RFS: Don’t Count Advanced Biofuels Out Yet

by | Oct 27, 2011

A new report from the National Academies on the Renewable Fuel Standard recapitulates the growing impatience among environmentalists that cellulosic biofuel production has not grown fast enough to meet the aggressive RFS goals. Unfortunately, the report is marred by some significant errors of fact. It shouldn’t convince anyone to give up on advanced biofuels just yet.

The National Academies report takes a good hard look at the challenges facing the cellulosic biofuel industry, which include growing new sustainable biomass resources and raising capital to construct new biorefineries. Unfortunately, it draws the wrong conclusion that because these challenges are daunting, they will never be overcome. The industry has recognized these challenges from the start. A 2009 report from BIO and Bio Economic Research Associates, estimated the need to construct nearly 400 new biorefineries at a total cost of more than $95 billion to meet the volume requirements under the RFS by 2022. It is a massive and important undertaking to create an entirely new energy infrastructure from the ground up.

The need to raise large amounts of capital has prevented the industry from meeting the cellulosic biofuel numbers during the first few years. Biofuel producers have been hampered severely by two things; first, banks are wary of investing in any new technology until it is proven, and second, they’re wary of lending to anyone in the aftermath of the recent economic recession and banking crisis. But pioneering companies have moved forward with the first projects. Abengoa, INEOS Bio, and POET have all made significant progress in securing the funding and starting construction on commercial-scale advanced biorefineries. Additional projects are moving from demonstration to commercial scale. The range of projects across the nation that combine local feedstocks with innovative technology are a robust affirmative response to the challenges of commercializing advanced biofuels.

In addition to its overly pessimistic view of the challenges, the NAS report makes a singular error in stating that the RFS expires after 2022. It doesn’t; the standard remains at the 36 billion gallon level for successive years. The report does correctly note however that policy uncertainty contributes to the challenge of capital formation for advanced biofuel companies. Businesses bringing innovation to the commercial marketplace need certainty and stability to flourish. Consistent, long-term federal commitment to the goals of the RFS is vital to continued investment and commercialization progress.

The report also claims that the RFS may be an ineffective policy for reducing greenhouse gas emissions, because lifecycle greenhouse gas emission models are highly uncertain and depend on how, where and with what material different biofuels are produced. The EPA is charged with measuring U.S. greenhouse gas emissions and it has conducted a thorough analysis of the emission reductions associated with commercial biofuel production pathways. In order to reduce regulatory uncertainty for new advanced drop-in biofuels that are ready for commercial development, the EPA must quicken its pace in evaluating their greenhouse gas reduction potentials. While the NAS report acknowledges that stable policy is needed to move the ball forward in a meaningful way, the report’s second-guessing of EPA’s conclusions about biofuels seems designed to increase policy uncertainty.

The NAS report concludes that we need to continue research, and I agree. We need to follow a parallel path of commercialization and continued research so we can improve technology and the cost structure as we move forward.

The Renewable Fuel Standard is the key foundation policy supporting the commercial development of advanced biofuels. It is not working as fast as some would like, but given the current economic situation it is indeed working. A handful of advanced biofuel companies have moved projects from the drawing board to demonstration scale since passage of the RFS in 2007, and a few recently have put steel in the ground for commercial-scale projects. This progress would have been significantly slower absent the RFS.

Brent Erickson is Executive Vice President of Biotechnology Industry Organization’s Industrial & Environmental section.

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