Defense-funded biofuels program can spur Production and lower risk to U.S. government.

• Author: McDonald, Taite
• Position: Commentary

In the wake of failed federal loan guarantees for green companies such as Solyndra and Range Fuels, the alternative-energy industry needs solutions that decrease government risk and elicit bipartisan support.

A Defense Department initiative, under the Defense Production Act, is one example of a useful role the government can play to expedite development and remove market barriers.

A March 2011 memorandum of understanding among the Navy, the Department of Energy and the Department of Agriculture establishes an interagency initiative to invest up to $510 million in the development of advanced fuels. The effort comes under the broad authority of the Defense Production Act, so investments that result from the MOU not only serve to meet the objectives of the military services, but also have the potential to play a significant role in encouraging market growth and boost energy independence from the Middle East.

The commercialization of first-generation biofuels relied heavily upon government programs such as Renewable Fuels Standard 2, biofuels tax credits, Agriculture research and rural development programs, and biomass initiatives. They bolstered ethanol and fatty acid methyl ether-based biodiesel. Many of these programs, however, are no longer available or have lost funding.

Of concern to the Defense Department is that diminishing government support for green-energy sources could delay the commercialization of second generation or "drop-in" biofuels that the military services are seeking as alternatives to conventional jet fuel. "The MOU should help facilitate partnerships to drive the advanced biofuels market forward," said Renewable Energy Group President and CEO Daniel Oh, who is a West Point graduate and former Army infantry officer.

Even during times of political gridlock, both parties tend to agree that government funding is most beneficial when directed toward areas that can have the broadest impact on innovation and help emerging industries overcome market barriers.

Extensive government support was provided to first-generation fuels--i.e. ethanol--that will not be required to commercialize second-generation products such as bio-based jet fuel and renewable biodiesel.

A number of technologies are ready for use, yet struggling to commercialize in the United States. The DPA initiative is the program with the potential to help advanced fuels come to market in a timely and cost-competitive manner.

There are also broader benefits of the...