Report predicts increased growth in advanced sectors despite challenges

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, September 11, 2012

The United States’ advanced biofuels industry is poised to grow to 685 million gallons in capacity this year despite pressure to dismantle the federal renewable fuel standard and difficulties in financing commercial-scale plants, according to a new industry report.

By 2015, advanced biofuels capacity could reach up to 2.6 billion gallons, the annual accounting of the U.S. biofuels industry by the trade group Environmental Entrepreneurs (E2) found. Driving the growth in the sector are the federal renewable fuel standard, California’s low carbon fuel standard and significant federal investments, the group said.

“Biofuels companies have had a challenging year, from an investment and policy standpoint, but continue to develop technologically and commercially,” concluded the report, which was released Thursday. “Many first-of-kind facilities are beginning or under construction, proving the scalability of some technologies.”

This year’s capacity would be more than 200 million gallons greater than what E2 reported in 2011. Biodiesel — the first commercially available advanced biofuel — makes up much of the growth seen over the past year. Currently, 91 companies are converting waste grease, soybean oil and animal fat into biodiesel in the United States.

Seventy-four companies are working in other advanced biofuel sectors, such as cellulosic ethanol, renewable diesel and drop-in fuels. They will continue to play a smaller role in the next few years, but E2 expects a minimum of 27 new or retrofitted facilities to come online by 2015 beyond the existing biodiesel plants.

Overall, E2 predicts a low-end estimate of 1.6 billion gallons of advanced biofuels capacity and a high estimate of 2.6 billion gallons by 2015.

“A close inspection of production levels indicates that the advanced biofuel market has grown despite … challenges,” E2 wrote. “While this growth is slower than we anticipated in 2011, the market is moving toward great commercial production of many advanced biofuels.”

E2 describes itself as the “independent business voice for the environment” and partners closely with the Natural Resources Defense Council. For its report, the group received input from U.S. EPA, which this year set a goal of 1 billion gallons of biodiesel production and 8.65 million gallons of cellulosic biofuel under the renewable fuel standard.

The standard, which also caps corn ethanol production, has been vital in helping the advanced biofuels industry grow, E2 said.

“This standard has become the most important biofuels policy in the nation,” E2 wrote, “and as a testament of its effectiveness, many of the biorefineries coming online in 2012 and 2013 are direct results of the RFS.”

But E2 also said cellulosic ethanol will likely continue to come up short of the targets set out in the standard, which was revised in 2007 to require 36 billion gallons of overall biofuel production by 2022.

EPA, which has already significantly lowered the short-term targets for cellulosic ethanol, likely will have to continue adjusting the requirements, E2 said. Oil industry groups have sued EPA over the targets, saying they penalize refiners for not using cellulosic ethanol that does not yet exist (Greenwire, Sept. 5).

The lawsuits coincide with increased pressure by livestock industries and oil companies to revise or repeal the standard.

Despite that pressure, the government has continued to fund advanced biofuel projects, providing $1.77 billion since 2008, according to the Cleantech Group. The Department of Agriculture has provided $967 million, while the Department of Energy has provided $730 million.

California’s low carbon fuel standard, which requires a 10 percent reduction in the carbon intensity of the state’s transportation fuel sector by 2020, has also helped establish markets, E2 wrote.

Private investment — critical to cover the high capital costs of commercial-scale projects — continues to be an issue, E2 said.

“Given the policy uncertainty biofuels are facing, many small venture capitalists have re-coiled,” E2 wrote. “Many in biofuels are looking to the multi-national oil companies, in hopes that increased strategic investments made by these companies will provide the biofuel industry with the capital access it needs.”