It may seem ironic that the largest military in the world would be one of the most enthusiastic advocates of alternative energy, but it’s true, writes contributor Gregg Early.

To cynics, it’s likely unsurprising as budget cuts get bigger and the economy seems to be teetering on another recession that the Department of Defense (DoD) is redoubling its efforts in green energy.

They may figure that this is precisely the kind of boondoggle that the politicians should be cutting out of the budgets. But nothing could be further from the truth.

And the spinoff technologies that DoD supports now will be the next leg up in energy independence for the US.

Actually, the military has been one of the most farsighted organizations when it comes to repositioning itself for a world where energy security is a top priority. DoD’s shift has been under way for many years.

The armed services are keenly aware of the logistical and operational challenges involved in being overly dependent on oil. In Iraq, many suicide-bomber and roadside-bomb casualties were transport personnel or lead vehicles in transport convoys, moving gasoline to forward bases for their operations.

A few years back, they tracked the costs of getting gasoline to a northern base in Afghanistan from the port at Lahore, Pakistan. All in, it was costing the about $100 per gallon to move fuel to where the troops needed it.

People are always talking about $100 toilet seats. How about a $100 gallon of gas?

But instead of just spending it and writing it off as yet another cost of war, the armed services decided to look for options. And not simply because of cost or the desire to lower its carbon footprint.

Tactically, it’s crucial to have a secure power supply that has a minimal chance of disruption, especially when you’re engaged in active operations. It’s also advantageous if you can increase the energy independence of forward bases, so they can operate with limited dependence on outside supplies.

Another key advantage of many alternative energy sources is stealth. Electric motors are much quieter than diesel generators; solar power and wind are also silent energy producers relative to their fossil fuel alternatives.

Also, in combat zones you can’t expect the energy infrastructure to be operational or consistent. These days, with all the technology deployed with even the lowliest Infantry grunt, a steady source of electricity is crucial.

So there are certainly strategic and tactical advantages of alternative energy. And there’s no doubt that there are huge security advantages in securing your energy supply chain as efficiently as possible.

The next question is whether there is enough commitment for DoD to be a long-term driver of US alternative energy development.

When you’re dealing with a $670 billion annual budget, there’s usually a few million in the sofa cushions for some important R&D work. But more important, the armed forces have already begun requiring new equipment to be designed with renewables in mind.

For example, the Navy’s newest and most modern ship, the Littoral Combat Ship (LCS) Freedom, built by Lockheed Martin (LMT) doesn’t have propellers (screws to you nautically inclined), and has a hybrid drive motor that enhances stealth and fuel consumption. It also has an impressive array of unmanned vehicles that keep sailors out of harm’s way until absolutely necessary.

In March, the Air Force flew an F-22 filled with biofuel manufactured in the US. Two companies to watch in this space are Dyadic (DYAI) and Solazyme (SZYM), two US firms that are doing some impressive work in the biofuels space.

The US Army has inked a deal with Clark Energy Group to build a $2 billion, 500-megawatt solar farm in the Mojave Desert to power Fort Irwin and support its 5,000 personnel. The cost to the Army? Nada. Zilch. Bubkus. S

The deal is, Clark will build the facility, sell the power to the Army...and then has the right to sell the surplus energy, which is enough to power another 100,000 homes.

Not to be outdone, the US Marine Corps has begun to convert Twentynine Palms in California to energy independence from the civilian grid. It’s built a solar farm, wind farm, and a co-generation plant that recycles waste heat into energy.

NEXT: Top 5 Companies to Benefit from a Green Military


Who are the winners in this shift? US companies that are working in these sectors and have the technologies to deploy.

Some good companies have been swallowed up in the grinding economy of the last 3 years, when green tech almost made it into the private sector...but was kicked to the curb as lending dried up and spending was slashed on every level.

The survivors may well get a lifeline from the US military, and then be in prime position to expand quickly when the economy stabilizes. Here are the firms to watch:

In the biofuels space, as discussed above, Dyadic and Solazyme have a great deal of promise.

In renewable energy, American Superconductor (AMSC) stock was decimated by troubles selling to China’s Sinovel, but it has projects across the globe and would be a logical supplier of wind equipment to the military. Plus, its superconducting wire business is gaining popularity with “secure grid” projects at Homeland Security and various utilities.

I don’t think solar panel builders are the best way to buy into solar. The next-generation panels are coming out now and there will likely be a game-changing technology—an iPad for solar panels—but until that happens, there’s not a lot of money in it and the client side is unstable.

Two other interesting plays are AeroVironment (AVAV) and Clean Energy Fuels Corp (CLNE). Both offer alternative energy distribution systems that will have increasing value as the military and civilian sectors incorporate alternative energy vehicles into the mix.

AVAV worked with GM on the charging system and charging stations for the EV-1, and has continued in the business since then. It is the approved charging station for the Nissan Leaf, and when Toyota commercial equipment dealerships sell customer fork lifts, etc., they also recommend the AVAV charging system. If there’s an American company with an established pedigree for build electric-vehicle charging systems, it’s AVAV.

What’s more, AVAV also builds some of the most popular unmanned aerial vehicles in service today. These aren’t the big ones, but the ones used by special forces and Marines on the vanguard—a very good niche indeed.

CLNE is partly owned by oil tycoon T. Boone Pickens, and is the sharp part of his stick regarding converting the US from foreign oil to domestic natural gas. CLNE is a veteran of natural-gas filling stations in the US and Canada. The recession and recovery have kept natural-gas prices low, so the stock hasn’t done much yet.

But Pickens is a smart guy, and at 83, he’s fond of saying “I don’t buy green bananas.”

Another interesting fact in his favor: electric motors aren’t powerful enough to run tractor trailers. There are a lot of tractor trailers in North America.

At the time of publication, Gregg Early may or may not own positions in any of the stocks mentioned in this column.