Oil Watchdog
03-25-2009
by dugan
A project of 
03-25-09 by dugan
There's no doubt that the ethanol industry is in trouble. Credit crunch, ugly recession, and roller-coaster energy prices that spook investors. The Des Moines Register has a good rundown today on cellulosic ethanol startups that can't get private investors to finance commercial-scale plants. One puzzling thing--a chief problem cited in the story is that cellulosic ethanol is just too expensive. And the main source for that conclusion is... the American Petroleum Institute:
Al Mannato, a fuels issues manager at the American Petroleum Institute, expects only just 1 million to 5 million gallons of cellulosic ethanol to be on the market in 2010. The Environmental Protection Agency will be forced to reduce the 100-million-gallon requirement next year, and the mandates for the next two or three years will be difficult to reach, too, he said. "We know how to make cellulosic ethanol. We don't know yet how to make it economically," Mannato said.
Just who is this "we," Kemosabe? (To quote Tonto). Cellulosic ethanol that isn't produced in fully commercial quantities, over time, will never be economical, and it can't get to that scale and duration without investment in both research and production. It's like the $4-per-tomato plant in a backyard pot. "Economical" is also a matter of comparison with fossil fuel prices, which soared last year and then crashed. The API's judgment also obviously excludes the dollar worth of carbon reduction.
The members of the American Petroleum Institute, the oil industry's loud voice in Washington, have deep reserves left over from the oil profit orgy of the last couple of years--unlike the biofuels industry, which doesn't generally produce its own raw material. Members of API also have a strong interest in suppressing or at least slowing biofuels, no matter what their greenwashed advertising tells us. The industry’s spending on the clean fuel they profess to love is a couple of cents at most on every dollar of their production budgets—and even there, the industry definition of alternative fuels includes petroleum products as well as renewables.So, yes, the cellulosic fuel industry is stalled. But we can’t let the petroleum industry write its obituary, or we’ll all be even more over the barrel as the price roller coaster spikes upward again.
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"So, yes, the cellulosic fuel industry is stalled. But we can’t let the petroleum industry write its obituary, or we’ll all be even more over the barrel as the price roller coaster spikes upward again."
OK, then here are some other obituaries for you.
From the Gristmill, the environmental news commentary. "A quiet consensus seems to be forming among people you'd think would know the facts on the ground: cellulosic ethanol, touted as five years away from viability for decades now, may never be viable."
Also cited in the Gristmill article:
Colin Peterson, chair of the House Ag Committee and a long-time friend of agribiz (January 2008): "I'm not sure cellulosic ethanol will ever get off the ground." He muttered something about "a lot bigger problem to overcome here than people realize in terms of the feedstocks."
The USDA -- an agency that has lavished ethanol with research cash since the '70s -- declared that while cellulosic has "some long-term promise" (some?), we shouldn't expect it to contribute significantly to fuel supplies before 2013.
A recent study ("Crop-Based Biofuel Production under Acreage Constraints and Uncertainty" by Mindy L. Baker, Dermot J. Hayes, and Bruce A. Babcock) from three agribusiness economists at Iowa State University (conventional ag scholars firmly entrenched within the corporate-dominated research world, according to Grist). The study's patrons -- i.e., the agribiz giants -- benefit from the corn-as-bridge-to-cellulosic. The authors delivered a dismal forecast for cellulosic ethanol. Quotes from the study:
"These results suggest that [without the 2007 Energy Act], once the opportunity cost of land is taken into account, rational farmers will not grow switchgrass or soybeans for biofuel production, and rational investors will not build these plants."
"The authors seriously doubt the cellulosic target can even come close to being met. They reckon that the mandate can inspire "rational" farmers and investors to churn out 4.5 billion gallons of cellulosic ethanol by 2022 -- but there's a catch. In order to reach even that level, the government will have to significantly jack up the tax credit awarded to mixers -- from the current 51 cents to $1.55. The message is this: Even with the fat 2007 Act mandate, cellulosic ethanol can only offset a tiny amount of petroleum use -- and then only if it's borne aloft by titanic amounts of public cash."
Dugan's googling stops when she finds the day's desired anti-industry slant. If she had dug a little deeper, like say for example actually researching how cellulosic ethanol companies (Aventine and Verenium come to mind) have been doing lately, she might have understood that maybe the API is probably right.
"Members of API also have a strong interest in suppressing or at least slowing biofuels..."
This is the 1960's conspiratorial view which forms the core of Judy Dugan's undertanding of the world. A more modern and rational view might be that, instead of paying a small fortune sticking many fingers into many dikes (a losing strategy), the oil industry is much more likely to attempt to buy a competing technology if they perceive it as profitable and a long term threat to their business.
Dugan, can you provide compelling evidence that the industry is actively suppressing the biofuels industry?
03-28-2009 | USER: KimRegio