Gevo, Inc. (GEVO), Solazyme Inc (SZYM): Department of Defense Needs These Companies to Succeed

The high gas prices of summer 2008 may be a distant memory to you by now, but the Department of Defense has not been so quick to forget. A combination of dependence on internationally sourced energy and exposure to volatility in the markets has nudged Uncle Sam to pursue renewable energy at a furious pace in recent years. That is probably a good idea: More than 93% of fuel consumed by the federal government can be chalked up to the DoD, according to a strategic review (link opens PDF) published by the U.S. Navy in 2010.

Dozens of companies with the capacity to produce next-generation renewable fuel — fuels may or may not be the primary focus of each — have answered the call. The latest comes from industrial biotech company Gevo, Inc. (NASDAQ:GEVO), which has begun supplying the U.S. Coast Guard with initial quantities of renewable isobutanol-blended gasoline for maritime vessels. This comes after an earlier collaboration with the U.S. Air Force in 2011, an extension of which calls for an additional 45,000 gallons of isobutanol-derived jet fuel to be supplied by the end of October. What do these partnerships with Uncle Sam mean for the future of the company?

What you need to know
Gevo, Inc. (NASDAQ:GEVO) is supplying finished 16.1% renewable isobutanol-blended gasoline under a 12-month operational study with the U.S. Coast Guard R&D Center, Honda Motor Co Ltd (ADR) (NYSE:HMC), and Mercury. The same Gevo, Inc. (NASDAQ:GEVO) fuel was used in Honda Motor Co Ltd (ADR) (NYSE:HMC) engines for eight hours a day for three months earlier this year. The engines were dismantled after testing to inspect wear and tear associated with isobutanol. Mike Coleman, U.S. Coast Guard project manager for the study, said he was pleased with the initial tests and that he expects a decision on the suitability of isobutanol-fuel blends for the Coast Guard’s gasoline-fueled crafts to be made following the completion of the current 12-month study.

The Coast Guard will be testing Gevo, Inc. (NASDAQ:GEVO)’s fuel in this 38-foot special purpose craft and a smaller 25-foot response boat. Source: U.S. Coast Guard

Can it succeed? No fuel is perfect, but isobutanol is a rather suitable blendstock that has several major advantages over ethanol.

Source: Gevo White Paper, May 2011