U.S. Navy invests in biofuel by signing a $12 Million Biofuels Contract

US Navy biofuelThe U.S. Navy is one of the frontrunners in biofuel usage. Now the U.S. Navy is moving forward with plans to purchase 450,000 gallons of drop-in biofuel. The biofuel will be used in a 50-50 blend of biofuel and traditional petroleum to power jets and vessels. The contract was signed with Dynamic Fuels, a joint partnership between Tyson Foods and Syntroleum Corp. that creates fuel from repurposed cooking oil. Dynamic Fuels signed a subcontract with Solazyme, which makes algae-based fuels, for 100,000 gallons to fill the order.

With this purchase of the U.S. Navy, the biofuel industry gets an important vote of confidence to develop drop-in biofuels at a national scale.

Though the order fills only a small portion of the Navy’s daily use, 3.36 million gallons, the contract is an indicator of significant price decreases in the biofuels market. In October 2010, the Navy purchased 20,055 gallons on algae biofuel at $424 per gallon. And now, a year later, this $12 million order costs around $26.67 per gallon. The cost remains six to eight times as much as traditional fuels, but the short-term drop is encouraging.

While the cost of biofuel is still high, compared to traditional petroleum, it is already half of what we were paying compared to last year. It shows that as the market develops you’re going to see costs come down.