BASIC Associates: Is the US Defense Department Leading the Biofuel Bandwagon?

Tuesday, October 26, 2010

Is the US Defense Department Leading the Biofuel Bandwagon?

By Robin J. Johnson, Ph.D.

The US Department of Defense's focus on renewable fuels represents a huge opportunity for companies in the biofuels sector. (In 2008, it was reported that the US military bought 130 million barrels of petroleum oil per year.) In Norfolk, Virginia, the US Navy has begun testing an experimental Riverine Command Boat, which will run on a fuel blend containing 50% algae-based renewable diesel fuel and 50% conventional Navy distillate fuel, NATO F-76. The renewable diesel is provided by algae producer, Solazyme, in partnership with Honeywell subsidiary, UOP.

Contrary to some reports, the algae biofuel used in the testing is not biodiesel, but a drop-in fuel made by hydroprocessing of plant oils. The hydroprocessing technology developed by UOP is similar to processes used in conventional oil refineries. By adjusting catalysts and reaction conditions, the process can produce mid-distillate fuels as well as jet fuels. In 2009, Air New Zealand, Continental Airlines, Japan Airlines and KLM Royal Dutch Airlines all successfully tested UOP's aviation biofuel, Bio-SPK (bio-synthetic paraffinic kerosene). In April of this year, the Navy tested renewable jet fuel in an F/A-18 Super Hornet aircraft.

Hydroprocessed biofuel has several advantages over conventional biodiesel fuel. Biodiesel is made up of esters of fatty acids and a small alcohol, most often methanol. It is a suitable replacement for diesel fuel, but does have a tendency to gel at cold temperatures and can also undergo oxidation. The extent of the problems caused by these drawbacks is determined to a large extent by the type of oil used in the processing. Oils with long, saturated fatty acids are more susceptible to gelling, but fairly resistant to oxidation. The opposite is true of oils containing shorter, unsaturated fatty acids. The molecules that make up hydroprocessed biofuels are similar to those found in petroleum-based fuels, making the biofuels more fully compatible with existing infrastructure. A main drawback with hydroprocessed fuels is that it may not be easy or cost-effective to generate the hydrogen required from renewable sources.

Secretary of the Navy Ray Mabus has ordered the US Navy sea service to use alternative energy sources (e.g., biofuels and nuclear power) for half of its total energy consumption by 2020. The fact that hydroprocessed biofuels have already been successfully tested in military and civilian applications bodes well for this technology. Having the DOD as a customer can’t hurt the economics.

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About BASIC

Unlike other investor services, BASIC Associates focuses not on the financials, but on the science behind various R&D initiatives in bioproducts. Sound science, after all, is the ultimate driver of profitability in the industry. We believe that a superior understanding of the science behind the business model reduces uncertainty and risk and allows for better decision-making by investors and stakeholders.

The principals at BASIC Associates use their doctoral training, coupled with years of experience researching and writing about biofuels, biochemicals, and other bioproducts, to provide an accessible science-oriented analysis of companies and projects in this growing market.

Meet the Principals

Robin J. Johnson, Ph.D.

Dr. Johnson is a cofounder of BASIC Associates. She previously worked as a curator for Garbrook Knowledge Resources, which she joined in March of 2007. Prior to joining Garbrook, she was a Scientist at Genstruct, a systems biology company that creates computer models of biological pathways, and a curator/editor at Incyte and later Biobase, working on the Proteome BiKnowledge Library. (Proteome was a successful knowledge company that provided comprehensive annotation of the proteomes of a variety of organisms, including humans.) As an assistant Professor of Biochemistry at Boston University School of Medicine from 1985-2003, Dr. Johnson taught Medical School and did research in the field of cellular neurobiology. She has numerous publications to her credit. Dr. Johnson received her B.S. in Biology from the State University of New York at Stony Brook and her Ph.D. in Anatomy from Boston University. Her postdoctoral studies of viral infection in the nervous system were performed at Yale University School of Medicine Section of Cell Biology.

Daniela Sciaky, Ph.D.

Dr. Sciaky, a cofounder of BASIC Associates, is a scientific expert in plant biotechnology and biofuels and bioproduct processes. From 2006 to 2010, she was the senior content expert at Garbrook Knowledge Resources, where she contributed her expertise to the gathering and organization of biofuels and bioproduct information. From 1998 to 2006, she curated the scientific literature on a wide variety of topics, including plant and yeast molecular biology, helping to develop content for the Proteome databases. She has also held research positions with Children's Hospital of Cincinnati and Albany Medical College and faculty and research positions at the University of Cincinnati and Brookhaven National Laboratory. During the course of her career, Dr. Sciaky has served as a peer reviewer for the US Department of Agriculture, the National Science Foundation, and the US Department of Energy, in addition to reviewing papers for the The Plant Cell, Biochemistry, Planta, Nucleic Acids Research, Plasmid, Bio/Technology and BioScience journals.

Dr. Sciaky received her M.S. and Ph.D. in Genetics from Washington State University and her B.S. in Biology from the State University of New York at Stony Brook. She did post-doctoral research at the Cold Spring Harbor Laboratory, NY. She has presented at numerous scientific conferences and is well published in plant disease and natural systems as well as other fields.

Henrique Oliveira, MBA

Henrique, a cofounder of BASIC Associates, worked as a curator for Garbrook Knowledge Resources from 2008 to 2010. A citizen of both Brazil and the United States, he received his MBA in Finance in 2008 from the Stephen M. Ross School of Business at the University of Michigan in Ann Arbor, where he was awarded a fellowship by the University’s William Davidson Institute to conduct research on Brazil’s 35-year experience with biofuels. As a Fellow of the Institute, Henrique spent several months in 2007 touring biofuel facilities in Brazil with Tom MacDonald, a senior researcher with the California Energy Commission and the head of MacDonald Associates, a boutique consulting firm specializing in alcohol transportation fuel.

Prior to joining Garbrook, Henrique worked as a consultant for Hart Energy’s Global Biofuels Center. He has extensive business experience in Brazil and has authored a number of reports on the country's biofuels industry, which, because of its size and depth, impacts alternative energy initiatives worldwide. Henrique has also written editorials on the Brazilian ethanol and sugar industry for various publications.