The greatest challenge the biofuels industry now faces is finding capital to construct new advanced and cellulosic plants, says Cole Gustafson, NDSU Extension biofuels economist.
“With unproven biofuels conversion technology, changing the Environmental Protection Agency’s regulations and weak financial markets, new investment capital is going to be difficult to procure,” he says.
In his latest, “New Energy Economics” column distributed by NDSU Extension Communications, Gustafson says the problem is EPA’s new regulations.
EPA is proposing that conventional biofuels, such as grain ethanol, in the future must reduce greenhouse gas emissions by up to 20%. EPA plans to includes both “direct” and “indirect” causes of greenhouse gas emissions during the lifecycle of production. The latter component commonly is referred to as indirect land use change.
EPA finds that any new traditional corn grain ethanol plant would reduce greenhouse gas emissions by only up to 16%, so it would not qualify as a conventional biofuel.
In its proposed regulations, though, the EPA is grandfathering in traditional corn grain ethanol plants built before Dec. 19, 2007. Therefore, existing ethanol plants will be able to continue to operate and produce ethanol that conforms to the federal guidelines for the time being.
“It is uncertain how long this grandfathering provision will last,” Gustafson says, especially as new technologies arise and production of conventional biofuels with a greater than 20% greenhouse gas emissions reduction occurs.
Corn grain ethanol plants will likely have to invest new technology, such as fractionation and new energy sources, to reduce their greenhouse gas emissions.