December 26, 2011

The great biofuel boondoggle

On orders from the White House, the Navy has purchased 450,000 gallons of a biofuel mix for its aviation fuel for about $16 a gallon. JP-5, the normal fuel for jet aircraft, sells for less than $4 a gallon.

A fermented algae biofuel sold by the California firm Solazyme for $26 a gallon was mixed with oil products to bring the overall price down to four times the going rate for jet fuel. The mixing took place in a Louisiana plant built in part by a $21.8 million grant Solazyme received from President Barack Obama’s stimulus bill.

T.J. Glauthier, a “strategic adviser” at Solazyme, worked for Mr. Obama on the energy portion of the stimulus bill. This was the largest government purchase of biofuel ever. It was authorized by executive order under the Obama administration’s “we can’t wait” campaign.

“Administration officials gave no indication why they’re not going through Congress, instead of using a program that was established to promote rapid job growth by bypassing congressional debate,” said Fox News.

About 300 people work at the Lousiana biofuels plant. That comes out to a taxpayer subsidy of about $73,000 per job — not counting the gouging the taxpayers are getting on the cost of the fuel.

Physics as well as economics make it impractical to produce much biofuel from algae, researchers at Kansas State University said in April. But the Navy, in partnership with the Departments of Agriculture and Energy, plans to spend up to $510 million over the next three years to develop infrastructure for supplying the military with biofuels, the White House announced in August.

Solazyme’s $26 a gallon biofuel is a bargain compared to the $1.5 billion in grants and loans the government has made to producers of cellulosic ethanol (ethanol made from wood, switchgrass, or the non-edible parts of plants).

From the standpoint of science and economics, ethanol is a terrible substitute for gasoline. It is a net consumer of energy. (More is used to produce it than ethanol generates when it is burned.) Ethanol is highly corrosive. It damages engines and can’t be transported in pipelines. Ethanol has a lower octane rating than gasoline, so it lowers vehicle mileage.

The great benefit of ethanol, allegedly, is that it emits less carbon dioxide. But production of bioethanol and biodiesel actually increases the greenhouse effect when the forest land in the tropics that is being cleared to plant energy crops is taken into account, a leading British scientist told the Royal Academy of Engineering last year.It will take up to 300 years for ethanol to compensate for the CO2 released from the forests already burnt, Dr. Roland Clift said.

Ethanol is more attractive from the standpoint of politics. Subsidies go mostly to the swing states of the Midwest. Subsidy recipients have made generous political contributions.

There was no commercial production of cellulosic ethanol in 2007. There still isn’t much. After Congress passed the subsidies, about half a dozen companies started up to get a piece of the $1.5 billion. The largest filed for bankruptcy last year, amid charges of fraud. The others are struggling because even with the subsidies, cellulosic ethanol costs too much to produce to compete with petroleum, the National Academy of Science said in a report in October. “Currently, no commercially viable biorefineries exist for converting cellulosic biomass to fuel,” the NAS said.

This is a problem, because the Democratic Congress in 2007 went beyond providing handsome subsidies for a product that didn’t exist. It passed a law requiring oil companies to buy cellulosic fuel to blend with conventional gasoline. The mandate for this year was supposed to be 250 million gallons, but the EPA quietly reduced that to 6.6 million gallons.That was still more than all the cellulosic ethanol produced, so oil companies had to spend $10 million to buy waiver credits for failing to obey a mandate to buy a product that wasn’t available for purchase.

The Obama administration in September lent Abengoa Bioenergy $134 million to build a cellulosic plant in Kansas.

The government “subsidized a product that didn’t exist, mandated its purchase though it still didn’t exist, is punishing oil companies for not buying the product that doesn’t exist, and is now doubling down on the subsidies on the hope that someday it might exist,” said the Wall Street Journal in an editorial. “We’d call this the march of folly, but that’s unfair to fools.”

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