ethanol – the energy of freedom
The Bailout Bill, Biofuels and You
The inclusion of the items was the price of support from many House members who were otherwise aghast at the $700 billion bar tab that must be picked up to save the global financial system from a 1930s style meltdown.
The alternative energy provisions were included so quickly and invisibly that the Congress itself didn’t always have a chance to dot its I’s and cross its T’s. The bill’s downloadable summary at www.house.gov rammed "Division B - Energy Improvement and Extension Act of 2008" without so much as a reference in the overall bill until page 113, and without even a carriage return between the Emergency Economic Stablization Act and the energy provisions.
So, those who are feeling confused should not feel alone. The House Printing Office joins you in perplexity.
In the blink of an eye, energy tax credit provisions that had been introduced and failed eight times during the 110th Congress passed without comment, almost without notice. A band of committed alternative energy supporters, and a host of lawmakers trying to prevent a complete financial crisis within 45 days of a national election, made the Wall Street bailout happen.
The bill was signed so rapidly by President Bush that observers were receiving calls about the bill's chances for passage in the Senate (it walked through in a 74-25 vote) after it had already become law. So doth Washington gridlock melteth away.
Taken as a whole, the provisions on alternative energy are not just good news: they are great news. No new ground was broken, but the biodiesel investment credit was extended, giving the industry the base for investor confidence that will jump-start private investment.
So, what exactly are the energy provisions that were rushed through with the haste and urgency of Paul Revere's midnight ride?
1. Cellulosic biofuel amendment. In previous legislation, the focus of cellulosic biofuels credits, incentives and subsidies has been cellulosic ethanol, shutting out companies such as Sustainable Power that produce bio-oil bio-cude, green diesel, or other non-ethanol fuels from biomass. The Internal Revenue Code of 1986 was amended in this legislation to clarify that "the term ‘cellulosic biofuel’ means any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis," and replaces the term cellulosic biomass ethanol with cellulosic biofuel.
2. Biodiesel tax credit. The biodiesel credit was extended by one year, to expire 12/31/2010. This is a victory for biodiesel producers, who had been struggling all year to pass an extension. The fact that the extension was made for one year, compared to eight years for solar tax credits, may reflect uneasiness over the use of the incentive to make a subsidised export market into Europe, a provision which has the European biodiesel industry up in arms.
3. Uniform treatment of diesel fuel produced from biomass. The legislation neutralized certain aspects of previous bills, removing a reference to "a thermal depolymerization process" and replacing the term "diesel fuel" with "liquid fuel". In general, previous legislation has unintentionally created 'winners and losers' by prescribing specific technologies. Using more neutral language allows new processes to emerge without the risk that they will fall outside the narrow definitions of tax credits, mandates, or subsidies for biofuels. The Advanced Biofuels Association has been particularly focused on increasing fuel, feedstock and process neutrality in legislative language.
4. Aviation fuel. In cases where renewable diesel is being tested or used as a substitute for aviation fuel (kerosene), the tax language has been amended to treat kerosene as if it were diesel fuel, opening up more opportunities to develop renewable diesel substitutes for kerosene that will be covered under favorable tax legislation. Most technologies related to aviation fuels are aimed at produced renewable diesels rather than, strictly, a biodiesel — using thermochemical or catalytic hydrolysis techniques.
5. Splash and dash. The bill clarifies that credits do not apply to alcohol fuels and biodiesel produced outside of the US for use outside of the US. This eliminates the credit previously available to producers who broght B100 to the US, added 0.1 percent diesel, and shipped B99.9 to Europe while qualifying for a $0.999 tax credit.
6. Alternative Fuel Credit. The alternative fuel credit was extended from 9/30/2009 to 12/31/2009, and was extended to include compressed or liquified gas. This is good news for the anaerobic digester process, producing methane in a manure-to-energy model, or using other farm litter. The credit was also extended to include fuel for aviation. The credit was also extended to include credit for coal-to-liquid felus proiduced using gasification, so long as the facility involved is sequestering no less than 50 percent of their CO2 (between 9/30/09 and 12/31/09; in 2010, the seqestration requirement rises to 75 percent).
7. Plug in hybrids. The credit for plug in hybrids is set at $2500 per vehicle plus $417 per KWh the battery can store. The credit is capped at between $7500 and $15000 depending on the weight of the vehicle.
8. Carbon sequestration credit. A credit of $20 per metric ton is offered for CO2 sequestration in a secure geological storage, and $10 for using the CO2 for enhance oil or gas recover. The facility receiving the credit must capture at least 500,000 tons of CO2 per year.
The emphasis on carbon sequestration and coal-to-liquid technologies here suggests that utilities and coal producers were hard at work on the specific provisions. Also, the one-year biodiesel tax extension, compared to a 6-8 year set of extensions given to solar, small wind, and other renewables, suggests that the "food vs fuel" debate has had its impact, and that anti-biofuels advocates created some doubt in the minds of legislators.
Overall, the bill has done a good job, is not a completely thorough one, in neutralizing the language of previous bills. The bias towards cellulosic ethanol, vs green gasoline or green diesel made from cellulose, has disappeared. The Advanced Biofuels Association has reason to be pleased, for fuel and process neutrality is one of their goals.
There was less progress on feedstock neutrality. Cellulosic biomass was favored over other forms of waste and residues. For example, landfill waste-to-fuel processes will find less in this bill than cellulose-to-energy producers.
Splash and dash was addressed, eliminating the practice of allowing producers from overseas to ship B100 to the US, add a splash of diesel, and shipping B99.9 to Europe while claiming a $0.999 per gallon credit. But the credit remains for exported biodiesel, which will not please regulators in Europe considering anti-dumping action against the US for permitting subsidized biodiesel exports.
Algae producers will struggle a bit with the carbon sequestration provision. Now, utilities can get credits for burying CO2, or for proving CO2 to the oil and gas industry for enhanced oil recovery, but receive no special treatment for linking up with algae producers. It will make a difficult development path a little more tough.
Overall, the bill increases neutrality, and extends credits to provide more clarity to the investment community. A longer-term view on the biodiesel credit would have been welcome, but in this investment-challenged economy one of the biggest bailouts may just haver been handed, without upfront cost, to the nascent renewables business.
The credits will go some ways to repairing the lousy investment environment for capital-intensive biofuels projects. And that may be the best economic news we’ll see out of this big, bad mess.
These and other stories are available at www.biofuelsdigest.com, via the free Biofuels Daily News Digest available free each weekday morning via email, or via Podcast