Biofuel policy has been a field of dreams, where government policy mandated the use of a product that didn’t exist.
The EPA insisted that companies obtain waivers in the form of RINs, at a cost of millions of dollars, when they couldn’t use cellulosic ethanol because it wasn’t available.
Here is how the Wall Street Journal described “The Cellulosic Ethanol Debacle”:
“Congress subsidized a product that didn’t exist, mandated its purchase though it still didn’t exist, is punishing oil companies for not buying the product that doesn’t exist, and is now doubling down on the subsidies in the hope that someday it might exist. We’d call this the march of folly, but that’s unfair to fools.”
But now, the first large new plants are coming online, when there isn’t a need for the product.
- Poet Inc. recently produced its first cellulosic ethanol at its new $275 million plant in Emmetsburg, Iowa. Poet Inc. received an $80 million grant from the U.S. Department of Energy (DOE).
- Abengoa Bioenergy, has just completed its $300 million plant in Hugoton, Kan. Abengoa received a $97 million grant and a $132 million loan guarantee from DOE.
- DuPont Cellulosic Ethanol, expects to soon complete its $200 million, 30 million-gallon-per-year plant in Nevada, Iowa. DuPont has also received grants from DOE for cellulosic ethanol.
The following chart depicts the government’s mandates for biofuels, including cellulosic ethanol, in billions of gallons.
Because of the lack of cellulosic ethanol, the EPA reduced the amount required to be used in 2013 and 2014, but still required more cellulosic ethanol to be used than would be available, which resulted in the continued use of costly RINs.
These three new plants are able to produce around 0.0000006% of the mandated 16 billion gallons required in 2022.
And, the prospects are bleak for building more new cellulosic ethanol plants, so it will probably be impossible to meet the requirement for 16 billion gallons of cellulosic ethanol in 2022.
The governments insistence on producing ethanol and cellulosic ethanol was based on four faulty assumptions:
- Ethanol and cellulosic ethanol would reduce CO2 emissions
- Gasoline consumption would continue to increase
- Ethanol and cellulosic were needed for energy independence
- They would be inexpensive to produce
Gasoline consumption has been decreasing, not increasing, which exacerbates the problem, since there is now too much ethanol (i.e., non-advanced biofuel) and cellulosic ethanol.
This has producers of cellulosic ethanol competing with ethanol producers, diminishing profits for all producers.
To help solve the problem of too much ethanol and too large a mandate for cellulosic ethanol, there has been a proposal to increase the amount of ethanol used in gasoline from 10% to15%.
In fact, the EPA has authorized using E15 in cars and light trucks for model year 2001 and later.
There is a debate whether E15 can be safely used in these newer cars, but there is virtually no debate that E15 is harmful to cars made before model year 2001.
So how might the EPA perpetuate requiring the use of ethanol and cellulosic ethanol? Perhaps, by requiring E15?
The average life of cars and light trucks is around 15 years, so it’s technically possible to claim, in the next few years, that the vast majority of cars in operation would be newer models supposedly capable of using E15.
The average age of cars and light trucks in 2014 is 11.4 years. By one estimate, in any year, 74% of cars between 11 and 23 years old are scrapped.
At what point will the EPA establish that E15 is mandated for all automotive gasoline usage? Will it be in 2017? Or 2020? … Because so many pre-2001 cars have been scrapped?
All four of the reasons for mandating the use of ethanol and cellulosic ethanol have now been discredited.
- It’s questionable whether ethanol and cellulosic ethanol reduce CO2 emissions.
- Less gasoline is being used, so there is less need for ethanol and cellulosic ethanol
- The United States is now producing, thanks to fracking, large amounts of oil, which, in combination with Canada, is putting the United States on the road to energy independence
- Ethanol and cellulosic ethanol require government subsidies and government mandates to make them viable
It should also be noted that there is less energy in ethanol than in gasoline, so a gallon of ethanol won’t take you as far as a gallon of gasoline, which increases the real cost of using ethanol.
There never really was a need for ethanol or cellulosic ethanol.
Mandating the use of ethanol and cellulosic ethanol was, and still is, a bad idea.
Requiring E15 so as to use the excess ethanol is a worse idea.
The next article discusses the politics behind ethanol and cellulosic ethanol, and will search for a solution … other than E15.
Note:
RIN refers to Renewable Identification Numbers. RINs are created by the producer or importer of the renewable fuel. The EPA has developed a system called the EPA Moderated Transaction System (EMTS) to manage RIN transactions. EMTS screens RINs and provides a structured environment for conducting RIN transactions.
A pdf describing the bureaucratic RIN system is available at http://www.ers.usda.gov/media/138383/bio03.pdf
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