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Beyond Ethanol

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  1. Beyond Ethanol Siouxland Bankers Meeting Storm Lake, Iowa February 17, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

  2. Crude Oil Prices Source: Energy Information Administration

  3. Ethanol Production Jan. – Oct. 2008 Sources: Renewable Fuels Association, Energy Information Administration

  4. Biodiesel Production Jan. – Sept. 2008 Sources: National Biodiesel Board, Energy Information Administration

  5. Projected Crude Oil Prices Source: NYMEX

  6. Population Source: U.S. Bureau of the Census, International Data Base

  7. Liquid Fuel Usage Source: U.S. Dept. of Energy, Energy Information Administration

  8. Countries Pursuing Biofuels • US • Brazil • Argentina • Colombia • Paraguay • Canada • Uruguay • Mexico • Thailand • New Zealand • South Africa • South Korea • Philippines • Indonesia • Pakistan • China • India • Malaysia • Australia • Japan • EU • Russia • Not a complete list

  9. Government Policies for Biofuels Ethanol • Ad valorem tariff of 2.5% • Import duty of $0.54 per gallon • Volumetric Ethanol Excise Tax Credit (VEETC) • $0.45 per gallon starting in 2009 Biodiesel • Biodiesel Mixture Excise Tax Credit • $1.00/0.50 per gallon Cellulosic • Cellulosic Biofuel Producer Tax Credit • $1.01 per gallon

  10. Renewable Fuels Standard (RFS) 50% GHG Emission Reduction 60% GHG Emission Reduction 20% GHG Emission Reduction If construction started after Dec. 2007

  11. Currently Available Biomass Source: NREL, 2005

  12. Spectrum of Biofuels • Grain/Sugar Ethanol • Biodiesel • Green Gasoline/Diesel • Cellulosic Ethanol • Butanol • Pyrolysis Liquids • Syngas Liquids Most Mature Least Mature Source: NREL, 2006

  13. Biofuel Challenges • Production costs • Conversion, ag. production, etc. • Infrastructure barriers • Developing supply chain for biomass • Continued development of biofuel distribution system • Growth in biofuel-compatible vehicles

  14. Biofuel Challenges • Investment risks • Higher capital costs, emerging technology • Biomass production shifts • Inducing farmers to produce new crops • Consumer understanding • About the fuels • About the tradeoffs

  15. Cellulosic Biofuel Waiver Provisions • EPA (in consultation with DOE and USDA) can reduce the cellulosic biofuel mandated volume • Waiver trigger based on EIA projections • EPA will also sell cellulosic biofuel credits • Price set at Max($0.25 per gallon, $3.00 – Average wholesale gasoline price per gallon)

  16. Components of 2007 Energy Act • Up to $500 million per year in grants for the production of advanced biofuels (with at least an 80% reduction in GHG emissions relative to current fuels) • Up to $25 million per year in grants for R&D for biofuel production in states with low rates of biofuel production

  17. Energy in the Farm Bill • Grants for the development and construction of advanced biofuel biorefineries, up to 30% of the cost of the project • Loans for the same, up to $250 million or 80% of the cost per project

  18. Biomass Crop Assistance Program • To support production of crops for bioenergy and assist with collection, harvest, storage, and transportation of biomass to conversion facilities • Excluded materials • Farm program crops, animal byproducts, food waste, yard waste, algae

  19. Biomass Crop Assistance Program • Requires producers and conversion facilities to submit proposal establishing a project area • Establishes contracts between USDA, producers, and facilities to promote project • Sets up establishment payments for perennial crops and annual payment to biomass producers

  20. Biomass Crop Assistance Program • Payments are also authorized for biomass collection, harvest, storage, and transportation • Matching payments • $1 for each $1 per ton paid by conversion facility, up to $45 per ton, for 2 years

  21. Thank you for your time!Any questions?My web site:http://www.econ.iastate.edu/faculty/hart/Iowa Farm Outlook:http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker:http://www.extension.iastate.edu/agdm/

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