The department will seeks to employ fuels generated from renewable raw materials to replace most of the jet fuel, diesel and other petroleum products – to be used in battleships, jet fighters and other vehicles.

Gevo, Syntroleum and Solazyme are among the companies vying for the contracts, having completed research or biofuels delivery for testing to the military, reported Bloomberg.

Other companies eligible to bid for the contracts include Cobalt Technologies and Sustainable Oils.

The first grant recipients will gain about $6m in March 2013 and nine months later, about three companies will jointly gain $180m to develop commercial production facilities.

The military aims to identify companies with the capacity to develop drop-in replacement biofuels that can be used without altering existing engines, while ensuring a steady fuel supply.