(Bloomberg) -- Biofuels face their biggest test yet -- whether they can power fighter jets and tanks in battle at prices the world's best-funded military can afford.
The U.S. Air Force is set to certify all of its 40-plus aircraft models to burn fuels derived from waste oils and plants by 2013, three years ahead of target, Air Force Deputy Assistant Secretary Kevin Geiss said. The Army wants 25 percent of its energy from renewable sources by 2025. The Navy and Marines aim to shift half their energy use from oil, gas and coal by 2020.
"Reliance on fossil fuels is simply too much of a vulnerability for a military organization to have," U.S. Navy Secretary Raymond Mabus said in an interview.
Yet the U.S., stung by an oil embargo during the 1973 Arab- Israeli war, won't deploy biofuels beyond testing until prices tumble. The Air Force wants them "cost-competitive" with traditional fuel, for which it pays $8 billion a year. Producers see it the other way around, saying they need big buyers before building refineries to help slash costs, according to Honeywell International Inc., which developed a process to make biofuels.
"The first few widgets are always more expensive than the billionth," said James Rekoske, vice president of renewable energy at Honeywell's UOP unit. "That's where we're at." Honeywell expects to have delivered about 800,000 gallons of biojet fuel from 2009 through early 2012.
Rekoske said prices need to dive to $3 to $4 a gallon from more than $10 now. Refineries, costing about $300 million each, are "mission critical" and a giant customer like the U.S. government is necessary to carry production to the next level.
"You can't take a 10-year contract from an American airline to the bank and get the financing that you need," Rekoske said. "You can if you have a 10-year contract from the U.S. Navy."
The military's drive to cut dependence on oil, coal and gas goes beyond biofuels. It's developing wind and solar farms to power U.S. bases and expanding the use of renewables into combat zones such as Afghanistan, where a study last year showed one Marine is killed or wounded for every 50 fuel and water convoys.
Under a 2005 law, federal government facilities must source at least 5 percent of their electricity from renewable sources in 2010-2012, and at least 7.5 percent afterward.
President Barack Obama on Aug. 16 announced the Navy and Departments of Agriculture and Energy would each plow $170 million over three years into the commercial development of biofuels, with the aim of generating at least as much in private investment. The Navy aims to ramp up its biofuels use to 3 million gallons in 2016 from 900,000 gallons next year.
'Create a Market'
"The U.S. military is by the far the largest user in the country, so we can create a market for it," Mabus said. The Navy is the "guaranteed customer" needed to get the industry "across the so-called valley of death from a good idea to commercial scale," he said.
The armed forces say they've been successful testing fuels produced from sources as diverse as animal fat, frying oils and camelina, an oil-bearing plant that's relatively drought- and freeze-resistant.
Major Aaron Jelinek, the lead solo pilot in the Air Force's Thunderbirds flight demonstration team, performed aerobatics including loops, rolls and formation flying at Andrews Air Force Base in Maryland on May 20-21. It was the F-16 fighter jet's first flight using a fuel made from the camelina plant.
"I could tell no difference between flying that day when I had biofuel in my tank versus flying the day before or the day after," Jelinek said in an interview.
The military wants its vehicles, except for the ships that are nuclear-powered, to be able to use new combustibles, cutting fossil fuel imports from politically unstable nations.
"We do buy a lot now from countries that we sure wouldn't let build our aircraft or ships, but we give them a say in whether they sail or fly because we buy our fuels from them," said Mabus.
The Navy has flown its Green Hornet fighter aircraft at 1.7 times the speed of sound using a biofuel blend and aims to have certified all of its aircraft for the fuels by year-end.
While the tests were done in the U.S., once certified, the forces will be able to operate aircraft on biofuels anywhere, including war zones such as Iraq, Afghanistan and Libya.
"If the fuel is available, whether it's in Afghanistan or it's in Kentucky, we want to be able to use it," said Geiss.
The Navy's fuel bill rose $1 billion this year because of the conflict that cut off Libyan output, said Mabus.