DOE’s $603M investment in biorefineries falls far short of goals — IG

Source: Katherine Ling, E&E reporter • Posted: Friday, September 13, 2013

The Department of Energy’s investment of $603 million in efforts to spur commercial-scale integrated biorefineries has failed to hit the mark, so the program won’t produce 100 million gallons of advanced biofuels by 2014 and is at risk of more wasteful spending, DOE’s inspector general said in a report released today.

DOE gave cash to 15 demonstration-scale and commercial-scale biorefinery projects in 2006, 2007 and 2009 that were required to be operational in three to four years, but only one demonstration plant achieved the goal, the report says.

The main reason that these projects failed to achieve the goal — 40 percent of the projects were terminated after spending $75 million — is that none was technically ready for commercial-scale operation when money arrived, the report says.

The highest score the DOE Merit Review Committee gave projects seeking funding was “satisfactory,” the report says.

DOE preferred to do more pilot-scale projects and did a separate award program for 14 projects, but the 2005 energy bill specifically authorized funding for commercial-scale projects, so pilot projects didn’t meet the intent of the law, the report says.

The near-collapse of U.S. financial markets in 2008 and the sour economy that followed also delayed the program as projects struggled to find private investors that DOE requires. Several projects were put on hold for two to three years, the report says.

These issues are likely to continue to cause delays and wasteful spending, the report notes. They are also having an impact on DOE’s accounting for its 2009 stimulus funds, it says. One biorefinery project with stimulus grants was expected to create up to 750 construction jobs and 65 to 70 permanent jobs but had created 13 jobs as of June 2012 because of project delays due to financing, the report says.

Other projects are on track with job-creation estimates, the report notes. The audit also applauded steps DOE has taken to reduce risk in the program by releasing funds only after projects have reached milestones, relying on independent engineers to monitor and verify projects, and requiring more credible and validated data from projects.

DOE hailed the opening of its first biorefinery in July, and two other projects are nearing completion, but the IG said these were still only demonstration plants and didn’t meet the law’s criteria for commercial-scale facilities (Greenwire, July 31).

The IG recommended that the department validate technology for each stage of project development before awarding funds for the next stage, create a formal “lessons learned” report to document common issues and best practices, and conduct a “blue ribbon” review of a project failure.

DOE concurred with the recommendations and has already started to implement some of these actions including ensuring a technology has demonstrated at a small scale, like a pilot project, before awarding funding for the next step.