RFS: It’s Not Perfect, But It’s Working

October 11, 2011 |

By Brent Erickson, Digest columnist and Executive Vice-President, BIO Industrial and Environment Section

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.

Nevertheless, there is some impatience and disappointment that cellulosic biofuel production has not grown fast enough to meet the aggressive RFS goals. A new report from the National Academies on the RFS is stoking this sentiment. The report is a nuanced examination of the current state of advanced biofuel development; unfortunately, it is marred by some significant errors of fact. It shouldn’t convince anyone to discount advanced biofuels just yet. If we look closely, 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.

The National Academies report takes a good hard look at the challenges facing the cellulosic biofuel industry – primarily, the growing and harvesting of sufficient biomass resources and the formation of capital to construct new biorefineries. Unfortunately, it draws the erroneous conclusion that these challenges cannot 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 389 new biorefineries, ranging from 20 million to 200 million gallons per year in nameplate capacity, by 2022 to meet the volume requirements under the federal Renewable Fuel Standard (RFS). The total capital cost was projected to be more than $95 billion. Let’s face it, we are talking about creating an entirely new energy infrastructure from the ground up, and that is a massive and important undertaking.

That high hurdle has prevented the industry from meeting the overall cellulosic biofuel mandate numbers. Biofuel producers’ ability to raise capital – in particular debt capital – has 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 that has not deterred pioneering companies from moving forward with the first projects. Abengoa, INEOS Bio, and POET have all made significant progress in securing the funding and the feedstock supplies to begin construction on commercial-scale advanced biorefineries. Each of these projects represents a unique technological approach to solving the challenges. Additional projects that are currently moving from demonstration to commercial scale will bring new approaches on line as well.

That’s the beauty of the RFS. The large volume of the advanced biofuels mandate of the RFS permits a number of technologies, feedstocks and strategies to compete for market space, depending on their ability to achieve cost competitiveness and meet end-user needs. I believe the RFS could have been better structured to anticipate the emergence of the full range of advanced feedstocks technologies, such as algae-based biofuels and other new sources of biomass that can be commercialized in the near future, by providing a path for these fuels to qualify under all appropriate categories. BIO continues to work with EPA to ensure RFS implementation maximizes opportunity for such emerging technologies. The RFS also contains a mechanism to adjust for the shortfall in cellulosic biofuel production, and that mechanism has been consistently implemented through the initial years.

In addition to its “glass-half-empty” (or 99 percent empty) view, 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. Errors of fact such as this contribute as well. Consistent, long-term federal commitment to the goals of the RFS is vital to continued investment and commercialization progress. Businesses bringing innovation to the commercial marketplace need certainty and stability to flourish.

The NAS report also said we need to continue research. 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 with building modern biorefineries and creating a new biobased economy.

The industry and other stakeholders need to consistently remind policy makers that those goals are worth pursuing. Energy security affects both national security and prospects for renewed economic growth. The advanced biofuels industry has been saying for years we are ready to commercialize. Now commercialization is becoming a reality and it would be an act of folly to pull the rug out from under the industry at this critical juncture.

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Category: Columnists, Policy

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