Shortly after Congress passed the Clean Air Act (CAA) in 1970, Government Agencies began implementing a regulatory rules making strategy called ‘Technology Forcing’. Instead of basing regulations on commercially proven technologies, Agencies mandated developing new technologies required for regulatory compliance. Technology Forcing regulations include environmental controls, energy efficiency, and replacing petroleum with alternative, renewable fuels. The success history of Technology Forcing regulations has varied. Many regulations requiring substantially reduced air pollution from fixed and mobile sources have been successful. Regulations have also successfully increased light duty vehicle (LDV) fleet fuel efficiency and replaced significant petroleum gasoline volumes with conventional ethanol. All Technology Forcing regulation’s, however, have not been successful. Unsuccessful regulations include methanol and hydrogen alternative fuels programs, the first zero emission electric vehicles program, and recently, developing advanced cellulosic biofuels.
The amended 1990 CAA mandated reducing LDV tailpipe emissions by blending oxygenates into petroleum gasoline. Although the Petroleum Industry initially met this requirement by blending MTBE, ground water pollution issues eventually resulted in the oxygenate requirement being supplied by ethanol. Congress passed the first ‘Renewable Fuel Standard’ (RFS1) as part of the Energy and Security Act (EPAct) in 2005. The RFS1 required blending increased amounts of ethanol up to 7.5 billion gallons per year in 2012. The RFS1 effectively replaced the CAA oxygenate mandate.
To support ethanol development for the CAA oxygenate mandate and RFS1 the Government created various subsidies and protections. Besides guaranteeing a market for specific annual ethanol volumes, ethanol producers benefited from about 50 cents per gallon ethanol in subsidies and import duties. The Ethanol Industry independently chose developing corn ethanol to meet annual blending targets. Although the first corn ethanol biorefineries faced many development challenges, the Industry successfully achieved the improvements needed to make most facilities economically sustainable.
Congress passed the Energy Independence and Security Act (EISA) in 2007 to substantially increase the volume of required ethanol produced-blended. ‘Conventional’ corn ethanol blending was increased up to 15 billion gallons per year in 2015. To address identified corn/food market price inflation and environmental concerns from excessive conventional corn ethanol production (> 15 billion gallons), the newly developed ‘RFS2’ required blending increasing amounts of ethanol produced from non-corn biomass. The EPA developed RFS2 requires blending increasing amounts of ‘advanced’ cellulosic ethanol beginning 2010 and up to 16 billion gallons year in 2022. This RFS2 is highly Technology Forcing since no commercial cellulosic ethanol biorefineries existed when the standard was approved and the technology is highly developmental.
The RFS2 faces greater technology challenges than RFS1. Unlike the basic corn ethanol fermentation process, converting cellulosic biomass into ethanol is much more complex. Cellulosic feedstocks typically include corn stover, wood, or switchgrass. The sugars required for fermentation into ethanol are tightly bound within feedstock cellulose fibers. To breakdown the cellulose and release the sugars requires technology that is more energy intensive than conventional ethanol and consumes large amounts of expensive enzymes and chemicals. This higher processing complexity makes the capital and operating costs of a new advanced ethanol biorefinery about twice the cost of a conventional biorefinery.
A major technology challenge for conventional ethanol biorefineries was energy efficiency. Earlier plants had significantly negative ‘net energy values’ (NEV); energy consumed > ethanol energy produced. As the technology developed, the conventional ethanol NEV’s became about breakeven; energy consumed = produced. The NEV was further increased by including the ‘displacement energy credit’ of the byproduct produced with the corn ethanol. Typical conventional ethanol biorefineries produce significant amounts of byproducts that are sold into animal feed markets. The byproduct increases revenues and also displaces existing animal feeds. The displaced animal feed and the energy no longer needed to produce the feed is credited to the corn ethanol production. This increases and makes the NEV significantly positive; energy produced > consumed. Determining the NEV is important for identifying the most economic biofuels and calculating total ‘greenhouse gases’ (GHG) produced; an EISA compliance requirement.
The advanced cellulosic ethanol NEV is extremely negative before including possible byproduct energy credits. Unlike conventional ethanol that yields relatively small amounts of byproduct, most of the total yield in an advanced ethanol biorefinery is a cellulosic byproduct. This byproduct is basically a bio-waste that is only suitable as a solid fuel. The bio-waste can provide NEV energy credits by fueling a power plant that displaces power produced from fossil fuels. Including a new bio-waste power plant with a cellulosic ethanol biorefinery makes the overall NEV slightly positive. Unfortunately, the bio-waste power plant substantially increases total biorefinery capital costs by 30-50%. These added costs cannot be avoided since building a bio-waste power plant is not optional. To qualify as an advanced cellulosic ethanol biofuel under the EISA requires reducing total ‘lifecycle’ GHG emissions. The lifecycle is defined as all the GHG’s generated in growing-processing-transporting the cellulosic feedstock, -through consuming the ethanol biofuel. The EISA requires that qualified advanced cellulosic ethanol must have ‘lifecycle’ GHG emissions 60% less than the petroleum gasoline displaced. This is only possible by consuming most of the bio-waste byproduct in a new power plant.
The RFS2 originally required blending 0.25 and 0.50 billion gallons of cellulosic ethanol in 2011 and 2012 respectively. Due to technology development problems with producing qualified cellulosic ethanol, the EPA reduced RFS2 blending targets to 6.60 and 8.65 million gallons for 2011 and 2012. Unfortunately the Advanced Ethanol Industry has failed to produce any significant cellulosic ethanol in 2011. Despite no cellulosic ethanol being available for blending, the EPA preceded to fine U.S. Petroleum Refiners almost $7 million for not blending the unavailable advanced biofuel. The American Fuels & Petrochemical Manufacturers (AFPM) petitioned the EPA to cancel all fines since it was impossible to comply with the blending mandates. This request was denied. The AFPM has filed a lawsuit to have the EPA’s decision overturned.
The EPA’s RFS2 Technology Forcing strategy has failed. If or when any significant volume of cellulosic ethanol will be available is unknown. The apparent economic barriers for cellulosic ethanol biorefineries are operating and capital costs which are 2-3 times greater than corn ethanol biorefineries. A state-of-art corn ethanol biorefinery fixed + variable operating expenses average about $1.50 – $2.00 per gallon, including feedstock costs. With ethanol market prices of $2.00 – $2.50 per gallon, efficient corn ethanol biorefineries are reasonably profitable without any Government subsidies. The total operating expenses of a cellulosic ethanol biorefinery is estimated at $3.00 -$4.00 per gallon, or higher for unreliable operations. Although advanced biofuel subsidies have been $1.00 per gallon, a state-of-art cellulosic ethanol biorefinery struggles to breakeven. Based on lack of free market investment in the cellulosic ethanol Industry and the shutdown or bankruptcy of the few advanced biorefineries or demonstration plants actually built, the future for cellulosic biofuels appears to be very poor.
The EPA’s decision to penalize the U.S. Refining Industry for not blending advanced biofuels that are unavailable is illogical. It’s time to end the RFS2 dysfunctional administration and refocus on the original intent of the EPAct/EISA regulations: developing clean and economically feasible alternatives to U.S. petroleum supply. These objectives can be achieved by developing efficient commercial technologies and facilities that can become reasonably sustainable within the free market. Cellulosic biofuels should be removed from the RFS2 and put back into the R&D domain until needed improvements are actually developed. The Government should only support commercializing technologies that have been thoroughly evaluated and determined to become reasonably profitable and sustainable without perpetual financial subsidies.