Cellulosic ethanol is one of the big winners in the draft of a farm bill passed by the U.S. Congress on Thursday that seems likely to become law.
Under the bill's latest version, Congress provides a $1.01-per-gallon production tax credit for cellulosic biofuel through 2012, a penny higher than the subsidy on biodiesel, as well as $320 million in loan guarantees to build refineries.
An additional $300 million in mandatory funding will support production of fuels like cellulosic ethanol.
The legislation also includes $70 million in mandatory funding from 2009 through 2012 for farmers to experiment with crops for sustainable biofuels. Those crops include poplar trees and switchgrass.
President Bush has said he will veto the bill, but it passed with a veto-insulated margin of 81-15 in the Senate and 318-106 in the House of Representatives.
Meanwhile, the subsidy for corn ethanol will drop from 51 cents to 45 cents. Last year, many fuel execs and analysts joked that the corn-ethanol subsidy would be safe as long as Iowa was the first stop on the presidential campaign.
The Iowa caucus, however, is long gone.
The bill extends the 54-cent tariff on imported ethanol through 2010. Brazil won’t be happy about that, but the bill will be greeted as good news in Silicon Valley.
Entrepreneurs and venture capitalists regularly complain about government interference in the market, except, of course, when the government is handing out checks.
Arnold Klann, CEO of cellulosic-ethanol company BlueFire Ethanol, said the bill will help pave the way for more biofuels from waste.
“Congress’ continued support for the development of clean-energy technologies is a key step toward full-scale commercial production of cellulosic ethanol and making America energy-independent,” he said in a written statement.
Many biofuel advocates have said that subsidies (at least for an extended period of years) and funding for research are crucial for getting the alternative-energy industry moving.
Other countries — the United Arab Emirates, Singapore, Ireland, Spain and Germany — also provide subsidies and/or hefty research grants.
The open question right now is how many companies will take advantage of the cellulosic credits. Cellulosic ethanol currently is found only in research labs.
Range Fuels, Coskata and a few others hope to start producing and selling fuel in 2009 or 2010. Those plants, however, are under construction and will initially come out with only limited quantities of fuel.
Coskata, for instance, will open a 40,000-gallon-a-year demonstration plant next year. The company’s first 50-million to 100-million-gallon commercial facility likely won’t be running until 2011.
In the meantime, the U.S. House of Representatives’ Ways and Means Committee voted to extend about $54 billion in renewable-energy tax credits – including the $1-per-gallon incentive for biodiesel. The incentive has been a sore spot for biodiesel companies in Europe, which contend it has led to unfair trading (see European Biodiesel Blames U.S.).
But a committee vote isn’t the same as money in energy producers’ pockets. The U.S. Congress has considered a number of bills to extend the credits this year, but so far, each bill that has passed one of the chambers has been rejected by the other (see U.S. Senate Passes Incentives, Another Tax-Credit Proposal, Solar Sharpens Weapons for Incentive Battle, Solar Industry’s Five-Step Plan, Renewable Tax Incentive Still At Risk and Senate Rejects Green Incentives to Pass Energy Bill).