Why the Feds Are Investing $510M in Advanced Biofuels

The U.S. government will spend a much as $510 million over the next three years to speed development of advanced biofuels to power the military -- a politically savvy investment aimed at solving three over-sized problems: energy security, job creation and the commercial failure of cellulosic ethanol. It makes perfect sense to achieve this through the military: The Department of Defense is not only the largest consumer of energy in the U.S., it's rarely denied funding. And it's made the use of alternative fuels a strategic priority.

Numerous alternative programs are already underway within the military. The U.S. Army, which plans to get 25 percent of its power from renewable sources by 2025, just announced last week an Energy Initiative Office to help manage large-scale alternative energy projects. The Navy is particularly ambitious and aims to replace one half of its conventional petroleum-based fuel use with domestically sustainable fuel alternatives. It even has Solazyme supplying it with an algae-based shipboard fuel.

This latest initiative, which will be funded by the Departments of Agriculture, Energy and Navy, is part of President Obama's broader goal to reduce oil imports by one-third by 2025. Under the agreement, the three agencies will partner with private industry to build commercial-scale bio refineries capable of making jet fuel and diesel from non-food sources, which should help it avoid the whole corn-based ethanol food versus fuel debate. Each agency will contribute $170 million to the program. Much of the money will come from existing "repurposed" funds, the Hill reported.

Why it makes sense
Militarily, the initiative makes perfect sense. When the military operates in foreign countries, it's often forced to pay a premium for energy. But this agreement is notable because it also underscores the federal government's urgency to create a commercial market for cellulosic ethanol.

The EPA has repeatedly scaled back the cellulosic ethanol mandate because the industry is falling short. By how much, you ask? The mandate calls for 350 million total gallons of cellulosic ethanol to be produced by the end of 2011. As R-Squared blogger Robert Rapier notes, zero gallons of qualifying cellulosic ethanol has been produced. Zero.

This "shortfall" has led the government to make some poor decisions and take matters into its own hands in hopes of pushing the industry forward. In this case, it's not a bad deal. And it's far more promising than what the corn ethanol producers have proposed. Producers have offered to step in and supply the missing cellulosic ethanol, a move that would shackle us to corn ethanol for good. If the government agreed, which it hopefully won't, the corn current corn ethanol mandate would rise 140 percent to as much as 36 billion gallons by 2022.

Photo from the U.S. Navy
Related:

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• Why Algae-Fuel Firms are Now Targeting the U.S. Navy, Drugs and Food