Wait’ll next year: advanced biofuels and the military

May 28, 2012 |

The Blue Angels, flying F/A-18 Hornet supersonic fighters

Is it time to think about 2013, for the supporters of military biofuels?

Too many early-stage biofuels supporters, we think, come from major market cities like Boston and the Bay Area, where the local baseball teams are seemingly always in contention, and heartbreak, if it ever comes, never seems to come until September or October.

Myself – I hail from Seattle, and “wait’ll next year” is a sentiment genetically fused into a Seattleite’s baseball DNA, imported into the genome from carefully-preserved Brooklyn Dodger genetic material, I suspect.  We are programmed to start thinking in those terms around Memorial Day.

The concept of “wait’ll next year”, or the rebuilding season, is alien to the developers of military biofuels, who have been on the offensive in an uninterrupted fashion for several years. But it is right to think in those terms now. Now, that’s “wait’ll next year”, not “shut down the circus forever, you’re doomed.”

Let’s look at that.

Early heartbreak in the House and Senate

In Washington, heartbreak came early in the season when the Senate Armed Services Committee has voted to nix the purchase of aviation biofuels, should they cost more than conventional fossil fuels, even at the small scale purchases the Navy that the Navy believe would be sufficient to scale-up an alternative fuels industry capable of providing fuels at parity cost with fossil fuels.

The Committee also voted to prevent the Navy from investing in biorefineries in order to assure production at scale, and at parity cost with renewables. It followed a similar vote in the House Armed Services Committee.

The Committee also, ironically, nixed a proposed amendment that would have freed the armed forces to buy alternative fuels made from, for example, coal – which would have cost less. The grounds? The impact in terms of carbon emissions – though it was carbon advantage, of course, that led to a lot of interest in advanced biofuels in the first place.

The general feeling around Washington is that the Senate’s action leaves the Navy dead in the water in terms of its proposed scale-up of advanced biofuels as an alternative to conventional fossil fuels. There is little hope that the Defense Appropriations bill will be defeated on the Senate floor, and a Presidential veto is only a remote possibility. So, time to think about alternatives.

Options – from conventional to out-of-the-box

Let’s look at some out-of-the-box and more conventional alternatives.

1. Alternative fuel specification. There’s nothing forbidden in the Congressional direction that forbids the Navy from establishing an alternative fuel spec that is low on particulates that cause radiative heating, or is low on carbon emissions, and invite bids on that fuel. It’s not entirely clear what would happen if the Navy were asking for bids on fuel, for which there is not an established conventional price.

2. Compared to what? The Air Force, for example, could look to utilize biofuels in its purchases of JTSP fuels – smaller volumes, but these are high flashpoint fuels that are used to fuel the U-2, and generally cost about three times as much as conventional JP-8 fuel – a small-size but higher price market that might be utilized to embark on some purchasing activity.

3. Meet a market price. The aviation biofuels industry could establish, via consortium or on a company-by-company basis – a commitment to providing some quantity of fuels at parity prices with conventional fossil fuels.

The devil will be in the details there. What’s the benchmark price, exactly – based on how long a contract, and so on. But the principle of selling some cuts of a barrel for a lower price, and others for higher prices, is well established in the fuels business. Gasoline is sold much cheaper than, say, kerosene – and the biofuels business may find itself selling a loss-leader in the mid-2010s to establish a market, get to scale, and benefit in the long-term from rising fossil fuel prices and falling biofuel prices.

4. Wait and see. First of all, what is in the 2013 budget, via Congressional amendment, can be taken out for 2014 via Congressional amendment. The Navy is not required to purchase fuels for testing and certification at parity prices – so it may just be a waiting year for the Navy, and a “get the vote out” year for bio-based industry to help ensure a friendlier Congress in 2012. For example, ensuring that Obama ally Tim Kaine reaches the US Senate to replace retiring Senator Jim Webb, in January 2013. With no other changes – that one vote alone could reverse the decision in the Armed Services Committee.

Wait’ll next year

In short, there are a wide variety of actions. Our tip? The industry will, like so much of the country, accept that 2013 is not their year in Washington, and wait and see how the national elections shake out for advanced biofuels, in the hope that next year brings some rookie phenoms to DC who have a healthier outlook on the Navy’s desire for a Green Strike Force.

So, it’s a rebuilding year – that starts with innovative thinking on pricing, on cooperation to achieve that pricing, and finding new friends in Washington, or sending new friends to Washington. A full agenda for a big rebuilding year.

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