BIO analysis illustrates impact of RFS delays on investment

By Erin Voegele | May 05, 2015

The Biotechnologies Industry Organization recently released an analysis that shows delays in renewable fuel standard (RFS) rulemaking by the U.S. EPA over the past two years have chilled investment in advanced and cellulosic fuels. BIO estimates the biofuel industry has experienced a $13.7 billion shortfall in investment due to the delays.

“Cellulosic and advanced biofuel producers have now reached commercial status, enabling them to build additional biorefineries based on proven technology with lower risk and reduced costs,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “But just as the industry reached this stage of commercialization, EPA rulemaking delays generated instability in the RFS program and intolerable investment uncertainty. The policy instability is responsible for chilling as much as $13.7 billion in investments that the advanced biofuel industry needed to build capacity to meet the RFS goals. The chill in investment has had the heaviest impact on cellulosic biofuel developers. The delays in rulemaking have also undercut the industry’s ability to create new employment opportunities, resulting in the loss of more than 80,000 direct jobs.”

In a white paper, BIO indicates that in 2009 Bio Economic Research Associates (bio-era) modeled the expected U.S. economic impact of building an advanced biofuel industry to meet the goals of the RFS. That modeling estimated that more than $95 billion cumulative capital investments would be needed by 2022 to construct nearly 400 advanced biofuel refineries with the capacity to produce 23 billion gallons of advanced biofuel.

To reach the 2015 RFS goal of 5.5 billion gallons of advanced biofuels, which includes 3 billion gallons of cellulosic biofuel and 2.5 billion gallons of advanced biofuel, bio-era projected 110 plants would be needed, requiring $20.34 billion in cumulative investment. While the U.S. advanced biofuel industry, including biodiesel, renewable diesel and advanced ethanol producers, have proven capacity to meet the 2015 requirement, BIO points out the chill in investment has had the heaviest impact on the cellulosic biofuel industry.

As of April 2015, BIO notes the U.S. has five commercial cellulosic biorefienries, with a combined capacity of more than 50 million gallons. In addition, 28 facilities are generating cellulosic biogas, with a combined capacity of 80 million gallons.

After taking into account additional renewable diesel producers deploying novel technologies, BIO estimates the industry has reached the level of investment bio-era originally projected for 2011. “We therefore estimate that the industry has a cumulative delay of four years, corresponding to a shortfall in investment of more than $20.6 billion, which can be attributed to policy instability, the general economic recession and the challenges of scaling up new technologies,” said BIO in the white paper.

Considering the EPA released 2011 and 2012 RFS rules on time, BIO said that the shortfall in investment for those years can be attributed solely to the recession and challenges associated with commercializing new technology. However, the white paper stresses the EPA was nine months late in issuing the 2013 rule and is currently more than 17 months late issuing the 2014 rule. The analysis shows those delays have been costly in terms of investment.

However, the industry has experienced regulatory delays beyond RFS rulemakings. BIO also points out cellulosic biofuel producers have waited an average of 29 months for EPA pathway approvals, and notes that 29 companies currently have unresolved pathway petitions filed with the EPA. On average, those 29 companies have waited more than 32 months for a decision. According to BIO, at least two companies have already abandoned plans for cellulosic biorefineries while waiting for EPA pathway approval.

BIO said rulemaking delays have also impacted job growth potential. “BIO estimates that EPA’s delays in rulemaking have undercut the industry’s ability to create jobs by more than 80,000 direct jobs in operations and construction, and an additional 228,000 indirect jobs within the rural economy,” said the organization.

The white paper concludes by pointing out that more than $600 million has been investment overseas in plants that are commercializing technologies researched and developed in the U.S., and additional commercial facilities originally planned in the U.S. are looking for locations overseas or have been put on hold indefinitely. “With commercialization of cellulosic and advanced technologies, companies will continue to seek economic opportunities to deploy them,” said BIO. “With policy instability in the United States, those companies are likely to continue deployment in other countries.”

A full copy of the white paper can be downloaded from the BIO website.