U.S. Biofuel Production Increase – Fact or Wishful Thinking?

A recent study, released on 11 October, “Biofuel and Technologies” released by Pike Research states that the global biofuel market will double within the next decade to $183.3 billion from its current level of $82.7 billion, with ethanol production accounting for $78 billion of future worldwide biofuel production, while predicting that biodiesel production will reach $25.5 billion. Perhaps not surprisingly, Pike Research predicts that the US will become the world’s leading biofuel producer, accounting for 71 percent of alternative fuel by 2021.

Colorado-based Pike Research on its website defines itself as “a market research and consulting firm that provides in-depth analysis of global clean technology markets.”
How realistic a prediction is this? Many in the media are utilizing the company’s press release on the gist of the report, as one has to be a user to login even to find out the price of the report, which the website helpfully notes, contains 144 “Tables, Charts, Figures.”

So, is America about to go ever more green to raise ethanol?

Recent history would not seem to indicate so.

Biofuel production is now receiving substantial attention from the executive branch of the federal government. Shortly before his inauguration in January 2008 President-elect Obama promised to invest $150 billion over the next decade to develop biofuels, plug-in hybrid vehicles, renewable energy production and a skilled work force for clean technologies.

Obama has now made clean energy a centerpiece of his administration’s policy – during his State of the Union address on 25 January he said, “This is our generation’s Sputnik moment.

Two years ago, I said that we needed to reach a level of research and development we haven’t seen since the height of the Space Race. And in a few weeks, I will be sending a budget to Congress that helps us meet that goal. We’ll invest in biomedical research, information technology, and especially clean energy technology – (applause) – an investment that will strengthen our security, protect our planet, and create countless new jobs for our people. Already, we’re seeing the promise of renewable energy.”

Agro-fuels first rose to national prominence in the U.S. in the aftermath of the second oil crisis in 1980. Seen as a renewable energy source, many policy makers in Washington supported increased production of biofuels as a substitute for imported oil. In the last few years, with increasing political instability in the Middle East, and rising oil prices, biofuels are once again being promoted aggressively, but the majority of U.S. biofuel production remains largely ethanol. Another factor promoting ethanol production – perhaps more important than rising oil prices – was the farm crisis. In the wake of the decline of the Midwestern agricultural sector, the ethanol industry was seen a way of revitalizing Midwestern economies. As a result, given the important political interests involved, the ethanol industry received strong bipartisan political support in the U.S. Senate.

But the ongoing recession is impacting all aspects of federal spending, including such previously sacrosanct programs as defense and agricultural subsidies, and the future is murky indeed.

Aside from ethanol production, the U.S. federal government has been involved in promoting alternative fuels for slightly more than a decade. In 1998 biodiesel fuel use credits were included in the alternative fueled vehicle requirements for government and state motor fleets established in 1992. In 2000 USDA’s Commodity Credit Corporation Bioenergy Program was implemented. The 2002 Farm Bill included an Energy Title for the first time encompassing several biofuel provisions, including expanding CCC Bioenergy Program and Biodiesel Education Program. The same year Minnesota enacted U.S.’s first biodiesel mandate requiring at least 2 percent biodiesel in diesel fuel sold in the state by 2005.

The American Jobs Creation Act of 2004 established the first national tax credit for biodiesel at $1 a gallon for oil crops and animal fats and 50¢ a gallon for recycled fats and oils. The Energy Policy Act of 2005 mandated the renewable fuels standard (RFS) and included several biofuel provisions, including a 10¢ per gallon income tax credit for small agri-biodiesel producers, lasting to December 2008; a 30 percent tax credit for installing fueling facilities for “Alternative Fuel Vehicles,” including vehicles that run on at least 20 percent biodiesel and an extension of the national tax credit for biodiesel to December 2008.

The “Energy Independence and Security Act of 2007” set a “mandatory Renewable Fuel Standard,” requiring fuel producers to use at least 36 billion gallons of biofuel in 2022.
In October 2008 the federal interagency Biomass Research and Development Board issued its National Biofuels Action Plan while in June 2009 the House of Representatives passed the American Clean Energy and Security Act of 2009 by a margin of 219 to 212. The 1,200-plus-page H.R.2454 bill mandated an economy-wide carbon dioxide emissions cap 17 percent below 2005 levels by 2020, 42 percent below by 2030 and 83 percent below by 2050.

In May 2009 the Department of Energy announced plans to invest $786.5 Million in Recovery Act Funds in biofuels. Two months later the DOE announced $85 million funding for development of algae-based biofuels and advanced, infrastructure-compatible biofuels while at the end of 2009, the U.S. Departments of Energy and Agriculture awarded approximately $600 million in biorefinery funding, the bulk of it earmarked for pilot and demonstration-scale projects to help accelerate the commercialization process.

While the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 aggressively mandated biofuels to replace 20 percent of the U.S. petroleum gasoline consumption, or 36 billion gallons, Congress has struggled unsuccessfully to pass a comprehensive energy bill and many states have put renewable energy on hold because of the recession.

The well established corn ethanol industry agricultural lobby remains at present in the driver’s seat of U.S. renewable policy and is heavily subsidized. For years, the livestock industry was the main buyer of cheap and plentiful U.S. corn. With the 2005 ethanol mandate the government required that Americans use about 13 billion gallons of ethanol in 2010 and now, nearly one-third of U.S. grown corn is used in ethanol production, which in turn has had a significant impact on raising food prices.

So, is ethanol a good deal? Currently, its production consumes more energy than it generates.

Dr. David Pimentel, professor of ecology and agriculture at Cornell and Tad W. Patzek, professor of civil and environmental engineering at Berkeley, conducted a detailed analysis of the energy input-yield ratios of producing ethanol from corn. Pimentel added up all the energy used in growing corn – the fertilizer, the tractor fuel and tractor manufacturing, etc., plus the energy used by ethanol plants and found that making one gallon of ethanol uses the equivalent of about 1-1/3 gallons of oil. Given the rise in oil prices since 2005, the cost would be higher now. Pimentel concluded, “Ethanol production in the United States does not benefit the nation’s energy security, its agriculture, economy or the environment.

Ethanol production requires large fossil energy input, and therefore, it is contributing to oil and natural gas imports and U.S. deficits.”

Nor is corn-derived ethanol cost effective.

According to the Congressional Budget Office, producing enough corn ethanol to match the energy contained in a single gallon of conventional gasoline costs taxpayers $1.78. Even with those subsidies, which total about $7 billion per year, corn ethanol still only provides about 3 percent of America’s oil needs, hardly enough to wean America from its dependence on imported oil.

U.S. biofuels production has also become hostage to a massive anti climate change campaign, underwritten by America’s oil and coal, whose political influence has precluded Congress from passing any clean energy/climate bill.

So, is U.S. biofuel production about to double in the next decade?

The evidence seems against it at present.

Article by John C.K. Daly, appearing courtesy OilPrice.com.

photo: silk cut.