Advanced and cellulosic ethanol producers are at a critical juncture, according to testimony from Bill Brady, CEO of Mascoma Corporation and chairman of the Advanced Ethanol Council, a group of companies leading the development and commercialization of advanced ethanol technologies. Brady is participating as part of a Senate Energy and Natural Resources Committee hearing on S. 187 — the “Biofuel Market Expansion Act of 2011.
“The time is now for the United States to make significant strides in the commercialization of advanced and cellulosic ethanol. The technologies are ready. Putting in place a consistent, long-term federal policy for advanced and cellulosic biofuels including significant focus on higher-blend ethanol infrastructure and FFVs is critical to continued development in the United States and its ability to continue to keep pace with clean energy investments of other countries,” Brady testified.
Brady outlined three areas in which the federal government’s role would be critical to commercializing advanced ethanol technologies.
“First, Congress must maintain [the U.S. Department of Energy’s (DOE)] authority and funding to provide renewable energy loan guarantees. To cross the valley and start construction of projects in 2011, this loan guarantee authority represents the best available tool for many projects,” Brady testified.
Last week, 34 CEOs of companies with applications pending before DOE wrote a letter to congressional leaders urging funding for this program be maintained. The CEOs were joined by seven leading trade associations for renewable energy who sent a separate letter urging funding and support for this program continue.
“With high crude oil and gasoline prices and a RFS2 mandate calling for significantly more gallons of cellulosic biofuels, now is not the time to eliminate this program. It will delay projects and undermine confidence in the investment community,” Brady said.
Second, the market signals for cellulosic ethanol provided by the RFS2 and the cellulosic biofuels production tax credit must be maintained. The RFS2’s call for 36 billion gallons of renewable fuels including 16 billion gallons of cellulosic biofuels including the cellulosic waiver credit pricing mechanism are extremely important. Efforts to weaken this commitment must be avoided. In addition, the existing cellulosic biofuels production tax credit (PTC) is important to the balance sheet for advanced ethanol companies in the near term as our capital and production costs continue to decline. The existing PTC is set to expire at the end of 2012. Ideally, the industry would like to see long-term tax incentives for advanced and cellulosic biofuels.
“Engaging in a yearly extenders game surrounding the cellulosic biofuels production tax credit will not provide the kind of consistent market signal that investors are looking for when making decisions in this industry. As you can imagine, incentives that expire before a facility is placed in service are very hard to market to investors,” Brady testified.
Third, the United States needs to make significant progress in breaking through the existing ethanol blend wall to ensure sufficient head room in the fuel marketplace for advanced and cellulosic ethanol. Investors are very aware of the limitations of the existing blend wall. While EPA, with the support of DOE and other agencies, have spent significant time working to approve increased ethanol blends in the existing automobile fleet from E10 to E15, focus needs to shift to removing infrastructure hurdles preventing the use of even higher ethanol blends in the future.
Brady's full testimony can be read here.