Motorists will use just a fraction of the next-generation biofuels in 2011 that Congress intended, and even that small amount depends on a single project in Iowa that isn’t ready yet.
The Energy Information Administration projects that less than 3.9 million gallons of cellulosic biofuels will be produced in 2011, far below the 250 million gallons that refiners were supposed to use under the 2007 energy law.
About 2.8 million gallons of that forecast production would come from a small former corn ethanol plant near Blairstown, Iowa. Maryland-based Fiberight LLC is converting the plant to make fuel from municipal garbage and waste from a nearby International Paper plant.
Fiberight chief executive Craig Stuart-Paul said recently that his company will notify the government by the end of the year whether it can provide that production. The company, which recently was awarded a $2.9 million grant from the Iowa Power Fund, is aiming to start construction soon to alter the plant.
Cellulose and algae are seen by many as the preferred future feedstocks for alternative motor fuels because they do not consume food crops such as corn. The 2007 energy law called for refiners to use 36 billion gallons of biofuels by 2022, with 16 billion of that coming from fuels made from cellulose, the fibrous material in plants.
But developers of cellulosic ethanol plants have struggled to lower their production costs and to find financing.
The Environmental Protection Agency, which administers the biofuel requirements, already has said it would have to slash the 2011 target for cellulosic biofuels. Earlier this year, the EPA estimated the number could be as low as 5 million to 17 million gallons and then was told by the energy agency in a letter in October that production would fall short of 4 million gallons.
In addition to Fiberight’s forecast output, that estimate includes a million gallons of methanol, another type of alcohol, made from wood chips at a plant in Georgia. Another 180,000 gallons of ethanol would come from plants in Wyoming and Tennessee.
Industry officials blame the recession and a lack of sufficient government support for the delays in these projects starting.
Cellulosic ethanol is eligible for a $1.01-a-gallon subsidy, more than twice what is provided for corn ethanol. But cellulosic projects also require federal loan guarantees that for now require too many restrictions, according to the industry.
“Until we see a flow of financing, some combination of public and private investment flowing to construction of commercial facilities, we’re going to be stuck in this position of very small amounts of cellulosic biofuels being available,” said Matt Carr of the Biotechnology Industry Organization.
Agriculture Secretary Tom Vilsack in October called for starting construction on at least one new advanced-biofuel refinery in each region of the country by next year. He offered subsidies for farmers who provide crop residue and other cellulosic materials for biofuels. However, Vilsack has not proposed loosening limits on the department’s loan guarantees, a major sticking point for companies.
Fiberight is in an unusual position relative to other projects. It is using an existing distillery rather than building a plant and doesn’t have to pay for its feedstock, a major cost hurdle for other developers. Fiberight, in fact, charges a fee for the waste that helps cover processing costs.
The government’s production estimate for Fiberight was based on an EPA review of the project, said Stuart-Paul, who sold a recycling business before starting Fiberight.
“We will communicate with the government if there is a shortfall in that assumption,” he said. “I don’t want to cut it back now. If we can achieve that, we’re going to do it.”
He said there’s enough municipal waste nationwide to produce 5 billion gallons of cellulosic ethanol.
The energy agency also raised questions about whether the 2011 target for biodiesel, 800 million gallons, can be met.
While there is sufficient production capacity, much of what plants have been making this year is being shipped overseas, the letter to the EPA said. About 30 percent of June’s production was exported.
Biodiesel production slowed sharply this year after Congress failed to renew the industry’s $1-per-gallon subsidy. Next year’s biodiesel sales will depend on whether the subsidy is revived and how the EPA implements the usage mandate, the government analysts said.
The EPA will announce the 2011 biofuel targets by the end of this month or in December, said spokeswoman Cathy Milbourn.
What’s not in doubt is that corn ethanol will remain the dominant biofuel for years. The mandate for corn ethanol rises from 12 billion gallons this year to 12.6 billion next year.
The mandate will be capped at 15 billion gallons in 2015.