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Home » BioRefineries, Biorefinery Infrastructure, Business News/Analysis, Energy, Federal Agency, Federal Regulation, Funding/Financing/Investing, Infrastructure, Opinions, Policy, Precursors/Biointermediates, R & D Focus, Sustainability, Texas

Is Bureaucracy Holding Back Advanced Biofuels?

Submitted by on February 6, 2015 – 1:11 pmNo Comment

by Jim Lane (Biofuels Digest)  … Why must “the entire value chain of production from feedstock to finished product be conducted at a single location” asks Antoine Schellinger, VP of Strategy and Technology at Triten IAG.

Should a regulatory burden for tracking RINs be increased so that the financing risk burden can be reduced for investors?

A memorable article on the challenges within and the future direction of the Renewable Fuel Standard appeared recently in the Texas Law Review, here.

“If one wishes to produce a RIN, the operator must operate the entire preapproved pathway on one site with common ownership. Conversely, it means that if a renewable fuels operator desires to produce RINs, it is prohibited from only performing the part of the pathway where it adds the greatest value. A simple example is a company that wishes to convert biomass into biocrude or mixed sugars and then market the intermediate product to companies that refine biocrude or ferment sugar.”

Schellinger writes: ““Bolt on” technology approaches are an effective way to legitimately finance and implement steps towards large-scale renewable fuels production…Therefore, the EPA should consider relaxing the facility registration requirements to be more in tune with the modern integrated energy supply chain.

“This requires a shift in thinking” he adds, “that encourages the integration of renewable and fossil fuel energy delivery despite increasing the burden of RIN tracking and verification. Biofuels developers will benefit from increased access to finance markets via lower risk smaller capital projects. Environmentally minded groups will benefit from a more rapid adoption less intense greenhouse gas energy. Obligated parties will benefit from the reduced RIN price that accompanies plentiful RIN generation.”

Facility registration requirements are embedded with the requirement that the entire value chain of production from feedstock to finished product be conducted at a single location. 40 CFR § 80.1450 requires a producer to state “each type of renewable fuel or ethanol” that will produced at a registered facility. 40 CFR § 80.1401 defines a facility to include 3 elements: (1) the complete conversion of feedstock to renewable fuel is carried out, (2) it is located on a single parcel of real estate, and (3) it is under common control.

Conversely, it means that if a renewable fuels operator desires to produce RINs, it is prohibited from only performing the part of the pathway where it adds the greatest value. A simple example is a company that wishes to convert biomass into biocrude or mixed sugars and then market the intermediate product to companies that refine biocrude or ferment sugar.

The use of intermediates is a viable means to defeat the size limitations of renewable fuels facilities due to feedstock aggregation limitations. The localized processing of biomass into an energy dense liquid form allows for efficient transport over longer distances; not unlike the collection of bituminous tar sands that are locally partially processed into flowable syncrude for export to major refineries. A single large-scale biofuels facility could purchase cellulosic sugars from a number of producers to address economy of scale issues. A similar story exists for biocrude with the added dimension of potential co-processing with fossil fuels.

A market pull subsidy goes awry if it incentivizes a behavior that will not persist post-subsidy. This is precisely the case when a renewable fuels producer attempts to replicate processes in the existing energy supply chain solely for compliance with RFS2. An example is a pyrolysis or algae company that is upgrading biocrude into refined products at <10% of the scale of an average refinery. In addition to the small scale, there exists a lack of institutional knowledge that is gained solely through years of operation. Further, there is an underlying issue of how to gain access to the intellectual property required to practice those processes.

Biofuels developers will benefit from increased access to finance markets via lower risk smaller capital projects. By running a cash positive business, biofuels developers can fund research and development efforts with sustainable capital rather than limited equity tranches.    READ MORE  AbstracDownload paper (Social Science Research Network)

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