SAIC Wins $25M Algae Jet Fuel Contract

algaeThe Department of Defense has awarded Science Applications International Corp. (s SAI) a contract worth up to $25 million to develop a $3-a-gallon algae-derived fuel for military jets. The funds come under a biofuels program in the federal department’s R&D office, the Defense Advanced Research Projects Agency, or DARPA, less than a month after the company won a $14.9 million contract for the same technology.

Despite the second grant, announced earlier this week, SAIC does not have a lock on battlefield biofuels or the military-grade jet fuel JP-8. Far from it. A handful of startups and big energy companies like Shell (s RDS.A) and Chevron (s CVX) are working on an alternative to petroleum-based jet fuel.

Within the DARPA program —  launched for fuels derived from virtually anything grown in soil or water back in 2006, and expanded the following year specifically for JP-8 made from cellulosic and algal feedstocks — SAIC is competing with San Diego-based General Atomics.

The military spent $6 billion on 71 million barrels of JP-8 in 2006; its interest in biofuels stems from a desire to shrink that cost. As Defense News put it earlier this month, “It’s no secret that jet fighters can fly on fuel extracted from algae. What’s not yet known, though, is how to squeeze oil from algae at a reasonable price.”

Just as grid parity represents the holy grail for solar power companies, SAIC, General Atomics and other biofuels developers are under the gun to bring down costs. SAIC’s target of $3 per gallon would undercut competitors by a significant margin: General Atomics says it has cut the cost of its algae-derived oil to between $6 and $7 per gallon, down from about $30 per gallon. According to General Atomics biofuels program manager David Hazlebeck, DARPA officials ultimately want to see that drop closer to $1 per gallon.

Photo credit: Minnesota State Legislature