Last month U.S. Army Energy Initiatives Task Force (AEITF) issued a draft request for proposals (Draft RFP) renewable energy contracts.
What’s on offer? Over the next decade, an impressive $7 billion. During the AEITF’s pre-solicitation phase, the Draft RFP is designed to gather information from potential bidders to assist the AEITF to develop a formal Request for Proposal (RFP) that it intends to issue later this year.
The United States Armed Forces, which currently fuels 77 percent of its machinery with petroleum-based fuel, has announced an aggressive goal, to be petroleum free by 2040. The Air Force intends to use biofuels for 50 percent of its domestic aviation needs by 2016.
A 2011 Pew Charitable Trusts report, "From Barracks to the Battlefield: Clean Energy Innovation and America's Armed Forces" reported that Department of Defense clean energy investments increased 300 percent between 2006 and 2009 - from $400 million to $1.2 billion - and are projected at $10 billion annually by 2030, adding that that by 2015, the Pentagon will be spending $2.25 billion each year to harness clean energy technologies for air, land and sea vehicles.
Driving the Pentagon’s green drive is Executive Order 13423, which mandates that the Department of Defense achieve a 30 percent reduction in non-tactical fleet fossil fuel use by 2020.
A second key piece of legislation driving the Pentagon’s mandate is the Renewable Fuel Standard, which Congress enacted in 2005 as part of the Energy Policy Act, amending it in the 2007 Energy Independence and Security Act. The amended standard mandated that by 2022 the consumption volume of the renewable fuels should consist of: 15 billion gallons of conventional biofuels, mainly corn-grain ethanol; 1 billion gallons of biomass-based diesel fuel; 4 billion gallons of advanced renewable biofuels, other than ethanol derived from cornstarch, that achieve a life-cycle greenhouse gas threshold of at least 50 percent; and 16 billion gallons of cellulosic biofuels produced from wood, grasses, or non-edible plant parts, such as corn stalks and wheat straw.
The draft AEITF RFP marks the beginning of the AEITF's plan to develop a large, coordinated procurement process for renewables. The AEITF's new program was developed in response to a National Defense Authorization Act that requires Department of Defense facilities to derive at least 25 percent of the electricity they consume from renewable energy by 2025, and a Department of Defense "Net Zero Energy" initiative, which challenges DOD installations to produce more energy than they consume, with emphasis on the use of renewable energy and alternative fuels.
So, what is holding back the production of commercially viable amounts of biofuels? Key barriers to achieving the renewable fuel mandate are the high cost of producing biofuels compared with petroleum-based fuels uncertainties in future biofuel markets, a lack of subsidies and crop insurance, along with a shortage of significant investment.
These factors have combined to produce a “perfect storm” up to now for biofuel producers, resulting in “designer fuels” of high cost for Pentagon testing.
To give but one example.
In October 2010 the Navy purchased 20,055 gallons of algae biofuel at an eye-watering cost of $424/gallon. Nevertheless, the contract was one of the biggest U.S. purchases of a non-corn ethanol biofuel up to that time. A year later, the Navy reportedly spent $12 million for 450,000 gallons of biofuel. The bad news was that the biofuel’s cost worked out to around $26.67 per gallon, roughly six times the current cost of traditional gas.
The good news? In a single year, the cost per gallon of biofuel plummeted by a factor of 15.9.
Furthermore, $7 billion in funding is likely to prove a significant game changer in the field.
So, where does this leave the investor? No single biofuel source, from jatropha, algae or camelina has yet to emerge as the clear winner, though the last seems most likely to emerge as the frontrunner. Accordingly, investors must do their homework and seek out potential winners.
For those wishing to broaden their portfolios, two websites will prove of immense value.
The first is www.usa.gov, the federal government’s website for the U.S. government, where one can come to grips with federal legislation and Pentagon initiatives.
The second is Jim Lane’s http://www.biofuelsdigest.com/, the self-proclaimed “world’s most widely read biofuels daily.” While the site has an element of tub-thumping boosterism, it nevertheless remains an immensely valuable source of information about the biofuel market and the major players.
It is important to remember how different the biofuels picture is now from even a year ago. The Pentagon, the largest U.S. consumer of fuel, is now under pressure to meet the various federal mandates, and careers and promotions hang in the balance.
CCRES special thanks to
John C.K. Daly ,
U.S.-Central Asia Biofuels Ltd