This week, the White House and Department of Energy announced a $510 million program in conjunction with the U.S. Navy to build infrastructure capable of producing advanced biofuels. The fuels will be targeted to supply military aircraft, marine vessels and the military’s transportation fleet. Days later, the Energy Department announced a $133.9 million loan to fund the construction of an Abengoa Bioenergy cellulosic ethanol plant in Kansas. The plant will be among the first commercial-scale cellulosic ethanol plants in the country, with a maximum annual output of roughly 23 million gallons.
Unlike corn-derived ethanol—which critics say drives up food prices by consuming about 40 percent of U.S. corn production—cellulosic fuel is made from switchgrass and other non-edible plant parts, and has significantly decreased emissions compared to gasoline. According to studies conducted by the Department of Energy, cellulosic ethanol reduces greenhouse gas emissions by 85 percent, while corn ethanol decreases emissions by just 10 to 20 percent.
But while a federal mandate and billions of dollars in annual subsidies have helped to rocket domestic corn ethanol production to more than 13 billion gallons per year, cellulosic ethanol remains years away from making a dent in oil consumption.
Including subsidies, the cost of the fuel has fallen to just $2.50 per gallon, making it competitive with corn. But the capital required to build facilities capable of turning plant waste into fuel has been hard to come by for biofuels companies.
As a result, the federal biofuels law mandating that cellulosic ethanol production gradually increase to 7 billion gallons per year by 2018 has failed to achieve its intended result. For three consecutive years, EPA has been forced to issue a waiver as the industry struggles to get off the ground. In fact, according to the Department of Energy, cellulosic ethanol output is unlikely to surpass 1 billion gallons until 2018.