Posts tagged “Renewable Fuel Standard”
We’ve Arrived at the “Blend Wall”
The Energy and Commerce Committee of the US House of Representatives has been holding hearings this week on the Renewable Fuel Standard (RFS). It’s otherwise known as the ethanol mandate, although it covers biodiesel, as well. These hearings are timely, since at least two bills have been introduced to reform or repeal the RFS. During Tuesday’s session Rep. Waxman (D-CA) referred to the “gasoline blend wall, which may be around the corner.” In fact, a review of current gasoline sales and this year’s ethanol target confirms that the ethanol “blend wall” has arrived, at least for some of the nation’s refiners. That explains the urgency of the debate about the future of the RFS.
The blend wall is simply the threshold at which the RFS requires more ethanol to be blended into US gasoline than the quantity necessary to dose essentially all of it with the maximum 10% ethanol content for which most cars on the road were designed. Because the Environmental Protection Agency, which administers the RFS, has been unwilling to exercise its flexibility under existing law, the fuels industry must now choose from a set of unattractive options: It can limit mainstream gasoline to 10% ethanol content and absorb substantial RIN costs (see below) or penalties for failing to blend the required volumes of biofuel. It can produce less gasoline than the country needs, or export more of its production, to reduce its renewable fuel obligations. Or it can produce higher-ethanol blends such as E15 and risk the integrity of millions of cars and large portions of the country’s fuels infrastructure, including all but the newest gas station pumps and tanks. All of these choices affect the price consumers pay at the pump.
Rewards for Performance, Not Over-Hyped Promises I recently wrote a post detailing some steps that I believe should be taken to improve the nature of how we provide incentives for biofuels: How to Fix the Broken Cellulosic Ethanol Incentive System. My proposal is like a feed-in-tariff for next generation biofuels. The highlights are that we should reward companies that deliver, and not those that make promises. We shouldn’t put the taxpayer on the hook for broken promises, and we should create a more level playing field for advanced biofuels. At present that playing field is tilted heavily in the direction of cellulosic ethanol. The original article was edited a bit and also published at Forbes: Fixing A Broken Biofuel Incentive… Continue»
Overview: Mandates, Zero Production, Penalties, and the Failure of the Current System In the previous post, I discussed the annual ritual of rolling back the cellulosic ethanol mandates by 90% or more. For three years running, cellulosic ethanol production will come in far, far short of the mandated target volumes. In fact, of the 100 million gallons mandated last year and 250 million gallons mandated this year, there is still no qualifying production to date. For 2012, the EPA is considering reducing the 500 million gallon mandate to as little as 3.5 million gallons. This is a reduction of over 99%, and should be a crystal clear indicator that this system is not working as intended. But even though product… Continue»
Another Year, Another Chapter In what is becoming an annual ritual, the EPA is once more scaling back the cellulosic ethanol mandate for 2012. The 2007 Energy Independence and Security Act mandated that we would use 100 million gallons of cellulosic ethanol in 2010, 250 million gallons in 2011, and 500 million gallons in 2012. I said quite explicitly from the start that this was wishful thinking, and that there was practically zero chance of meeting these mandates. In one article, I wrote: The next few years will see a record amount of back-pedaling from most of the companies trying to establish a foothold in this space – and overpromising on their technology to do so. There will be the… Continue»