DOE Secretary Chu breaks with Obama over energy policy; aviation turns to China for biofuels capacity development

In Washington, the US Secretary of Energy, Dr. Steven Chu, broke with Obama administration renewable energy policy, telling stunned alternative energy developers at a recent meeting on alternative fuels that “if it were up to me, I would put every cent into electric cars,” according to a source present at the meeting.

The Department of Energy has closed $1 billion this year in loan guarantees for all-electric luxury sports cars while releasing less than $20,000 as of last month in ARRA funds for biofuels, according to previous reports in the Digest.

Meanwhile, the global aviation industry, which has set a target of 3 billion gallons of aviation biofuels by 2020, has begun an historic shift in focus to Chinese leadership in biofuels capacity development, with Air New Zealand CEO Rob Fyfe traveling to Hong Kong to blast global leaders for investing “enormous resources the world over in debating climate change regulatory frameworks and yet failing to take even the most basic steps to actually reduce emissions.”

In related news, Boeing confirmed that it has commenced talks with the Chinese Academy of Sciences and “several Chinese universities” about a potential development of low-carbon aviation biofuels. CCTV is reporting that near-term opportunities for collaboration between Boeing and China’s alternative energy industry could focus on jatropha development in Yunnan, Sichuan and Guizhou provinces and Guangxi Zhuang autonomous region. According to Xinhua News Agency, China is projecting “13 million hectares of biofuel plantations by 2020,” primarily to meet increased internal energy needs.

Meanwhile, a meeting of leading biofuels scientists has been called in Beijing this fall that will provide advice to Chinese ministries preparing for an upcoming state visit of US President Barack Obama, with energy issues reported to be high on the agenda for the summit meeting. The US President, whose official policy calls for strong investments in solar, wind, and biomass as well as electric car infrastructure, and whose administration is the largest shareholder in the largest US maker of flex-fuel vehicles (General Motors), will head to China with his energy message in potential disarray.

Both aviation and biofuels industry leaders have expressed concern that the capacity to manufacture the advanced, drop-in biofuels along timelines required by the aviation industry and emissions policy, will require state intervention to provide, and according to energy lobbyist Curt Rich, “no biofuels project is going to get a DOE loan guarantee based on the current DOE interpretation of US energy policy.”

“Policy discussions and the hand-wringing over agreeing to emission reduction targets are interminable and they are distracting us from the far more important focus of taking action,” charged Air New Zealand CEO Fyfe,” referring to a global problem rather than merely the US energy policy implosion. “This is simply a travesty. To my mind, the UN climate change discussions amplify all that is wrong with global politics. Whether under the Framework Convention on Climate Change, ICAO or elsewhere–it’s the same procrastination; multiple conferences of many thousands; turgid presentations and inequitable albeit politically acceptable backroom deals determining the shape of unwieldy global agreements at a glacial pace.”

Frye added: “I am very happy to see a price on carbon–it should be applied equitably across geographies; uniformly across all industry sectors; and it should incentivize improvement and investment in new green technologies rather than simply penalize all activity. I look forward to the day when we all stop protecting our respective butts in the endless policy debates and start focusing, globally, on concerted action.”

The remarks came as Air New Zealand highlighted a 10 percent increase in fuel intensity since 1995 and pledged to reduce another 15 percent by 2019. But the remarks highlighted increased frustration among biofuels stakeholders at the pace of fuel development, and stakeholders have said that the lack of a constructive, stable carbon policy is the single most important inhibitor in the development of alternative fuels.

At a recent CAAFI meeting in Washington, FAA Aviation Fuels Specialist Mark Rumizen noted that the industry is set to win ASTM approval by 2010 of alternative fuel specification D7566, which covers synthetic hydrocarbons using the Fischer-Tropsch method, produced produced from coal, gas and biomass. Boeing confirmed last week that the Bio-SPK alternative fuel specification is on track for approval by 2011.

Last week in Canada, the CEO of the International Air Transport Association (IATA), Giovanni Bisignani, said that the industry has set a 6 percent biofuels target for 2020, and would improve emissions by 1/5 percent per year between now and 2020. But the industry, which is facing carbon taxes in the EU of as much as $10 billion per year commencing in 2012, finds itself caught between the carbon penalties imposed for inaction on emissions, and the inaction on building up capacity for advanced aviation biofuels.

Glenn Tilton, CEO of United Airlines said in a recent speech, “We’re willing to step up and be the [biofuels] buyers. Volatile increases in fuel costs devastate the industry’s bottom line. We are actively supporting and seeking funding for this work. We are working with relevant government agencies and also with agricultural interests, universities, independent researchers and the military. With government bridging, private investment can take over.”

The bridge may well be found in China. In Part I of “Benjamins for Biofuels”, the Digest identified “Only Nixon (and Bioenergy projects) could go to China” as strategy #12 in raising money for biofuels developments. China’s Shanghai Alliance Investment recently became an investor in the US-based Solix Biofuels, in a leading indicator for what could become a notable trend. Especially if Obama administration energy policy continues to show signs of internal turmoil. In “Benjamins for Biofuels”, the Digest wrote:

In #9, we mentioned the Indian tribes, first encountered by Columbus as he sought out a faster way to get to China. There days, no one is finding a faster path to China than bioenergy project developers. If you haven’t had your passport stamped in Shanghai, Beijing, or Shenyang, time to hit the road and explore options. China’s capital accumulations, growth rate, and growing carbon problems (in this decade it became the world’s #1 CO2 emitter) make it a ripe target for hot technologies.

Update:

Dan Leistikow, Director of Public Affairs, U.S. Department of Energy, writes: ” I can’t verify the quote you are using from an undisclosed source at an undisclosed meeting, which is at best wildly out of context.  Secretary Chu talks about the potential of biofuels in nearly every public speech, as well as on Facebook and Youtube.    More importantly, Secretary Chu is providing nearly $800 million in Recovery Act funding to develop and deploy the next generation of biofuels, which he believes must play an important role in our transition to a clean energy economy.  He also recognizes how important it is to develop more advanced and efficient batteries, and make sure America’s auto industry can lead in the production of plug-in hybrids and electric vehicles.  Anyone who has spent five minutes listening to Secretary Chu also knows he is one of the country’s staunchest advocates for pursuing a broad portfolio of clean energy research, and has warned against investing all our resources in a single technology to the exclusion of all others.

“Secretary Chu has been keenly interested in biofuels since well before he joined the Obama Administration.  As Director of the Lawrence Berkeley National Laboratory, he helped focus more of the lab’s scientific work on finding alternative energy sources.  He pursuaded some of the finest researchers in physical biosciences and materials sciences that solar-based liquid fuels, either in the form of biofuels or through artificial photosynthesis, represent one of the best near-term solutions for meeting our transportation energy needs. These researchers formed the core of the Helios initiative that resulted in the creation of both the Joint BioEnergy Institute and the Energy Biosciences Institute.”

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