Power Politics

Carbon Markets – Senate Debates Regulation

By: John Nikoloff, President of ERG

The proposed cap and trade policy designed to reduce carbon emissions in the U.S. is raising concerns among some members of the U.S. Senate over how the resulting carbon markets would be operated. Experience with other commodities, such as the extreme volatility created in oil, corn and soybean prices in recent years, has led to these concerns.

Could large financial institutions bid prices away from reality and create economic harm by speculation, or could development of new derivatives generate the potential for a new financial crisis, as suggested by some Senators?

Anytime a new commodity market is established, it only makes sense to install basic safety standards to prevent abuse. The carbon markets in Europe have not shown a clear path for success, and the incipient markets in the U.S. have demonstrated limited success and little cohesiveness to date.

Congress, as it works its way through the maze that has become the climate change legislation, will be looking to balance the politics of environmental policies with innate fears of speculative markets. While it seems that most Senators support the large "Wall Street" institutions trading carbon credits, some, such as Sen. Byron Dorgan (D, North Dakota) have publicly talked about either preventing the Goldman Sachs and JPMorgan Chases of the world from carbon trading or placing serious restrictions on their ability to trade.

We are well aware that the prices these markets eventually find for commodities are not always based in economic reality, but rather fueled by speculation. Still, without the inclusion of traders outside the industries affected, there might be too little liquidity for the market to function properly. When trades cannot be consummated, prices will be volatile and price spreads will be extremely large.

In July, Massachusetts Sen. John Kerry said flatly, "There will be no derivatives, there will be no credit swaps. There will be a tighter regulatory control on this so that it will be impossible to play any of those kinds of games." Sen. Dorgan said he will oppose creating any carbon-trading market. "It won't be very long before we have derivatives, we'll have swaps, we'll have synthetic swaps, you name it, we'll have all of them and it'll be a field day for speculation," Dorgan said before the summer recess.

But one reality is that derivatives, like options and futures contracts, do have the value of letting companies hedge their bets, reducing risks for their capital projects and actually getting them built. Companies that need oil can hedge against large price shifts, and farmers who want to significantly expand production of a commodity can protect themselves against price drops. The same should hold true in a carbon market.

The immediate issue being addressed by these Senators is the carbon market that would accompany a cap-and-trade bill, but in a more and more technical world, our public officials are often challenged with making key decisions that affect industries, technologies and of course the economy, in which none can claim real expertise. It's important that these decisions be made using sound science and sound logic, rather reacting to fears. In the end, development of the carbon allowance market, and their structure and regulation, may be as big a challenge as the battle that's already being waged over whether a cap-and-trade system or carbon taxes are a realistic a driver to generate GHG reductions.

ERG Letter to Evironmental Protection Agency (EPA)

Pennsylvania Energy Resources Group, LLC recently submitted the following comments on the EPA proposed rule for the RFS-2 under the Energy Independence and Security Act of 2007.

Honorable Lisa Jackson
Administrator
U.S. Environmental Protection Agency
Ariel Rios Building
1200 Pennsylvania Ave., N.W.
Washington, D.C. 20460

RE: Docket No. EPA-HQ-OAR-2005-0161

Dear Administrator Jackson:

Thank you for the opportunity to comment on the proposed rule for the Renewable Fuels Standard, or "RFS-2."

Pennsylvania Energy Resources Group is a strategic consulting firm which focuses on alternative and renewable energy projects in the Mid Atlantic region of the US.  We are proud to have a BQ 9000 certified biodiesel production company, pipeline terminal companies, rail companies and oil refineries among our clients.  We have been actively involved with all phases of the biofuels industry for more than six years and have seen the effects of feedstock variability, lack of markets, and the impact of the US economic situation on the biofuels industry.  We have seen the impact that failure to implement the RFS-2 has had on markets, the entire fuel distribution sector, and retail outlets, as lack of guidance and certainty has resulted in confusion and made investment decisions extremely difficult. 

ERG strongly believes that an interim rule is critical now, to ensure that the 2009 and 2010 volumes are met, as required by the Energy Independence and Security Act of 2007. 

The two month extension to the comment period for the new regulations further delays implementation, creating additional difficulties for biodiesel plants, refineries and terminal facilities that are spending hundreds of millions of dollars in Pennsylvania alone to meet the volume goals under RFS-2.  The Pennsylvania biodiesel industry cannot afford a significant further delay in implementation of the volume requirements mandated by EISA 2007.

Biodiesel has an already established reduction in lifecycle GHG emissions compared to petroleum diesel by well over 50%.  Existing biodiesel facilities which are able to meet the RFS-2 requirements with existing feedstock sources should not be unfairly penalized for assumptions related to international land use changes.  Since EPA has already indicated that 2009 biodiesel and renewable diesel can be used to meet the RFS-2 requirements, an interim rule will support stability for the industry.

Having a viable biodiesel industry is one key factor in reducing our dependence on foreign oil and providing a larger share of our energy needs with home grown products creating jobs here in the US.

Your attention to this is important to the sustainability of the biodiesel industry.

The biodiesel industry in Pennsylvania has invested well over $100 million dollars to develop an industry and the oil distribution, terminal and retail fuels businesses of the state have invested twice that to accommodate the RFS, and anticipated movement of biofuels in the marketplace.  Existing biodiesel production plants should be grandfathered under EPA regulations as in compliance with the 50 percent reduction requirement.  Because existing feedstock sources are already meeting production levels and capable of increases, there are no land use changes involved, and no significant emissions from any changes can be associated with existing production.  All lifecycle analyses, including EPA's without international land use changes, show well over 50 percent reduction in emissions.  There is ample support, therefore, for EPA to grandfather existing facilities by deeming these facilities to be in compliance with the 50 percent reduction requirement.

ERG has serious concerns over the lifecycle greenhouse gas methodology for biodiesel.  As we reviewed the modeling, there are multiple inaccuracies and assumptions which are flawed.  Among the many items we have identified as  such are use of out of date data being used, ignoring world markets for feedstocks, coproducts and agricultural crop yield and production improvements.  We find the inclusion of the language "the impact of any land use change tends to be magnified with soybean biodiesel" to be both inaccurate and problematic.  Public policies must be driven by sound science, not political philosophy or assumption.

EPA's analysis compares estimated, future direct AND INDIRECT GHG emissions for biodiesel to only direct emissions for petroleum, which is a violation of sound science.  Comparative analysis must contain the same comparative criteria, and should not be an "apples to oranges" comparison.  Congress recognized this and from our discussions with members, it is clearly the intent to compare alternative fuels with fossil fuels on an even playing field. Such comparison is a specific requirement of the International Standards Organization (ISO) 14040 standard for lifecycle analysis.

Again, thank you for the opportunity to comment on the agency's proposed rule for the renewable fuels standard as established under EISA 2007.

Sincerely,


John Nikoloff
Partner

Massachusetts – Throwing the Baby Out With the Waste Oil?

By: John Nikoloff, President of ERG

The Massachusetts Department of Energy Resources this week announced that it would ban all biofuels not made using waste feedstocks from qualifying under the state's Clean Energy Biofuels Act of 2008. To us, this action is like throwing the baby out with the waste oil, and will likely severely limit availability of biofuels in that state.

The act, heralded last year as encouraging the development of advanced biofuels and substituting biofuels for petroleum products, may now actually have the opposite effect.

ERG contacted Massachusetts industry members, who expressed disappointment and surprise at the Department's proposed regulations. "DOER will only accept applications for biofuels derived from waste feedstocks which, as defined and provided in the statute, are exempt from a detailed greenhouse gas reduction analysis, provided a preliminary analysis based on both CARB and EPA methodologies indicate such waste feedstocks will yield the 50% greenhouse gas reduction threshold in the Massachusetts law."

Under the proposed regulations, Massachusetts will ban the use of all non-waste feedstocks, which include algae, cyanobacteria, jatropha, miscanthus, switchgrass, or oils produced on a harvestable basis unless they can demonstrate a 50% GHG reduction through life cycle analysis after protocols are adopted.

ERG sees the action, while intended to promote a low carbon fuel standard, as another example of letting policy and ideology trump sound science. The regulation could jeopardize not only the biodiesel mandate, but also work to discourage the advanced biofuels industry in that state.

The Bay State's DOER said it will continue to engage with federal and California efforts to establish analytical methodologies and protocols for evaluating non-waste feedstock biofuels, and will seek to adopt such protocols, as they become available.

The Act mandates biodiesel be mixed with all diesel motor fuel and home heating oil beginning at 2% per year in 2010 and increasing to 5% in 2013, but under the regulation, mandated volumes will be waived in the first year. "Early Action Credit" will be provided for all gallons of qualified advanced biofuels, which will be applied to 2nd- year mandate obligations.

DOER's action essentially makes any feedstock except waste restaurant oil ineligible as a biofuel feedstock, which appears to gut the whole purpose of the original Massachusetts biofuels law.

The ruling that emissions from all renewable fuels have to prove themselves 50 percent cleaner than petroleum in life cycle greenhouse gas emissions follows a controversial provision established by the California Air Resources Board, and considered in the Waxman-Markey bill debate in Congress. The reality is that the standard which uses Indirect Land Use Change as a metric, almost automatically disqualifies many biodiesel and ethanol feedstocks, and in the case of our northeastern neighbor, until protocols are approved, could not be proved even if obvious and accurate.

As Curt Felix, a Massachusetts advanced biofuels executive said on Tuesday, "Why not require that next year petroleum has to lower its carbon emissions by 50 percent?"

That's food for thought.

Hopefully, Pennsylvania regulators are not seriously considering similar actions as they work hand in hand with the northeast's Regional Greenhouse Gas Initiative states to develop and adopt a low carbon standard for OUR Commonwealth.

US Energy Production Numbers Show continued Growth in Renewable Sources

By: John Nikoloff, President of ERG

The latest evidence of the country’s steady march to a 25x’25 renewable energy future is a report from the U.S. Energy Information Administration showing that in April of this year, renewable energy sources accounted for 11.1 percent of domestic energy production. Furthermore, the EIA says that production of renewable energy for the first four months of this year was 6 percent greater when compared to the same time period in 2008.

During the month of April, renewable sources provided .664 quadrillion Btu’s (quads), or 11.1 percent, of the total U.S. energy production of 5.98 quads. By comparison, nuclear power provided .620 quads (10.4%) during the month.

The EIA reported that domestic energy production for the first four months of 2009 totaled 24.394 quads. Of that amount, 2.512 quads came from renewable sources, including 34.6 percent from hydropower, 31.2 percent from wood and wood wastes, 19 percent from biofuels, 9.3 percent from wind energy, 4.7 percent from geothermal energy and 1.2 percent from solar power.

ERG, along with 25 x’25 and other organizations, advocates policies that allow the nation’s farms, ranches and forestlands to meet a much greater percentage of US energy needs with renewable resources. The proof of the viability of this vision is demonstrated by the fact that most of the renewable sources measured by the EIA grew compared to the first third of 2008, with wind expanding by 34.5 percent, biofuels by 14.1 percent, hydropower by 8.2 percent, and geothermal by 2.6 percent.

Also bolstering this growth was the announcement from the DOE that up to $30 billion in loan guarantees will be made for renewable energy projects, depending on the applications and market conditions. The department said another $750 million will be made available to support several billion dollars more in loan guarantees for projects that increase the reliability, efficiency and security of the nation’s transmission system.

Congress continues to debate energy and climate legislation, and policy makers should pursue the policies that promote this growth in a new energy future. There are abundant natural renewable energy resources that can provide new economic opportunities and jobs, enhance our national security, and provide a cleaner, healthier environment.

Restrictions on Woody Biomass Must be Removed

By: John Nikoloff, President of ERG

ERG this week joined with 25x'25 and forestry partners in seeking to reverse federal policy that denies the use of a wide variety of woody biomass resources to meet the nation's renewable energy goals. Severely restricting the definition of eligible woody biomass in federal energy legislation makes no sense.  It is a policy that undermines the intent of those in Congress who say they want to create a renewable energy future that promotes energy independence, enhances national security, boosts the economy and improves the environment.

Woody biomass has multiple commercial applications in the battle for a renewable energy future - as a feedstock for cogeneration, as exemplified in Northumberland County by Viking Energy, with its cooperative relationship with  Furman's Foods replacing natural gas in the company's canning operations; as a thermal heating source, as at the Elk Regional Health Center; as fuel for business heating systems, as with the Dillon Floral Corporation in Columbia County; cofiring in coal to electric generating facilities; and as feedstock for cellulosic ethanol production, just to name a few.

Yet Pennsylvania has no state economic incentives specifically targeted to biomass included in the Alternative Energy Investment Act passed last summer.  Even the Energy Harvest Grant Program in DEP has been revised by the Department so that businesses are no longer eligible for those funds. 

At the federal level, despite almost a decade of interagency study and promotion, this potentially valuable piece of the future energy tapestry has been largely overlooked as the big battles center around coal, oil, ethanol and taxes - and in the case of the Waxman-Markey bill, it is precluded from the mix entirely in considering a national Renewable Electricity Standard.

Congress is considering wide-ranging energy and climate change legislation, including provisions that would require a significant percent of the nation's electricity to come from renewable resources by the year 2025. Yet, the Waxman Markey proposal would limit the renewable fuel feedstocks eligible to meet that mandate, picking up the extremely restrictive definition of eligible biomass contained in the Energy Independence and Security Act of 2007, which mandates 21 billion gallons of second-generation biofuels by 2022.

Neither EISA nor the Waxman-Markey draft proposal include such common sense feedstocks as thinning materials and woody residues from federal forests; most woody material from non-plantation, native or naturally occurring forest land; or the wide array of feedstocks from municipal solid waste. Furthermore, Waxman-Markey excludes all material from federal land, except that removed from within 200 feet of any man-made structure or campground. It is incredibly short-sighted to not include as a renewable energy resource the millions of acres of dead and dying trees that, with one spark, could go up in wildfires, releasing billions of tons of greenhouse gases.

This week, 68 national organizations joined together in an effort to bring sanity to this debate. The Chesapeake Bay Commission, 25 x '25, the American Farm Bureau Association, the American Forest Resource Council, the Environmental and Energy Study Institute and the National Association of Conservation Districts are among the dozens of groups telling policy makers that applying EISA's restrictions on the "use of most renewable forest biomass negates the many benefits of this critical energy source, including its contributions to lower carbon emissions, and jeopardizes our renewable energy goals."

Those of us who support the use of woody biomass as a renewable fuel are not looking to turn our forests into "fuel farms." In fact, many of us have consistently been telling lawmakers that strict rules and oversight on biomass harvesting and environmental concerns are necessary to ensure a sustainable biomass industry. The 25 x '25 letter lays out a set of principles to insure woody biomass policy will meet "our renewable energy needs, maintain forest sustainability and garner the support of a broad range of interests."

It is time for policy makers to correct this ill-conceived restriction and capitalize on the clean energy solutions America's forests can provide. Through sustainably managed forests we can provide much needed energy feedstocks while simultaneously improving soil, water and air quality.

California Air Resources Board sets Controversial Low Carbon Fuel Standard. Northeast States and PA to follow?

By: John Nikoloff

With much fanfare, the California Air Resources Board (CARB) finalized its Low Carbon Fuel Standard (LCFS), which is designed to reduce the carbon intensity of California's passenger vehicle fuels by at least 10 percent by 2020. The LCFS is the world’s first global warming standard for transportation fuels, and will require fuel providers in California to ensure that the mix of fuel they sell into the California market meet a declining standard for GHG.

On January 5, Pennsylvania joined the ten Mid Atlantic and Northeast States in seeking to develop a similar Low Carbon Fuel Standards in the region. ERG has talked with state and regional officials and learned that the Northeast States hope to draft a plan by the time they establish a MOU in late 2009. They have told ERG that they are “trying to be consistent with the system recently announced in California,” which has come under public fire.

The US House’s Waxman-Markey draft proposal would incorporate a LCFS into federal policy, an issue which is already generating opposition among Congressional rank and file.

Lack of a consistent policy for planning purposes could create havoc in the state’s refining, blending and distribution industries and markets, which are already facing unfunded mandates that require major capital expenditures to meet the needs of state and federal mandates for biofuels.

With a low carbon fuel standard, the government is trying to reduce GHGs in transportation fuels using a system equivalent to the state’s Alternative Energy Portfolio Standard for electric generation, using credits as equalizers. The net effect will likely be to promote biodiesel, cellulosic ethanol, renewable diesel from oilseeds, CNG, LNG and other advanced biofuels over ethanol.

But the LCFS is based on concepts that remain controversial, and scientists as well as the biofuels industry are pushing back, already getting concessions from CARB.

Under California’s LCFS, fuel refiners, importers, and blenders are required to ensure that the mix of fuel they sell meets, on average, a declining standard for GHG emissions measured in CO2-equivalent grams per BTU. CARB told Energy Resources Group that it expects this will decrease GHGs from transportation fuels by 10 percent by 2020, and would replace 20 percent of on-road gasoline and diesel consumption with lower carbon fuels.

To accomplish this, each fuel provider has to demonstrate, on an annual basis, that the fuel mix provided to the market met the established state standard, if necessary, by using credits purchased from others, similar to the cap and trade concept. Under the California LCFS, fuel providers will have at least three different options for compliance: blend or sell an increasing amount of low-carbon fuels; use previously banked credits; and purchase credits from fuel providers who have earned credits by exceeding the performance levels required.

Fuel providers have flexibility to choose what types of fuels in what volumes they sell as long as their sales-weighted average meets the standard. In this way, the theory is that the market will determine the least-cost and most consumer-responsive outcome for the fuel mix while ensuring decreasing GHG emissions.

However, there is significant concern in the biofuels industry about the standards that California adopted, and CARB’s use of the theory of indirect land use change (ILUC) in the carbon score of ethanol in particular to set the C02 equivalencies. With ILUC included in their regulation, average ethanol produced from corn goes from 30 percent fewer greenhouse gas emissions than gasoline to roughly equivalent.

The logic behind ILUC is that increased demand for corn for ethanol will lead, through increased prices, to more crops being planted elsewhere - and that the planting of these crops can cause land clearing and subsequent GHG release. These hypothetical crops are not part of the actual biofuels life cycle, but are part of the life cycle of other products. ILUC theory proposes that these crops become part of the biofuels life cycle.

The federal Energy Independence and Security Act of 2007 requires that life cycle methods be used to determine the GHG performance of renewable fuels. But these methods have strict standards regarding technical issues and the concept of ILUC may not meet these standards.

The California Air Resources Board acknowledged the significant uncertainty in their indirect land use change penalty, and did commit to more study using an expert panel that includes industry representatives, and agreed to assess the indirect effects of other fuels before the California LCFS goes into effect in late 2011.

When CARB looked at the direct effects of all fuels, it found that ethanol emits about 30% fewer greenhouse gas emissions than gasoline. CARB decided to look at only one indirect carbon effect and assesses it only on ethanol, while ignoring the significant indirect effects of all other fuels, including petroleum. When you include CARB's creative accounting, ethanol essentially has a carbon score equal to gasoline.

The new CARB regulation is expected to boost biofuels production and usage and is aimed at diversifying the variety of fuels used for transportation. CARB told ERG that to produce the more than 1.5 billion gallons of biofuels that will be needed, more than 25 new biofuel facilities will have to be built, creating more than 3,000 new jobs, mostly in the state’s rural areas. Seeking to enhance private sector and federal investment into alternative fuel production and distribution, California is also providing funding to assist in the early development and deployment of the most promising low-carbon fuels.

The policy is intended to drive the production of advanced biofuels, most of which are not through the pilot and demonstration process, and are unavailable to the commercial marketplace. This is a case of government regulating in anticipation of scientific and economic breakthroughs, which remains to be realized. We expect a significant battle with individual states should the Northeast consortium decide to include ILUC as part of their estimating process. That has yet to be determined.

ERG will continue to work with state and federal officials to monitor the development of legislation, regulations and standards, and will seek to establish consistency to avoid serious market dislocation.

Past Time for America to shift to NEW WEALTH INDUSTRIES

By: Bill Holmberg, Chairman of the Biomass Coordinating Council, American Council on Renewable Energy (ACORE)

In these troubling times, it is critical to recognize the irreplaceable value of "new wealth industries" (NWI).  NWI are based on natural resources - mining (oil gas, coal, minerals, metals); agriculture; aquaculture; silvaculture  (forestry); all renewable technologies (biofuels, biopower and biothermal energy), solar, wind, geothermal, hydro and water power, and renewable hydrogen; recycling/reuse; Energy Efficiency; and human creativity.

The importance of NWI was recognized by President Lincoln when building the transcontinental railroad (rails manufactured in the US) and by President Roosevelt during World War II.  Neglect set in during the Truman Administration when the concept of parity for agriculture (one of America's most important NWIs) was set aside while US oil production dominated the world with major NWI benefits.

New Wealth Industries are vital to the reconstruction of America, given their economic multipliers (generally more than  three, whereas service industries are generally limited to one plus).  These industries produce new commodities in a sustainable manner, whereas service industries do not produce goods.  NWI are an investment in the future while creating new basic industries and quality jobs; they have ready markets - many are "shovel ready," and they encourage positive nation and community oriented consumption, while contributing to national, energy, homeland, economic and environmental security.  These industries also combat the effects of greenhouse gas emissions.

In our haste to recover economically, we are wisely using stimulus dollars to support important service industries, bankers, police, fire fighters, teachers, public servants, marketers of goods and services to stimulate consumption.  It is also important to direct adequate stimulus funds toward generating new wealth.  As valuable as these service professions are, they are in fact dependent on new wealth industries for their own long term sustainability.

America cannot recover without focusing on sustainable new wealth industries.
Biofuels, biopower, and biothermal energy play critical roles in our future, and will succeed because they are products of American agriculture and silvaculture industries with significant support from aquaculture, hunting and open stream fishing, renewable energy, recycling and reuse, energy efficiency and human creativity.  These industries are driving forces that also demand a nationwide focus on health, education, creativity and community involvement.

The low hanging fruit - energy efficiency (weatherization of low-income housing, schools, public buildings, etc.) should be our first order of business, followed by advancing all renewable energy industries!

For more information on NWI, email biorefiner@aol.com.

Federal Stimulus Package Signed Into Law

By: John Nikoloff

The federal stimulus package presents a significant opportunity for Pennsylvania, including the funding and expansion of clean energy and technology projects. As such, look for additional blogs and information from Energy Resources Group to be posted in the near future further exploring the potential impacts the recovery act may have on the energy industry in Pennsylvania.

"What does it mean for me?" is the big question for many alternative and renewable energy companies in the wake of President Obama's signing of the $787 billion American Recovery and Reinvestment Act (the stimulus bill). ERG's phones and email accounts have been busy this week, as midAtlantic companies work through the 1,071 page bill, and the 420 page "executive summary."

The act specifies that 34% of the package is to be devoted to tax cuts of $286 billion, and a further $120 billion will be used to fund infrastructure projects. About $41 billion is dedicated to energy projects. More information on the projections of where your money will go, broken down by state, is available on the web at a White House site, www.Recovery.gov.

In signing the bill, the President called it "an investment that will double the amount of renewable energy produced over the next three years." He noted that "Today… does mark the beginning of the end - the beginning of what we need to do to create jobs for Americans…and to set our economy on a firmer foundation, paving the way to long-term growth and prosperity." The full text of Obama's statement is available on ERG's web site.

The act creates a series of tax credits for businesses and residential consumers, for energy production, conservation and energy efficiency. The package also carves out money for state energy programs, research and development and alternative fuels. There's where things get murky. Time frames for spending the funds have been compressed, and Acting DEP Secretary John Hanger told ERG that the state expects the first wave of funding within 30 days, and the strings on the funding call for the money to be committed within 120 days.

According to Sen. Robert P. Casey's office, Pennsylvania stands to receive $258.8 million dollars in weatherization assistance funding, $100.8 million through the State Energy Programs, and $114.6 million in Energy Efficiency and Conservation Block Grants. Another $343.7 million in funds will go for transit programs, $61.6 million for Community Development Block Grants, and PA's share of the Earned Income Tax Credits will be increased by more than $160 million dollars. Provisions in the energy portion of the bill allow ITCs to be converted to grants. Click here to view a more detailed breakdown of the stimulus package.

ERG is working closely with state government to monitor these programs and funds, and can provide additional information. As state programs are defined, we will provide information and links on our website at http://www.pa-erg.com.

Mixing Apples and Biodiesel

By: John Nikoloff

Last month, Governor Rendell announced that initial biodiesel production targets had been reached and that the process would begin to require B2 blends be sold in Pennsylvania. And almost immediately, ERG received dozens of calls about what biodiesel is, what it means, how it will be handled, and a few calls asking if biofuels were really good for the environment. Over the next few months, ERG will try to provide some background on biodiesel as a means to "clear the air."

For now, we want to respond to some of the calls, which were apparently generated by comments in a wire story on the mandate which disputed the effects of alternative fuels like biodiesel. The "expert" quoted in the story claimed that biofuels' environmental and economic impacts are still unclear, and he went on suggest that biodiesel "seems to have some kind of impact on food prices since you're using some land that would be used for food."

These kinds of comments demonstrate a lack of understanding of agriculture, renewable energy production and biofuels. Having been lucky enough to work with agriculture and agribusiness for more than three decades, and to work daily in renewable energy sector, I was surprised and disappointed by the lack of basic knowledge of these industries. All biofuels can't be lumped in one basket - and any "experts" who do so, are only proving that they don't know apples from oranges, or ethanol from biodiesel. 

For the record: Pennsylvania's biodiesel producers are manufacturing a sustainable fuel that is good for the environment. Biodiesel is nontoxic - ten times less toxic than table salt. It is the only alternative fuel to have a complete evaluation of emission results and potential health effects submitted to the EPA under the Clean Air Act.

Decades of independent testing show that ozone forming potential of biodiesel emissions is 50 percent less than that of diesel fuel. Biodiesel use virtually eliminates sulfur emissions, major components of acid rain. And using biodiesel results in significant reductions of particulate matter (47%), carbon monoxide (48%) and unburned hydrocarbons (67%), along with decreases in various polycyclic aromatic hydrocarbons (PAHs) of from 50 to 95%.

Biodiesel production and use reduces carbon dioxide emissions by 78 percent, from planting the feedstock beans to the pump. And every gallon of B100 that is used instead of petrodiesel reduces Greenhouse Gas Emissions by between 16 and 18 pounds.

Almost 50% of biodiesel production in 2008 was made from feedstock other than soy oil - an industry building on wastes, animal fats and other oils. Several Pennsylvania manufacturers exclusively used animal fats and waste oils in their biodiesel production.

Sustainable production practices for biofuels are important. This week, in San Francisco, Dr. Rob Myers, a director of the Thomas Jefferson Agricultural Institute, and Roger Beachy, President of the Donald Danforth Plant Science Center, said "Biodiesel from a variety of feedstocks can meet contemporary needs for environmental stewardship, economic prosperity, and quality of life without compromising the ability of future generations to meet these needs for themselves."

The Pennsylvania biodiesel industry supports these practices and is proactively engaged in this area, investing in second and third generation feedstocks, such as camelina, canola, jatropha and even algae.

Penn State has conducted years of research in Pennsylvania on canola, which is now being grown for biodiesel use. Lake Erie Biofuels has been working with Northwest PA farmers and Penn State's Extension Service to develop production and processing capabilities for camelina, an oilseed crop that does not compete with corn and soybeans for acreage, and can be grown on marginal lands, including reclaimed minelands.

Second and third generation feedstocks will result in less expensive biodiesel without impacting planting and production or prices for traditional commodities. The oil content of canola and camelina is double that of soybeans, and the oil output per acre is more than double that of soybeans. While an acre of soybeans would yield approximately 50 gallons of oil, canola produced in Pennsylvania the last two years has yielded more than 140 gallons per acre. And crops like jatropha (202 gallons per acre) and algae (15,000 gallons or more per acre) are coming in the near future.

Food Price Impacts?
The food vs. fuel argument is loaded with fallacies and assumptions, even in the case of corn based ethanol. But extrapolating those indefensible numbers about corn, to oilseeds and biodiesel is just plain bad science. Corn and soybeans, like ethanol and biodiesel are, to mix a metaphor, different animals, and subject to very different market pressures.

Soybean MEAL drives soybean demand - the oil is a byproduct. And soybean oil isn't the only product available to fill the position served by it in the food and industrial markets Other vegetable oils - sunflower oil, canola oil, etc. are often more beneficial in biodiesel use than soybean oil.

Historically, two things have driven soybean prices - the demand for soybean meal as protein in livestock rations has been the major driver, and the export markets have been the second. Last year soybean prices soared, but the major drivers were oil prices and speculative investing. The US has surplus soybean stocks and a 400 million gallon soybean oil surplus. Nearly 50 percent of the soybeans produced in the United States are exported in the form of whole beans, meal or oil.

Increasing production of soybeans should lead to a lowering of overall food prices. Soybean meal prices would be more reasonable, and therefore, expenses rearing feedlot cattle or dairy cattle, for example, would be less, and beef milk and butter prices, etc., would follow suit.

With biodiesel you're left with the oilseed cake after the oil has been pressed out. Depending on what seed is used, this is usually a highly nutritious, high-protein livestock feed.

With biodiesel, you CAN have your cake and eat it.

Wind Solutions

By: Melissa Britcher

Pennsylvania has a rich and diverse landscape that lends itself to all forms of renewable energy - including wind. During the Power for the Future: 2008 Pennsylvania Wind Energy Symposium held at Penn State in November, ERG Associate Melissa Britcher met with industry leaders and advocates who are promoting the possibilities for large-scale wind farms, community wind projects and even small wind.

Wind is seen as a critical element in achieving energy independence, and could produce as much as 20 percent of the nation's electricity by 2030, creating many opportunities for wind development in Pennsylvania. As mandated by the state Alternative Energy Portfolio Act, 18 percent of the state's energy production must come from renewable sources, including wind by 2020. Today, electricity makes up 40 percent of energy use in the U.S. and over the next 15 years, the demand is expected to increase by 25 percent. Pennsylvania is the sixth largest consumer of electricity, and third largest producer, with most electricity coming from coal and nuclear and only one percent coming from renewable sources.

To date there are 10 large scale wind farms in Pennsylvania in Somerset, Fayette, Cambria/Blair, Schuylkill, Luzerne and Wayne counties. Pennsylvania has over 300 megawatts of wind power generation installed with several more wind farms planned. It is estimated that Pennsylvania's potential wind power capacity is around 5,120 megawatts, whereas the state's estimated existing wind capacity is at 374 megawatts.

While large turbines and wind farms produce the most bang-for-your-buck, the industry faces many challenges. ERG reported earlier this month on the difficulties, costs and need for an improved grid infrastructure. Large wind producers also discussed  the need for more manufacturing capacity to provide parts and equipment, with needs to increase five fold over the next ten years.  They said that supply chain issues and a shortage of qualified construction workers, engineers and maintenance professionals are also problematic, and all noted that the current economic situation makes funding projects even more difficult.

Communities across the U.S. are partnering to purchase turbines that will provide locally generated energy at a reasonable cost. Community wind projects have great merit and will be a topic of future ERG blogs.

Small turbines are becoming increasingly popular for residential and small business applications. Smaller turbines operate at slower wind speeds, and require less wind.  An average home can get the majority of their power from a 10-kilowatt turbine.

While the up front capital costs can be high, state and federal programs may improve the relative cost and payback times.  The benefit for homeowners and communities to produce their own electricity is simple - the cost becomes fixed. With some Pennsylvanians already experiencing the electric rate increase and others just waiting caps to come off in 2009 and 2010, the potential to relieve to rate increases is catching the attention of many. As a renewable source, wind power provides environmental benefits as well. Wind power lessens the amount of traditional resources required to produce electricity, through coal and fossil fuels.

Over the next several months, ERG will continue to discuss the issues and opportunities facing wind production in the U.S. and in Pennsylvania.