A Riverine Command Boat running on a 50/50 blend of algae-based and traditional fuel.

Here's a question: Who’s the largest energy user, by far, in the United States?

Answer: the U.S. Military. Its annual energy bill runs about $15 billion dollars a year, which is why the Department of Defense has developed a keen interest in finding other ways to meet its energy needs, including investing in alternative energy.

Traditionally, the military has been deeply dependent on fossil fuels, which power its helicopters and ships, as well as over a hundred thousand diesel generators that keep tents air conditioned and batteries charged in places like Iraq and Afghanistan.

But on the battlefield, oil can be a dangerous liability. Last year there were more than a thousand attacks on US military fuel convoys. US Navy Secretary Ray Mabus says in order to be an effective military force, you have to know what your own vulnerabilities are.

"One of the ones that rose to the top was our dependence on fossil fuels," says Mabus.

The Price — and Opportunity — of Instability

Fossil fuels aren't just highly flammable, they can also require doing business with the very countries the US is often in conflict with. Political instability often leads to price spikes. Take, for example, the recent conflict in Libya.

"Libya is a big oil producer, but not the biggest one," says Mabus. "But simply the disruption in Libya caused the price of oil to go up almost $30 a barrel."

That's no small hiccup for an organization that consumes 300,000 barrels of oil a day.

Even an increase of just one dollar a barrel can force a major reshuffling of funds, says Mabus. "Every time the price of oil goes up a dollar a barrel it costs the Navy an extra $31 million in fuel costs."

"The only place we have to get that is from our readiness account," he says, "so [there are] fewer flying hours, less training."

This sensitivity to price spikes has sent the military in what might seem an unlikely direction: It’s become a major investor in alternative energy.

Phyllis Cuttino directs the clean energy program for the Pew Charitable Trusts and is author of a recent report on the military and alternative energy, From Barracks to the Battlefield: Clean Energy Innovation and America's Armed Forces.

She says whatever the military can do to reduce fuel use, it's doing. According to the report, over the last four years the military has tripled its investment in technologies like biofuels, solar panels, and electric vehicles, to $1.2 billion a year.

"The Department of Defense is not doing all this work in biofuels and efficiency, for example, because they are green, or because they are environmentalists," says Cuttino. "They are doing it because they want to increase effectiveness and reduce costs."

New Partnerships in Silicon Valley

That’s been a boon for people like Bob MacDonald, the CTO and co-founder of Skyline Solar, in Mountain View, California. Skyline's solar arrays are relatively low-tech, made from off-the-shelf components and are easy to assemble.

Bob MacDonald helped get Skyline Solar its $1.58 million military contract

A few years ago, MacDonald saw that the military was looking for clean tech companies like his to partner with. He flew to Washington to present Skyline's product. He says it was a bit intimidating.

"There was a lot of brass," he recalls, "literally, a lot of stripes and shoulder adornments around the table. I kept it simple. Sir, yes sir."

MacDonald soon realized his audience had a lot in common with the venture capitalists he does business with out here in California. The military officials liked that Skyline's components are easy to source and that they're portable. An added benefit is the stealth effect, says MacDonald: Solar panels are a lot quieter than a diesel generator.

Macdonald has a $1.58 million contract to try out his arrays on two US military bases, one in Texas, one in Southern California. If the pilot is successful, he’d like to see his systems operating overseas, powering remote bases in Iraq and Afghanistan.

Solazyme, in South San Francisco, is also benefiting from military investment.

The company's algae-based biofuel is being tested in Seahawk helicopters, as well as Navy vessels in Virginia and other parts of the country. CEO Jonathan Wolfson says the $8 million military contract is less than a quarter of his company's revenue, but it sends a powerful message to other investors.

Jonathan Wolfson is CEO of Solazyme, which produces algae-based biofuel for the US Navy

"I mean, eight years ago we were five people with a completely delusional dream," says Wolfson. "So go from that to [being partnered with] an entity like the military, which is very, very disciplined and demands an enormous level of discipline out of its suppliers. It does really good things to help a company like Solazyme."

Bridging the "Valley of Death" Between Innovation and the Market

Wolfson says by the sheer force of its purchasing power, the military can transform a technology from cutting edge to mainstream. He points out that it's happened before.

"People forget that the Internet they go log onto every day was funded by the Department of Defense. They forget that the entire semiconductor industry was [built up] by they Defense Department. They were the ones that got the first orders and got the first plants built."

The Solyndra Effect

Lately, in Washington, the words “clean technology” have become a political flashpoint. At a September 22 hearing focused on the bankruptcy of Fremont-based solar panel maker Solyndra. Issa, who chairs the House Oversight and Government Reform Committee railed against the Obama Administration's investments in alternative technology.

"The Obama Administration has systematically waged a war on carbon-based energy in pursuit of new green energy," said Issa. "Jobs have not been produced in a sustained fashion or in the number promised and bills of taxpayer dollars have done little to truly stimulate the economy."

Issa and other Republicans have argued government should avoid investing in clean tech all together. And this has put Navy Secretary Mabus in a curious position: A high level military official turned into one of clean tech’s most vocal defenders. He says as the head of the US Navy, that’s his job.

"We’re doing this to become a better military, to make us better war fighters. We’re doing this as a matter of security, of energy security and national security. The fundamental purpose of our doing this is so that we will be better at the mission that the US has given us."

Mabus says his goal is that by the year 2020, the Navy and Marine Corps will get at least half its fuel from non fossil-fuel sources.

The biofuels we look at in this piece are primarily cellulose-based. Some of the researchers we talked with called the products they are designing, biopetrol because they are trying to mimic, synthetically, what petroleum does. The San Carlos start up, LS9, is making a biopetrol product. The hope of these researchers is to use plant matter, or biomass, to make a cellulosic biofuel that can be used in the existing petroleum infrastructure without needing to change pipelines, pumps at stations or gas tanks.

There are a number of California companies and research institutions working on developing advanced biofuels. The big, new academic center for research is the Joint Bio Energy Institute out of Emeryville.

As you will hear in this story, some are tinkering with microbes, others are trying to improve on current feedstocks.

Biofuels don’t have to come from traditional plants in the ground but can come from converting algae or trash into biodiesel. While that is not the focus of this story, we hope to take it up in the coming months.

You may listen to the "Designer Biofuels" radio report online, as well as find additional links and resources.