Bloomberg News

Fat Replaces Oil for F-16s as Biofuels Head to War: Commodities

October 18, 2011

Oct. 18 (Bloomberg) -- Biofuels face their biggest test yet -- whether they can power fighter jets and tanks in battle at prices the world’s best-funded military can afford.

The U.S. Air Force is set to certify all of its 40-plus aircraft models to burn fuels derived from waste oils and plants by 2013, three years ahead of target, Air Force Deputy Assistant Secretary Kevin Geiss said. The Army wants 25 percent of its energy from renewable sources by 2025. The Navy and Marines aim to shift half their energy use from oil, gas and coal by 2020.

“Reliance on fossil fuels is simply too much of a vulnerability for a military organization to have,” U.S. Navy Secretary Raymond Mabus said in an interview. “We’ve been certifying aircraft on biofuels. We’re doing solar and wind, geothermal, hydrothermal, wave, things like that on our bases.”

Yet the U.S., stung by an oil embargo during the 1973 Arab- Israeli war, won’t deploy biofuels beyond testing until prices tumble. The Air Force wants them “cost-competitive” with traditional fuel, for which it pays $8 billion a year. Producers see it the other way around, saying they need big buyers before building refineries to help slash costs, according to Honeywell International Inc., which developed a process to make biofuels.

“The first few widgets are always more expensive than the billionth,” said James Rekoske, vice president of renewable energy at Honeywell’s UOP unit. “That’s where we’re at.” Honeywell expects to have delivered about 800,000 gallons of biojet fuel from 2009 through early 2012.

Rekoske said prices need to dive to $3 to $4 a gallon from more than $10 now. Refineries, costing about $300 million each, are “mission critical” and a giant customer like the U.S. government is necessary to carry production to the next level.

Convincing Bankers

“You can’t take a 10-year contract from an American airline to the bank and get the financing that you need,” Rekoske said. “You can if you have a 10-year contract from the U.S. Navy.”

The military’s drive to cut dependence on oil, coal and gas goes beyond biofuels. It’s developing wind and solar farms to power U.S. bases and expanding the use of renewables into combat zones such as Afghanistan, where a study last year showed one Marine is killed or wounded for every 50 fuel and water convoys.

Under a 2005 law, federal government facilities must source at least 5 percent of their electricity from renewable sources in 2010-2012, and at least 7.5 percent afterward.

President Barack Obama on Aug. 16 announced the Navy and Departments of Agriculture and Energy would each plow $170 million over three years into the commercial development of biofuels, with the aim of generating at least as much in private investment. The Navy aims to ramp up its biofuels use to 3 million gallons in 2016 from 900,000 gallons next year.

‘Create a Market’

“The U.S. military is by the far the largest user in the country, so we can create a market for it,” Mabus said. The Navy is the “guaranteed customer” needed to get the industry “across the so-called valley of death from a good idea to commercial scale,” he said.

The armed forces say they’ve been successful testing fuels produced from sources as diverse as animal fat, frying oils and camelina, an oil-bearing plant that’s relatively drought- and freeze-resistant.

Major Aaron Jelinek, the lead solo pilot in the Air Force’s Thunderbirds flight demonstration team, performed aerobatics including loops, rolls and formation flying at Andrews Air Force Base in Maryland on May 20-21. It was the F-16 fighter jet’s first flight using a fuel made from the camelina plant.

“I could tell no difference between flying that day when I had biofuel in my tank versus flying the day before or the day after,” Jelinek said in an interview. “It was a normal demonstration, one that we perform at 70 shows during the year and in many more practices than that, doing the exact same maneuvers and the exact same show sequence as any other day.”

Green Hornet

The military wants its vehicles, except for the ships that are nuclear-powered, to be able to use new combustibles, cutting fossil fuel imports from politically unstable nations.

“We do buy a lot now from countries that we sure wouldn’t let build our aircraft or ships, but we give them a say in whether they sail or fly because we buy our fuels from them,” said Mabus.

The Navy has flown its Green Hornet fighter aircraft at 1.7 times the speed of sound using a biofuel blend and aims to have certified all of its aircraft for the fuels by year-end.

While the tests were done in the U.S., once certified, the forces will be able to operate aircraft on biofuels anywhere, including war zones such as Iraq, Afghanistan and Libya.

“If the fuel is available, whether it’s in Afghanistan or it’s in Kentucky, we want to be able to use it,” said Geiss.

The Navy’s fuel bill rose $1 billion this year because of the conflict that cut off Libyan output, said Mabus.

$8 Billion in Fuel

Volatile prices for oil can hit budgets. At the Navy, which spends about $4 billion a year on fuels, the energy bill rises $31 million for every $1 gain in the price of a barrel of oil, Mabus said. The Air Force has twice the budget.

“When you’ve got a bill of $8 billion, you’re going to look for opportunities to diversify your options,” said Geiss.

The Army aims to approve biofuels for its aircraft and ground vehicles, including Humvees, Abrams battle tanks and Apache helicopters by the end of 2013, a spokesman, Dave Foster, said in an e-mail.

The Air Force certified biofuels for use in F-15s, F-16s and C-17 cargo planes and they’re set for approval for the whole fleet by 2013, said Jeff Braun, director of the Alternative Fuels Certification Office. The force has a 2016 deadline for being able to get half its needs from 50/50 alternative fuel blends, equivalent to 400 million gallons of biofuels or other combustibles, such as synthetic liquid fuels from coal and gas.

Boeing, Lockheed Martin

“We can use an almost unlimited number of feedstocks to produce these fuels,” said Braun. “From a performance stand- point you can’t tell the difference whether you’re burning a camelina blend, a tallow blend, or another fuel that’s made up of a bunch of waste greases -- fry grease or seasoning grease.”

The Air Force has worked with aircraft makers Boeing Co. and Lockheed Martin Corp. and engine-makers Rolls Royce Holdings Plc, General Electric Co. and United Technologies Corp.’s Pratt & Whitney in testing the biofuels, said Braun. The fuels used were made by Honeywell’s UOP, Sustainable Oils Inc. and Dynamic Fuels LLC, a venture by Springdale, Arkansas-based Tyson Foods Inc. and Syntroleum Corp. of Tulsa, Oklahoma.

The results of the military tests have been shared with commercial airlines, many of which have carried out their own trials -- starting with Air New Zealand Ltd. in December 2008, and Continental Airlines -- now part of United Continental Holdings Inc. -- and Japan Airlines Co. the following month, according to Honeywell.

Lufthansa Precedent

The data from military and commercial airlines helped ASTM International, formerly the American Society for Testing & Materials, in July approve the fuels for use in commercial planes, paving the way for Germany’s Deutsche Lufthansa AG, Europe’s second-largest airline, to become the first carrier in the world to offer regular scheduled flights running on biofuel.

“Lufthansa wouldn’t be flying today if we had not done our work to enable development of that ASTM standard,” Geiss said.

The next hurdle is for the fuels to be produced commercially at prices the military would accept.

Honeywell made 800,000 gallons of fuel for the Air Force’s tests, though it doesn’t aim to produce the fuels commercially. It plans to license the technique to refiners such as Valero Energy Corp. and Darling International Inc., which are building a $368 million plant in Louisiana, Rekoske said. While it’ll be licensed to make bio-jet fuel, Bill Day, a Valero spokesman, said the focus will be on making ground transportation fuels.

The renewables effort extends to electricity. To make the Marines more “combat effective,” they’re pushing the use of solar power, energy-efficient lighting and batteries, said Colonel Bob Charette, director of the U.S. Marine Corps Expeditionary Energy Office.

Saving Marines

Renewable technologies including energy-efficient lighting, solar blankets and larger solar systems have been distributed to about half the Marines in Afghanistan. A patrol of as many as 20 Marines this year operated for three weeks using small solar blankets to re-charge their batteries, according to Charette.

“When you don’t need as much re-supply for fuel, water, and batteries, you can stay out longer, do the mission at greater distances and you don’t have your Marines at risk,” he said. In Sangin district, there are two patrol bases operating on nothing but solar energy and battery packs, he said.

The Army is seeking a quarter of its domestic electricity from renewables by 2025, up from 2 percent now, said Jonathan Powers, director of outreach for the Energy Initiatives Task Force. The goal is equivalent to an extra 2.1 million megawatt- hours of renewable energy annually, and will require $7.1 billion of private investment, Powers said.

“The benefit for the private sector is we’re committing to long-term power-purchase agreements for cost-effective large- scale renewable energy projects on our bases,” Powers said. “We’re providing land and demand.”

--Editors: Todd White, Steve Geimann

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net; Louise Downing in London at Ldowning4@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.


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