Posts tagged “RFS”
Disagreement, But The Outline of A Compromise
Yesterday I watched the livestream of a National Journal’s event, “Biofuels Mandate: Defend, Reform, or Repeal” from Washington, DC. I encourage you to skim through the replay. The session highlighted a wide range of views concerning the US Renewable Fuels Standard (RFS), including those of the corn ethanol and advanced biofuels industries, poultry growers, chain restaurants, environmentalists, and small engine manufacturers. Although these broke down pretty sharply along pro- and anti-RFS lines, I thought I detected hints of the kind of compromise that might resolve this issue. I’d like to focus on the elements of such a deal, rather than rehashing the positions of all of the participants, with one necessary exception.
The Requirement for Reform
The most disappointing contributions to the discussion occurred during the interview with Representative Steve King (R, IA) by National Journal’s Amy Harder. If we accept Mr. King’s perspective, we should embrace the RFS as being as relevant today as when it was conceived, with no changes required. That flies in the face of the serious market distortions now manifesting in the “blend wall” at 10% ethanol content in gasoline. Among other things, Mr. King claimed that a 2008 reduction of $0.06 per gallon in the now-expired ethanol blenders credit brought the expansion of the corn ethanol industry to a standstill. The industry’s own statistics tell a very different story, with US ethanol production capacity having grown by a further 86% since that point.
This week, the EPA announced that it was adjusting the Renewable Fuels Standard (RFS) in order to reflect market realities. As originally proposed earlier this year, the rule called for 14 million gallons of cellulosic ethanol, but the final rule sets a requirement for 6 million gallons of cellulosic ethanol this year.
However, as all the news stories focus on how the EPA has “backed down”, what goes overlooked is that there is finally a cellulosic biofuel industry in which commercial production has started.
KiOR’s biorefinery in Columbus, Mississippi started commercial production in March using wood chips to produce cellulosic fuels, and Ineos just announced on July 31 that their Indian River BioEnergy plant in Florida has begun operations to make biofuels from plant waste. Both of these are now operating at full commercial scale. Whether they’re making money yet, we don’t know, but the fact that they’re producing large volumes of cellulosic biofuels may be a historic turning point. These developments are important steps towards developing a real advanced biofuel industry that can help move us toward a point where we have other options for how to fuel our cars and trucks.
US Ethanol Policy Should Reflect Circumstances and Consequences
This April, two separate bills were introduced in the US House of Representatives to reform, or repeal, the federal Renewable Fuel Standard (RFS) that mandates how much ethanol and other biofuels must be blended into gasoline.
To understand why reform or repeal makes sense now, we should recall the factors that led Congress to enact this standard six years ago and consider how many of the basic assumptions underlying its design have changed since then. That requires a review of US fuel consumption and import trends, commodity prices, and the impact of the RFS on food prices. After summarizing the other points I want to focus on the last one, based on an interview I conducted with Dr. Yaneer Bar-Yam, an expert on complex systems who has developed a model that explains the behavior of food prices since the introduction of the first, less ambitious RFS in 2005.
First Qualifying Cellulosic Ethanol
Last year, to much fanfare, the first batch of qualifying cellulosic ethanol was produced (i.e., it qualified for credits under the EPA program for certifying ethanol for sales). I reported on the development at that time.
Western Biomass Energy LLC, a subsidiary of Blue Sugars Corporation (previously KL Energy) reported the major milestone of claiming the first cellulosic ethanol tax credits under the RFS2 for a 20,069 gallon batch of cellulosic ethanol produced from bagasse (sugar cane waste) in April 2012.
However, regular readers are aware that for years I have been deeply skeptical that cellulosic ethanol as envisioned by — and ultimately mandated by — the US government will be an economic and scalable fuel option. The obstacles to success are significant, and I have described them in detail on many occasions.
The following article was written by Andrew Holland for Energy Trends Insider, a free subscriber-only newsletter published by Consumer Energy Report that identifies financial trends in the energy sector. Get you free subscription today.
The ethanol industry has seen its position in Washington severely weakened over the last year. The modern ethanol industry is a creation of Congress; the Renewable Fuels Standard (RFS), the ethanol tax credit, and a tariff on imported ethanol were all responsible for creating the ethanol industry we see today. We should note that this industry has seen some remarkable successes: it has replaced almost 10% of the country’s gasoline fuel supply, with an impact on prices that is marginal at best.
It is important to note that more advanced biofuels still receive tax support: cellulosic ethanol receives $1.01 per gallon in tax credits, but that is set to expire at the end of this year. A Senate bill would extend that credit for a year, as well as retroactively re-instate the $1 per gallon biodiesel tax credit that expired at the end of last year. The fate of these credits is up in the air, as Congress will have to consider a broad range of tax policy questions before the ‘fiscal cliff’ coming this year.
This Week in Energy is a weekly round-up of news making headlines in the world of energy. Most of these stories are posted throughout the week to our Energy Ticker page. The purpose is to stimulate discussion on energy issues, and community members should feel free to turn these into open thread energy discussions. Suggestions and news tips are welcome. I (Sam) can be reached at editor [at] consumerenergyreport [dot] com . NRC Report to Congress: Cellulosic Biofuel Mandates Unlikely to Be Met A congressionally requested study by the National Research Council — an arm of the National Academy of Sciences — concluded that next-generation biofuels are costly, and their impacts questionable. “Absent major technological innovation or policy changes, the… Continue»
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»
In Part I we saw that the Renewable Fuels Association (RFA) pays for shoddy studies and then cites them to fear-monger into getting more tax dollars. Hypocritically, when they are challenged with a critical point on ethanol, they attempt to cast doubt by questioning the source of funding from the challenger (as shown here). Here in Part II, I will show that the RFA is guilty of misrepresentation so blatant that it can only be called dishonesty. Perhaps the biggest irony in all of this is that our tax dollars via the ethanol subsidies keep groups like the RFA in business. The circle goes like this: Tax dollars and mandates create and support an ethanol industry. Some of the money… Continue»
Over the next two posts, I will examine some of the tactics used by the Renewable Fuels Association to justify keeping the $6 billion ethanol subsidy that was made almost entirely redundant when the the Renewable Fuel Standard (RFS) was passed into law in 2005. Not satisfied with a market that is mandated by law to grow by 25% between now and 2015, the ethanol lobby insists that they need the subsidies as well. As I will show, they have no qualms about deceiving people to get their way. In this post, I will cover a tactic that the RFA has previously condemned in others: Paying for self-serving research. I will also show that the amount of taxpayer money they… Continue»