“The Roof is lifting” – the United States to inject $800 billion into climate, energy sectors as IRA 2022 passes to Biden for signing

August 14, 2022 |

Huge and positive news arrives from Washington, the US House passed the Inflation Reduction Act and it now crosses to the White House for President Biden’s signature, which is a foregone conclusion.

One of the Digesterati described the shift in momentum: “The roof is lifting off the renewable energy industry broadly with the IRA and the Infrastructure Investment and Jobs Act of 2021. The IRA and IIJA amount to more than $800 billion in climate and energy money.”

At the same, time, new details are emerging about the scope of the ACT and the benefits which it can bring to the advanced bioeconomy. Victory has a thousand fathers, yet a tip of the Digest cap is in order to: Kilpatrick’s Energy and Government Relations Practices, the AFCC membership, members of the Advanced Biofuels Association and its leadership, the Holland & Knight climate team, the Advanced Biogas Council, the Clean Fuels Alliance America, Airlines for America, the Coalition for RNG, Growth Energy and the Renewable Fuels Association.

Included in the Act are many new tax incentive provisions for SAF, hydrogen, Section 45 Q—carbon capture storage and use, energy storage, and so forth, A complete summary on that is here. In today’s Digest, we are going to focus on the $70 billion in  new funding for the DOE Loans Program Office, which has not received as much attention as it merits.

The Loan Programs Office

Since January 2021, there have been filed in the DOE LPO more than 85 applications representing more than $80 billion in senior debt requests resulting from the “reopening” of the LPO’s 5 funding programs (4 loan guarantee—renewables, clean fossil, nuclear and Native American, along with the direct loan ATVM) as a result of Section 9010 which Kilpatrick/AFCC drafted and lobbied into law as part of the Consolidated Appropriations Act of 2020 (enacted on December 27, 2020). These funds will assist the clean US energy and chemical industries stand up the significant new technologies that assist the US retain its leadership in the development of our new clean  energy, chemical and climate- based industries.

These first commercial funds are critical as many advanced bioeconomy companies are already in the LPO pipeline with applications or are in the midst of submissions—for SAF, renewable diesel, RNG, hydrogen, CCS, renewable chemicals, biobased products, among the first-of- a- kind products of many of the clean energy and chemical industries.

Longtime  guru Mark Riedy, who with John Kirkwood of Faegre Baker Daniels has brilliantly helmed the ABLC Finance & Investment Summit since 2010, said: “These funds open up tremendous opportunities for bioeconomy companies to stand up their commercial technologies, after AFCC and Kilpatrick drafted Section 9010, which we also lobbied into the Omnibus Appropriations Act of 2020 to “reopen” the DOE LPO.”  (Note: prior to the OAA, the LPO had not had an original closing since 2014 and now has 5 conditional commitments and 2 closings completed in the past 6 months with many more in process.)  Riedy added. “Currently, there are approximately 85 applications filed into the DOE LPO to date at $80 billion + in senior debt, of which Kilpatrick has filed 15 client applications of those 85 applications with another 4-5 + new applications being readied to file– amounting to more than $20 billion of this approximate overall $80 billion amount.”

The tax credits in practical use, The Velocys story

The SAF tax credits and associated incentives are expected to underpin the financing of Bayou Fuels, Velocys’ advanced SAF reference project in Natchez, Mississippi, US. Bayou Fuels is a planned cellulosic biofuels plant enabling the production of carbon negative fuel through the use of biogenic feedstock, renewable power, and carbon sequestration. The biorefinery will convert 3,000 tons/day of woody biomass forestry residues into 36 million gallons/year (nameplate) of renewable transportation fuels, predominantly SAF, with a negative carbon intensity. The biofuels produced will adhere to both the US Renewable Fuel Standard (“RFS”) and the Low Carbon Fuels Standard (“LCFS”) and earn additional incentives via the associated Renewable Identification Number (“RIN”) and LCFS credits.

As announced in November 2021, Velocys has already secured long-term offtake arrangements for 100% of the SAF output expected from the Bayou Fuels facility with Southwest Airlines (a 15-year agreement) and IAG/British Airways (MOU for a 10-year agreement) avoiding 8.8 million tonnes of CO2 over the term of the off-takes. This new climate legislation is expected to allow finalisation of conversion of the MOU to a full offtake agreement.

Velocys CEO Henrik Wareborn commented, “the legislation passed in the US is of historic significance, putting the United States on a path to lower its emissions significantly by 2030, and beyond. We believe this landmark legislation represents a compelling model which other governments will seek to follow, in particular in its focus on total amount of avoided carbon instead of volume of sustainable fuel supplied.”

The tie-in to UK activities on SAF

The legislative development in the US follows last month’s launch by the UK Government’s Department for Transport of its Jet Zero Strategy, setting out the Government’s approach for achieving net zero aviation by 2050. Like Low Carbon Fuel Standards developed originally in California,  the UK mandate is to be expressed in terms of greenhouse gas reductions, rather than simple volume, which will benefit ultra-low carbon intensity projects. This includes an ambition for a minimum of five commercial-scale SAF plants to be under construction in the UK by 2025, and a mandate for the equivalent of at least 10% SAF to be blended into conventional aviation fuel by 2030.

Velocys and British Airways are jointly developing the ultra-low carbon Altalto project, which is to build a full scale plant in Immingham, UK, to make SAF from commercial and residential residual waste, in anticipation of UK policy incentives competitive with those announced by the US.

Reaction from the stakeholders

Michael McAdams, President of the Advanced Biofuels Association: “Congress passing the IRA is a significant step toward achieving President Biden’s national climate ambitions. It is undoubtedly the single largest law Congress has ever enacted to combat climate change.

“This comprehensive bill offers a suite of meaningful policy directives that will enable the advanced biofuels industry to better reach its fullest potential, including long-term tax policy, new financing and grant resources at DOE, USDA, and DOT, and increased federal resources for EPA to administer the Renewable Fuel Standard. We support all of these provisions. Together, they comprise the integrated strategy necessary to achieve meaningful carbon reductions in the United States.

“Yet, ABFA will not be resting on our laurels. There is still much work to be done to ensure that low carbon industries reach their fullest emissions reductions potential. We look forward to engaging with the EPA about upcoming Renewable Volume Obligations rulings and related issues, such as feedstock supply and emerging technologies, to ensure a cleaner, more sustainable future for all.”

Clean Fuels Alliance America: “Cleaner, better fuels like biodiesel and renewable diesel are essential to America’s economy and environment. They support good-paying jobs, reduce fuel prices and the cost of transporting consumer goods, and cut carbon emissions by an average 74%,” stated Clean Fuels’ Vice President of Federal Affairs Kurt Kovarik. “We appreciate Congress providing our industry long-term certainty in tax policy, and we thank Representatives Cindy Axne and Angie Craig for their tireless advocacy of the biodiesel tax credit, as well as Chairman Richard Neal and Representative Mike Thompson for supporting its inclusion in today’s legislation.”

“We applaud the new Biofuel Infrastructure and Agriculture Product Market Expansion, which will build on the success of USDA’s current infrastructure grant program,” Kovarik continued. “As our industry looks to continue growing and sustainably meeting America’s need for affordable, clean energy, these grants will help our industry deliver cleaner, better fuels directly to consumers.”

The American Biogas Council: “Before this bill, our industry had only benefitted from short one- to two-year extensions of a tax credit that served one sector of the biogas industry. While trying to attract investment to projects that take years to build and competing with other industries with long-term tax credits, this was not a long-term solution. For the first time, this bill gives developers and financiers certainty and a competitive edge that will fuel growth of the biogas and clean energy industries for years to come.

“While the U.S. has 2,300 operational biogas systems, only about 15 percent of the potential for the biogas industry in the country has been realized. Meanwhile, we produce 65 million tons of food waste, manure and waste from 8 billion cows, chickens, turkey and pigs, and more than 11 trillion gallons of wastewater each year. We must build more biogas systems to recycle this material into baseload renewable energy and soil products, and we can do so 24 hours a day and 365 days a year with 95 percent reliability.

“For the first time, the system of tax credits in the bill supports all biogas sectors: wastewater, farm, food waste, and projects that produce renewable electricity, renewable natural gas, and renewable heat. Plus, the additional $1.965 billion to support the existing Rural Energy for America Program (REAP) will help our industry work with agriculture to increase sustainability and productivity.

“While many have been supportive of the biogas industry, at this time, we would like to give a special thanks to Representatives Ron Kind (D-WI-03) and Tom Reed (R-NY-23) and Senators Sherrod Brown (D-OH) and John Thune (R-SD). They have fought for the biogas industry for years to create a level playing field so we can compete in fair markets with fossil fuel and other renewable energy sectors.

“We look forward to President Biden signing this landmark bill and are excited to engage the administration and other leaders to secure a clean energy future in the U.S.”

Joe Britton, Executive Director of the Zero Emission Transportation Association: “With the passage of the Inflation Reduction Act today, we are one step closer to creating millions of good paying American jobs, lowering consumer energy and transportation costs, and protecting tens of millions of Americans against dangerous emissions and unhealthy air caused by tailpipe pollution. On behalf of ZETA, I’d like to sincerely thank the White House and Congressional leadership for their tireless efforts to enact this law, as well as the many electric vehicle champions in and out of government who have contributed considerably through the years to securing policy support for the zero emission vehicle sector.

“We’ll continue working with our federal partners to ensure smart and expedient implementation of this law, and do our part to ensure Americans know about and take advantage of the transportation electrification it makes possible.”

The American Coalition for Ethanol: “This far-reaching legislation Congress sent to the President’s desk will provide half a billion dollars for E15 and E85 infrastructure, invest a whopping $18 billion to support climate-smart agriculture practices which help reduce the carbon intensity of ethanol, reward fuels like ethanol with a new clean fuel production tax credit based on carbon intensity, establish a new sustainable aviation fuel tax credit based on carbon intensity, and give a big boost to projects which capture and sequester carbon.

“While this bill does not contain everything on our wish list, it does contain some incredible incentives for farmers and ethanol producers looking to capitalize on carbon intensity and we encourage the President to sign it into law, so farmers and ethanol producers can continue innovating and playing a meaningful role in helping combat climate change.”


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