Biofuels, Biopower, and Biobased Products

1
Biofuels, Biopower, and Bio-based Products

• By
• Jack Werner
• Joint Energy Interim Committee, Arkansas General
  Assembly
• February 27-28, 2006

2
National Energy Issues

• U.S. dependence on foreign oil is increasing
• Growing world demand for limited oil supply
• Crude oil price increases could continue upward
• Growing need for U.S. to identify sustainable
  source of domestically produced energy supply
• Energy is connected to economic development,
  environmental health and safety, and homeland
  security

3
Potential of Biomass Future Use
The Billion Ton Study, a joint publication of
USDA and DOE, concluded that the land resources
of the US can produce a sustainable supply of
biomass sufficient to displace at least 30
percent or more of the countrys current
petroleum consumption. The study found that 1.3
billion dry tons of biomass are available in the
US annually.
4
Administrations DOE Budget FY07

• Biomass Biorefinery Systems RD FYO7 Proposed
  Budget 150 mil
• FY06 Biomass Program Appropriation 91 mil (57
  earmarked)
• EPACT of 2005 Some Major Biomass Authorizations
• Grants to improve the commercial value of forest
  biomass for electric energy, useful heat,
  transportation fuels, and other commercial
  purposes (Sec. 210) 50 mil
• Integrated Biorefinery (Sec. 932(d)) 100 mil
• Production Incentives for Cellulosic Biofuels
  reverse auction (Sec. 942) 250 mil
• Renewable Fuel (Sec. 1511) 429 mil

5
Administrations Proposed FY07 Budget(millions )
6
2002 Farm Bill (P.L. 107-171) Energy Title

• Sec. 9002 Procurement of Biobased Products (1
  mil/yr)
• Sec. 9003 Biorefinery Development Grants
• Sec. 9004 Biodiesel Fuel Education Program (1
  mil/yr)
• Sec. 9005 Energy Audit and Renewable Energy
  Development Program
• Sec. 9006 RE/EE Improvements (23 mil/yr)
• Sec. 9007 Hydrogen and Fuel Cell Technologies
• Sec. 9008 Biomass RD Act of 2000 (63 mil/yr)
• Sec. 9009 Carbon Sequestration Research
• Sec. 9010 CCC Bioenergy Program (150 mil/yr)

7
Farm Bill Other important programs

• Rural Development (VI)
• Sec. 6401 Value-Added Agricultural Market Product
  Development Grants Program (40 mil/yr FY02-07)
• Conservation Programs (Title II)
• Sec. 2301 Environmental Quality Incentives
  Program (EQUIP)
• Sec. 2101 Conservation Reserve Program (CRP)
• Sec. 2001 Conservation Security Program (CSP)

8
Reports Energy Balance
Key reports find that ethanol has a positive
energy balance

• The 2001 Net Energy Balance of Corn-Ethanol.
  Shapouri, Duffield, McAloon, Wang. (USDA
  Argonne National Lab, 2004 )
• The Energy Balance of Ethanol An Update. Wang,
  Shapouri, Duffield. (USDA, 2002)
• Allocation Procedure in Ethanol Production System
  from Corn Grain. Seungdo, Dale. (Michigan State
  University, 2002 )
• A Rebuttal to "Ethanol Fuels Energy, Economic
  and Environmental Impacts" by D. Pimental.
  Graboski, McCleeland. (Colorado School of Mines
  National Corn Growers Association, 2002)
• Effects of Fuel Ethanol Use on Fuel-Cycle Energy
  and Greenhouse Gas Emissions. Wang, Saricks,
  Santini. (Argonne National Laboratory 1999)

9
Changing Policy Landscape Local and State
Actions on biofuels (more than 45 policies)

• 1 Arkansas AR S.B. 363
• 2 Hawaii HI S.B. 2221 HI S.B. 3207
• 3 Illinois P.L. Act No. 93-724 04, P.L. Act
  No. 94-62 05 P.L. Act No. 94-346 05
• 1 Indiana P.L. No. 6 - 2005
• 3 Minnesota MN S.B. 1495, MN H.B. 2633 MN S.B.
  4
• 2 Montana MT H.B. 362, MT H.B. 644
• 3 Maine P.L. No. 474 1999, P.L. No. 698 2003
  P.L. No. 266 2003
• 1 Michigan Public Act No. 5 - 2003
• 1 Mississippi MS H.B. 928
• 4 Nebraska (Signed by Governor) L.B. 605, NE
  L.B. 479, NE L.B. 983 NE L.B. 1065
• 5 North Dakota (Signed by Governor) ND H.B.
  1390, ND S.B. 2019, ND S.B. 245, (Filled) ND H.B.
  1309, ND S.B. 2222
• 1 New Jersey NJ S.B. 2313
• 4 Oklahoma (Signed by Governor) OK S.B. 878, OK
  H.B. 1398, OK H.B. 1556, (filled) OK S.B. 429
• 1 Rhode Island P.L. No. 484 2004
• 3 South Dakota SD H.B. 1279, SD S.B. 162 SD
  S.B. 31
• 2 Tennessee TN H.B. 3067 TN H.B. 1740
• 4 Washington WA H.B. 1240, WA H.B. 1241, WA H.B.
  1242 WA H.B. 1243
• 3 Wisconsin (Signed by Governor) WI S.B. 378,
  (filled) WI S.B. 39, WI S.B. 41
• 1 Wyoming WY H.B. 5

10
State Actions on Biomass

• Governor Pataki (R-NY)
• Renewable fuels available at service stations all
  across the state
• Renewable fuel tax-free
• Incentives for biorefineries
• Increased use of hybrid vehicles including
  plug-ins
• Renewable Fuel Standards
• Hawaii - 85 of gasoline to contain 10 ethanol
  (starting in 06)
• Minnesota - 20 of its transportation fuels must
  be renewable by 2012
• Montana - 10 after in-state production of 40
  million
• California - 10 of fuel should be ethanol by
  2007
• 21 States have Renewable Portfolio Standards (RPS)

11
State Biomass Incentives
Incentives Available
Biomass Applications
Credit/Exemptions /Rebates
Electricity
Grants/Loans
Heating
Both Incentives
Multiple Biomass Applications
12
What needs to happen?

• Research on
• Feedstocks and Co-products
• Cellulosic Technologies
• Sustainable Harvesting
• Incentives for
• Production
• Consumption
• Infrastructure
• Education for
• Policymakers
• Universities
• Farmers
• Environmental Groups
• Health Organizations

13
Land Grant Universities

• More funding for agricultural practices for
  energy crops and related residues
• What are the appropriate feedstocks for different
  regions of the country?
• Need state/regional biomass inventories
• Appropriate Technologies
• Assistance on sustainable and rural development
• Factors that need to be considered
• Climate
• Soil
• Native Species
• Natural Pests
• Farmer/community equity

14
Federal Agency Collaboration

• Healthy Forest Restoration Act of 2003, Title II
• Memorandum of Understanding (MOU) for Woody
  Biomass Utilization
• (DOE/USDA/DOI)
• Biomass Research and Development Act of 2000
• Biomass RD Technical Advisory Committee
• Vision for Bioenergy Biobased Products in the
  US
• Roadmap for Bioenergy Biobased Products in the
  US
• Biomass RD Board
• Farm Bill 2002, Title IX
• Federal Procurement of Biobased Products (Section
  9002)
• Renewable Energy Systems and Energy Efficiency
  Improvements (Section 9006)
• Biomass Research and Development (Section 9008)
• Joint DOE/USDA Solicitation for FY 02, FY 03,
  FY04
• Continuation of the Bioenergy Program (Section
  9010)
• Energy Policy Act of 2005

15
The New Industrial Biorefinery

• USES
• Fuels
• Ethanol
• Renewable Diesel
• Hydrogen
• Power
• Electricity
• Heat
• Chemicals
• Plastics
• Solvents
• Chemical Intermediates
• Phenolics
• Adhesives
• Furfural
• Fatty acids

Biomass Feedstock
Conversion Processes

• Trees
• Grasses
• Agricultural Crops
• Agricultural Residues
• Animal Wastes
• Municipal Solid Waste

- Enzymatic Fermentation - Gas/liquid
Fermentation - Acid Hydrolysis/Fermentation -
Gasification - Combustion - Co-firing
16
Lessons Learned

• Use of an abundant existing crop can facilitate
  strong state support and commercialization
• Corn for ethanol in Iowa and Illinois
• Sugarcane in Hawaii
• State RPS programs tend to foster wind and not
  biomass may need biomass sub-targets in RPS
• Wind has strong federal tax credit, and lower
  capital costs
• Landfill gas is typically the only biomass supply
  chosen
• NY, CA and other states have seen biomass do
  poorly vs. wind
• Need to credit base load supply, farmer benefits,
  resource diversity

17
Lessons Learned Contd

• Incentives that facilitate long-term contracts
  (e.g., 20 or 30 yrs) can foster a large industry
• California Standard Offer 4 power sales
  contracts fostered over 49 biopower plants with
  over 830 MW of capacity
• Oregon forest thinning potential and problems
• Long-term incentives may need flexible features
  for changing markets, to avoid boom/bust cycles
• California SO4 contracts, utility buy-outs,
  shrinking industry
• Oregon Business Energy Tax Credit (BETC) pass
  through to entities with tax liability

18
Lessons Learned Contd

• Bioenergy project financing assistance can
  effectively target economic development needs
• NE financed ethanol plants in areas that raised
  salaries
• MN Job Opportunity Building Zones (JOBZ) program
• States can facilitate innovative local
  incentives, like skip zoning approaches
• NE allowed smaller cities to collect property
  taxes from nearby plants, then use these dollars
  to help with project financing

19
Lessons Learned Contd

• State fuel production incentives can be more
  effective than fuel sales taxes in fostering new
  in-state capacity
• MN and NE initially tried ethanol sales taxes ,
  which fostered increased use of ethanol from
  other states
• When MN NE added ethanol production incentives
  they succeeded in getting new in-state facilities
  built

20
Lessons Learned Contd

• Public benefit funds financed by fees on electric
  utility bills typically must be used for electric
  power applications (CA, NY, OR, etc.), a
  potential drawback for biomass
• Biomass may be most competitive for
  non-electricity uses, like transportation fuels,
  heating, and bio-products
• Funds financed by state bonds (PA), taxes on gas
  (NY) and/or fertilizer sales (NE) can target
  non-electricity applications for biomass

21
Lessons Learned Contd

• Pro-active multi-agency approaches and
  collaboration can be very effective
• MN Dept. of Commerce and Dept. of Agriculture
  efforts and MN Lung Association helped achieve
  strong ethanol and biodiesel growth
• California is developing a strategic biomass plan
  with multi-agency collaboration
• IL labor agreement requirements

22
Summary

• Federal tax incentives tend to favor seed-row
  crops
• Biopower cannot compete with wind to take
  advantage of Regulatory (RPS) and Tax Incentives
• Educational Programs targeted to specific
  audiences are essential to develop a biomass
  program

23
Summary cont.

• A biomass resource assessment is important but
  should be linked to an economic development plan
• Production incentives need to be linked with
  marketing incentives
• Need a Champion and often it is the
  agricultural community