U.S. renewable energy share highest since 1930s

In 2014, about 9.8% of the total energy consumed in the U.S. came from renewable energy sources, according to the U.S. Energy Information Administration.  This represents the highest share of total domestic energy supply coming from renewable resources since the 1930s.

Prior to the growth of production and distribution networks for petroleum and other fossil fuels in the early 20th century, many homes used wood for heating as did industry.  This reliance on renewable biomass historically satisfied a significant portion of the total domestic energy demand.  But technological advances and the birth of the electric power industry led to greater use of other fuels.  As a result, the EIA reports that renewable resources' share of total domestic energy supply peaked in the 1930s, then declined.

But recent growth in U.S. renewable energy use has brought the country's energy mix back to nearly 10% renewable.  Indeed, from 2001 to 2014, renewable energy use grew an average of 5% per year, largely through increased use of wind, solar, and biofuels:

• Wind energy grew from 70 trillion Btu in 2001 to more than 1,700 trillion Btu in 2014.
• Solar energy (solar thermal and photovoltaic) grew from 64 trillion Btu to 427 trillion Btu.
• The use of biomass for the production of biofuels grew from 253 trillion Btu to 2,068 trillion Btu.

According to EIA, inn 2014, slightly more than half of all renewable energy was used to generate electricity.  Renewable energy accounted for 13% of energy consumed within the electric power sector, the highest renewable use attributable to any sector.

Biofuels lead growth in U.S. biomass energy

The use of energy from biomass resources in the United States grew more than 60% over the decade between 2002 and 2013 -- primarily in the form of increased use of biofuels like ethanol and biodiesel that are produced from biomass.


A fuel pump displays prices for gasoline blended with up to 10% ethanol.

According to the U.S. Energy Information Administration, biomass accounted for about half of all renewable energy consumed in 2013 and 5% of total U.S. energy consumed. The three primary sources of this biomass are wood and forest products byproducts, waste including municipal solid waste and landfill gas, and raw organic feedstocks like corn and soybean oil used to produce biofuels.

Of biomass energy resources, biofuels experienced the greatest growth over the last decade. From 2002 to 2013, biofuels created from biomass grew more than 500%, driven largely by increases in U.S. production of ethanol and biodiesel for blending as transportation fuels. These biofuels are typically produced from feedstocks such as agricultural crops and other plant material, animal byproducts, and recycled waste. For U.S. ethanol production, corn is the dominant feedstock, while biodiesel producers rely on soybean oil for just over half of feedstock needs and an array of biomass resources for the rest. Market demand for these biofuels comes in part from federal mandates such as the U.S. Environmental Protection Agency's Renewable Fuel Standard, which requires the blending of certain volumes of biofuels into gasoline and diesel.

Meanwhile, EIA data shows that consumption of wood and waste energy increased just 4% over the decade. About two-thirds of U.S. wood energy is consumed for industrial processes, while nearly all U.S. waste energy is consumed for electric generation or industrial processes.

If this trend continues, woody biomass and waste energy will continue to hold their positions in our portfolio of energy resources, while continued growth in the conversion of biomass into biofuels for transportation and other needs will increase biofuels' weighting in the nation's energy mix.  At the same time, debates continue over the cost and value of programs encouraging the growth of corn as a biofuel feedstock.  What does the future hold for biomass in the U.S.?

Energy, environment, and the 2013 inauguration

This week U.S. President Barack Obama took the oath of office for his second term. The 57th presidential inauguration was celebrated in Washington, D.C. on January 21, 2013.  In his inaugural address, President Obama delivered calls for action on issues ranging from the federal budget to social policy.  His speech also offered a platform on environmental and energy issues.  What did the 2013 inaugural address say about environmental and energy policies?

The United States Capitol after the inauguration ceremonies on Martin Luther King Day, January 21, 2013.

Climate change featured prominently in President Obama's second inaugural address.  Drawing on the official transcript of the address provided by the White House:

We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity. We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. (Applause.) Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires and crippling drought and more powerful storms.  

Exactly how he plans to address climate change remains to be seen.  Likely measures include further Environmental Protection Agency regulations covering emissions from coal plants, greater military use of renewable and alternative fuels and energy sources, and an emphasis on energy efficiency.

President Obama also advocated for greater use of sustainable energy resources:

The path towards sustainable energy sources will be long and sometimes difficult.  But America cannot resist this transition, we must lead it. We cannot cede to other nations the technology that will power new jobs and new industries, we must claim its promise. That’s how we will maintain our economic vitality and our national treasure -- our forests and waterways, our crop lands and snow-capped peaks. That is how we will preserve our planet, commanded to our care by God. That’s what will lend meaning to the creed our fathers once declared.

Because this paragraph immediately followed his remarks about the climate and natural disasters, the speech suggested greater reliance on renewable or sustainable energy as another response to climate change.  President Obama emphasized both the environmental and economic value of these alternative energy resources.

Left unsaid were the details on the path towards sustainable energy.  Will President Obama suggest a national program requiring the use of renewable electricity?  Congress enacted a renewable biofuels standard as part of the Energy Policy Act of 2005, and most states have enacted laws requiring utilities to source electricity from renewable sources.  To date, no proposed federal electric renewable portfolio standard has found traction in Congress.  What about federal tax credits and incentives for renewable energy, such as the renewable electricity production tax credit and investment tax credit?  Last year President Obama called for making the production tax credit permanent and refundable, meaning taxpayers would not need to have any income tax liability to benefit from the credit.

Based on President Obama's 2013 inaugural address, he will push for solutions with enthusiasm and vigor.  The ultimate proposals, and the paths towards their execution, may affect their chances of success.  Exactly what measures surface -- and which can either pass through Congress or, in the case of agency action, survive legal challenge -- will be revealed over the next four years. 

Energy implications of fiscal cliff deal

Congress enacted the American Taxpayer Relief Act of 2012 on January 1, 2013.  The bill's primary purpose was to stave off the so-called fiscal cliff by extending tax cuts and unemployment benefits.  The bill also included a variety of energy-related provisions, including extensions of tax credits for producers of biofuels and renewable electricity.  These policies will shape business activity in 2013.

The most prominent energy provisions in the act extend and modify incentives for producing renewable electricity.  One extended the production tax credit for wind.  The production tax credit is worth 2.2 cents per kilowatt hour of electricity produced for a 10-year period from a wind facility.  While the production tax credit had previously been available only to wind facilities placed-in-service by the end of 2012, the new legislation extends the credit to any facility that begins construction before the end of 2013 to claim the 10-year credit.  This provision is estimated to have a net of cost $12.109 billion over ten years but was seen by some as essential to continued investment in renewable energy facilities.  A parallel provision extended the investment tax credit in lieu of production tax credit, which gives a tax credit equal to 30 percent of eligible investment in renewable facilities in the year that the facility is placed-in-service. Facilities must begin construction by the end of 2013.  This provision is estimated to cost $135 million over ten years, suggesting Congress thinks the investment tax credit will be applied to about $450,000,000 in qualified investments.

Other provisions extended credits for energy-efficient improvements to existing homes, plug-in electric vehicles and alternative vehicle refueling property, producing cellulosic bifuel, biodiesel and renewable diesel.

The extension of the renewable electricity credits will stimulate growth in an industry that has suffered from uncertainty over their renewal.  Their previously-scheduled 2012 end led to a rush of construction to enable projects to qualify for the tax credits, but fewer new projects were announced in 2012 as they appeared unable to be placed in service before the deadline.  The credits' renewal will likely lead to a similar scramble to complete at least some construction financing and begin construction in 2013.  This in turn may mean busy caseloads for state environmental and energy permitting authorities, as developers pursue permits to enable construction to begin this year.  Projects able to start construction in 2013 will be eligible for either the production tax credit or the investment tax credit, even if construction takes several years.  This feature may help offshore wind and other projects with long construction times, if they can get the permits to start work this year.

Does blending ethanol in transportation fuels lower costs?

While widespread drought has driven corn prices up in the U.S., pinching ethanol producers, debate has emerged about the economic impacts of blending corn-based ethanol into gasoline and diesel used as transportation fuel.

As local gas pumps may tell you, U.S. transportation fuels may contain ethanol.

Under the EPA's U.S. Renewable Fuel Standard program, transportation fuel sold in the United States must contain a certain amount of renewable fuel.  Corn is the feedstock for the vast bulk of the ethanol biofuel used to meet the renewable fuel standard.  Despite near-record levels of corn planting, drought across much of the country has led to crop reductions and high prices for corn.  At the same time, the demand for gasoline and diesel has not grown as it had been projected to do.  This slackening of demand comes from both increases in vehicle energy efficiency and decreases in fuel demand due to the economic slowdown.  Between higher feedstock costs and reduced product demand, many biofuel ethanol producers are struggling or failing to turn a profit.

Some policy questions surrounding the blending of corn ethanol into transportation fuel remain controversial.  One argument used to support the practice points to evidence that blending ethanol into gasoline and diesel reduces the cost of fuel.  A widely-cited study by Xiaodong Du and Dermot Hayes titled "The Impact of Ethanol Production on U.S. and Regional Gasoline Markets" found that over the period of January 2000 to December 2011, growth in ethanol production for fuel reduced wholesale gasoline prices by an average of $0.29 per gallon.  Looking at 2009 alone, they reported that the average effect across all regions increased to $1.09/gallon, with regional price suppression  impacts ranging from $0.73/gallon in the Gulf Coast to $1.69/gallon in the Midwest. 

Not so, according to a study released earlier this month by Christopher Knittel and Aaron Smith.  Their July 12, 2012 paper, Ethanol Production and Gasoline Prices: A Spurious Correlation, disputes many of the findings of Du and Hayes's research.  In Knittel and Smith's view, the previous researchers' results were "driven by implausible economic assumptions and spurious statistical correlations".  Like Du and Hayes, Knittel and Smith provide a detailed analysis of the "crack spread" and "crack ratio", measures of the margin associated with refining.  They challenge the accuracy of the previous study's results, arguing that "the empirical results are extremely sensitive to the empirical specification; however, empirical models that are most consistent with economic theory suggest effects that are near zero and statistically insignificant."

Which view is more accurate is a question that remains to be seen.  The answer may have implications for the future course of U.S. policy on blending corn-based ethanol into gasoline and diesel fuels used for transportation.

Corn, ethanol, drought, and demand

Corn plays an important role in current United States transportation fuel policy - but environmental and economic factors are putting the pinch on corn ethanol producers.

The U.S. Renewable Fuel Standard program requires transportation fuel sold in the United States to contain at least a minimum volume of renewable fuel.  This renewable fuel is generally ethanol, produced by fermenting sugars contained in plant feedstocks like sugar cane and sugar beets, or sugars produced by converting plant-based starches like corn starch.  The program's goals include reducing greenhouse gas emissions from the transportation sector, reducing petroleum imports, and encouraging the development and expansion of the domestic renewable fuels sector.

In the U.S., more than 95 percent of operating ethanol plants reportedly use corn starch as their feedstock.  According to the U.S. Department of Agriculture, U.S. farmers planted 96.4 million acres of corn this year, the highest corn acreage since 1937.  Favorable field conditions this spring led to the quickest planting pace on record, with nearly all of the corn planted by May 20 and plants emerged by June 3.

This summer's high temperatures and widespread drought conditions - with nearly 56% of the area of the 48 contiguous states experiencing drought - have hurt the U.S. corn crop, resulting in reduced estimates for this year's crop.  This anticipated reduction is driving corn prices up, with the commodity trading at over $7 per bushel (contrast a 2007 U.S. Energy Information Administration analysis of transportation biofuels assuming corn prices of about $2 per bushel).  This price increase is cutting into ethanol producers' bottom line.

At the same time, transportation fuel consumers are driving less.  Between increased fleet efficiency prompted by both governmental mandates and a natural desire to cut costs, and the overall slowdown in the national economy, overall demand for ethanol fuel has not grown at the pace previously projected.

According to Reuters, the average ethanol plant operating in Illinois is currently losing 32 cents on every gallon it produces.  As a result, many ethanol plants are running below their production capacity, and several have announced planned closures.  EIA data shows that ethanol production dropped 4% last week to 821,000 barrels per day, the lowest production rate since July 23, 2010.

Proponents of blending ethanol into transportation fuels point to its nature as a renewable biofuel, lower cost than gasoline, and ability to be produced domestically.  Critics question the wisdom of converting a potential food crop into an energy commodity, as well as the economic and environmental consequences of current pro-ethanol policies.  Whatever the ultimate outcome, the climatic and economic conditions affecting the corn ethanol industry may be calling into question the sustainability of the current system.

USDA funding for biomass energy crops

The U.S. Department of Agriculture has announced $9.6 million in funding for biomass energy crop production in New York, North Carolina and Arkansas. The funding under the Biomass Crop Assistance Program (BCAP) focuses on expanding the production of non-food energy crops for use in manufacturing liquid biofuels and renewable electricity.

Miscsnthus - the dwarf garden variety, related to the giant hybrid energy crop.

BCAP, created in the 2008 Farm Bill, is run by USDA's Farm Service Agency (FSA). BCAP is designed to help farmers and forest land owners switch to crops that can be used to produce usable energy. In many cases, these new energy crops can have significant start-up costs and can take several years before they are ready for harvest. Developing the facilities need to convert these crops into energy products can also involve significant lead time. To overcome these obstacles, BCAP will pay energy crop producers reimbursement for up to 75 percent of the costs of establishing perennial crops. BCAP will also pay for annual maintenance of these crops, for up to five years for herbaceous crops and eleven years for woody crops.

The funding announced this week includes nearly $4 million to fund the production of up to $4,000 acres of grass crops including miscanthus and switchgrass in North Carolina. These crops will be sent to a refinery proposed by Chemtex International where they will be converted into 20 million gallons of bioethanol per year. The refinery is also expected to produce chemicals and biogas. North Carolina farmers will be paid an initial amount to establish the grass crops, plus five years of annual payments for crop maintenance, on top of their crop sales.

$4.2 million in BCAP funding will also support the establishment of up to 3,500 acres of shrub willow in northern New York. Project sponsor ReEnergy Holdings LLC will buy the willow crop as a fuel for biomass electricity production in the area.

BCAP will also provide an additional $1.2 million in funding for an expansion of miscanthus production in northeast Arkansas. Project sponsor MFA Oil Biomass LLC anticipates using the crop to produce a pelletized fuel for both heating use on the producing farms and sale into pellet fuel markets.

POET ethanol plant declines DOE loan guarantee

Cellulosic ethanol producer POET LLC has declined a $105 million federal loan guarantee for its planned "Project LIBERTY" facility in Emmetsburg, Iowa, instead turning to private funding from Dutch company Royal DSM NV.  This choice has implications both for energy policy and for the biofuels industry.

Last year brought an end to a US Department of Energy program to help fund innovative energy projects with loan guarantees.  Before it ended in September 2011, DOE's Section 1705 loan guarantee program backstopped a total of $16 billion in loans for 28 projects ranging from nuclear power to solar, wind to transmission, biofuels to energy efficiency.  Questions about the value and implementation of the loan program grew after the recipient of the first loan guarantee, solar panel maker Solyndra LLC, failed and went bankrupt.

Before the Section 1705 loan program ended, POET was awarded a guarantee for $105 million.  POET is developing the Project LIBERTY plant, which aims to use cutting-edge enzymatic hydrolysis to produce fermentable sugars from corn crop waste, and then to use special yeasts to transform the sugar into usable ethanol.  By 2013, the plant could be producing up to 25 million gallons per year.

This week POET announced that it was declining the DOE loan guarantee.  Instead, POET will partner with Royal DSM, a private business that grew out of a former Dutch national coal-mining company.  Together, the companies will invest up to $250 million in initial capital expenditures for Project LIBERTY.

What does POET's choice mean?  For POET, the terms of the joint venture with Royal DSM are presumably more favorable than the alternative.  Royal DSM's money is likely what made it most attractive to POET, but its experience and markets may have also played a role.

For Iowa, any financial arrangement that realizes $250 million in capital investments in the state is likely to be greeted with open arms.

For other ethanol producers, the deal may signal increased interest in ethanol from the investment community.  The  U.S. Environmental Protection Agency estimates that its renewable fuels standards will require 16 billion gallons of advanced cellulosic biofuel per year by 2022; using the Project LIBERTY plant as a model, this could mean up to 400 new biorefineries will be built by 2022 to meet these standards.  By extension, other recipients of DOE loan guarantees may similarly partner with private-sector entities to complete project financing.

Biofuels power first commercial airline flight

Today marks the first U.S. commercial airline flight powered by biofuels.  United Airlines has selected a Boeing 737-800 for the route from Houston to Chicago.  The plane will be powered by Solajet, a fuel blend of 60 percent petroleum-based jet fuel and 40 percent biofuel produced by California-based algae producer Solazyme.


Biofuels appear poised to play an increasing role in the transportation sector.  Biofuels have traditionally included liquid fuels like ethanol (derived from corn or cellulosic sources) and biodiesel.  Biofuels typically rely on plants or algae to convert solar energy into chemicals that can be refined and modified to produce usable fuels.  The wood (biomass) burned in hearths and stoves around the world represents a very basic biofuel, but today's advanced biofuels can involve significantly more technology.  The U.S. Department of Energy is funding research and development efforts to produce "drop-in biofuels", which can be  used as additives or even replacements for liquid fuels like gasoline, diesel and jet fuels -- without requiring consumers or distributors to modify their engines and fuel distribution networks.

United Airlines is not the only carrier to take its biofuels experimentation live this week.  On Wednesday, Alaska Airlines will fly two commercial flights from its bases in Seattle and Portland, Oregon, to Washington, D.C.  Alaska Airlines' jets will be powered by a fuel blend composed of 20% biofuels from used cooking oil.  Alaska Airlines chose Dynamic Fuels as its supplier; Dynamic Fuels is a joint venture between food product giant Tyson Foods and synthetic fuel producer Syntroleum.