Navy plans action this year on two large pathways to alternative fuel

Wednesday - 4/23/2014, 4:36am EDT

Jared Serbu reports.

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The Navy says it will create two new acquisition vehicles this year to ensure it has a stable supply of advanced biofuels.

The service says the high-tech liquid fuels won't cost it any more than the petroleum-based diesel and jet fuels it has been buying for decades.

In its years-long alternative fuel push, the Navy already has used the Defense Production Act, a Korean War-era law that lets DoD channel seed money into companies that supply things the military wants but aren't yet produced in economically-viable quantities.

But that was to produce small amounts of biofuel for demonstration purchases, and so far, the Navy has paid prices that were several times what it spends for a gallon of fossil fuels.

Now, the Navy says its initial investment has paid off. Advanced biofuel technologies are far enough along that it can start to think about a larger-scale replacement of petroleum fuels for day-to-day mission use.

"The Navy has a long history of energy innovation. From sail to coal, coal to oil, and then to nuclear, the Navy's led the way. We see biofuel as that next energy innovation, and we're taking action," Tom Hicks, the acting undersecretary of the Navy, told the Advanced Biofuels Leadership Conference in National Harbor, Md., Monday. "Through the DPA program, DoD made awards to four companies who have now committed to producing a total of 170 million gallons of drop-in, military- compatible biofuels, with production starting in 2016."

The firms have each committed to providing biofuels at a price that's "well below" $4 per gallon, Hicks said. The Navy currently pays an average of $3.73 for petroleum-based fuel.

Hicks also said the Navy has determined the biofuels that the upstart companies will supply will generate 50 to 90 percent fewer greenhouse gas emissions.

Phase Two awards in July

The selection of the initial four biofuel companies made up phase one of the Navy's DPA program. In phase two, it plans to make awards this July in a downselect process, in which it will pick some or all of those companies for large-scale production, said Chris Tindal, the Navy's director for operational energy.

"The big thing is that out of the phase one proposals we got, we were able to add up all of those gallons, and we have a potential — if all of the awards are made — of getting 171 million gallons," he said. "We know this is going to be cost-competitive, and we're very excited about it."

The raw material the four companies will use to generate that replacement energy source will range from leftovers from lumber manufacturing to used cooking oils and municipal trash.

The Navy says in the demonstrations it has conducted so far, its engineers and the operators of its ships and aircraft have been unable to tell any difference in the performance of its platforms and the effects of the fuels on the equipment, with one exception: since the synthetic fuels contain fewer contaminants than refined crude oil, they don't have to change the fuel filters on ships as often.

Farm-to-Fleet, no table needed

Separate from the DPA effort, the Navy says it plans to issue two new biofuel solicitations this summer under an agreement it signed with the Department of Agriculture in December.

The Farm-to-Fleet program will let the Navy buy up to 800 million additional gallons of biofuel each year.

The prices under Farm-to-Fleet are also expected to be competitive with petroleum, but that's due in large part to the fact that USDA will heavily subsidize the program, at least in its early years, through its Commodity Credit Corporation as "early stage financing," to help offset farmers' costs to produce the biofuels' feedstock.

Under one solicitation, which will cover farms in the eastern half of the country, the Navy expects fuel deliveries to start in April 2015. The second will start generating biofuels from the Rocky Mountain and West Coast regions by next October.

Initially, Tindal said, the service will take a cautious approach to buying biofuels under Farm-to-Fleet. They will make up just 10 percent of a blend, along with traditional fuels, that the Navy will use to power some of its ships and aircraft.

Within the next few years, it expects the program to be able to supply a fuel source that consists of a 50/50 blend of fossil fuels and biofuels.

"The reason we're doing that is because we know about 90 percent of the cost is going to be locked in — that's the fossil fuel. It's the 10 percent we've really got to worry about from a cost perspective right now," Tindal said. "By doing a 10 percent biofuel blend to start out with, it will help these companies get to the volumes and price points that we need. But 10 percent still means about 80 million gallons of total production, and we can go all the way up to 400 million gallons if we go to a 50/50 blend. And that's just domestically."