The Burning of the Witches

It is springtime in Washington, and the lunatics have come out for their annual airing.

But some sober, reflective voices are offering a vision of advanced biofuels policy well worth considering.

In Washington, the Senate Environment and Public Works Committee has been holding hearings on Capitol Hill this week on the future of renewable energy, and biofuels within that sector. Numerous committees within the Congress have been looking at the re-shaping of US biofuels policy.

The actions of the Congress have produced some “wacky week in Washington” side effects. Our favorite: the farcial “forum on ethanol policy” being staged this week by meat and cattle producers and some environmental groups, to which not a single ethanol producer or representative has been invited.

Staged as a policy forum, it is more reminiscent of the annual Czech festival Pálení čarodějnic – the Burning of the Witches, or the witch-burning scene from Monty Python and the Holy Grail.

VILLAGER #1: We have found a witch. May we burn her?
CROWD: Burn her! Burn her!
BEDEVERE: How do you know she is a witch?
VILLAGER #2: She looks like one.
WITCH: I’m not a witch. They dressed me up like this.
BEDEVERE:  Did you dress her up like this?
VILLAGER #1: Yeah, a bit.
VILLAGER #2: Burn her anyway!
CROWD: Burn her! Burn her!

Wonderful theory, wrong species

For it is springtime in Washington, and the lunatics have come out for their annual airing. They insist that the US roll back its renewable fuel standards, and go back to a time when the world was made safe for cheap meat, and nothing else.

Each year, they gather and demonstrate against ethanol and anything else that interferes with their “eat more chiken” vision of national policy.

They rage against the future, together with a cluck of allies clothed in the livery of the environmental movement. But their allies are less environmentalists than a Primitive Movement, advocating for one child per family, vegan diets, one light bulb per room, and a society on bicycles. As E.O. Wilson once said about Marxism, “Wonderful theory, wrong species.”

Meanwhile, India, China and Russia grow apace, as they have every right to do, and more power to them as their lifestyles improve. But it hardly gives any hope at all to the idea that energy demand is going anywhere but up, up, up and up.

“Advanced biofuels are a technological and economic reality”

But in other sections of the Capital, more serious voices were being heard. DuPont BioFuels Global Director Jan Koninckx told the Senate Committee that “Advanced biofuels are a technological and economic reality, and they are about to be a commercial reality. The U.S. government called on the private sector to step forward and advance biofuels technologies and production.  We have responded with ten years of work, hundreds of millions of dollars of R&D investment and our brightest minds.  We are confident of our capabilities to cost effectively produce advanced biofuels.”

Here Today, More on the Way

The tour de force arguments were brought by Advanced Biofuels Association president Mike McAdams.

He testified, “These fuels are real, some are here today, and more are on the way. We now have several new plants operating both in the United States and around the world which are producing advanced drop-in biofuels.  These plants are making renewable fuels for the first time, and can be used without changes to the transportation fleet or requiring any infrastructure changes to deliver them.”

“These developments would simply not be occurring if it were not for the vision of this Committee and the Congress from 2005 to date to enact a framework to expedite the development of advanced and cellulosic biofuels.”

But McAdams also cautioned senators that the federal government should not be picking winners and losers as the market matures, “Currently the EPA in their RIN certification process is showing a tendency to be very prescriptive and narrow in allowing some of the determinations of new qualified pathways as well as qualifying some significant potential feedstocks.”

McAdams’ testimony emphasized consistency in public policies, “Advanced and Cellulosic biofuels tax policy has been too inconsistent and is not tailored currently to provide parity or the right form of tax options to enable some companies to take advantage of the current law.  In addition, other sectors of the renewable energy sector were afforded provisions such as a refundable investment tax credit which were not afforded the biofuels industry.”

McAdams’ complete testimony, which is well worth the read, can be found here.

Ground Zero Washington

It is impossible to accurately forecast what will come of the combination of discourse and discord in Washington. At a minimum, we understand that the ethanol tax credit will be cut. At worst, it may be zeroed out. We hear predictions on the DOE Loan Guarantee program ranging from “zeroed out” to “reduced, and tweaked”.  Overall funding for renewable energy programs was cut under the House-Senate budget deal – how much the axe may fall on biofuels, too soon to tell.

One thing is for sure. The overwhelming challenge is investment, and investment in the sector needs long-term policy. In this spending and budgetary environment, the opportunities for public investment in bioenergy, or in renewable fuels or energy, will be slim.

McAdams observed in Washington this week, “over the last two years, a significant amount of federal funds were granted for renewable energy projects. But the startling fact is that the advanced and cellulosic sectors were given pennies on the dollar compared to other sectors which, may well be important, but will require much longer time frames to develop, deploy, and back out foreign oil. Advanced biofuels can make an immediate contribution to our nation’s energy diversity and security. We would hope in the future the biofuels industry would be afforded levels of support at parity from the Administration and the Congress more in line with the electricity, and auto sector.”

Enforce the law

Amen. “Fondly do we hope, fervently do we pray” as Lincoln phrased it in his Second Inaugural Address. But we find ourselves filled with doubt that the Congress will have the votes to establish a longer-term renewables vision. So we continue to urge the biofuels industry to look beyond the public market for loan guarantees – which inherently pick project over project and pick winners and losers, at best.

The best thing the US Government can do is enforce the Renewable Fuel Standard, and mandate the gallonage that demonstrates demand, and continue to signal demand through the Department of Defense on the grounds on energy security and lessening strategic dependence on hostile regimes.

“At this critical point in development, it is essential that these policies be maintained,” Dupont’s Koninckx said.  “With stable policy and access to the fuels pool, we will succeed. The Renewable Fuels Standard is helping to motivate the right kinds of market transitions.”

The Government as strategic buyer

The Government can do more as a buyer. A government or other entity that buys renewable gallons, in the near term, at premium rates, to thereby grant a significant first-mover advantage and lock in the interest of oil companies, is a good idea. 500 million gallons at $6 per gallon for a couple of years, is not much of a premium over the retail cost of petroleum we are expecting this summer, but it would go a long, long ways towards fostering investment. That investment will produce scale, and will produce parity – and such a policy (twinned with a low-carbon threshold) would be inherently neutral between the various renewable options.

Boldness of policy, not the annual, puerile, burning of the witches, is the order of the hour. Let’s hope we get it.