Solazyme, Dynamic Fuels score big US Navy aviation fuel contracts

December 6, 2011 |

The US Navy taps Solazyme, Dynamic Fuels for big aviation biofuels contracts.

But just a drop in the bucket, in the bigger picture? And, is cost coming down fast enough?

In Washington, U.S. Navy Secretary Ray Mabus and U.S. Department of Agriculture Secretary Tom Vilsack announced that the Defense Logistics Agency (DLA) signed a contract to purchase 450,000 gallons of advanced drop-in biofuel, the single largest purchase of biofuel in government history.

The winners, please: Solazyme and Dynamic Fuels

The Defense Department will purchase biofuel made from a blend of non-food waste (used cooking oil) from the Louisiana-based Dynamic Fuels, LLC, a joint-venture of Tyson Foods, Inc., and Syntroleum Corporation, and algae, produced by Solazyme.

The order

The contract involves supplying the Navy with 100,000 gallons of jet fuel (Hydro-treated Renewable JP- 5 or HRJ-5) and 350,000 gallons of marine distillate fuel (Hydro-Treated Renewable F-76 or HRD-76).  The fuel will be used as part of the Navy’s efforts to develop a “Green Strike Group” composed of vessels and ships powered by biofuel.

Obamafuel

As part of his energy security goals, outlined in March 2011 in the “Blueprint for a Secure Energy Future,” President Obama directed the Departments of Agriculture, Energy and Navy to work together to advance a domestic industry capable of producing “drop-in” biofuel substitutes for diesel and jet fuel.

Responding to that challenge, in August 2011, the Secretaries of Agriculture, Energy and Navy announced an intention to invest up to $510 million during the next three years in partnership with the private sector to produce advanced drop-in biofuel to power military and commercial transportation.

While that investment awaits Congressional action, this week’s announcement uses the existing authority – leveraging Defense Department procurement – to support this energy security goal.

The proverbial drop in the bucket?

Is this just a drop in a bucket, as some critics contend? Well, if you could fit all the world oil usage into a four-liter (one gallon) bucket, how many drops would this order represent in that proverbial bucket?

Er, well, not actually even one. About one-thirtieth of one drop in that bucket. More like a drop in a bathtub.

The glass half-empty version? To put this in the context of a car driving from, say, Los Angeles to New York, this would be the equivalent of powering the car on advanced biofuels for 5 feet. Or about one half-foot of a marathon.

The glass half-full version? In the context of a journey to Mars, it represents a journey of around 150 miles, or not incomparable to the flight duration of Alan Shepard’s historic suborbital “first American in space” flight in 1961.

In short: important progress, but not quite time to roll out the champagne.

The Green Strike Group

The fuel will be used in the U.S. Navy’s demonstration of the Green Strike Group in the summer of 2012 during the Rim of the Pacific Exercise (RIMPAC), the world’s largest international maritime exercise.

In preparation for this demonstration, the Navy recently completed testing of all aircraft, including F/A-18 and all six blue Angels and the V-22 Osprey, and has successfully tested the RCB-X (Riverine Command Boat), training patrol craft, Self Defense Test Ship, and conducted full-scale gas turbine engine testing.

(What’s the Green Strike Group all about? See our in-depth report, The Green Strike Group: The Force, the Fuels, the Skinny.)

The high price of energy freedom

DLA will pay half the price, it says, for the Green Strike Group biofuel than it paid for biofuel for testing in 2009.   Since the award has not yet been posted, we are left to do some guessing on price. To give the DLA’s characterization some color: In 2009, they paid $14/gallon for fuels delivered by Sustainable Oils, according to FedBizOpps.

The US Government appears undaunted by the high prices at this early stage. Secretary of Agriculture Tom Vilsack commented: “In March, the President challenged me, Secretary Mabus, and Secretary Steven Chu to work with the private sector to cultivate a competitively-priced—and domestically produced—drop-in biofuel industry that can power not just fighter jets, but also trucks and commercial airliners. This is not work we can afford to put off for another day.”

“The future for the Navy, and this country lies in energy security and controlling our own destiny. We are going to create jobs, out innovate and outbuild the rest of the world.”

One-tenth of one percent down…

Now, the US Navy is not, all by its ones, going to carry the US advanced biofuels business all the way to parity pricing, it does use more than 1.26 billion gallons of fuel each year,So, let’s put this purchase in context. The Navy has committed ultimately to a 50 percent advanced biofuels component in its fuels, and that means that today’s purchase represents about one-tenth of one percent of its expected purchasing by the end of the decade.

The military rationale

US Navy Secretary Ray Mabus said, “We are doing this for one reason. It makes us better war fighters. Our use of fossil fuels is a very real threat to US Navy’s ability to protect America and project our power overseas. This biofuel purchase is significant because it accelerates the development and demonstration of a homegrown fuel source that can reduce America’s, and our military’s, dependence on foreign oil.

“Just as the Navy went from sail to coal, coal to oil and pioneered nuclear in the 1950s, we are going to lead again by helping to establish a market for biofuels. The purchase is going to be used toward our plan for a Great Green Fleet – which is a historic reference to the Great White Fleet established by President Theodore Roosevelt to demonstrate the advanced readiness and capability of the US Navy a century ago.”

“It;s a major step for energy independence for US,and for the US Navy, to reduce our dependence on unstable sources of foreign energy, as well as preventing budget shocks that come from buying energy from volatile sources.

The USDA effort on advanced biofuels

In joining Mabus for the announcement, Secretary Vilsack said that the program “reflects a consistent message sent this year from Obama Administration this year in its commitment to biofuels.” Vilsack noted that  the USDA issued two loan guarantees for advanced biofuels in 2011, and expects to make more in 2012. He also noted the development of virtual research centers, work by the Agricultural Research Service into better feedstocks, adequate research into supply chain, He also highlighted the work of the forest service on bioenergy, the recently announced crop assistance program for camelina, and more than $118M in grants for biomass assistance.

A word on Solazyme and Dynamic Fuels

For both companies, its a big won. In Solazyme’s case, they are turning out to be the Secretariat of advanced aviation biofuels – they pull down wins on US Navy contracts on such a regular basis, you come to expect  that they lap the field.

For Dynamic Fuels, not only a big win, but far less expected. They are turning out to be the Seabiscuit of advanced biofuels, the underdog that always seems to come out on top in the end. Continually surprising people by actually getting a 75 million gallon facility completed, when other companies were unable to move off the drawing board. Landing this significant order for jet fuel.

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