Environmental Policy Update Newsletter
April 12, 2011 - Biofuels Industry
The Environmental Policy Update Newsletter aims to provide frequent, comprehensive, and objective reports on environmental policy issues and relevant legislation in Georgia, especially during the legislative session. Click here to subscribe to future editions.
In This Issue
- What Are Biofuels?
- Georgia’s Biofuel Industry
- Relevant Georgia Legislation
- In the News
- What Others Are Saying
Over the past several years the federal government has enacted a series of mandates, protective tariffs, tax incentives, and grant programs designed to increase the amount of domestically produced liquid biofuels. The major goals of these federal biofuel policies include reduction of U.S. petroleum imports, a decrease in greenhouse gas emissions for transportation, and promotion of rural development.
With millions of acres of highly productive forest and crop lands, Georgia has been widely viewed as a potential epicenter for future growth of the biofuels industry. In an attempt to facilitate development of this emerging sector, Georgia’s state and local governments have provided millions of dollars in grants, loans, and tax incentives to biomass producers and biofuel companies. However, recent troubles within Georgia’s biofuel industry have raised some degree of skepticism about future public investments in new and existing facilities. This newsletter provides a review of some of these issues, as well as some highlights of recent state legislation related to biofuels and bioenergy.
What Are Biofuels?
Biofuels are renewable liquid fuels made from some form of biomass, often referred to as a “feedstock.” The most common biofuels currently used in the U.S. are ethanol and biodiesel.
Ethanol is an alcohol formed through the fermentation of plant sugars and starches and currently is being blended into U.S. gasoline at up to 10 percent by volume. Although corn grain has typically been the dominant ethanol feedstock in the United States, there is an increasing amount of research into the development of “cellulosic ethanol” production processes that can make use of crop wastes, perennial grasses, wood, and other biomass with low sugar content.
U.S. ethanol production and consumption have both dramatically increased over the past several years. Current U.S. gasoline supplies may contain up to 10 percent blended ethanol by volume (such fuel blends are often referred to as “E10”), which is the listed ethanol blend limit for most conventional gasoline-powered vehicles in the U.S. fleet. However, some specially-designed vehicles (often referred to as “flex fuel” vehicles) can combust “gasohol” blends containing up to 85 percent ethanol (E85). Such E85 blends are available in a small number of U.S. fueling stations, including several in Georgia.
Biodiesel is a non-petroleum diesel fuel produced by reacting organic lipids, typically sourced from vegetable oil or animal fat, with methanol in the presence of specific catalysts. The most commonly feedstocks for U.S. biodiesel production are soybean and canola oils. However, Georgia’s biodiesel production has largely been based upon conversion of chicken fats that are a by-product of the state’s large poultry industry.
Biodiesel has the important advantage of being suitable as a direct substitute for petroleum-based diesel at any blending level. Although diesel blends containing from 2 percent (B2) to 5 percent (B5) biodiesel can commonly be found in conventional filling stations, pure biodiesel (B100) has limited supplies and can typically only be purchased through local, specialty producers.
Georgia’s Biofuel Industry
Development of a large-scale biofuel industry in Georgia has been viewed as a major opportunity by private investors, farmers, forest owners, and officials from local, state, and federal governments. Although there may indeed be important biofuel opportunities and breakthroughs that can benefit Georgia, a review of the recent “boom-bust” cycle for the state’s nascent biofuel industry also indicates that there are significant downside risks that should also be taken into account.
The first wave of biofuels investment in Georgia was associated with biodiesel. Several biodiesel facilities were constructed and began commercial production throughout the state from approximately 2005 to 2008. While most of these facilities experienced some initial economic success, the temporary expiration of a $1/gallon federal biodiesel tax credit in January 2010 forced virtually all of Georgia’s biodiesel companies to either greatly curtail or cease production altogether. The federal biodiesel tax credit was renewed by the U.S. Congress in December 2010 and retroactively applied for all biodiesel production in 2010. However, it remains unclear as to whether this renewal will provide enough policy certainty to revive the Georgia biodiesel industry to its pre-2010 levels, much less promote further growth of the industry in the state in the near future.
The second wave of recent biofuels investment in Georgia was in ethanol production. These investments included traditional corn ethanol facilities similar to those more commonly found in the Midwestern corn belt, as well as significant investments in new cellulosic ethanol technologies. However, Range Fuels, intended to be the nation’s first commercial cellulosic ethanol plant, was forced to suspend operations in February 2011 due to technical problems and cost overruns. The company had been financed through a $76 million Department of Energy grant, an $80 million USDA loan guarantee, and a $6 million state of Georgia grant. It is currently unclear whether the process will ever work as originally designed.
2011-2012 Relevant Georgia Legislation
(*** denotes current legislation)***2011-2012 Regular Session: House Bill 515***
HB515 would encourage electric utility companies to establish renewable energy source goals starting at one-half of 1 percent of their annual net electricity sales by December 31, 2013 and increasing each year until reaching seven percent of annual net electricity sales by December 31, 2020. This bill also requires the Georgia Public Service Commission to establish a renewable energy credits trading program, create a registry of renewable energy producers in the state, and provide a reporting system to monitor electric service providers’ compliance with the program.
Status: This bill failed to crossover to the Senate and ended in the House Energy, Utilities & Telecommunications Committee (as if March 14, 2011)
***2011-2012 Regular Session: House Resolution 510***
HR510 urges Georgia state government to pursue an “accelerated deployment of clean energy production and infrastructure.” The resolution also calls for state support of federal initiatives that provide financing assistance for clean energy projects.
Status: House Second Readers; Energy, Utilities & Telecommunications Committee (as of March 10, 2011)
***2011-2012 Regular Session: House Resolution 520***
HR520 would create a 5-member House Study Committee on Renewable and Sustainable Energy in Georgia to study the conditions, needs, and problems associated with renewable energy projects in the state.
Status: House Second Readers; Energy, Utilities & Telecommunications Committee (as of March 11, 2011)
***2011-2012 Regular Session: House Resolution 598***
HR598 would create a 13-member Joint Study Committee on Renewable Energy Industries in Georgia to study the implementation of a renewable energy portfolio in the state so that Georgia “can be competitive in the field of renewable energy industries.”
Status: House Second Readers; Energy, Utilities & Telecommunications Committee (as of March 21, 2011)
***2011-2012 Regular Session: Senate Resolution 326***
The Senate version of HR598, SR326 would also create a 13-member Joint Study Committee on Renewable Energy Industries in Georgia.
Status: Senate read and referred to the Regulated Industries and Utilities Committee (as of March 4, 2011).
In the News
Biofuel dreams running on vapor by Dan Chapman of the Atlanta Journal Constitution (AJC): Tracks and evaluates Georgia’s biofuel industry over the past six years.
Plant closure bursts Ga.\'s biomass bubble by Dan Chapman of the AJC: Examines the reasons behind the plant closure of what was once thought to be Georgia’s most promising alternative energy venture.
Biofuel industry struggling in midstate by Heather Duncan of the i: Highlights challenges facing the biofuel industry and examines the recent decline in production by midstate companies.
What Others Are Saying
Green energy plant sucks up subsidies, then goes bust by Timothy P. Carney, columnist for The Washington Examiner: Discusses the Range Fuels plant closure.
The media\'s role in the Range Fuels fiasco by Robert Rapier, blogger for Consumer Energy Report: Examines the media exposure surrounding the Range Fuels plant closure.
Vega Biofules updates shareholders on Georgia manufacturing plant by Michael Molen, CEO of Vega Biofules, Inc: An update on recent developments in the company’s Georgia bio-coal manufacturing plant.
The opinions expressed here are solely the responsibility of the authors.
May 12, 2011 Newsletter (PDF) >>
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