On the cleantech Richter Scale, last week’s news that California-based Amyris was going to wind down its biofuels operations, and focus instead on the more economically rewarding business of making non petroleum-based cosmetics, rated as a minor tremor. Disappointing, yes. Surprising, no. A relatively common consequence of the sector’s struggle to reach the necessary scale – and technological milestones – to make biofuel production commercially viable and cost-competitive.

At the other end of the scale, however, the news that the Republican-dominated House Armed Services Committee voted, last Wednesday, to introduce a measure banning the US Defense Department from making or buying alternative fuels that cost more than “traditional fossil fuels” rates as a potential catastrophic earthquake.

As we’ve said before, the US Armed Forces has been a huge backer – and early adopter – of clean technologies. As retired Navy vice admiral Dennis McGinn (and current president of the American Council on Renewable Energy) put it in an interview with The Daily Climate republished here in April, “from lance corporal to general, they are on board” with green energy effort.

“There is not a shred of political correctness in what the military is doing with energy efficiency or renewable energy,” McGinn added. Rather, the US military’s green push is strategic. Not only does the Pentagon see climate change and energy security as “prominent military vulnerabilities” – and climate change in particular is an “accelerant of instability and conflict” – but, as McGinn put it, American soldiers in the field “live with the problems from the over-reliance on fossil fuels.”

It was in this spirit that the US Navy, on Monday, officially announced the ships for the demonstration of its “Great Green Fleet” – an entire aircraft carrier strike group powered by biofuels and other green energy sources, says Wired.com‘s Noel Shactman. Costing $US12 billion, the Green Fleet’s 450,000 gallons of fuel made mostly from chicken fat and other waste greases rates as arguably the biggest biofuel purchase in military history , says Shactman. And at about four times the cost of the standard petroleum product, it certainly wasn’t cheap – which is what the Republicans are officially objecting to.

And in case there is any doubt about their motives, Committee Republicans, like Randy Forbes, have insisted that this is not an attempt to kill off military biofuels before they’ve had a chance to take off, says Shactman. “Now, look, I love green energy,” Forbes said in February. “It’s a matter of priorities.”

But if the congressional panel has its way and the proposed ban becomes law, “it could be the last time the Navy ever uses biofuels to run its ships and jets,” says Shactman. “It would make it all-but-inconceivable for the Pentagon to buy the renewable fuels. It would likely scuttle one of the top priorities of Navy Secretary Ray Mabus. And it might very well suffocate the gasping biofuel industry, which was looking to the Pentagon to help it survive.”

Mabus has already appeared before Congress, summonsed by Republican lawmakers in March to justify his department’s programs after US President Barack Obama doubled Defense Department energy efficiency spending to $1 billion.

Back then, Mabus told Congress that biofuel prices could be competitive with oil by 2020 – and that cost parity could be helped along through the military’s testing of alternative fuels and work with researchers and scientists. He might have added that if the military is prevented from buying and working with biofuels, the goal of achieving price parity starts to disappear from view.

For companies like Amyris, it was already well beyond reach. Technology Review reports that the California-based company started out making biofuel using genetically modified organisms and simple chemistry to turn sugar into an oil like diesel. And while they had some success with that in Brazil, where their bio-derived fuel was used in buses, they got a lot more bang for their buck producing chemicals used for such things as moisturisers and fragrances.

The news of the Amyris’ change of focus sent its stock down 30 per cent to $6.99 per share, but the reasoning behind the move soon became crystal clear at the company’s earnings call last Wednesday night, says TR‘s Kevin Bullis. Amyris said the average selling price for all its products was $US7.70 per litre, or $US29 per gallon – far higher than the price for petroleum-based diesel, which costs about $US1 per litre in Brazil.

Even $7.70 a litre isn’t enough for the company to break even, says Bullis. In its earnings report, Amyris says the company lost about $US95 million in the first quarter of 2012, compared to a loss of $US33 million for the same period last year. Management said last week it would still be producing limited amounts of biodiesel, and would continue work on joint ventures that could lead to large-scale biofuel production some time in the future, but for now the focus was on making its cosmetics business profitable, as well as raising new money to keep itself afloat.

Even US Big Oil companies, who are said to be throwing their weight and their billions behind the green fuel effort – enticed, perhaps, by the federal Renewable Fuel Standard, which requires about 15 billion gallons of alternative fuels in the US energy mix annually, and 36 billion gallons a year by 2022 – are unsure what it will take to achieve commercialisaton.

A Bloomberg BusinessWeek column last week, “Big Oil’s Big in Biofuels,” said BP had invested $7 billion in alternative energy since 2005; ExxonMobil was spending $600 million on an algal fuel project; and Royal Dutch Shell had invested billions in a Brazilian biofuels venture to produce ethanol, while in the US it produces small lots of drop-in biofuels.

The article quotes Cleantech Group CEO Sheeraz Haji as saying that it’s a matter of pride and fear that’s driving Big Oil’s biofuel investments. “We’re not talking about oil companies turning into green activists,” says Haji. “It’s tied to their view that this is economically rational.”

Haji says ExxonMobil’s $600 million algae play – a joint venture with California-based Synthetic Genomics – might be relatively small beer for the oil giant, but rates as “big dollars” for the biofuel sector. And as the article points out, algae has a lot going for it. It produces energy-storing molecules similar to those extracted from crude oil, and can be grown in saltwater on marginal land, so it won’t compete for fresh water or arable land. But while the three-year-old project recently upgraded to an outdoor facility in Texas, “ExxonMobil says billions more in research dollars are needed before it will know whether commercial production is possible.”

As for the goal of price parity, well, not everyone in the industry sees that a necessary milestone. Tom Todaro, a leading US biofuel entrepreneur whose various companies have supplied the military with tens of thousands of gallons of mustard seed-derived biofuel, certainly does not. “This idea that we can match [the price of] crude oil – I think it’s such a bullshit question,” he said in October last year. “A car with airbags costs more than a car without. Society decides how valuable those airbags are. Society can decide the value of renewable fuels.”

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