When Will I Be Loved?: Supporters of the US Renewable Fuel Standard Begin to Rally

by Jim Lane (Biofuels Digest) ...“Fuels America is built around one core idea: renewable fuel is essential to the U.S. economy, our nation’s energy security, our rural communities and the environment,” said former Congressman Jim Greenwood, President and CEO, Biotechnology Industry Organization (BIO). “More than 400,000 American jobs are supported by renewable transportation fuel, and America leads the world in renewable fuel innovation.”
...Two titanic pieces of regulation, the RFS and CAFE standards, may run into each other and begin to create instabilities that will cause difficulties for the RFS, even after the 2012′s season of drought is just a memory.
Under new regulations agreed to by the US auto industry, average fuel economy in the US will reach 54.5 miles per gallon for 2025 model cars – up from 24.5 miles per gallon in 2011 – and 47.5 miles per gallon in 2022, the final year of the current Renewable Fuel Standard.
Let’s look at that in context of the established RFS target of 36 billion gallons of renewable fuel.
Based on the 93% increase in vehicle mileage contemplated by CAFE standards between now and the 2025 model year, there’s every reason to assume that baseline US fuel demand for passenger cars and light duty trucks will drop correspondingly to roughly 80 billion gallons in 2022. To arrive at that figure, we projected that the actual fleet will get around 40 miles per gallon by 2022 – as older cars with lower fuel economy remain on the roads.

Energy independence in light of CAFE standards and domestic biofuels production

Now let’s look at domestic US petroleum production – today, the US meets 45 percent of its needs through domestic production. That’s the equivalent of around 58 billion gallons of domestically-produced gasoline for the light duty-market.
That’s good news for fans of US energy independence. There’s every reason to expect the US to be able to reach full energy independence – in terms of light duty fuel – by adding 22 billion gallons or so (on a gasoline equivalent basis) of renewable fuels into the pool.

RFS targets, and what’s left for domestic petroleum and traditional refiners

But what does that leave for US oil refiners, in terms of producing traditional fossil gasoline for the domestic light duty market? Somewhere in the neighborhood of 45-53 billion gallons, depending on how much diesel is displaced through RFS. That’s a big drop in production: they’ll squawk, and hard, and who would blame them?
Where’s the ethanol – or other biobased fuel – going to go? The RFS targets represent as much as 30-35 percent of the pool – how is that going to be distributed into the pool? CAFE raises questions that undermine the RFS’s own architecture.
...There may be other ways to achieve a stable platform for the financing of advanced biofuels at scale.
...Here in Digestville, we very much prefer a public utility model for transportation fuels. The public utility provides a levelized price to the consumer – averaging out the price swings in the commodity markets.
In turn, the utility strikes long-term fuel price agreements with a blend of suppliers – based on a pool of attributes. Price attributes, carbon attributes and perhaps even local economic development of national fuel independence attributes.
Like the utility market, one continues to have a free market in supply, and a free market in demand. Just a buffer in the center. Owned by the public and private investors, managed as a private corporation with private sector management, and accountable for P&L. reinvesting a portion of its earnings into the development of long-term fuel alternatives and energy efficiency.
To us, that provides more stability than the RFS model – and is proven to work in the utility markets. READ MORE and MORE (Biofuels Digest) and MORE (The Hill E2Wire)