The Air Force along with the Army, Navy and Marines have been increasingly interested in the use of plant fuel and waste oils to power their fuel hungry operations.  The continued instability of the Middle East has accelerated the concern that skyrocketing oil prices is a major security concern.  Hence the need to begin to look at alternatives such as oil waste and plant derived fuel.  A variety of alternative could be used. 

“We can use an almost unlimited number of feedstocks to produce these fuels.  From a performance stand- point you can’t tell the difference whether you’re burning a camelina blend, a tallow blend, or another fuel that’s made up of a bunch of waste greases — fry grease or seasoning grease.”

In an article over at BusinessWeek this morning, they indicate the Air Force is set to certify more than 40 aircraft models for alternative fuels by 2013 which is three years ahead of schedule.  Back in February, the C-17 cargo plane was approved for a 50/50 biofuel/jet fuel mix.  In May, an F-16 fighter jet made its first flight using a fuel made from the camelina plant.

“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. “We’ve been certifying aircraft on biofuels. We’re doing solar and wind, geothermal, hydrothermal, wave, things like that on our bases.”

It should be noted however that the Air Force will not move beyond a testing phase until biofuels are cost competitive with oil which means a more than 50% drop of the current biofuel cost of about $10/gallon.  Producers say they need big customers like the military in order to ramp production, increase economies of scale which will lead to a plunge in biofuel prices.  James Rekoske, VP of Renewable Energy at Honeywell said you can’t get financing to build a refinery on a 10 year commitment from a US airline, but you can on a commitment from the US military.  It appears those commitments by the military will happen sooner rather than later. 

Here’s a rundown of each military branch:

Air Force:  certified biofuels for use in F-15s, F-16s and C-17 cargo planes and set for approval for the whole fleet by 2013.  Has goal of getting half its fuel from alternative sources within 5 years.  Spends $8 billion/yr on fuel so each dollar rise in barrel of crude contributes to $64 million/yr increase.

Navy: has flown the Green Hornet with biofuels and aims to have all aircraft certified by the end of the year.  Spends $4 billion/yr in fuel with each $1 rise contributing to $32 million a year in additional cost. 

Army: goal to approve biofuels use for aircraft and ground vehicles including Humvee, Abrams tanks and Apache helicopters by end of 2013. 

Just as the military helped pave the way for what the internet is today, the military may play a huge role in kick starting the biofuel industry.  The research and testing done by the military is shared with commercial airlines and is a big reason why Europe’s 2nd largest airline Deutsche Lufthansa is the first carrier in the world to offer regular flights running on biofuel.

Companies to put on your investing radar in this space:

Syntroleum (SYNM): Their Dynamic Fuels LLC partnership with Tyson Foods (TSN) is providing biofuel to KLM Royal Dutch Airlines

Rentech (RTK): Rentech’s Synthetic Jet Fuel Powers 1st US Commercial Flight On Certified Alternative Fuels

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Valero (VLO): obviously biofuels would make a very small part of their business

Darling Int’l (DAR): Honeywell licensing technology to Darling

Have additional ideas or comments?  I’d love to hear them below!