Outlook for Renewable Energy in America – Advanced Biofuels
Tuesday, April 1, 2014
By Michael McAdams, President, Advanced Biofuels Association
At a minimum, these numbers suggest America should not just adopt an “all of the above” energy strategy, but rather an “everything and the kitchen sink” strategy. In its 2014 Energy Outlook, BP forecast energy consumption rising 41% by 2035 with 95% of that growth coming from rapidly growing, emerging economies. Of that demand, BP forecasts North American demand increasing by 5% between 2012 and 2035. In their analysis, the previous energy demand peak seen in 2007 is not forecast to return until at least 2023, with a trend of demand declining after 2035. Although the U.S. is never forecast to return to the 2007 demand peak, we operate in a world energy market and the worldwide demand and shortages will directly impact the prices American consumers pay at the pump.
If these numbers are in the ballpark, that is cause for serious review of the public policy tools available to preserve economic development, stir innovative technology deployment, and address sustainability issues, such as air pollution, water use, and the potential for climate change.
ABFA believes these issues can be an opportunity and driver for advanced and cellulosic biofuels. Let’s start with where we stand today in terms of global production. According to a February 2014 report from Navigant Research, worldwide biofuels production was about 32.4 billion gallons total in 2013. Around two thirds of the total is produced in the United States and Brazil. In 2013, the EPA mandated the use of 16.55 billion ethanol-equivalent gallons of biofuel, and we were able to hit that target. The overwhelming majority of U.S. biofuels production came from the corn ethanol sector, with over 13.1 billion gallons reported on EPA’s Moderated Transaction System (EMTS). But notably, the growing advanced biofuels industry produced a record 3.23 billion gallons in 2013. Of this, cellulosic biofuels, which have to largest growth potential, contributed approximately 1 million gallons.
One of the great advantages of advanced biofuel technologies is the diverse set of feedstocks from which they can be produced, and the resulting potential geographic diversity of their deployment within the United States. With the passage of the recent Farm Bill and a strong commercial and federal commitment to develop energy feedstocks, such as giant mythcanthus, biomass sorgum, and others, land previously unable to grow value crops can be put into production to provide these new biorefineries with low-cost feedstocks that are high in biomass density per acre. This is also an unprecedented opportunity for economic growth in rural communities.
As a result of the Renewable Fuel Standard (RFS), the United States continues to be in the forefront of global development of advanced and cellulosic fuels. However, this important policy must be consistently implemented and supported by both the Executive and Legislative branches of government. Recent efforts to repeal the law in Congress, and a woefully inadequate proposal for the RFS’s targets in 2014 from EPA, have dealt a serious blow to those companies seeking capital to build their first commercial plants. Concern over the policy stability of the RFS has also had a negative impact on new startups and investor confidence in the industry.
On the other hand, the new Farm Bill includes $881 million for energy programs, including support for bioenergy crop production and biorefinery construction for fuels and chemicals. The U.S. military continues to lead the way on developing and using alternative fuels and is working jointly with the Department of Energy and Department of Agriculture on a $510 million initiative for defense use of drop-in advanced biofuels. This federal leadership is invaluable in moving technologies to commercial scale.
But without a steady and consistent federal policy, this industry will struggle to keep this remarkable momentum going. Not only are there regulatory hurdles to overcome, and a vigorous Congressional debate over the RFS to endure, but also on-again/off-again tax policy and an unequal playing field that continues to create fresh challenges for new producers. When Congress allowed all of the biofuels tax provisions to expire at the end of 2013, it sent inconsistent signals to smaller, newer, players who have made investments dependent on the federal policies in place since 2005.
Many in the industry believe these inconsistencies reflect the government going back on its promise to those who have put up their own money to build the future generation of plants. According to Bloomberg Energy, the biofuels industry has invested $14.7 billion in the last six years to provide the research and development and build pilot, demonstration, and commercial plants. This will become stranded capital if we do not continue to send a clear signal of support from all branches of the federal government.
ABFA welcomes the opportunity to participate with ACORE, salutes their efforts in regard to the development and deployment of all renewable technologies, and stands ready and interested to engage the readers and participants who wish to further discuss the challenges the advanced biofuels sector must navigate and the contributions we may deliver.
This article is featured in The Outlook for Renewable Energy: 2014 – published by the American Council On Renewable Energy (ACORE).