Biofuel Bonanza

The energy bill signed this week will have an enormous impact on biofuels.

Friday, December 21, 2007

By David Rotman

In case you were a bit busy this week and didn't have time to examine the 822 pages of the Energy Independence and Security Act of 2007, it is a big deal. And in particular, it is a big deal for biofuels.

The numbers speak for themselves. The legislation, which was signed by President Bush on Wednesday, creates an enormously ambitious Renewable Fuel Standard (RFS) that mandates the production of 36 billion gallons of renewable fuels by 2022; included in that is 21 billion gallons of advanced biofuels (most of which will be cellulosic biofuels). At such levels, biofuels will account for more than 20 percent of total road-transportation fuels in the United States by 2022. To give a sense of the ambition of such a mandate, it is worth noting that total biofuel production in 2007 was only 4.7 billion gallons, and almost all of that was corn-derived ethanol. There is still no commercial production of cellulosic ethanol.

The biofuel industry is, of course, thrilled. Bio, the biotechnology trade association that counts among its members numerous companies involved in various aspects of biofuels, predicts that the new mandates will mean nearly 300 new biofuel plants, including 75 new corn ethanol plants and 210 new cellulosic ethanol plants. Bio estimates that the RFS could mean $170 billion invested in advanced technology development, biofuel production, and new infrastructure to handle biofuels.

Overall, the federal mandate for biofuels appears to be a good thing. It will finally give industry and academic researchers confidence that biofuels are really going to play an important role in the country's energy future. But it is worth keeping in mind that there are still huge technology challenges in ramping up production of advanced biofuels. Achieving the ambitious standards of the new energy law will require an equally ambitious effort in researching and developing advanced biofuel technologies.