Aviation Industry an Enormous Growth Challenge for Biofuels

To meet the demand for sustainable aviation biofuels with algae, the industry would have to build a new plant every month for the next 20 to 30 years, Biojet Corp. Chairman Chuck Fishel noted during Tuesday’s General Plenary Session at BIO’s World Congress.

Michael Lakeman of Boeing put forward a more cautious goal of meeting 1 percent of jet fuel demand with biofuels by 2015. That would still require 60 million gallons, though, and from Boeing’s perspective, they must be truly sustainable.

Fishel still worries whether the airline industry is an attractive market for algae and advanced biofuels. Biotech companies can make more money by pursuing low-volume, high-value chemicals than high-volume, low-value jet fuels. So would airlines be able to compete for these sustainable solutions?

Navy Director of Operational Energy Chris Tindal, however, is far more certain about the Defense Department’s needs for sustainable biofuels, particularly from algae. The Navy has set a goal of using 50 percent renewable energy by 2020 and launching the Great Green Fleet by 2016. Currently, the military uses about 2 percent of all energy used in the United States, with most of that represented by transportation fuels. So, it is a niche market, but one that still requires cost competitiveness as well as a sustainable level of greenhouse gas emissions.

Navy Asst. Sec. Chris Tindal Speaking at the 2011 BIO World Congress

Tindal also made clear that what the Navy wants is to be able to pull into ports around the world to refuel with biofuels. Relying on a single large producer of fuel and a long worldwide supply line would recreate one of the problems with the military’s reliance on oil.

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Video of Plenary Sessions from BIO’s World Congress

BIO’s World Congress on Industrial Biotechnology held 6 plenary sessions, featuring Agriculture Secretary Tom Vilsack and DOE Asst. Secretary Cathy Zoi. Additionally, a World Economic Forum report on the Future of Industrial Biorefineries, detailing the potential economic contribution that industrial biotechnology can make, was presented by Novozymes CEO Steen Riisgaard. And a survey of the industrial biotech and advanced biofuel industry by McKinsey & Co. took the pulse of executives in the industry.

In the June 28 plenary session, DOE Asst. Sec. Zoi announces funding totaling $24 million for three algae biofuel research consortia.

During the June 29 plenary session, Ag. Sec. Vilsack indicated that the Obama administration supports biofuel development as a means of boosting rural employment and economic development.

Novozymes CEO Riisgaard followed Vilsack, saying that “converting biomass into fuels, energy, and chemicals has the potential to generate upwards of $230 billion to the global economy by 2020.”

Earlier that day, McKinsey & Co.’s Raoul Oberman presented the findings of a survey of the industry, including that more than half of respondents said there is currently insufficient capital to support growth of the industry.

Ways and Means Should Include Job Creation of Advanced Biofuels and Bioproducts in Green Jobs Leg

On Wednesday, April 14 the House Ways and Means Committee will hold a hearing on Energy Tax Incentives Driving the Green Job Economy. The focus of the hearing is to examine the effectiveness of current energy tax policy and identify additional steps that the Committee can take to ensure continued job growth in this area while at the same time advancing national energy policy focus on a discussion of current and proposed energy tax incentives. Witnesses for this hearing have not been announced and we do not know how much of the hearing will focus on transportation fuels however, energy tax incentives for biofuels and biobased products should be a significant area of focus for this round of green jobs legislation. These technologies are ready to deploy and create near term job opportunities.

Industrial biotechnology is the key enabling technology for producing biofuels and biobased products like bioplastics and renewable chemicals to aid in reducing our dependence on foreign sources of oil, thereby reducing greenhouse gas emissions. They also have the ability to crate jobs, jobs that are currently moving overseas due to their reliance on petroleum as a feedstock or more favorable economic or political environments.

The United States has invested considerable amounts of taxpayer dollars to try to revive our economy. Too often, though, the resulting jobs are being created overseas, as other countries invest in green technology deployment. As a result, the opportunity to improve our economic competitiveness is lost. The United States is a leader in the research and development of green technologies, but to maintain that lead we must invest in the companies that are putting that green technology to work in our economy. These industries have shed hundreds of thousands of domestic jobs over the past two decades, as petroleum producing countries have attracted more capital investment. For example, U.S. chemical and plastics companies have increased capital investment outside the United States by 32 percent over the past decade, while increasing investment within U.S. borders by only 2 percent.

The Renewable Fuel Standard (RFS) enacted as part of the Energy Independence and Security Act of 2007 sets the minimum level of renewable fuel that must be produced and blended into the US transportation fuel supply at 36 billion gallons by 2022. 21 billion gallons of that requirement must be cellulosic or advanced biofuels. Direct job creation from the advanced and cellulosic biofuels volumes in the RFS could reach 29,000 by 2010, rising to 190,000 by 2022. Total job creation could reach 123,000 in 2010 and 807,000 by 2022. Jobs will be across many sectors of the economy. Some projected job creation sectors are: labor/freight, mixing and blending machine operators, shopping/receiving/traffic clerks, truck drivers, chemical equipment/technicians, chemical plant/system operators/electrical, sales etc.

The Ways and Means Committee can aid in accelerating this job creation by incentivizing biorefinery construction here in the United States. In 2008 Congress enacted a cellulosic biofuels production tax credit and enhanced depreciation for advanced biofuels facilities as part of the 2008 Farm Bill, both of which are scheduled to expire on December 31, 2012. Due to an overall downturn in the worldwide economy, this tax credit has not yet been utilized by cellulosic biofuels producers. This credit needs to be extended now in order to signal to investors that a plant being constructed this year, will have certainty in the availability of that tax credit once the plant begins to produce the advanced biofuel. A tax credit that expires before or shortly after production begins, does not create economic security for a yet to be built advanced biofuel biorefinery looking for funding. Furthermore, capital costs for construction of next generation biorefineries, which utilize renewable biomass to produce next generation biofuels and biobased products, are a substantial barrier to commercialization. Congress should provide an investment tax credit to help accelerate construction of next generation biorefineries and speed deployment of next generation fuels, chemicals and products.

Historically, the U.S. chemicals and plastics industry was the envy of the world. At its peak in the 1950s, the industry was responsible for over 5 million domestic jobs and a $20 billion positive trade balance for the United States. Jobs associated with the industry were typically among the highest paid in U.S. manufacturing. However, the petro-chemicals and plastics industries are now hemorrhaging jobs overseas. Conversely, biobased products and chemicals production, like domestically produced biofuels, will stay in the U.S., in close proximity to their biomass feedstocks. Total US employment in the chemicals industry declined by over 20% in the last two decades and is projected to decrease further. The US is a world leader in industrial biotechnology with a wide range of companies pioneering new, renewable pathways to traditional petroleum-based chemicals and plastics.

The potential job creation from bio-products is immense. Consider that the nascent biobased products industry employed over 5,700 Americans at 159 facilities in 2007 and every new job in the chemical industry creates 5.5 additional jobs elsewhere in the economy. Currently the biobased products portion represents only about 4 percent of all sales for the industry. Congress should create targeted production tax credits that can help them to expand their share of the market and grow additional domestic jobs. With an industry with the potential to grow by over 50% per year, bio-products can form the basis for a strong employment growth engine for the US.

Clearly commercializing the advanced biofuels and biobased products industries is an integral solution to creating high caliber domestic green jobs in the United States that will catapult this country to be a leader in successful high tech, sustainable technologies. BIO will be urging the Ways and Means Committee through written comments to recognize that innovations such as these are some of the most promising sources of green jobs and economic growth for the future.

Weekly Industrial and Environmental Bio Blog Roundup

This week we start off with a little Road Music, From Bluegrass to Switchgrass, from our colleagues at the Biofuels Center of North Carolina. They’ve put together a nice set of bluegrass pieces. To listen visit their web site.

Gas2.0 announces this week that BP could start selling biofuels in 2010, writing that,

“BP has partnered with Verenium to bring a commercial-scale cellulosic ethanol facility online next year to start bringing alternative fuels to a gas”

Wednesday, according to the Government Monitor,Tom Vilsack announced,

“the publication of nine additional BioPreferred product categories which will now be eligible for Federal procurement preference.”

Making, “more Than 1,000 Biobased Products Eligible For Federal Procurement,” the Monitor reports.

You can find USDA biopreferred on Twitter, http://twitter.com/BioPreferred and on the Web at: www.biopreferred.gov.

So what’s the deal with this conversation on whether or not biofuels are carbon friendly? We at BIO have certainly have had a lot to say on the matter and you can find all our opinions on our biofuels page.

However, our opinions aside, the folks at the journal Science, where the initial study and follow-up policy paper were published say that they are giving us the inside story, by holding a moderated conversation between Tim Searchinger and John Sheehan—kind of interesting, take a look for yourself.

That’s all for this week. See you next week!

Compounded Climate Accounting Errors

Timothy Searchinger, visiting scholar at Princeton University, Dan Kammen of the University of California Berkeley, David Tilman of the University of Minnesota and other authors from the Environmental Defense Fund published an interesting new proposal in the Policy Forum section of Science magazine today. The argument put forward is that “Replacing fossil fuels with bioenergy does not by itself reduce carbon emissions, because the CO2 released by tailpipes and smokestacks is roughly the same per unit of energy regardless of the source.”

The premise behind this proposal is that the world is facing such a great need to reduce carbon emissions that future sources of energy and biofuels cannot make use of any currently sequestered carbon. Maybe… but there’s a perverse consequence of using this logic. Fossil fuels are a source of sequestered carbon. If you then say that all existing biomass is an untouchable source of sequestered carbon, you are essentially counting that sequestration as a benefit of having used fossil fuels for the past 150 years.

The logic is particularly tortured when a foregone sequestration penalty is attributed to biofuels when none is counted for petroleum.

There is much in the paper to agree with — particularly in recognizing carbon sequestration benefits from improved land management practices and energy crops. And certainly, the challenge of climate change is so great that implementing best practices for carbon sequestration is a necessity.

But a proposal that attributes carbon sequestration in trees as a plus in the accounting of fossil fuel use is counterproductive.

Visualizing the indirect effects of oil

It has been pointed out numerous times on this blog (herehere and here) that you can’t have a true comparison of fuels if you account for the direct effects of all fuels and the indirect effects of only one. But that is what the U.S. Environmental Protection Agency (EPA) and the California Air Resource Board (ARB) have proposed. Both the EPA in their proposed RFS II rules and ARB in their Low-Carbon-Fuel-Standard have calculated the direct effects of all fuels and then only looked at indirect land effects and applied them only to biofuels.

Is it reasonable to claim that there are NO indirect effects from petroleum? One study, published in the academic journal Biofuels, Bioproducts and Biorefining, suggested that accounting for the military protection of pipelines alone would double the greenhouse gas emissions of Persian Gulf oil. But if you don’t want to read through the study, just watch this video from the Renewable Fuels Association. They say a picture is worth a thousand words and in this case I think they’re right.

Corn Growers Try to Understand Indirect Land Use Change

The National Corn Growers Association’s recent “Land Use: Carbon Impacts of Corn Based Ethanol 2009” conference highlighted the confusion the issue of indirect land use change has engendered for farmers. Chuck Zimmerman of AgWired summed it up in a report from the conference:

Do you understand things like indirect land use when it comes to regulations via departments like the EPA due to the RFS? Me either. And I’ve sat in on conferences and discussions and interviews on the subject for a while now. That’s because an issue like indirect land use involves predicting the future based on certain assumptions that may or may not be valid, especially if they’re based on out of date data and information.”

Conference chairman Jamey Cline, NCGA Director Biofuels and Business Development, indicated to Zimmerman

that these issues are extremely important to agribusiness and corn growers in particular because if the CARB regs hold up, by 2012 they will effectively shut off that market to ethanol. Additionally, one presenter said that due to the proposed climate change bill and RFS, approximately 27.1 million acres would be taken out of production across the Unites States. That would have a huge impact on our economy, especially in rural areas.”

Jeanne Bernick of Farm Journal also reported from the conference:

Even the leading ag economists of our day are scratching their heads on this issue (read Land Use Change Tricky to Measure). They claim it is simply impossible to verify why land use changes occur.

“‘We are trying to measure the unmeasurable,’ says Bruce Babcock, ag economist with Iowa State University’s Center for Agriculture and Rural Development (CARD). ‘We would never really be able to verify why those acres changed production plans. Annual agricultural land use is flux, and largely variable.’

“Interpretation: No one really knows what influences land use change. Farmers make planting decisions in the U.S. and around the world based on a multitude of factors (weather, markets, weed and insect pressure), not just one factor like increased biofuels production in the U.S.”

Mike Wilson of Wallace’s Farmer astutely noted several questions raised by the conference:

Why are we setting U.S. policy based on something that may or may not take place in other countries? As speaker and Texas A&M ag economist Bruce McCarl says, ‘If we want to get out of this indirect land use debate, we simply need to have Brazil institute some greenhouse gas emissions penalty for when it develops its land.’

“What role does politics play in this? Clearly politics is the 800-pound gorilla in the room. President Obama has his people in place and a mandate from voters; he wants to get something passed regardless of the flawed logic that is now floating around in EPA’s regulatory proposal.

“Is this an Obama-driven apology to the rest of the world for eight years of George Bush unilateralism?

“Is this punishment for not agreeing to the Kyoto Protocol so many years ago?”

During the August Congressional recess, Sen. Chuck Grassley (R-Iowa) invited EPA officials Gina McCarthy, who is Assistant Administrator for the Office of Air and Radiation, and Margo Oge, who heads the Office of Transportation and Air Quality, to tour Iowa State University’s BioCentury Research Farm near Boone and the Renewable Energy Group’s 30-million gallon biodiesel plant at Newton.

Dan Looker, Business Editor of Agriculture.com, reported:

Dermot Hayes, an economist with ISU’s Center for Agriculture and Rural Development, shared research by a graduate student, Jerome Dumortier, that shows the effects of technology as crop prices rise due to demand for biofuels. Farmers are more likely to spend more on biotechnology that speeds up yield gains, Hayes said. If this effect is just 1% more than the trendline in yields [1.6% is used in EPA calculations] over 10 years, it brings the gain [carbon debt] from ethanol from 166 years to just over 30. If it’s just 2% higher, the gain from producing ethanol instead of using gasoline is immediate. In essence, there is no indirect land use effect.

After the recess, at a Senate Agriculture, Nutrition, and Forestry Committee Hearing on Sept. 3, Senators heard from Bill Couser, a fourth-generation farmer from Nevada, Iowa:

As a seed corn grower for Monsanto I have witnessed firsthand the wonderful improvements in corn and soybean genetics over the last few years. The simple fact is that yields are not only increasing, they are increasing at an increasing rate. Coupled with improved farming practices, I have no trouble believing Monsanto’s national average projection of 300 bushels per acre corn by 2030. Iowa will likely hit that mark much sooner. And we will do it with fewer inputs and less impact on soil and water than today.”