Long-awaited report finds next-wave biofuels unlikely to meet energy targets

A new National Research Council (NRC) report concludes that U.S. production of next-wave biofuels probably won’t meet renewable energy targets created in a 2007 law, and that the fuels face a slew of barriers to becoming cost-competitive.

The report, which also questions the environmental benefits of biofuels
overall, provides new political ammunition for critics of
biofuels at a time when federal energy subsidies are coming under
increasing scrutiny.

{mosads}“Absent major technological innovation or policy changes, the … mandated consumption of 16 billion gallons of ethanol-equivalent cellulosic biofuels is unlikely to be met in 2022,” the report states, noting the current absence of commercial-scale production.

The report to Congress — which drew immediate criticism from the ethanol industry — looks skeptically at biofuels and the promise of advanced, cellulosic fuels made from non-food crops, agricultural wastes and other sources.

A major 2007 energy law expanded the national Renewable Fuels Standard to require 36 billion gallons of biofuels in the nation’s fuel mix by 2022, and caps traditional corn ethanol — today’s dominant biofuel — at 15 billion gallons (a level that current production is already approaching) of the mandate.

The bulk of the mandate must ultimately be met with cellulosic ethanol and other advanced fuels that are required, under the 2007 law, to have a sharply lower carbon footprint than traditional gasoline and diesel.

But cellulosic ethanol production is already extremely far behind the escalating annual targets in the 2007 law, and the NRC authors aren’t bullish on the prospects that it will catch up.

The report states:

Although the government guarantees a market for cellulosic biofuels regardless of price up to the level of the consumption mandate, policy uncertainty and high cost of production might deter investors from aggressive deployment. Therefore, the capacity for producing cellulosic biofuels to meet the RFS2 consumption mandate will not be available unless innovative technologies are developed that unexpectedly improve the cellulosic biofuels production process and technologies are scaled up and undergo several commercial-scale demonstrations in the next few years to optimize capital and operating costs.

{mossecondads}Nor does the NRC panel see a clear path to cost competitiveness without heavy federal policy intervention or a price on carbon emissions, which has proven politically elusive.

“Only in an economic environment characterized by high oil prices, technological breakthroughs, and a high implicit or actual carbon price would biofuels be cost-competitive with petroleum-based fuels,” the report states.

It notes that an oil price of $111 per barrel — one of several modeled — would not provide a feasible market without certain “policy incentives.”

“A cellulosic feedstock market would be feasible under other circumstances, such as if the price of oil reaches $191 per barrel, if a carbon price makes the price of cellulosic biofuels more competitive, if government subsidy payments are high enough, or if government mandates are enforced at given levels of biofuel blending,” the report states.

However, the report also notes that there are several opportunities to reduce costs.

Elsewhere, the NRC report delves into the debate over the climate-friendliness of biofuels, which involves complex questions of land-use changes related to using various types of fuel feedstocks.

“RFS may be an ineffective policy for reducing global greenhouse-gas emissions because the effect of biofuels on greenhouse-gas emissions depends on how the biofuels are produced and what land-use or land-cover changes occur in the process,” it states.

It more broadly calls biofuels a mixed bag, environmentally, noting the potential for net benefits compared to petroleum as well as various drawbacks.

Several biofuels industry groups attacked the report.

“It is discouraging to see the National Research Council … miss an opportunity to cast the [Renewable Fuels Standard] in the proper light. The most glaring problem is the Council analyzed the ongoing development of the biofuels industry in a vacuum, as if these fuels are not displacing the marginal barrel of oil, which comes at great economic and environmental cost to the consumer.

“Congress was seeking a sober analysis of the RFS, and regrettably, this is not it,” Brooke Coleman, executive director of the Advanced Ethanol Council, said in a statement.