U.S. Navy Secretary Ray Mabus has been strongly criticized for authorizing investments in biofuels, with as much as $32.2 million spent last year on research, development, and deployment in 2011, according to the Energy Innovation Tracker. Opponents are largely missing the point: investments in advanced biofuels increase the Navy’s capabilities and could potentially reduce war fighting costs.
In particular, much derision has been directed at the $12 million procurement of 450,000 gallons of algae (roughly $26.67/gallon) and used cooking oil late last year for use in an advanced biofuel blend. After the algae and cooking oil is mixed with conventional petroleum fuel, the resulting blend will be utilized in an upcoming military exercise at a cost of around $15 per gallon. Critics say that makes it significantly more expensive than regular fuel, which typically costs a few dollars per gallon. As ITIF’s Lean, Mean, and Clean report on energy innovation at the Department of Defense describes, however, the “fully burdened cost of fuel” – accounting for transportation, delivery, security, and infrastructure and hardware maintenance – is as much as ten times higher than its purchase price. Nevertheless, while the cost of the advanced biofuel blend might raise concerns in times of budget austerity, the critique largely misses that investing in advanced biofuels better equips the Navy and increases capabilities, always its top priority.
A U.S. Navy that is reliant on petroleum for fuel is one that is susceptible to oil price fluctuations. As Secretary Mabus points out, every $1 increase in oil prices per barrel results in the Navy paying an additional $31 million in fuel costs under current consumption rates. In short, conventional energy consumption is a strategic vulnerability for the United States and by reducing dependence on unstable sources of foreign energy, biofuel can help the Navy be a more effective war fighter.
The Navy is also following a long tradition of innovating to gain tactical advantage. After all, throughout its history the Navy has led one revolution after another in the propulsion of its ships, moving from sail wind power to coal, from coal to oil, and from oil to nuclear (in the case of carriers and submarines). By acting as a significant buyer of products, the Navy – and the U.S. military as a whole – can have a positive impact on the development of new energy technology. The $26.67 for a gallon of biofuel actually represents a dramatic short-term drop in price from October 2010, when the Navy bought 20,055 gallons of algae biofuel at $424 per gallon. That drop has been attributed to “continued research and a growing commercial market for biofuel.” The fact is that having a large and consistent buyer of innovative biofuels in the form of the Navy will continue to significantly accelerate cost-reductions and performance improvements by providing much needed back-end innovation ecosystem support.
Ultimately, the Navy’s investments in biofuel RD&D are both a metaphorical drop in the bucket, as a proportion of total expenditures, as well as a literal one, when considering the 450,000 gallons of biofuel against the backdrop of the almost 1.3 billion gallons of fuel used by the service every year. As small as the Navy’s investments might be, however, they have the potential to make a big future impact.