Though the bulk of the DOE’s share of funds have yet to materialize the Navy has established a two-track investment program in building capacity. In May and June 2013, the DoD announced that it would award four contracts totaling $20.1 million to Emerald Biofuels, Natures BioReserve, Fulcrum Biofuels, and Red Rock Biofuels forPhase 1 of the DPA Title III Avanced Drop-in Biofuels Production Project, which includes front end engineering and designing, permitting, and development of detailed business cases.
[Note to newer readers: DOE invested the first $5 million that got the program office underway]
Under the grants, the companies will develop plans for up to 170 million gallons of total capacity between the four biorefineries that will produce drop-in biofuels at a cost of less than $4 per gallon. The biorefineries are expected to supply aviation and marine diesel fuel. The grants will be matched by $22.6 million in investments by the companies, which have proposed making biofuels primarily from fats, oils, and greases as well as municipal solid waste and woody biomass..
A second phase, which would be funded out of FY 2013 and later year funds, would award additional contracts for construction and commissioning of one or more biorefineries capable of providing the US military with sufficient sub-$4 renewable fuels to meet its Great Green Fleet and alternative energy goals.
USDA’s Price Support
In an innovative program, the USDA will make available up to $161 million in Commodity Credit Corporation (CCC) funds — in support for the Navy’s fuel program. The USDA’s support was originally announced by the Administration in 2012. The CCC is a wholly-owned government corporation created in 1933 to “stabilize, support, and protect farm income and prices”.
Under the USDA component of the program, for fuel solicitations in coming years the Navy will be able to access the CCC funds to buy down the cost of the biofuels component of any fuel purchase (using CCC-qualified, domestic US feedstocks), that is above the current price of fuel paid by the Navy.
For example, if the DLA receives a bid for 50 million gallons of military spec (JP-5) jet fuel with a 20 percent biofuels component, in a qualifying year and using CCC-qualified feedstocks, that is 10 cents per gallon above the price that the Navy pays for conventional fuels, then the CCC funds can be “tapped” by the Navy to make up the difference of $5 million in the cost difference between a conventional fuel buy and the green fuels buy.
U.S. Navy To Pay the “Going Rate” for Conventional Fuels
In this way, the Navy is assured of paying only the going rate for conventional fuels as it makes its transition to a more energy-secure, diversified fuel base.
Having established an assurance of supply with its DPA program, the Navy has established this program to make sure it can obtain fuels from a much wider set of suppliers — ensuring that it has the best chance of eliminating the delta between the cost of conventional fuels and military-spec biofuels as quickly as possible.
In another example, if the DLA receives two bids — both at the same price, but one containing a 30% biofuels blend and one containing a 10% blend, the higher biofuels blend will be selected.
“We don’t want to produce an artificial cap on our purchasing [by specifying blend percentages]. Rather, we want to unleash market forces.”
The Navy’s History
The Navy has a long tradition of conversion of its energy sources — from sail to coal, coal to oil, and the introduction of its nuclear program.
“In every case, it was never done all at one time,” said McGinn. “If you look at photographs of our ships in the 1800s, you’ll find many cases of ships carrying both sails and steam, together. The original hybrid, really. And in every case it was a matter of replacing one ship at a time, and the transition was gradual. We had some diesel-powered submarines for some time after the first nuclear submarine was delivered, and for some time we had a mix of carriers after the first nuclear carrier (the USS Enterprise) was delivered.
The first deliveries under the Farm to Fleet program are 330 million gallons (with a minimum biofuels component of 33 million gallons) scheduled for the Inland/East/Gulf Coast fuel procurement region — which includes the Eastern US as well as Guantanamo Bay. These contracts are expected to be issued as of April 2015.
The second deliveries under the program are 370 million gallons (with a minimum biofuels component of 37 million gallons) scheduled for the Rocky Mountain / West Coast region. These contracts are expected to be issued as of June 2015.
DLA Energy is expected to have two solicitations in 2014, in spring and summer.
US Navy’s Industry Day
To provide more details about the program and network with prospective suppliers, the Navy will hold an Industry Day in Washington DC on January 30th, scheduled to follow the annual meeting (Jan 28-29) of CAAFI (the Commercial Aviation Alternative Fuel Initiative).
The Navy’s Great Green Fleet
In 2016, the Navy will deploy its Great Green Fleet — these ships will employ either a minimum of three Energy Conservation Measures (ECMNs) on board, or will utilize biofuels blends. The specific ship designations — and whether they will operate jointly on an ongoing basis or will be assigned on a mission-by-mission basis will be determined closer to 2016 deployment date by the Navy. Operations could include, for example, a group operating at the PACRIM exercises, or assigned to duty in the Mediterranean, or a group operating in the Caribbean on anti-drug patrols.