America needs new investment: In the next generation of biofuels

President Obama and the presumptive new Speaker John Boehner (R-Ohio) both are strong supporters of ethanol, as are many leaders who were elected or re-elected, including Sen. Chuck Grassley (R-Iowa), Senator-elect Mark Kirk (R-Ill.), Senator-elect Jerry Moran (R-Kan.), Governor-elect Sam Brownback (R-Kan.), Rep. Kristy Noem (R-S.D.), Rep. Dave Camp (R-Mich) and Congressman John Shimkus (R-Ill.).

There is bipartisan support for biofuels because their development, production and use serve great national needs. The biofuels industry supports nearly 400,000 jobs, pays $15.9 billion in taxes, promotes energy security, reduces air pollution and climate change, and promotes economic recovery in hard-hit rural America and throughout the Midwest.

Biofuels exemplify American innovation. While existing bio-refineries continue to improve their processes, they are also joining with next-generation technology companies to bring cellulosic (non-grain-based) and other advanced biofuels to market.

At least 28 advanced biofuels companies are developing new technologies to produce biofuels from new feedstocks. At Abengoa, we’re moving forward to produce biofuels from corn stover, wheat straw, milo stubble, switchgrass and other biomass. Other feedstocks being developed across the country include wood wastes, municipal wastes, and even discarded cooking oil.  This not only broadens the feedstock base available for the production of biofuels, but also allows the industry to expand geographically across the country, and well beyond today’s concentration in the central portions of our nation.

These technological advances are the good news. The challenging news is that more public as well as private investment – and much more thoughtful public policies – are needed to bring these technologies to commercialization.

As the Energy Information Administration (EIA) just reported, cellulosic ethanol production is projected to be only 3.94 million gallons, well below the 6.5 million gallons that the Environmental Protection Agency (EPA) had readjusted as the target under the Renewable Fuels Standard (RFS), and nowhere near the original goals of the RFS.

We need to bridge the gap between our projected production of cellulosic ethanol – and our urgent need for more American-made next-generation biofuels. The most important issue facing cellulosic and other advanced biofuel technologies is access to investment. These technologies stand at the brink of commercialization, but they have been hampered by a faltering economy, the financial crisis, and the failure to implement key loan guarantee programs with the scale and scope that the industry needs.

To put it plainly, we can’t have commercialization without capital. That is why we need to improve existing loan guarantee programs and tax policies – and we need to do it now.  Federal loan guarantee programs established by the Departments of Energy and Agriculture have been woefully ineffective in fulfilling their intended purposes.

Since it was established by the 2005 energy bill, the U.S. Energy Department’s Renewable Energy Loan Guarantee Program has failed to bring next-generation biofuel technologies to the marketplace. It has discriminated against biofuels for motor vehicles, and its funds have been raided for purposes far removed from energy policy.

As administered by the Energy Department, the loan guarantee program has required operating data and purchasing agreements that are not part of the real world of liquid transportation fuel marketing. Instead, the program has been skewed towards energy sources that are used to generate electrical power, not fuels that power cars and trucks.  Moreover, Congress has raided the loan guarantee program’s funds to pay for the “Cash for Clunkers” program and even to cover budget shortfalls in the state governments.

The Energy Department needs to fix the loan guarantee program so that it becomes what Congress intended and the nation needs: a source of capital for producers of the next generation of biofuels for the nation’s motor vehicles.  Failure to do so will threaten not only the future of the advanced biofuels industry, but also the existing biofuels industry which currently provides almost 10 percent of our nation’s transportation fuel.  The future growth of biofuels necessary to meet the RFS goals is inextricably tied to advanced technologies, and an industry which cannot grow is doomed to languish.

Similarly, Congress needs to expand the cellulosic biofuels producer tax credit to include a broader range of eligible advanced biofuels including algae and to allow developers to select a refundable 30 percent investment tax credit for advanced biofuel commercialization.

Half a century ago, the nation elected a dynamic young president who promised to “get America moving again” by sending an American to the moon and back. Now is the time for our nation’s leaders to promote public policies that keep America moving by developing, producing and using the next generation of biofuels to power our motor vehicles here on Earth.

Chris Standlee is the former chairman of the Renewable Fuels Association and the Executive Vice President of Abengoa Bioenergy headquartered in Chesterfield, Missouri.