U.S. military's need for biofuels could build new market

Such good news: "The Department of Defense has called for biofuels that don't displace food, don't use up fresh water, yield less greenhouse-gas pollution than conventional fuels and cost the same." ---BBB

June 20, 2011
U.S. military's need for biofuels could build new market
By Renee Schoof | McClatchy Newspapers

ANDREWS AIR FORCE BASE, Md. — Maj. Aaron Jelinek of the Air Force Thunderbirds flies his F-16 upside down, rolls it, thunders past his teammates in breathtaking close charges and joins five other fighter jets in precision formation.

And for the first time in the 58 years of Thunderbird air shows, Jelinek's flight last month was fueled by a 50-50 blend of conventional jet fuel and biofuels.

"Flying is a blast," he said after the show at Andrews Air Force Base, outside Washington. As for the biofuels blend, he said: "There is no difference that I can tell."

Biofuels have buzz in the military because the Air Force and the Navy are taking a lead role in creating a U.S. market for them. They've spent the past few years testing and certifying aircraft to run on them. Now they need hundreds of millions of gallons of biofuels to meet the goals they've set for using alternative energy by the end of this decade.

The challenge for the new industry is to find money to ramp up from nearly zero today. The Department of Defense has called for biofuels that don't displace food, don't use up fresh water, yield less greenhouse-gas pollution than conventional fuels and cost the same. About a dozen companies that want to make this jet fuel for the global market have exhibits for the first time this year at the Paris Air Show, which began Monday.

The potential market is huge, for military and commercial aviation. President Barack Obama in March gave the job of helping the private sector do this to the Departments of Energy, Agriculture and the Navy.

National security is the main reason to move off oil dependence, according to Navy Secretary Ray Mabus.

"Our military depends too much on fossil fuels," Mabus, a former Mississippi governor and ambassador to Saudi Arabia, said at a recent business conference.

Oil comes from volatile places, and its price spikes eat into the military budget, Mabus said. As world demand for oil rises, it's likely to become more expensive, so the military is seeking alternative fuels.

The main thing the Navy brings is a market, Mabus said. But the price, he added, "is going to have to be pretty competitive with fossil fuels."

The cost of biofuels now is about $35 a gallon, 10 times the cost of conventional jet fuel.

Mabus ordered the Navy to get ready to use alternative energy for half of its power at sea and on shore by 2020. That would require more than 300 million gallons of biofuels a year, for blending with conventional fuel.

The Air Force aims to fly on a 50-50 blend of biofuels and conventional fuel by 2016, an annual requirement of 400 million gallons.

The military provides 10 percent of the U.S. demand for aviation fuel; if the Department of Defense were an airline, it would be the biggest one. That's big enough to have an influence on the nascent biofuels market, said Tom Hicks, the deputy assistant secretary of the Navy for energy.

"Just about every major country is looking at alternative fuels in some shape or form," Hicks said.

The Navy predicts that it will have enough biofuels for an aircraft carrier strike group that will be deployed over the horizon on a 50-50 biofuel blend in 2016.

"The bigger question is 2020, not only for the quantities, but also the price points that will be competitive with petroleum," Hicks said. "If we left the market to itself, 2020 would be a question for us." But working with the Energy and Agriculture departments, "we think we can mature the market."

The Air Force will have its entire fleet certified to run on biofuels by the end of 2012 and will buy them when they're available at a good price, Undersecretary Erin Conaton said.

Kevin Geiss, the deputy assistant secretary of the Air Force for energy, said he'd been meeting with a lot of companies about biofuels development and other forms of alternative aviation fuels that the Air Force had been testing. Investors are interested, he said.

Money is the biggest obstacle. Financing is needed to grow the feedstocks and build refineries.

Mitch Hawkins, the CEO of BioJet International, said the only barrier to creating the market was capital. BioJet got a $1.2 billion investment earlier this year, but investors are just starting to get interested, and billions more will be needed to build an industry, he said.

"There is nothing that has entered commercial life that the first units that were produced was something everybody could afford," said Rich Altman, the executive director of the Commercial Aviation Alternative Fuels Initiative, a coalition of airlines, aircraft and engine makers, and energy producers, including the U.S. government.

The initiative has projects in 17 states to develop renewable jet fuel from plants, including algae, camelina (a relative of mustard) and soybeans. The Department of Agriculture is working on ways to accelerate the yields of "energy crops," plants grown for conversion to fuel such as algae, switch grass and camelina. The Energy Department is working to reduce the costs of various systems that process plants into fuel.

Altman expects biofuels to be commercially viable without subsidies by the second half of this decade. He said that commercial airlines were interested because they wanted a secure supply. Forty percent of their costs are fuel, and they pay a premium for jet fuel refining, he said.

International airlines also are looking to limit their greenhouse gas emissions, now about 2 percent of overall emissions and growing. Emissions can't be reduced without using biofuels, Altman said.

The Air Transport Association, the U.S. airline trade association, is a founding member of the Commercial Aviation Alternative Fuels Initiative and would like to see competition for petroleum, said spokesman Steve Lott. "The big question is how much it's going to cost."

Unlike the military, the Air Transport Association has no goal of using a certain amount of biofuels by a set date. It's also fighting the European Union's plan to charge for greenhouse gas emissions starting in 2012 on flights into and out of Europe.

Tom Todaro, the CEO and founder of Sustainable Oils of Seattle, sold test batches of camelina oil to the Air Force for the Thunderbirds' test flights. He said that what was needed was project finance and customers with long-term commitment.

"To date, the military has absolutely been the leader," he said. The company also has signed letters of intent to sell renewable fuel to large commercial airlines and cargo shippers, including American, United, FedEx and United Parcel Service.

"They'd like to be large customers of the fuel once it's ready," he said. "At scale it can be competitive with petroleum."

Todaro's company grew camelina in Montana for the fuel it sold to the Air Force. Camelina doesn't displace food because it's grown on wheat fields that otherwise would need to lie fallow, Todaro said. And compared with oil, camelina reduces the heat-trapping gas disrupting the climate by more than 70 percent.

Boeing spokesman Terrance Scott said his company's airline customers had been asking for help to get more biofuels. The EU's plan to charge for emissions gives low-emission biofuels an edge.

Boeing just completed a study of how to set up a biofuels industry in Washington state, Oregon, Idaho and Montana. Boeing also is active in setting up biofuels supplies around the world — in Mexico, Australia, China and the United Arab Emirates.

The company set up a Sustainable Aviation Fuels User Group, made up of airlines that represent a quarter of global aviation fuel use. Only one member, Alaska Airlines, is from the U.S.

An international standard for aviation fuel from plants, or hydro-treated renewable jet fuels, is expected as soon as next month.

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