Advanced BioFuels USA

by Brentan Alexander (Forbes) … But for advanced biofuels, which qualify for a broad set of renewable credits, their unique diversification of revenue streams is providing protection against the price destruction occurring in the fuels marketplace.

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Potential feedstocks for advanced biofuel projects include household trash (known as ‘municipal solid waste’), leftover woody biomass material after logging operations (known as ‘slash’), and the shells from almond orchards. 

These feedstocks are currently either landfilled, plowed under, or (depending on local regulations and the desire to follow them) burned. But in the United States, their use in biofuels production is incentivized through a variety of state and federal credit programs. The federal system, known as the Renewable Fuel Standard (RFS), primarily supports the entire domestic ethanol industry with ethanol-blend targets for the nation’s fuel supply.  Less known is that the program also supports more advanced biofuels development. The RFS authors envisioned that corn-based ethanol would be a temporary bridge to an advanced biofuels future, and created multiple credits, known as Renewable Identification Numbers (RINs), to differentiate between the various feedstocks used to produce a biofuel.

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One type of RIN targeted at cellulosic fuels (a ‘D3’ for the in-crowd) came coupled with an important price support: the cellulosic waiver credit (CWC). The value of the CWC is set by the EPA annually, based on the price of gasoline in the Unites States. As gas prices fall, the value of the CWC goes up (albeit on a time-lag). This built-in hedge means many advanced biofuels projects won’t suffer nearly as much revenue destruction as would be expected if oil prices remain low for the foreseeable future.

The other important credit these projects qualify for is the California Low Carbon Fuel Standard (LCFS).

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Barely three months ago, the value and durability of the various renewable credits was viewed by potential lenders and investors as a weakness in the business plan of advanced biofuels producers. With upwards of 50% of project revenues dependent on these credits, investors worried that If programs were cancelled or not renewed, biofuels projects would struggle to complete with fossil alternatives on the open market. These are still valid concerns that impact the financing of new projects. But ironically, for projects already underway, these renewable credits are a lifeline keeping them solvent. READ MORE

U.S. ethanol plants cutting output due to crashing demand: trade group (Reuters)