Time for a Bioenergy Reset?

By Douglas L. Faulkner, “The Cleantech Conservative”

Secretary of State Clinton famously called for hitting the “reset” button in our relations with Russia at the start of the Obama Administration. I believe it is time to call for a reset in our bioenergy policies.

It’s easy now to forget that not too long ago the Bill Clinton and George W. Bush Administrations, joined by supportive Congresses, pursued the goal of ending our reliance on ever-growing imports of oil through expanding bioenergy production beyond a reliance on first-generation feedstocks. That old bipartisan dream of a robust bioenergy future is clearly on life support, mortally wounded by low oil prices from the fracking revolution and softening demand for fuel from ever more efficient internal combustion engines.

What could change this complacency over energy and reinvigorate public support for expanding advanced biofuels? Frankly, it’s a harder sell than ten years ago – – even five years ago – – in the face of surging U.S. dominance in global oil markets. There’s also the strong headwinds from the left’s suspicions that biofuels serve to extend the life of petroleum fuels as well as the growth of conservative backlash against crony capitalism, over-reaching government, mandates, subsidies and the frightening federal debt.

A bulwark against oil market instability

My conclusion is that the main argument now for re-focusing on advanced biofuels is to give this country and its allies a bulwark against oil market instability a decade or more out, when the fracking revolution may have peaked. This actually parallels the underlying thrust of the recent National Petroleum Council recommendation for increased drilling in the Arctic. The report highlights the huge potential for oil and natural gas production in the Arctic as well as the long lead times for moving to actual production. It calls for starting Arctic exploration now to give the U.S. time to adjust to the eventual decline of lower 48 production over the next two decades. It contends this would play an important role in extending U.S. energy security in the 30’s and 40’s, since the timeframe for developing significant Arctic fossil fuel resources would be one to three decades.

Given the enormous logistical and political hurdles that the Arctic drilling frontier faces as well as the slowness and unpredictability of penetration into the vehicle markets by electric or fuel cell vehicles and the potential for major shifts in global supply and demand, policymakers should look also to the additional insurance policy offered by next generation fuels. Providing time for the advanced biofuels industry to mature would also allow the climate debate to settle out and highlight the important long transitional role for advanced biofuels in reducing greenhouse gases.

A clear sunset date

But, I also suggest actions to achieve this goal should avoid expanding federal support. In fact, to clinch the deal for an extended mandate in this political climate, the advanced biofuels industry will need to articulate a clear sunset date. If the industry cannot become economically competitive by a date certain, then all should agree that there would be no reason to continue federal government interference in the marketplace. This would help mute conservative opposition to a new mandate.

As part of the overall deal, first generation biofuels may need to be de-coupled legislatively from the fledging advanced biofuels sector. The two groups face such different needs and challenges – – and those will diverge even more over the next decade than in the last ten years. Corn starch ethanol and soybean biodiesel leaders will also have to recognize their mandates probably will not continue indefinitely as currently crafted – – and the reality is these mandates may not even be necessary at all. The challenge is to plan for a gradual weaning off of the national mandate and eventually meeting markets head-on, like the renewable chemicals industry already.

The uncomfortable truth is that the auto industry needs the extra octane boost for its vehicles of the future and there is nowhere else to get it for the next decade or so, except from corn ethanol, with or without the current Renewable Fuels Standard. In any event, crop surpluses of main commodities need to be addressed mainly through future Farm Bills and other agricultural policies, with an eye to the reality of growing global demand, including those countries battling hunger and malnutrition.

A narrow window for action

The advanced biofuels industry has a narrow window for action, probably up through the early years of the next Presidency. Failing to reform the current Renewable Fuels Standard and restore a more supportive federal assistance overall will likely lead to the industry withering on the vine and unable to be a trusted agent for policymakers seeking to construct a viable, balanced approach, particularly given the long lead times for new energy infrastructure.

Who needs biofuels? The world will in the near future – – and a lot more than now available from non-food, sustainable feedstocks. The world we envisioned in 2000 or even 2007 when the last RFS was passed has changed so fundamentally as to make its assumptions obsolete. Taking a clear, long-term view on complex subjects is hard for elected officials focused on short-term election cycles, for legacy industries with huge sunk investments, for farmers facing hard times and for consumers satisfied with the status quo.

But, that has always been the nature of the challenge in making national energy choices, absent a crisis. Making that case about the need to recognize and address a coming crisis is the advanced biofuels’ industry challenge, especially with the Iowa caucuses looming and the race for the White House heating up. It is high time to hit the reset button on our government’s whole approach to bioenergy.