The Future of Renewable Fuels: Have We Missed the Target?

Justin Christensen |

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Being the new fuel on the market isn’t easy. You’re up against the big dogs who’ve held their place for well over a century, you’re trying to learn the rules, iron out the kinks in your technology for development and find your place in the supply chain.

You’re also looking for support. Last year, the Environmental Protection Agency (EPA) shocked the renewable fuels industry with its proposal to cut blending requirements for 2014 from 18.15 billion gallons, set by Congress in 2007, to 15.21 billion gallons.

Moving Targets

Rationale behind the agency’s decision was based on two components:

  1. Ethanol markets are saturated – Continuing to meet those volumes would require gasoline-ethanol blends to be much higher than the 10 per cent “blend wall” already regulated as safe for most cars. Restrictions are also based on the quantity of fuel pumps available to deliver the product through existing infrastructure.
  2. Low production of qualifying fuels – Just as the ethanol gauge was overestimated, cellulosic ethanol is also struggling. Since 2010, production volumes have failed to meet targets set by the EPA. The mandate then was 5 million gallons, rising to 8.56 million by 2012, dropping to 6 million last year and now for 2014 is set at 17 million. The amount produced in 2013? 281,819 gallons.
What’s Left for 2014

As the last quarter of 2014 moves in, there are a number of issues still waiting to be resolved, most importantly, setting the volume requirements for renewable fuels.

Without a favorable amendment to the rule, the industry would face big hits in the market, including the loss of technology investment to both Brazil and China. Next to the United States, the two countries round out the top three ethanol producers, and are anticipating commercial scale cellulosic ethanol plants to be operational by the end of this year and into 2016.

Industry businesses also believe capping the ethanol blend at 10 per cent will eliminate incentive for oil companies to invest further in new equipment.

Despite the unsettling challenges, there is still hope. POET-DSM Advanced Biofuels opened the first commercial cellulosic ethanol plant in Emmetsburg, Iowa earlier this month, expecting annual production of 20 million gallons. Quad County Corn Processors opened a second plant in Galva, Iowa a week later and they are poised to produce 2 million gallons annually. And DuPont Danisco will be finishing construction on a third plant in Nevada later this year.

Looking Ahead

Just how the renewable fuels will fare with rulings and production this year remains to be seen. Even with progress, it will take time to find balance in the existing market and mandate appropriate regulations as the industry grows and evolves. The potential is definitely there, but like many good things, it doesn’t mean success will happen overnight.

In the meantime, work with a fuel distributor to stay on the cutting edge of market developments, products and services. They will be there to support you whether the industry changes or your business does. It’s an investment that’s renewable.