The national market for ethanol is fast approaching the saturation point, meeting just over 10 percent of gasoline demand. Where will the next generation of ethanol plants sell their product? In the meantime, markets for aviation biofuels are opening up.
The outlook for the biofuel industry is a mixed bag. On December 8, the Energy Information Agency (EIA) reported that in August ethanol, for the first time, exceeded ten percent of the nation’s gasoline supply (by volume), and now reaches more than 90 percent of the gasoline market nationwide. In addition, on November 29, the EIA released its first annual report on fuel ethanol production capacity in the U.S. It finds that the maximum sustainable production capacity, with 193 plants operating, has surpassed 14 billion gallons per year. Most of that ethanol is produced from feed corn. The Renewable Fuel Standard (RFS) caps ethanol made from corn at a maximum of 15 billion gallons. That is an impressive achievement in a relatively short amount of time to reduce U.S. oil dependence, advance U.S. energy security, and boost rural economies.
However, the RFS requires the production of at least another 21 billion gallons of cellulosic ethanol and other advanced biofuels and biodiesel by 2022, and, at the moment, there is no market for the additional ethanol. This is a real barrier to developing, financing, and building next generation cellulosic ethanol biorefineries. In January, the EPA approved increasing the concentration of ethanol in gasoline for vehicles produced in 2001 and later from E10 to E15 (15 percent by volume). This will certainly help enlarge the market, but as the December 8 EIA report notes, there are still many hurdles to overcome before E15 will be on sale at the corner gas station. Will the market open up in time?
There may be much less help from the federal government for the advanced biofuels industry moving forward if the following expiring tax incentives and tariff are not renewed by Congress before the end of this year:
Biodiesel and renewable diesel production tax credit ‐ $1.00/gallon
- Small agri‐biodiesel producer tax credit - $0.10/gallon
- Alternative fuels producer tax credit - $0.50/gallon
- Ethanol blenders tax credit – $0.45/gallon
- Tariff on imported ethanol – $0.54/gallon
In other news, Bloomberg news reported on December 2 that the Department of Energy had ordered the liquidation of the Range Fuels plant in Soperton, GA after it had failed to begin production of advanced biofuel. The plant had received as much as $156 million in federal loans and grants during the Bush administration. The plant failed for technical reasons.
Other biofuel news, however, is more positive:
- A number of commercial air carriers have announced commitments to purchase aviation biofuels in recent months, American Airlines being the most recent one this week.
- The U.S Navy and USDA announced on December 5 the largest purchase yet of biofuels.
- The Federal Aviation Administration announced on December 1 the award of $7.7 million in contracts for the development and production of advanced aviation biofuels.
- The USDA announced on November 30 a pilot program to provide crop insurance for camelina, an oil seed that is well-suited for the production of aviation biofuel.
These recent favorable announcements follow many others in recent months of major federal agency and civil aviation initiatives to accelerate the development of aviation biofuels.