By Tammy Klein
Special to the Houston Chronicle
Somewhere along the road to that clean, affordable energy future we were promised, elements of the U.S. government’s renewable fuels policy took a weird detour from reality.
Not content to simply encourage the development of biofuels, Congress decided to enact legislation that mandated the production of vast amounts of next-generation fuels that this country lacks the capacity to manufacture. At the same time, diminishing consumer demand for gasoline has resulted in the shutdown of a number of our oil refineries that already produced fuels.
A Hart Energy study examined mandated ethanol production vs. capability and arrived at this inconvenient truth: The government, through the federal Renewable Fuel Standard, has ordered production of cellulosic biofuels to ramp up to 16 billion gallons a year by 2022; the country, however, will be able to generate no more than 900 million gallons by then, if that much. The policy relies upon a “Field of Dreams” logic (“If you legislative it, they will come”) that only a wonk could love. It’s a mandate for failure – for the biofuels industry and for our country.
The Renewable Fuel Standard was based on the premise that next-generation biofuels made from cellulosic material like switchgrass, wood chips and non-edible parts of plants will deliver energy security and a healthier environment with lower greenhouse gas emissions from our cars. And they will … someday. But policy makers seized upon the promise of the future and assumed that the technology to make these fuels work on a large scale would be achievable tomorrow. Then they sought to legislate accelerated scientific development. If only it really worked that way….
An industry shackled by incongruous legislation like this cannot attract needed investment to develop and improve its products. Success in the biofuels field depends on cutting-edge science because the most promising developments, like algae-based fuels, are still nowhere near commercial production.
That’s not to say that the Energy Independence and Security Act of 2007 has not been a profound success in a sense. Your gasoline-powered car, and just about everybody else’s, runs on a blend that contains up to 10 percent ethanol. We are way past the “someday we’ll grow our fuel, kids!” stage. The United States is now the largest ethanol producer, consumer and exporter in the world and primed to produce 15 billion gallons in 2012, most of it derived from corn. That makes it all the more crucial to repair broken policies before they trigger long-term economic and environmental consequences.
Congress paved this road with plenty of good intentions. Encouraging the production and use of next-generation biofuels pursued two huge goals: reduced emissions of greenhouse gases and reduced reliance on imported crude oil, the supply of which can be threatened by political instability in petroleum-producing regions.
Some industry trade groups contend that the system is not broken, that it just needs a chance to work out the kinks. After all, government support and incentives have allowed the biofuels industry to flourish. Achieving energy security and a cleaner environment are worthy goals but difficult tasks to complete. They take time.
The issues bedeviling the industry via this policy have reportedly captured the attention of a bipartisan group of U.S. senators led by James Inhofe, R-Okla., and Christopher Coons, D-Del. The group said it intends to examine the impact of the Renewable Fuel Standard and find ways to improve it. Sens. Saxby Chambliss, R-Ga., and Jim DeMint, R-S.C., however, plan short-sighted measures that would kill it.
We can’t move toward that clean, affordable energy future if our strategy doesn’t account for reality. Stop and go – and at the same time – doesn’t work. The Senate Armed Services Committee’s recent vote to restrict the military’s purchase of biofuels is a good example of this.
The government’s approach makes it impossible to reduce harmful emissions sufficiently and enhance this nation’s energy security.
Worse, it could place the U.S. at a competitive disadvantage in the international energy trade arena. China, for example, is on track to lead the world in cellulosic ethanol capacity.
What our country needs to achieve this is not necessarily another round of government incentives, but a round of legislative sanity. A commitment to common-sense rules, aligned with realistic production mandates that are technology-neutral, will boost the biofuels industry and provide investors with the confidence to support technological development. What we need is legislative and regulatory certainty that should underpin the “all-out, all-of-the-above” strategy laid out by President Obama in February.
Investments are needed, along with heaps of patience, because biofuels offer the best, most realistic hope right now of reaching long-sought energy goals. The world will very shortly be dominated by huge increases in energy demand from Asia, led by China and India, and we will need a diversified energy portfolio that includes biofuels. Every molecule will count. It’s just that the research and development for next-generation biofuels isn’t quite there yet. Commercial-scale production is still some distance into the future.
In a world in which our phones can let us shoot videos, read the news and play “Words with Friends,” it might be difficult to remember that technological development does require time and patience. This work is complex. It marries the energy and agricultural sectors of our economy in a grand project to grow our feedstock for fuel, harvest it when ready and grow it again. This relatively new and sometimes uneasy relationship signals a departure from the customary practice of drilling and pumping crude from the ground. It’s a different road, but it’s our road to a clean, affordable energy future.
Tammy Klein is assistant vice president of Houston-based Hart Energy and leads its downstream research and consulting division. She is the core author of the U.S. & Brazil Ethanol Outlook to 2022.