Is the Renewable Fuel Standard Helping Bring the Next Generation of Biofuels to Market?

For many supporters of the Renewable Fuel Standard (RFS), a key goal was to stimulate the development and use of low-carbon, next generation biofuels – to help reduce both U.S. petroleum dependence and greenhouse gas (GHG) emissions from the transportation sector. Has it worked?

There can be little doubt that the RFS has encouraged the development of next generation, low-carbon advanced biofuels. Hundreds of biodiesel plants are now online, with the capacity to produce more than two billion gallons of advanced biofuel per year. Each is meeting or exceeding GHG reduction thresholds of 50 percent or more compared to petroleum-based diesel.

This year, the first two commercial-scale cellulosic biofuel plants (INEOS Bio (Florida) and KiOR (Mississippi)) have come on line and are starting to produce biofuels. INEOS Bio is using agricultural residues and yard wastes to produce ethanol and renewable electricity, and KiOR is using woody biomass to produce bio-crude and drop-in fuels. They are expected to achieve life cycle GHG emission reductions greater than 80 percent compared to petroleum-based fuels.

Many more commercial-scale, advanced and cellulosic biofuel plants are under construction and scheduled to start up over the next 18 months. These include Abengoa (now building its first commercial scale facility in Kansas), AltAir (California), Cellana (Hawaii), Cool Planet Biofuels (Louisiana), DuPont (Iowa), Fiberight (Iowa), Fulcrum (Nevada), Gevo (Minnesota), Joule (New Mexico), Poet/DSM (Iowa), Sapphire (New Mexico), and Solazyme (Illinois).

These companies will use a wide variety of feedstocks - algae, woody biomass, yard waste, municipal solid waste, switch grass, corn stover, wheat straw, or they will use no biomass feedstock at all (e.g., Joule). And, they will also use a wide variety of new, advanced, energy conversion technologies. Some (e.g., DuPont, Gevo, Poet) will be producing advanced cellulosic biofuels from corn stover in conjunction with ongoing conventional corn ethanol production – making the most of existing supply chains, improved energy efficiency, and other complementarities. All of these projects will meet or exceed GHG reduction thresholds of 50 percent or more compared to petroleum-based fuels, and some will approach, meet, or exceed net carbon neutrality on a life cycle basis.

This is just a partial list of advanced and cellulosic biofuel projects now underway and nearing completion thanks to the ambitious Renewable Fuel Standard. Environmental Entrepreneurs reports (E2) there are 160 commercial-scale, advanced biofuel projects now planned, under construction or completed, representing almost $5 billion in private investment since 2007 and additional billions in public investment. Most of these projects will produce biodiesel, but the list also includes cellulosic ethanol plants and drop-in biofuel producers (e.g., bio-jet fuel and bio-gasoline). By 2016, E2 predicts that the United States will have an additional 0.6 to 1.1 billion gasoline equivalent gallons of new advanced biofuel capacity installed – if current trends and policies continue. This would bring the total U.S. advanced biofuel production capacity to 1.6 - 2.2 billion gallons. Combined, these projects will further accelerate GHG emissions reductions from the transportation sector.

Few, if any, of these projects would have been started were it not for Congress’s long-term, bipartisan commitment to renewable fuels and feedstocks research and development, public investments, and the Renewable Fuel Standard. Yet, even with this strong policy support, it has been a steep challenge to create this new bioenergy industry.

Just as the RFS2 was enacted at the end of 2007, the worst economic crisis in decades began. The tremendous economic uncertainty that resulted created a very difficult environment in which to find willing investors. Risk adverse lenders were hesitant to invest in what seemed to be expensive, unproven, new technologies that required large volumes of feedstocks from supply chains that did not exist. Progress was delayed.

The industry has done much to demonstrate its new capacities and allay the economic and technological uncertainties. But now there is mounting policy uncertainty about the future of the RFS and the commitment of the federal government. Will Congress pull the plug or change the rules after billions of dollars have been invested?