Can the US Military Afford More Biofuels?

Last week the US House of Representatives passed the fiscal 2013 National Defense Authorization Act by a wide, bi-partisan margin. It included two controversial provisions relating to energy that will presumably be debated when the Senate Armed Services Committee takes up the bill this week.  Sections 313 and 314 would exempt the Department of Defense from a provision of the Energy Independence and Security Act of 2007 (EISA) barring the government from purchasing alternative fuels with higher emissions than conventional fossil fuels, while prohibiting the purchase of any alternative fuel that costs more than the conventional fuel it would replace, except for testing and certification purposes.  If enacted, the bill would require drastic revisions to the current alternative energy strategies of the US military branches. 

It would be easier to attribute these provisions to partisan maneuvering, if our economic and fiscal circumstances hadn't changed so dramatically subsequent to the passage of EISA in 2007.  Although I don't dismiss the influence of election-year politics in such matters, we are now in the third full year of a recovery so weak that many Americans still think we're in a recession, and we face deficits and a ticking debt bomb that forced a reluctant Congress to agree to deep spending cuts starting next January.  Nearly $500 billion of those cuts are targeted at military spending.  Moreover, our perspective on US energy security has been altered by the emergence of shale gas and so-called "tight oil", and by our recent shift from net importer to net exporter of petroleum products--though certainly not of crude oil.  While it remains desirable for the US military to diversify its energy sources, the value of that diversification has arguably fallen.  Meanwhile, the biofuels industry, despite tremendous growth and advances, has been unable thus far to compete with petroleum-based fuels without either large subsidies or strict mandates, even with a global price of oil that has remained consistently above $100 per barrel since January 2011. 

Last year I had a couple of opportunities to question Defense Department officials about their alternative energy strategies, as part of an Army/Air Force energy forum and a subsequent Air Force media briefing at the Pentagon.  Although I was impressed by the changing military culture concerning energy and the methodical way they were approaching the introduction of new fuels, I was concerned that at some point the services' procurement of higher-cost renewable fuels would conflict with their other priorities, including the need to replace equipment worn out in Iraq and Afghanistan and to field the next generation of aircraft and naval vessels.  What I thought I heard very clearly from the Air Force Deputy Assistant Secretary for energy was that his service was not going into the fuel-production business, and would only buy renewable fuels--other than for certification with their fleet--if they were competitive with conventional fuels. That approach seems very different than the one embodied in the Navy's "Great Green Fleet" initiative.

The rationale behind the military's adoption of alternative fuels rests on many complex issues, including the vulnerability of military supply chains and budgets to potential disruptions in oil supplies and price spikes, consistency with the government's imposition of renewable energy mandates on the private sector, and the desirability of reducing the environmental footprint of the military's global activities.  There's also the human dimension of personnel put at risk delivering fuel to front-line units, although it's not clear how biofuels would alleviate that risk unless they were produced in forward locations. In any case, however, all these concerns must be reconciled with a realistic response to budget constraints. That looks extremely challenging, and it shouldn't be divorced from deeper questions about the evolving drivers for biofuels or other alternative fuels for the US military.

Consider the question of supply disruptions, for example.  US oil production looks set to continue increasing and oil imports to keep falling, while we now enjoy a refining surplus that is supporting new product exports.  We also have a Strategic Petroleum Reserve that could replace up to half of our net crude oil imports for up to 5 months, or a smaller disruption for much longer.  As a result of these factors, it's become more difficult to envision a scenario in which an oil market event affected the military's access to fuels in a manner that the present renewable energy industry could alleviate.  And with the cost of most alternatives still above even today's elevated prices for oil and its products, the investment required to develop an alternative fuel industry capable of making a meaningful dent in the military's needs under such a scenario would be very substantial.  Should the military make that investment, should someone else, or should it be left to the market?  And that doesn't begin to address the issues related to the non-renewable alternative fuels that would be enabled by Section 313, including synthetic fuels derived from natural gas or coal, though these would still be subject to the restriction that they must be price-competitive with conventional fuels. 

I suspect that the House bill will not be the last word on this subject, though I also imagine that in the new world of "sequestered" budgets and the fiscal challenges that lie ahead, the US military may need to rethink what can be achieved in this area without sacrificing readiness and combat capabilities. It's also important to note that the 2013 Defense Authorization Act's provisions on alternative fuels shouldn't affect the services' efforts to integrate renewable electricity generation, which looks like a real boon for some forward-deployed applications.

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Fueling the Aerotropolis

Roger Cohen's column in Monday's New York Times sent my mind spinning with its portrayal of a global network of airport-based businesses and organizations that might have closer links to airports a country or continent away than with the traditional urban centers for which these facilities are often named. I'm embarrassed to admit that it was the first time I had run across the "Aerotropolis" concept, which has apparently been around since 2000. Its implications are thought-provoking, not least for their impact on energy and the environment.

The term aerotropolis was apparently coined by a professor at the University of North Carolina business school; it's also the title and subject of his new book. It evokes a retro-1920s science fiction vision of gleaming cities connected by flying cylinders, crossed with the gritty reality of the modern airport and its environs. I wasn't surprised to learn that a third of world trade-- though just 1% by weight--moves by air, but the idea of a hospital integrated into an airport in Hyderabad, India, or an entire city in South Korea growing up around the Incheon International Airport was new to me. The possibilities seem endless, though I can't think about them without also considering where the energy to facilitate the implied explosion of air travel and air freight will come from.

A few years ago, I would have said that air travel was even more closely linked to petroleum than are automobiles. That's not because alternative aviation fuels seemed impossible--quite the contrary--but because the aviation world has historically been understandably cautious and conservative about what goes into the engines that power aircraft. From a technical standpoint, jet turbines offer a great deal more fuel flexibility than the internal combustion engines under the hoods of most automobiles. However, while a fuel failure in your car is a major inconvenience, a fuel failure at 30,000 feet is catastrophic. In some respects the alacrity with which the aviation industry has begun to embrace alternative fuels is nearly as big a surprise as the shale gas revolution, and perhaps ultimately as transformative. Airlines and militaries have entered partnerships and set targets for integrating alternative jet fuel into their consumption, and supplies are gradually appearing.

Scale remains an issue. Kerosene-based jet fuel accounted for 7% of US petroleum consumption last year, down from nearly 8.5% a decade ago, as air carriers have transitioned to more efficient aircraft and higher load factors. That's still a big volume, though it turns out to be easier to make suitable kerosene substitutes from a variety of sources, including natural gas, coal and biomass, than to make comparable substitutes for gasoline. Nor does jet fuel produced from camelina seeds, algae, or the gasification and FT-synthesis of bulk biomass, natural gas or even animal fat entail the kind of performance penalties inherent in our primary gasoline alternative, ethanol. Delivering on this potential will require significant investment, but of a magnitude that seems much more achievable than what is required for many other renewable energy goals.

Another important aspect of scale concerns the logistics of gathering enough biomass to produce meaningful quantities of "biojet". The government of Ontario Province just awarded Rentech, Inc., a company with long expertise in gasification and fuel synthesis, a 1.3 million ton-per-year supply of forest waste and other biomass from Canada's Crown Forests, specifically for the production of renewable jet fuel. The proposed facility would produce around 22 million gallons per year of biojet, along with another 11 million gallons of non-jet products. That equates to roughly 1% of Canada's current jet fuel consumption. Canada might have enough forest biomass available to produce a sizable fraction of its jet fuel needs from such sources, but other countries don't, so it's fortunate that alternative jet fuel can be made through so many different pathways.

That's also fortunate for the aerotropolis concept, because without an incremental supply of non-petroleum jet fuel, meeting the energy needs inherent in this idea without dramatic increases in aviation's current approximately 3% share of global greenhouse gas emissions could become a major obstacle within just a few years. With sufficient supplies of renewable and gas-to-liquids jet fuel, the concept might even be able to withstand a peak in global oil output, even if the price of such alternatives seems likely to track that of oil-based jet fuel.

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Obama on Energy: Getting the Balance Right

Another energy crisis, another presidential speech? It must seem that way to many of us who came of age in the first set of energy crises in the 1970s, and the President acknowledged that history in his talk on energy at Georgetown University on Wednesday. Yet although it contained little in the way of new ideas or initiatives, along with a target that was remarkable mainly for the relative ease with which it might be met, it at least presented a perspective that balances the continuing importance of our current energy sources with the potential of our new ones. No more talk of "yesterday's energy."

I was under the weather this week, so this is at least a day later than it should be, but if nothing else was clear from Wednesday's speech it's that our energy challenges have persisted for so long, while our preferred solutions have shifted with the mood of the moment, that a day or a week changes nothing. However, a sense of urgency matters, as gasoline prices rise to levels we haven't seen since 2008. A president can't be seen to be behind the curve on this issue. Except for a few quibbles I'll come back to, Mr. Obama got matters mostly right, reminding his audience that we will remain dependent on oil for a long time, and that increasing domestic oil production and relying on stable neighbors are both crucial strategies for managing our vulnerability to imports from less dependable sources. That puts him squarely in the mainstream of serious American energy thinking for the last four decades.

The President's goal of reducing oil imports by one-third from their level of 11 million barrels per day in 2008 seemed appropriate for several reasons. First, because the basis of that goal is the right one: net imports of crude oil and petroleum products. It would do little for our energy security to reduce crude imports by constraining US refineries and then importing more refined products from abroad. Nor should one ignore the growing US exports of refined products arising from mismatches between US fuel regulations and refinery configurations and yields. More importantly, this is one of the first energy security goals I've seen that we stand a fair chance of achieving. The DOE's preliminary forecast for 2011-35 shows a 17% reduction in oil imports by 2025 in the reference, or base case. Last year's forecast for the high oil price case showed an even steeper reduction, meeting Mr. Obama's goal as early as 2021. Reaching the President's target shouldn't require Herculean efforts, provided we stay focused on the things with the greatest potential to deliver in that timeframe: increased domestic production, efficiency, and possibly next-generation biofuels. That leaves out electric vehicles, which are a longer-term proposition, along with wind, solar and other renewable electricity sources, which only stand to displace oil via EVs. (Remember, a million EVs replace less than 0.2% of our oil consumption.)

The President was right to highlight the potential contribution from biofuels while calling for reform in biofuel subsidies, a task that is long overdue. He cited two examples of how biofuels could help to reduce our oil imports. One related to the military's goal of obtaining half its domestic jet fuel needs from alternatives to petroleum, while the other promoted four "next-generation biorefineries", referring to facilities that produce fuel from non-food biomass. Unfortunately, he didn't mention cost as one of the key trade-offs involved. It's laudable for the military to seek to reduce its vulnerability to oil-supply disruptions, and it can provide a crucial early-adopter base for new technologies. However, to the extent that bio-based jet fuel is more expensive than conventional fuel, then either Air Force operating budgets must include cuts in other areas, such as missions and training, or we will be buying fewer new-gen aircraft to pay for it. And while subsidies can help next-gen biofuels reach commercial scale--I don't consider 20 million gallons per year (1,300 bbl/day) as meeting that definition--they can't guarantee they will be commercial. That will require mastery of one or more of the numerous technology paths now being pursued, more than a few of which have already disappointed. Technological mastery doesn't appear on command.

That's an important consideration, because as desirable as it is to produce large quantities of biofuel without setting up ruinous competition between food and fuel, it seems equally important not to build another industry that will be unprofitable without sustained large government subsidies for decades to come. Helping new technologies through the development stage and across the "commercialization chasm" makes sense, but the level of support now offered for cellulosic biofuel, at $1.01/gal., looks unaffordable once output finally start to take off. As it is, corn-based ethanol will collect roughly $6.3 billion this year from a subsidy less than half that generous, for its displacement of just under 7% of our gasoline consumption on an energy-equivalent basis.

That brings us to the only item in Wednesday's talk that we haven't been hearing about for years: the application of the nation's newly-tapped shale gas bonanza to address the problem of our oil imports. Aside from the jokey references to the expertise of his Secretary of Energy, whose Nobel Prize in Physics was for "development of methods to cool and trap atoms with laser light"--not so relevant to natural gas extraction--this was the speech's money line. Shale gas is the only new technology we have that can deliver huge amounts of energy to compete directly with oil in transportation using off-the-shelf-technology: no breakthroughs required. This would have sounded even more impressive and serious if the punch line had focused on knocking down the barriers to making that happen, including infrastructure requirements and vehicle conversion costs, rather than calling for a bill regulating the production of shale gas.

And unfortunately, that was symptomatic of the things that kept the President's talk from being a landmark in our decades-long battle with energy security. It's one thing to state the problem clearly and lay out the options; it's another to bring it all together in a realistic plan for action. The administration's new "Blueprint for a Secure Energy Future" merely incorporates natural gas into a grab bag of many of the same initiatives it has been pushing since Inauguration Day 2009. Nor does it help when the President repeats his old talking point about the US consuming 25% of the world's oil (it was actually 22% last year) but having only 2% of its oil reserves. Someone needs to pull him aside and explain that current US proved reserves are no more of a limitation on future US oil production than wind power's contribution of just 2% of US power generation last year caps its future potential at that level. Reserves support today's production; resources determine tomorrow's, and the US has many billions of barrels of untapped resources, many of which remain off limits under the administration's policies.

So call it two-thirds of a great speech on energy. Unfortunately, what we desperately need is that missing third that concentrates it into something that the American people--and American industry--can rally behind.

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