up, Loglines, July-August 2010, 24-29).

I think this contract length is not a big problem. If DOD continues to pay multiples of conventional fuel per gallon it will always find a company that will produce large amounts green fuels. Why? Because 15 year contract can be squeezed into 5 years if per gallon fuel price high enough. If the Navy energy goals are really achieved then extraordinarily high fuel costs might be justified. Even then the government’s job should not be to pick the winners. Let life cycle economics and environmental constraints pick the winners.

In any case one thing is clear: in the next decade more tax payers money will evaporate in the name of green military fuels.

FA18 to run on a Biofuel Blend

In my previous post I talked about USAF Test of a New Biofuel Blend. Here I will continue on the same line, but for the Navy.

Representatives of the Defense Energy Support Center and Air Transport Association of America, Inc., signed a strategic alliance agreement on 19 March 2010 in Washington, D.C., recognizing a partnership for the development and deployment of alternative aviation fuels. (DESC News Release DLA 03-18, 19 March 2010, signing event represents future of alternative aviation fuels).

The agreement highlights the shared goals of the DoD and the principal U.S. airlines to advance the development and deployment of commercially viable, environmentally friendly, alternative aviation fuels. The alliance is hoped to help promoting widespread commercialization of environmentally friendly alternative aviation fuels, and to advance the development and deployment of their commercial viability.

The alliance directs the formation of three collaborative teams, composed of ATA and DESC representatives, with each team focused on specific developmental and marketing models of the alternative fuels goals.

The environment team will identify common methodologies for life-cycle assessment of greenhouse gas emissions for alternative aviation fuels. The deployment and logistics team will identify locations or regions suitable for alternative fuels production and deployment, as well as means of distribution to and from those locations. The contracting and finance team will jointly publicize supply opportunities, explore opportunities for complementary fuel-supply agreements and develop compatible pricing and finance mechanisms.

Through the combined efforts of the Commercial Aviation Alternative Fuels Initiatives fuels produced using the Fischer-Tropsch process were already approved for use in commercial aviation. The Fischer-Tropsch process uses certain chemical reactions to produce synthetic oils and fuels from coal, natural gas and biomass. Additionally, approval of a new class of hydrotreated renewable jet fuels is expected in the second half of 2010. Various plant-derived oils can be treated with water as part of a chemical reaction to produce jet fuel.

Meanwile, DARPA continues its aggressive research on biofuels. Its current BioFuels work involves Cellulosic and Algal Feedstocks program. (see DARPA Biofuels Factsheet).

And Navy is looking ahead to making its ships green or more fuel efficient by engineering solutions on how ships are fueled, powered, designed and operated. (see p.33 of OnWatch 2010 for a most recent update). Note that in September 2009, the Navy commissioned the USS Makin Island, the world's first hybrid fuel warship (gas turbine engines and electric drive). The ship is the largest amphibious assault ships in the world which are designed to carry more aircraft, equipment and personnel than their predecessors.

Alternative fuels search of the Navy extends to aircraft as well. The Navy will demonstrate the 'Green Hornet,' an F/A-18 Super Hornet (see here, here and here) powered by a 50/50 biofuel blend, on Earth Day, 22 April 2010, at Naval Air Station Patuxent River, Md., as part of its Energy Strategy. (See presentation by Chris Tindal, Acting Deputy Assistant Secretary of the Navy, for a comprehensive overview of Navy’s Energy program. Also see Navy Energy Approach, Office of Naval Research science and technology focus on energy)

source: USN

Remember that Secretary of the Navy Ray Mabus has made energy independence a top priority for the Department of the Navy. His energy reform includes:

- Change contracting policies to include the fully burdened cost of fuel energy costs to be used as criteria,

- Green Carrier Strike Group conducts local operations by 2012, and sail the Great Green Fleet composed of nuclear ships, surface combatants with hybrid electric power systems using biofuel and aircraft flying on only biofuels by 2016,

- By 2015, reduce commercial vehicle oil use by 50%

- By 2020, at least half of shore-based energy requirements will be provided by alternative sources

- By 2020, half of total energy consumption will be from alternative sources (currently 17%).

These targets are hope to “increase warfighting capability by reducing reliance on fossil fuels from unstable locations and reducing volatility associated with long fuel supply transport lines.”

The 'Green Hornet' flight is considered to be an important step in the certification and ultimate operational use of biofuels by the Navy and Marine Corps. The feedstock for the biofuel to be tested is derived from the camelina sativa plant, which is a US-grown, renewable, non-food source. The objective of the test flight program is to confirm there is no difference in performance between the biofuel blend derived from the camelina plant and standard petroleum-based JP-5. After the test is successful, the Navy will move to expand biofuel testing to marine gas turbine engines and to the engines of tactical vehicles. The DESC recently awarded a $2.7 million contract to Sustainable Oils of Seattle and Bozeman, Montana for 40,000 gallons of the camelina-based fuel.

See also my post on Navy's Green Great Fleet.