by Jetta Wong, Agriculture & Energy Policy Analyst
01/02/07
The biomass industry made tremendous gains in 2005, but even
those knee-deep in biomass could not have foreseen such amazing
strides made in 2006. Even with appropriation woes, large
venture capital investments, new leadership, increased acceptance
from the environmental community, national security threats
and unstable energy markets sparked the country's enthusiasm
for biomass. The industry's capacity to ramp up production
and the ability of this renewable resource to provide a considerable
quantity of power, not just liquid fuel, has made biomass
a significant player in the U.S. energy future.
With dozens of biomass conferences and events across the
country, it is no wonder that in 2006 more than 50 biomass-related
bills were introduced. Increases to the national RFS, incentives
for alternative fueling stations and flex-fuel vehicles and
extensions of biomass-related tax incentives were highlighted
in these bills.
Earlier this year the President shocked the country by saying, "America
is addicted to oil," in his State of the Union Address,
and later saying he would fund, "ethanol, not just from
corn, but from wood chips and stalks, or switch grass" --
but his budget fell far short. The President's FY07 budget
for biomass only totaled $161.7 million, 11 percent of the
authorized biomass programs in the Energy Policy Act of 2005.
Furthermore, his budget cut popular energy programs enacted
in the Farm Security and Rural Development Act of 2002.
Congress did propose significant increases in many biomass
programs, but funding levels are still not close to authorizations.
The House-passed FY07 Agriculture Appropriations Act fully
funded most farm bill renewable energy programs as did the
senate, but with a $2 million increase for the Renewable
Energy Systems and Energy Efficiency Improvement Program
and funding of $48 million for Value-added Producer Grants.
The Senate Energy and Water Appropriations bill funded DOE's
Bioenergy program, at its full authorization of $213 million
for FY07 and directed DOE to study the "reverse auction" authorized
in Sec. 942 of EPAct, and states support for the Loan Guarantee
program. The House bill has funded DOE's Bioenergy Program
at the President's request of almost $150 million. Several
unmentioned programs received no funding. Alas, Congress
has not yet finished FY07 appropriations.
DOE and USDA issued solicitations for two new programs, for
which many companies are anxiously awaiting decisions: Integrated
Biorefinery Demonstration Projects and the DOE Loan Guarantee
Program, both authorized in EPAct. The former, developed
to fund lignocellulosic feedstock biorefinery projects, is
still pending appropriations. The latter, released a Solicitation
Announcement as part of the President's Advanced Energy Initiative
(AEI), which includes biomass.
This program for $2 billion in loan guarantees was issued
to encourage early commercial projects that employ new or
significantly improved technologies. Its deadline was postponed
to December 31, 2006. Authorized in EPAct, this program sketched
a clear path for venture capitalists to shift into biomass
technologies, including cellulosic ethanol. But without implementation
of the Loan Guarantee the industry may be slowed down.
Equally important is the role of private industry in developing
biomass technologies. BP announced its intention to invest
$500 million over the next 10 years to establish a biosciences
research laboratory attached to a major academic institution
in the United States or United Kingdom. An early 2007 announcement
is likely. The new BP Energy Biosciences Institute (EBI)
will be dedicated to energy technologies, focusing on development
of new biofuels and increasing efficiency and flexibility
of current technologies.
State governments have been more active on biomass than the
Federal Government, with the passage of Renewable Fuel Standard
bills in Washington, Iowa and Louisiana. Renewable fueling
station legislation in Michigan, among other states, and
New York's toppling of the exclusivity clause in new contracts
between retailers and oil distributors have also been big
wins this year. Although the national RFS was passed last
year in EPAct, state infrastructure legislation has focused
attention on this important barrier.
Had California's Proposition 87 passed, taxes on California
oil production of up to $380 million a year would have raised
billions of dollars for investments in clean energy. Even
with large investments by Steve Bing and Larry Page (a real
estate developer, film producer, philanthropist and Google
co-founder, respectively) into this biomass friendly referendum,
the political power of the oil companies was too much. Although
many have said the biomass industry and the oil industry
will be working together, it is clear that 'big oil' will
fight to keep biomass down.
Biofuels received the most attention of all the biomass industries
this year. Corn ethanol illustrates the biomass industry's
ability to become a larger player in energy markets. Ethanol
refineries increased from 95 to 108 with capacity of 4 billion
gallons at the end of 2005 to 5.2 -- and 9.5 billion gallons
when all new refineries are on line. Similarly, biodiesel
has increased from 75 million gallons at the end of 2005
to a total capacity of 582 million gallons from 85 companies.
The announcement of Broin Companies $200 million expansion
of Voyager Ethanol in Iowa to cellulosic ethanol was another
high point for the industry in 2006.
Moreover, biomass as a renewable resource for electricity
and heat should not be overlooked, especially when paired
with biofuel technology. Two facilities in Minnesota are
doing just that. Chippewa Valley Ethanol Company (CVEC) and
the Central Minnesota Ethanol Cooperative (CMEC) are installing
biomass gasifiers to replace fossil fuel burned for heat
and electricity. Portsmouth New Hampshire opened the Northern
Wood Power Project at the Schiller Station power plant to
retire one of three coal-burning boilers and replace it with
a boiler that burns wood materials. This will generate $20
million in revenue for timber farmers, and provide enough
power for approximately 50,000 homes in New Hampshire with
50 MW of electricity.
Furthermore, the Western Governors' Association's Clean and
Diversified Energy Initiative Report released in June, found
that, "Biomass as an energy resource has the potential
to supply 15,000 MW of electricity to the Western states
by the year 2015," which is half of the initiative's
target.
Biobased products made real gains with USDA's announcement
of new rules for the Federal Procurement of Biobased Products
program and new partnerships like the one between Metabolix
and Archer Daniels Midland Company (ADM). This partnership
will produce new PHA plastics adjacent to ADM's wet corn
mill in Clinton, utilizing the starch from the mill's corn
grind as a raw material for production of the plastics.
With dozens of biomass conferences and events across the
country, it is no wonder that in 2006 more than 50 biomass-related
bills were introduced. Increases to the national RFS, incentives
for alternative fueling stations and flex-fuel vehicles and
extensions of biomass-related tax incentives were highlighted
in these bills.
The Democratic Rural Working Group's bill, Bioenergy Innovation,
Optional Fuel Utilization, and Energy Legacy (BIOFUEL Act
of 2006), introduced by Rep. Herseth's (D-SD) has good examples
of these initiatives.
The bill's stated purpose is to "promote the increased
utilization of domestically produced, renewable, biobased
motor vehicle fuel supplies and the increased manufacture
of flexible-fuel vehicles in the United States." It
increases the biofuels mandate (to 20 percent by 2015), expands
the number of vehicles that can run on ethanol, increases
the number of E-85 pumps, encourages research and development
into new biofuel technologies, and provides financing incentives
for cooperative and independent biofuel plants.
Other bills were smaller, but no less important, such as
Rep. Hulshof's (R-MO) Renewable Fuels and Energy Independence
Promotion Act of 2006, to make permanent the excise tax incentives
for ethanol and biodiesel used as a fuel.
An expanded national RFS was a popular addition to legislation,
especially since the 7.5 billion gallon mandate will be reached
before 2012. Rep. Upton's (R-MI) 10 percent Renewable Fuel
Requirement requires that, after the year 2012, all gasoline
sold for motor vehicles contain at least 10 percent renewable
fuel is an example. Sen. Grassley's (R-IA) 10 by 10 Act would
require all gasoline sold for use in motor vehicles to contain
ten percent renewable fuel by 2010.
Other biomass-related bills introduced in 2006 include Senators
Obama (D-IL) and Lugar's (R-IN) American Fuels Act of 2006,
Sen. Conrad's (D-ND) Breaking Our Long-Term Dependence (BOLD)
Energy Act of 2006, Rep. Hoyer's (D-MD) Program for Real
Energy Security Act or 'PROGRESS Act', Sen. Cantwell's (D-WA)
Clean Energy Development for a Growing Economy (EDGE) Act
of 2006 and Sen. Clinton's (D-NY) Strategic Energy Fund Act
of 2006.
Although national security has increased this country's interest
in biomass over the last few years, climate protection and
rural development may become the driving forces behind new
biomass legislation and action.
With the reauthorization of the farm bill and a new Congress
in 2007, stakeholders are working hard to develop connections
between these very big issues and the benefits of biomass-to-energy
technologies. Many policymakers expect biomass legislation
to play out in three key bills: farm, energy and tax.
Jetta Wong is an Agriculture and Energy Policy Analyst working
with EESI's Agriculture and Renewable Energy program. Currently,
she writes for the organization's BCO: Bioenergy, Climate
Protection, Oil Reduction newsletters; monitors the reauthorization
of the Farm Bill and implementation of its existing energy
provisions; and is the primary EESI researcher on three organization
project studying effective marketing incentives for biopower,
biofuels and biobased products; and monitoring and advocacy
related to the Renewable Fuels Standard.
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