Fueling the Future

Well folks, things are in a real state of flux right now, for sure.

Renewable fuels like ethanol and biodiesel continue to get attacked by environmentalist for not being green enough, while the industry struggles to survive without key government support initiatives.

A few reports and articles have come out over the past couple weeks which have fueled the fire, namely the Congressional Budget Office's accounting of the total cost of subsidies to biofuels.  Of course conspicuously absent from the whole debate is the cost of petroleum subsidies, which according the a report from the International Energy Agency, benefit from 12 times the amount of government subsidies as biofuels.

The article from Bloomberg New Energy Finance correctly assesses that "Global subsidies for fossil fuels dwarf support given to renewable energy sources such as wind and solar power and biofuels," and goes on to count $557 Billion spent in 2008 on petroleum subisidies, compared to $43 B for biofuels. 

So while the ethanol industry eagerly anticipates the EPA's delayed ruling on the increase of the allowable percentage of ethanol in gasoline (currently capped at 10% - i.e. the 'blend wall') if they decide to allow up to even just another 2% more - E12 - that translates into a 50% increase in demand! Senator Ben Nelson of Nebraska asks the EPA to look at 20-25% blends, like Brazil.  I love it when I read these type of articles, as it highlights exactly why the 'problem' we face in not running enough renewable fuels, doesn't come from technological issues, but more political will and leadership.  Obama is falling flat on his face in this regard unfortunately.  (See this article for more on how ethanol runs great in race cars, and the technical issues around converting gas motors.) 

For example, as ICIS reports, biodiesel producers, are basically bankrupt at this point, as congress still hasn't gotten its act together to pass the retroactive tax credit!  Now obligated parties (oil refiners) under the Renewable Fuel Standard (RFS), are just buying 'Paper' credits, instead of physical product, further exacerbating the situation.  So in effect, the 'mandate' that the RFS is supposed to have created, is doing little more than forcing oil companies to do more paper trading, for product that was produced last year, when we still had the $1.00/gal tax credit.  To quote: 

“The bottom line, there isn’t a 1.15bn market waiting in 2010” for the physical fuel, said Ron Marr, marketer for the biodiesel-producing Minneosota Soybean Processors. “The wet barrel demand for 2010 is looking more like 200 [m]-600m gal.”

It all comes down to economics, sources said. With the credit in place, biodiesel fuel prices averaged $839/tonne for the first seven months of 2009. After the $1/gal blending subsidy for biodiesel expired in December 2009, the fuel price rose to an average $948/tonne (€749/tonne) between January and July 2010.

According to the Energy Information Administration, 'US Production of ethanol-blended gasoline hits record.'  This equals 5.01 Million barrels per day.  Gasoline suppliers decide to blend based on the economics of gas vs ethanol, incentives, and mandates.  There is much talk on the 'hill' now about US Blended ethanol and the Volumetric Ethanol Excise Tax Credit, (or VEETC) of $0.45 / gal. 

If the refiners margins are $0.31/gal ($2.00 gas - $1.69 ethanol), * 10%, + $0.45/gal, then the margin is still $0.4725 / gal for the oil refiners.  The ethanol industry takes so much heat for this VEETC credit, yet we don't see a dime! It all goes to the oil companies.  

Now Growth Energy is openly calling for the credit to be eliminated, in exchange for more E85 infrastructure.  Although I heard that them & the RFA had meetings to coordinate strategies, and then on the steps of the Capitol, Growth stabbed them in the back and said, "We changed our minds. Screw VEETC.  Way to be united guys.)

Personally I say great! Get rid of it, Let's go with the Fueling Freedom Plan *pic above* and stop funding the oil companies for blending, and blaming ethanol companies for taking subsidies.  The other part of the plan that I love is that they're calling for all cars to be Flex-fuel.  That's right, we can do it.  Ford & GM are building them today in Brazil, and since we - the American Tax Payer - Own GM after we bailed them out in 2008, they should be making cars that can run off of US Produced fuel, not imported oil. 

"In a fair and open market – one in which ethanol is an option for consumers – ethanol will succeed."  

In India, it seems that the Government has committed to deregulation of fuel prices. Price went up two rupees, or about $0.40 / gal overnight.

The California Energy Commission, announced earlier this month that they're finally spending the money slated for the Pearson E85 infrastructure buildout, on Propel's E85 buildout.  Much fanfare, as the article in ethanol producer magazine made headlines.  But readers of the B.I. know the real story, which is that the commission announced this for the first time back in February of this year, and little to nothing has happened in the meantime.  They postponed their most recent grant announcement again... by two months from the original deadline.  Not like we have any energy crisis going on right now or anything, right?  Jobs, anyone? No, no problem.

I was hearing the Ethanol tax incentives were to be included in the new energy bill.  But, of course this bill isn't going to pass, especially before the August recess next week, and the mid-term elections.  Sen. Klombuchar from Minnesota is taking the lead, claiming biodiesel credit could get tacked onto a small business jobs bill? But, again - none of these have a chance of passing.

As BP polices the gulf like a war zone, the cap seems to finally have worked at stopping the flow of oil into the gulf, and it couldn't be better timing, as Hurricane season really takes off.

While most US Citizens struggle to fill up at the pump, it's tough to see big picture, but I'll credit Post Carbon Institute for really providing perspective and vision on where we are at today in the peak oil transition.

"Three or four dollar a gallon gasoline may again become a reality in America before most people think and with it will come much harder economic times."

The Chicago Tribune ran an article over the weekend last week that really pissed everyone off here in the industry, titled: Enough Ethanol.  It might as well read: more oil!   They cite the Congressional Budget Office's completely misguided study released a couple weeks ago about,

"how much taxpayers provide in biofuel subsidies to reduce gasoline consumption. The bottom line: $1.78 for every gallon when the biofuel is made from corn. (That includes tax credits for petroleum blenders, plus lost revenues from excise taxes that otherwise would be collected.) Ethanol from cellulose costs a beyond-belief $3 a gallon in subsidies


Now, to retort - the 'tax credits for petroleum blenders' don't go to the ethanol producers.  It's an oxygenate, included in fuel to help meet ozone standards to protect the air we breathe, as per the EPA's clean air act.  It's renewable, not fossil, need we forget!? And corn-ethanol is a stepping stone to cellulosic, whose costs are being reduced dramatically as time goes on. 


The RFA's analysis of the report is telling.  CBO acknowledges ethanol has reduced petroleum imports and GHG emissions.  And its underlying assumptions about the costs are flawed to say the least.  For example, the calculation of energy content in ethanol versus gasoline, 


I'm hoping we'll be able to get over this hurdle, and compete with big oil to offer real alternatives.  But, it ain't easy being green!

-The B.I.

The Oil Keeps Spilling as Biofuels Co's Struggle to Stay Above Water

All,

It's been a busy couple of weeks.  As many of you may know, oil continues to spew out of the gulf of mexico, as oil hits the shores, and cleaning crews' efforts are hampered by bad weather.

We in the renewables fuels industry are also struggling to keep our heads above water.

According to reports, while the latest attempt to retroactively reinstate the biodiesel blenders credit failed along with the JOBS bill, the Governors Biofuels Coalition is committed to getting it passed.  Here's a sample of what they said at the latest National Biodiesel Board meeting:


The federal biodiesel tax credit expired in December. In the five years since it was enacted, the energy legislation has been highly effective, leading to:

• More than 150 biodiesel plants sprouting throughout the country
• 53,000 green jobs added to the economy
• Successful commercialisation of the first advanced biofuel in the US, made from a variety of agricultural byproducts and co-products

Meanwhile, retailers are struggling to stay afloat, as consumers face the sticker shock at the pump of $4.25/gal Biodiesel (B100) versus $3.00 Dino-diesel.  This is very misleading as well, since the price of petroleum benefits from all sorts of government subsidies...

Here in California, a State known for our 'greenies,' things have gotten so backwards, that we are actually going to be voting in November, on weather or not to keep the groundbreaking legislation AB32 in place - the bill which gave the State the power to regulate carbon emissions, and thus the controversial Low Carbon Fuel Standard, or LCFS.  Who is behind this referrendum, I don't know.  But I can guess...

Being described as a "job killer," it is claimed (in ethanol producer magazine noless) that reducing carbon emissions back to 1990 levels by 2020, is a bad thing because of the bad economy.  We could lose 1.1 Million jobs in the short term, apparently.  Which, I will say is nothing to sneeze at.  But, let's be honest - we can create new ones within a renewable energy economy.

Real leadership is what's needed, so that we can bridge the gap.  Dismissing these goals, if it's what the voters decide, because of bad economy, is just wrong.  Time and time again, the politicians are able to table debate on serious issues like climate change, by scaring us with the notion that we can't change or the "economy" will collapse and we'll all die.  I guess time will tell on this one...

All across the world, it seems, it's the same thing: Biofuels struggling to gain ground against the status quo.  In Germany: the 'stagnant renewable fuel sector' is warning that since tax breaks were removed in 2008/9, biofuels use has fallen to 5.4% of total fuel use in the country.

To quote: "There is no stable policy framework for biofuels and this is hurting their use.” 

We had Senator Chuck Grassley, of Iowa in to our offices today.  And he couldn't tell us why the biodiesel blenders credit hasn't passed yet.  Except that the Senate was busy in December debating Health Care, which doesn't take effect for another 5 years...  Nor could he say that the ethanol credit will be renewed this year, even though he's 100% sure it will.  (He said the same thing 1 year ago about the Biodiesel credit!)...

He said he may be able to help on India, where we're also trying to get the government to start blending biofuels, after they've said they would but the petroleum companies aren't.  (Sounds familiar huh?)

But man he got a bit worked up about having to defend ethanol all the time.  It's a clean, homegrown fuel that our farmers in the midwest make, and run in their trucks.  It creates jobs, and reduces pollution and climate change, and our trade deficit.  I mean, for years you didn't have to defend it.  But now you do, because enviro's want us all to ride bikes instead of in cars, all while the Chinese are trading in their bikes for cars!  E12, he said, will probably happen.  But, we haven't heard word 1 from the White House on the EPA's delays...  (& the leadership is where, exactly - Obama?)

Rest assured - I'm on the job.  Even though Congress, the Executive Branch, and the CA Energy Commission are all asleep at the helm!  (The CA Ethanol Producer Incentive Program question & answers were supposed to be posted yesterday - July 6th - but weren't.  I asked questions, and got no answers.  Yet...)

Perhaps they were too busy tooting their own horn? [California Energy Commission approves $114.3 million for electric and ethanol vehicle infrastructure]

Good news, by the way.  The e85 infrastructure grant may sound familiar to B.I. readers...  And I'm all for electric charging stations, but I happen to know that not a dime of this has actually been wired to the recipients yet.  So... seriously.  What's the hold up here?  Cart ahead of the horse?

And now, in honor of the Independence Day holiday, a little food for thought: Are Environmentalists 

Keep it here folks.  Be good to eachother.

-A.J. Walter

Governor Schwarzenegger Hosts Summit on Advanced Transportation

Governor Schwarzenegger Hosts Summit on Advanced Transportation

All, 

Tuesday, the B.I. attended the Governor's Mini-Summit on the Advanced Transportation Industry.  A rep from the company was invited to speak, and there were many representatives there from industry.   

After a preview of new 'zero-emissions' (even if they run off electricity generated by coal pwer plants...) vehicles outside beforehand, Governor Schwarzenegger gave opening remarks.  (video link & pics on Gov's site).  Of course, he made an off-the-cuff remark about how the Bush administration made a mistake by picking 'corn-fuel' as a winner, (7 minutes into video) which obviously didn't help us make our case.   

The purpose of the summit was to bring together industry leaders in electric/hybrid vehicle technologies and clean transportation fuels, and determine how to maintain CA as the leader in both R&D & manufacturing.  'Green is the new Red, White & Blue.'  

The first panel, CALSTART gave a good summary of the industry and how far we've come since '92, when they were founded.  With 200 companies now in the space in CA alone, such as Amyris in Emeryville, and Electric Vehicles Int. in Stockton.  There was much talk about S.B. 71, which proved sales tax exemption on biofuels renewable equipment purchases, which is still in limbo.  And some employee training programs, which are beginning to be utilized by the private sector (EVI).  (San Joaquin work-net & S.C.A.P. were also mentioned)  Presenters discussed why they moved their business to the State, (market opportunity), and progressive policy.  Quallion talked about the need for gov't support to compete with Japan & China in the lithion-ion battery market.  There were many comments after the panel, like ZAP car's CEO saying the State could sell it's gas vehicle and buy electric.  Or add medium-speed vehicle language into the States laws to allow more electrics.  Or at least get the university system buying them.  

The Governor's office of Economic Development (GoED)'s Joel Ayala spoke briefly about their purpose, which is basically to coordinate between all government agencies to help CA develop its economic opportunities.   They have reps from CalEPA in house, and many local municipalities to help streamlines projects apparently.  Could be worth reaching out to them.    

Matt Horten of Propel made some good remarks.  They moved their business to CA from Seattle a few years back, and he said that their focus on the 'last mile,' has been aided by partnering with stations that are close to State fleets.  AB118 support was mentioned by all as a priority. (We need to keep funding it & let the agencies allocate as they see fit).  Horten also said that the State needs over 900 e85 stations.  (currently we have 33 public ones).  Timelines are also important, and there needs to be more certainty around the government meeting them.  Also, facing the many permitting challenges for building stations, could be aided by more guidance & coordination from State agencies.  

Our COO presented on the second panel after a short break.  He basically defended ethanol's success, and outlined our strategy for integration of cellulosic.  Mentioned our grant application, stated support of AB118, and also took some shots at the LCFS and the indirect land use change provisions and underlying assumptions.  (see this article for more).  I think it was a great speech and definitely got the points across we wanted to without ruffling too many feathers.  

Other panelists echoed similar statements, i.e. Gov't needs to move faster, be decisive.  Pass policy and then get out of the way.  Waste Management discussed their Bio-L.N.G. (liquified natural gas) from landfills, and the potential to input into pipelines if reg's are amended.  We are currently sourcing most from TX.   Their MSW to fuel process through Linde is the lowest Carbon Intensity fuel out there.  And Lowenthal from Coloumb talked about the need for certainty in the market.  They Public utilities commission is apparently assessing the viability of the business model of charging residents for the power to charge their electric cars.  He suggested gov't not get in the way, more faster, and be decisive.  (They were awarded funds under AB118 back in Feb. '10, and have yet to see a dime...)  

Please comment and/or feel free to let me know if you have any questions.  

More to come!

-The B.I.