Advanced BioFuels USA

by Scott Irwin and Darrel Good (FarmDocDaily) .. In our first farmdoc daily article (June 3, 2015) after the release of the (RVO) proposal, we analyzed whether the renewable (ethanol) mandates proposed by the EPA, while lower than statutory levels, were still high enough to provide a “push” for biofuels use beyond the E10 blend wall. The analysis confirmed that the mandates do indeed imply pressure towards higher ethanol blends or non-ethanol biofuel, but this depends on assumptions about growth in gasoline use and ethanol inclusion rates. In our second farmdoc daily article (June 10, 2015) after the release, we investigated how the degree of push above the blend wall changes depending on whether the EPA targets a fixed volumetric or fixed fractional standard. The analysis in these articles highlights an important change in direction for EPA policy with respect to setting annual RFS standards. Compared to the preliminary proposal for 2014 released on November 30, 2013, the latest proposal indicates the EPA is serious about pushing RFS standards past the E10 blend wall. The purpose of today’s article is to examine the implications of the EPA continuing this policy direction after 2016.

Analysis

The analysis in our previous two articles (farmdoc daily, June 3, 2015; June 10, 2015) focused on 2014-2016, as these are the years covered by the EPA’s recent RFS rulemaking. Here, we assume that over time, the EPA will expand the magnitude of the push implied in the most recent proposal, consistent with language in the proposal.

…

The analysis for subsequent years is based on the assumptions that (1) the cellulosic, and therefore total advanced biofuel mandates will continue to be written down, (2) the mandate for biodiesel will continue to increase each year through 2022, (3) domestic gasoline and diesel consumption in 2017-2022 stabilizes at the projected level for 2016, and (4) the domestic ethanol inclusion rate remains stable from 2017 through 2022. We also make the simplifying assumption that the level of RINs stocks and biofuels stocks remain constant.

…

For 2017-2022, we assume domestic gasoline consumption stabilizes slightly above the projection for 2016 and the ethanol inclusion rate stabilizes near the average rate estimated by EPA for 2014-2016.

…

However, after 2016 the difference in the total gap narrows fairly quickly and disappears entirely by 2021. The differences total only 2 billion gallons over 2017-2022. This, of course, assumes that the EPA would be willing to increase the push in the RFS standards along the lines assumed here. READ MORE and MORE (Biomass Magazine)