Has renewable fuel development in the U.S. hit a brick wall, or at least a fork in the road?
After all, recent developments seem to point in that direction.
The U.S. Environmental Protection Agency (EPA) is looking at waiving the Renewable Fuels Standard (RFS) due to the recent harsh drought conditions in the mid-western U.S. this summer, which have driven up corn prices. At one point they hit nearly $8.50 a bushel – pretty far off the July forecast of $5.40 to $6.40.
Now, while that maybe good for commodity traders and rich agribusiness, it’s certainly not good for supplying conventional biofuels and food because the prices will be passed along to the consumer.
Meanwhile, despite seeing some progress on the advanced biofuel market with algae and various other non-food based fuels, the development of them remains stagnant.
On the flip side, there have been some exciting developments in the commercialization of renewable fuel development. Recent developments, including the U.S. Navy’s commitment to source half of their energy from renewables, point to the potential for big innovation for the biofuels market.
So it remains fitting that a group of advanced and conventional renewable stakeholders joined to fight for America’s Renewable Fuels Standard (RFS) recently.
“Fuels America is built around one core idea: renewable fuel is essential to the U.S. economy, our nation’s energy security, our rural communities and the environment,” noted former Congressman Jim Greenwood, President and CEO, Biotechnology Industry Organization (BIO) in the release.
“More than 400,000 American jobs are supported by renewable transportation fuel, and America leads the world in renewable fuel innovation. That is why Fuels America’s diverse membership has come together to reset the national conversation on renewable fuel, protect the progress that has been made and ensure that America’s Renewable Fuel Standard continues its success,” he said.
Despite intense lobbying from the renewable fuels industry, the question remains: where should renewable fuel development go from here? While it’s easy to say yes, we should develop them, or no, we should not, there are a few aspects everyone needs to consider in the broad picture:
1. The food vs. fuel debate: This is the cornerstone of many biofuel debates. Should we use the same materials that feed the human population to feed our growing need for energy? This drought has no doubt raised deep concerns as to whether biofuels (at least conventional) are a wise choice for providing for our energy needs.
Corn is often used to feed livestock, which is then turn to feed humans. Georgia Governor Nathan Deal noted a study from the University of Georgia showing the upward trend in corn prices in August cost chicken farmers in his region an extra $1.4 million a day. If conventional forms of biofuel expand, the pressure on prices will only increase. These concerns will need to be addressed if biofuels are to play an important role in the energy mix.
2. Advanced biofuels taking longer to develop: OK, so if conventional biofuels are not the best answer, then what about second/third generation, otherwise known as advanced biofuels? There are many advantages to advanced biofuels – like wood diesel and cellulosic ethanol – because they take advantage of other feedstocks. However, development of these technologies has been somewhat slow. The EPA released a report that the U.S. would fall short of its required production volume of next-generation biofuels. Even Shell and Iogen shelved building a cellulosic ethanol plant in Manitoba, Canada this year. While there is some promise with algae, in the short term, advanced biofuels will need to pick up the slack, in order to move U.S. biofuel goals forward.
3. The economic impact on the Mid-West: You can’t dispute this. The drought and resulting prices are having a strong economic impact for mid-western states. On a positive note, we are seeing a lot of bi-partisanship when it comes to developing a clean energy economy, especially in biofuels. For example, the blue state of Minnesota leads all of America with more than 350 biofuel fuelling stations, and ranks number four in ethanol production, according to the book Clean Tech Nation, (p 102-103). Meanwhile, in the Republican state of Iowa, Govenor Terry E. Brown has been a big supporter of renewable fuels, saying waiving the standard would be risky for the economy. Waiving the RFS in the heart of the midwest where many people are employed by both the biofuel and biodiesel industry is not necessarily good business or political strategy.
4. Security risks and the U.S. military’s commercialization of biofuels: If there is one strong case for biofuels that most people from all political stripes could agree on it’s this: Biofuels are a good bet for getting off of fossil fuels. U.S. citizens saved $50 billion in imported oil costs in 2011, while seeing a 25 percent drop in oil imports from the Gulf since 2000, Fuel America noted.
Even Vice Adm. Dennis McGinn (Ret.), President of the American Council on Renewable Energy (ACORE) noted, “America’s energy security and national security depend on expanding our renewable fuel sector.”
With the U.S. Navy targeting such a big increase in renewable energy usage, there is real potential to ramp up the commercialization next generation biofuels, specifically algae. If anyone can ramp up the speed to market, it’s the U.S. military, as seen in the past with internet technology and satellite communications. Thus, the U.S. military may provide a big boost for a stalled biofuels market.
5. Climate change & globalization: This is the big one. With many extreme weather events across the planet this year, and a new report suggesting increased global economic costs, the issue again has got people talking about the impacts of fossil fuels on our environment. Tie that with the rise of the middle class in emerging markets and there will be an increased need to fulfill the energy appetite of 9 billion people by 2050. Yes, electric vehicles are slowly gaining a foothold in the market, yet will need time to develop.
The question remains, with renewable fuels stuck in a fork in the road, where does it go? Concerns over food vs. fuel, and the slow growth of second generation renewable fuels would suggest the best days are long gone. However, the political weight of mid-west legislators, security concerns, the commercialization of biofuels thanks to the U.S. military, climate change, and feeding the energy appetite of a growing global population suggests renewable fuel’s best days are yet to come.
Take your pick. I am betting on the latter.