Following up on Marlo’s post yesterday concerning the difficulties of bringing cellulosic ethanol to market, the Wall Street Journal wrote an editorial about the (lack of) fuel, and EPA’s decision to require refiners to buy ‘credits’ — Cellulosic Ethanol and Unicorns:
The EPA set the 2011 standard at six million gallons. Reality hasn’t cooperated. Zero gallons have been produced in the last six months and the corner isn’t visible over the next six months either. The EPA has only approved a single plant to sell the stuff, operated by Range Fuels near Soperton, Georgia. The company used to be a press corps favorite and has been lauded by the last two Presidents, but it shut down its cellulosic operations earlier this year to work through technical snafus.
For some reason, utility contracts in Scotland are written such that companies are paid for energy that the utility cannot use. In this case, The Telegraphestimates that the payments were worth up to 20 times the actual value of the electricity under normal conditions:
The payments, worth up to 20 times the value of the power they would have produced, raises serious concerns about such subsidies, which are paid for by the customer.
The six Scottish wind farms were asked to stop producing electricity on a particularly windy night last month as the National Grid was overloaded.
Their transition cables do not have the capacity to transfer the power to England and so they were switched off and the operators received compensation. One operator received £312,000, while another benefited by £263,000.
T. Boone Pickens went on Bloomberg to discuss the Pickens Plan:
Pickens claims that Koch is working for himself, while the pure hearted T. Boone Pickens is working for America. Now yes, Koch Industries has a financial incentive to not support federally built infrastructure for a fuel that competes with a product that he sells, but it also clearly aligns with a free-market perspective of not providing federal support for any particular energy sources. Furthermore, if it wasn’t obvious, Pickens would stand to make tons of money from increasing the use of natural gas in America, so its beyond disingenuous to pretend that he is solely “doing good.” [click to continue…]
Well, what many predicted has come true, subsidies for ethanol aren’t actually going away:
Ethanol advocates Sens. John Thune (R-S.D.) and Amy Klobuchar (D-Minn.), meanwhile, won multi-year extensions of tax credits for producing “cellulosic” ethanol — which isn’t made from corn — and installing ethanol blender pumps at gas stations.
The deal will steer $1.33 billion — two-thirds of the savings from ending the blenders’ subsidy — into deficit reduction, while the balance of $668 million would support the other incentives, according to the lawmakers.
Any rational proposal for the future of ethanol should aggravate industry trade groups, and they’re predictably cheer-leading about how they’re being fiscally responsible, fueling our freedom, and all that other nonsense. It seems as if they saw the light at the end of the tunnel was fading fast, and they hopped on a train that would funnel a remaining 600 million into the industry. [click to continue…]
We recently posted about the EPA’s decision to reduce the cellulosic ethanol blending requirement from 500 million gallons in 2012 to somewhere between 3.45-12.9 million gallons, which is 0.69- 2.5 percent of the original “mandate.”
Via Greenwire ($ubscription required), we see that refiners are still required to purchase “credits” from EPA indicating that they are complying with the mandate, despite its impossibility:
The proposal fine-tunes blending mandates for 2012 called for by the federal renewable fuel standard, and EPA said yesterday it expects to require a total use of between 3.45 million and 12.9 million gallons of cellulosic biofuels next year. Officials said the final figure could come out to more or less than the 6.6 million gallons required in 2011.
Charles Drevna, president of NPRA, said given that EPA’s own data show the ethanol industry has produced no qualifying fuel in the past year, the requirement for blenders to either use the fuel or pay EPA about $1 per gallon for a credit makes no sense. [click to continue…]
Under attack from almost everyone these days, the ethanol industry has been digging deep to find ways of convincing America that they really are the best. They’ve been running advertisements everywhere claiming that ethanol (and presumably, federal ethanol policies) have helped to keep the price of gasoline up to $0.89 per gallon cheaper in 2010. They commissioned a report from the Center for Agriculture and Rural Development at Iowa State University. The report itself merely updates similar research from past years, the original study can be found here. The abstract (of the 2010 report):
This report updates the findings in Du and Hayes 2009 by extending the data to December 2010 and concludes that over the sample period from January 2000 to December 2010, the growth in ethanol production reduced wholesale gasoline prices by $0.25 per gallon on average. The Midwest region experienced the biggest impact, with a $0.39/gallon reduction, while the East Coast had the smallest impact at $0.16/gallon. Based on the data of 2010 only, the marginal impacts on gasoline prices are found to be substantially higher given the much higher ethanol production and crude oil prices. The average effect increases to $0.89/gallon and the regional impact ranges from $0.58/gallon in the East Coast to $1.37/gallon in the Midwest. In addition, we report on a related analysis that asks what would happen to US gasoline prices if ethanol production came to an immediate halt. Under a very wide range of parameters, the estimated gasoline price increase would be of historic proportions, ranging from 41% to 92%.
Today the EPA announced its proposed 2012 Renewable Fuel Standard requirements:
The Energy Independence and Security Act of 2007 (EISA) established the annual renewable fuel volume targets, which steadily increase to an overall level of 36 billion gallons in 2022. To achieve these volumes, EPA calculates a percentage-based standard for the following year. Based on the standard, each refiner, importer, and non-oxygenate blender of gasoline or diesel determines the minimum volume of renewable fuel that it must ensure is used in its transportation fuel.
The proposed 2012 overall volumes and standards are:
As was widely reported, the Senate voted last week on a bill that would terminate the ethanol tax credit and corresponding tariff. While many were excited by the prospect of finally moving towards better energy policy, it seems likely that things will still get worse before they get better. The ethanol industry does not seem worried.
Consider the following: John McCain (R-AZ) offered additional legislation, while the Senate was voting down the tax credit, that would have ended federal subsidies for ethanol fuel pumps at gas stations. This was voted down 41-59:
“It lost because of the influence of the ethanol lobby,” McCain said on Fox News Thursday, alleging ethanol “is probably the greatest rip-off that I’ve seen since P.T. Barnum.
In what is being described as an ambush, Senator Tom Coburn (R-OK) has successfully forced a vote (next Tuesday, June 14) on legislation that would, upon July 1, terminate the ethanol tax credit and corresponding tariff. A back of the envelope calculation suggests it would save approximately $3 billion in the remainder of 2011.
According to the article, Coburn is cautiously optimistic that he has 60 votes. Politico gets it right, this is a big deal regardless if it passes:
Today The New York Times ran two dueling opinion pieces featuring Robert Bryce, author of a number of books, and Tom Friedman, who chose this column to unleash his inner Paul Ehrlich. The latter column will make regular NYT readers anxious and depressed, the former will make them angry.
Bryce argues that though wind and solar farms do not produce emissions, they require a whole lot of land, significant natural resource inputs, and new transmission lines. He believes that these shortfalls are under appreciated by renewable energy proponents, and the scaling of renewable energy might have other environmental consequences. California appears to have plenty of land, but that is to meet a 33% renewables goal, which is unlikely to satisfy environmentalists, and California has much more land than other states. The takeaway is that all energy choices have their tradeoffs:
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