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Alternative Energy and Agriculture: Spotlight or Stoplight

Alternative Energy and Agriculture: Spotlight or Stoplight. Harry S. Baumes, Ph. D. Associate Director Office of Energy Policy and New Uses Presented at Southern Association of Agricultural Scientists 2009 Annual Meetings Westin Peach Tree Plaza Atlanta Georgia February 1, 2009.

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Alternative Energy and Agriculture: Spotlight or Stoplight

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  1. Alternative Energy and Agriculture: Spotlight or Stoplight Harry S. Baumes, Ph. D. Associate Director Office of Energy Policy and New Uses Presented at Southern Association of Agricultural Scientists 2009 Annual Meetings Westin Peach Tree Plaza Atlanta Georgia February 1, 2009

  2. OVERVIEW • Relevant Policy and Market Factors – Interstate Highway, no speed limits • 2008, stoplights and traffic congestion • Moving Forward, intersection, or a traffic circle with many possible ways to go.

  3. BIOFRENZY

  4. Relevant Policy • CCC Bioenergy Program • Energy Policy Act of 2005 • RFS 7.5 bgpy by 2012 • Excludes liability protection for MBTE producers from water contamination lawsuits (MTBE – 5 bgpy market) • Energy Independence Act of 2007 (EISA) • RFS2 36 bgpy by 2022 • Caps corn starch ethanol at 15 bgpy • Focus on advanced biofuels – cellulosic • GHG Thresholds • Research and Development • Food, Conservation, and Energy Act of 2008 (FCEA) • Biofuel Production Incentives • Rural Development Programs • Research, Development & Commercialization

  5. Market Factor: Rising Energy Prices Gasoline Conventional Corn Starch WTI RFS1

  6. Market Factor:Corn – Ethanol Prices Ethanol – Corn Price Spread Profitability Indicator

  7. Accelerating Investment Source: Renewable Fuels Association

  8. Accelerating Investment Source: National Biodiesel Board

  9. EISA – EPACT Renewable Fuels Standard Other Biofuels Biobased Diesel Cellulosic Biofuels Conventional Corn Starch RFS1 Years

  10. Source: Renewable Fuels Association

  11. 2008 • Further Run-up in Energy and Commodity Prices • Export Bans - Weather • Food and Fuel Debate • Texas Waiver Request • RFS2 Rulemaking • Indirect Land Use • Collapse of Financial Sector and commodity price bubble • Global Slowdown

  12. Year – Over Year Change in Commodity Prices Petroleum Primary Commodities Food Agriculture Source: International Monetary Fund

  13. Issues and Concerns • Climate Change • Sustainability • Environment • Land Use • Consistency of Supply and feedstock quality • Policy Objectives • Energy security • Food security • Implementation EISA • Implementation FCEA Bioenergy Complicated and Interdisciplinary

  14. Energy Independence and Security Act of 2007 Fuel categories must meet greenhouse gas life cycle performance threshold • 20% life cycle reduction threshold – Conventional Biofuels (ethanol derived from corn starch from new facilities) • 50% life cycle reduction threshold – Advanced Biofuels • 50% life cycle reduction threshold – Biomass-based Biofuels • 60% life cycle reduction threshold – Cellulosic Biofuels Life Cycle Analysis must include • direct and indirect land use change due to biofuel feedstock production • Baseline fuel comparison to gasoline and diesel fuel in 2005

  15. Source: Michael Wang, Argonne National Laboratory

  16. Ethanol Capacity • 11.8 bg capacity • 1.8 bg under construction • 0.6 bg expansion projects • 14.2 bg total capacity • 1.8 bg idled • RFS 2009 • 10.5 bg ethanol • 0.6 bg advanced biofuel (0.5 biodiesel) • 11.1 bg renewable fuels Source: Renewable Fuels Association, January 29, 2009

  17. Moving Forward – Which Way to Go? • Economy must improve – Stimulus package help directly for bioenergy industry and credit markets • New Administration’s team is being put in place – seems clear of support for bio or renewable energy – commitment to alternative energy (beyond transportation fuels) • Recognition that bioenergy is not independent of climate change, environment, and sustainability • Alternatives to fossil based energy is a global concern

  18. Moving Forward – What will it take? • Recognize the complexity of developing, deploying, and using alternative bioenergy - Systems approach to solutions • Interdisciplinary cooperation and collaboration – research teams • Commitment to Research and Development • Continue to be a role for public policy

  19. Moving Forward - What we need to know • Overcoming Infrastructure Constraints • Blend Wall • Vehicles • E-85 availability • Transport of “ethanol” • Production, harvest, transport, & storage biomass • Concentrate or improve energy density of biomass

  20. Moving Forward - What we need to know beyond biofuels • Overcoming Infrastructure Constraints • Getting Connected to the Grid • Wind farms and solar technology • Biomass • NIMBY attitude

  21. Moving Forward - What we need to know • Biomass Production • Alternative Feedstocks • Switchgrass, miscanthus, algae, … • Supply, Use & Price • Feedstocks for energy (not exclusively transportation fuels) • Land Use • Direct & Indirect effects • Life Cycle Analysis

  22. Moving Forward - What we need to know • Will a sustained increase in commodity prices – provide incentives for investment in agriculture? • Domestic & Foreign Investment • Increase adoption of new and existing technology in developing (and developed) countries/regions • Trade-offs between bioenergy and other industries – food, forestry,…

  23. What We Need To Know • Technology Development • Crop productivity – across potential feedstocks • Implications for other input use (fertilizer, water, chemicals,…) • Conversion

  24. Source: USDA, Office of Budget and Program Analysis

  25. THANK YOU! Contact Information: Harry S. Baumes hbaumes@oce.usda.gov 202-401-0497

  26. Section 9006 Funding Activity FY 2003 thru 2007 Renewable Energy/Energy Efficiency TechnologyNo.AmountLeveraged Biomass 218 $49,219,744 $282,508,476 Wind 193 35,800,088 505,221,691 Solar 49 1,862,651 4,519,509 Geothermal 24 1,230,996 3,232,743 Hybrid 132,514,643185,649,921 Subtotal 497 $90,628,122 $981,132,340 Energy Efficiency 762 $16,493,734 $42,969,435 Subtotal 1,259 $107,121,856 $1,024,101,775 Guaranteed Loans 153 $91,529,855 $181,321,296 Grand Total 1,412 $198,651,711 $1,205,423,071

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