DOD Steps Up Innovation in Installation Energy, Recognizes Limits in Biofuels

It’s worth noting a pair of recent developments on the Defense Department energy front. One is a useful reminder of what DOD can achieve now with the proper support, and a cause for optimism; the other, more pessimistic, illustrates the pressing need for accelerated innovation in the alternative fuels industry more broadly if DOD’s strategic energy needs are to be met.

First, the Environmental Security Technology Certification Program (ESTCP), which runs the Installation Energy Test Bed Initiative for the Office of the Deputy Under Secretary of Defense for Installations and Environment, has announced27 award recipients under its latest funding round. The initiative was originally established in the American Recovery and Reinvestment Act of 2009 to serve as an evaluator of emerging energy solutions: the program tests technologies in operating environments, assesses their costs and benefits, and facilitates scale-up of those that are most promising.

As we explained in a report earlier this year, DOD sees energy as a strategic vulnerability, and recognizes installation energy efficiency and civilian grid independence as substantial opportunities. This thinking underlies the varied efficiency targets previously mandated by legislation, executive order, and internal departmental goals (our reportgets into the specifics). The Department has an enormous physical footprint, with over 500 global installations under management, and spends around $4 billion every year to supply electricity and other forms of energy to them. And in many places they must rely on a civilian grid that’s vulnerable to cyberattack or susceptible to outages.

Pursuing activities like the Installation Energy Test Bed Initiative helps unearth tools and technologies that can begin to remedy this situation, ensuring better control and efficiency. And it’s also good news for the broader industry, as DOD represents an enormous potential buyer for those technologies that work. By providing a large but stable market, DOD can help drive cost reductions as it serves its own needs, which in turn facilitates product transition into the civilian commercial market for these technologies – much as it has done in computing and other industries.

The awardees cover a range of energy technology areas, from energy monitoring, demand response, and building controls to solar cogeneration and advanced energy storage. The full list is here (and also check out ESTCP’s upcoming symposiumin DC next week).

In the other development, a report released earlier this month by the Office of the Assistant Secretary of Defense for Operational Energy Plans and Programs and the Defense Logistics Agency released a report (PDF) critically assessed the prospects and challenges surrounding the long-term transition to alternative fuels. The report was mandated via the FY2010 National Defense Authorization Act, and throws some cold water on the likelihood that DOD will hit its aggressive drop-in renewable fuel target of 745 million gallons by 2020, regardless of continuing successful test runsin warships and elsewhere. The bulk of this target would consist of jet fuel, the military’s primary operational fuel, but which is not included in the national Renewable Fuel Standard established in the Energy Independence and Security Act of 2007.

The report identifies two fundamental challenges: quantity and cost based on current market trends and projections. Quoting the report’s summary of these challenges:

1. Ensuring a sufficient supply of drop-in renewable fuel, particularly jet fuel. The aggregate supply of drop-in renewable (jet and diesel) fuel may not meet both DOD and commercial demand. Given the Services’ goals and projected supply, DOD would have to capture more than 40 percent of the renewable and cellulosic diesel and jet markets in 2020. The Services’ 2020 goals for renewable jet fuel alone far exceed even the high-end projected domestic supply.

 

2. Providing drop-in renewable fuel at an acceptable cost. Drop-in renewable fuels are expected to cost more than their petroleum counterparts: the estimated price premium will be between $1.43 and $5.24 per gallon in 2015. Given the Services’ goals, mid-range estimates suggest that DOD’s drop-in renewable fuel use would represent an additional annual fuel cost of $865 million by 2015 and $2.2 billion by 2020, which represents a 10-15 percent increase over just conventional petroleum fuels.

The report states further that some of the more promising advanced fuel sources, including third-generation biofuels like algae, are unlikely to make much of a contribution by 2020.

These conclusions lay bare the fact that massive innovation is needed in the biofuels industry if the clean energy transition is to be achieved. Setting targets and aspiring to boost consumption are well and good in theory, but without rapid cost declines and technological advances in alternative fuels technology, the services (and the broader economy) are going to have a hard time doing so, let alone doing so economically. This major conclusion matches the findings of a recent National Research Council report on the biofuels industry, the summary of which is also worth reading.