This September 2006 report by David Morris examines federal policies supporting cellulosic ethanol production and advocates that the Federal government adopt strategies that support farmer-owned biorefineries.
On June 14, 2006 the U.S. Department of Energy issued a Request for Information (RFI) — regarding the most beneficial and efficiency way to consider implementation of Section 942 — of the Energy Policy Act. We are concerned that by focusing on a single policy tool–a large government purchase–the RFI undermines holistic thinking. The Energy Policy Act contains provisions that allow a number of cellulosic ethanol commercialization tools to be used (direct grants, loan guarantees, direct incentives, large federal purchase). DOE should invite the public to comment on how best to combine all of these tools into an effective program.
The most significant part of the Energy Policy Act is its mandate for 250 million gallons of annual cellulosic ethanol production by 2013. Using the Act’s incentives will not significantly reduce the time in which its quantitative goals are met.
Therefore DOE should use the incentives primarily to meet the Act’s qualitative objectives. These include maximizing the benefit of cellulosic ethanol production to farmers and rural areas, stimulating a diverse array of feedstocks, processing technologies and geographic locations. If properly designed, these incentives can play a very important and perhaps even determining role in achieving these objectives.
- DOE should use the Act’s seed grants to nurture many geographically dispersed farmer or locally owned pilot plants (500,000 gallons per year capacity) that rely on a variety of feedstocks and technologies.
- DOE should use the Act’s direct incentives and/or reverse auction tools to nurture many small commercial scale plants (5-10 million gallon capacity). Here too priority should be given to majority farmer- or locally-owned plants and feedstock, technological and geographic diversity.
- DOE should use the Act’s loan guarantees to facilitate larger plants (25-35 million gallons per year), again encouraging farmer or locally owned facilities.