Government report calls for RFS infrastructure investments

By Hope Deutscher | June 03, 2009
If the U.S. is to meet federal renewable fuel goals, infrastructure incentives in the U.S. must be increased to accommodate a wide variety of biofuels, according to a report released by the Biofuels Infrastructure Task Force. The task force was convened by the National Commission on Energy Policy in 2008 to examine infrastructure implications of the federal renewable fuels standard (RFS) which calls for the U.S. to produce 36 billion gallons of biofuels by 2022 and to develop recommendations for advancing the infrastructure investments needed to support timely and cost-effective implementation of the RFS.

The task force concluded that significant efforts will be needed to achieve the RFS. "The renewable fuels standard is ambitious," said task force chairman Norm Szydlowski, former president and CEO of Colonial Pipeline Co. and NCEP commissioner.

"To meet its timetable, approaches to biofuels infrastructure upgrades must also be ambitious. Whether it's vehicles, pipelines, or pumps, new investment will be needed to meet the 36 billion gallon mandate," he said.

Task force members focused on identifying optimal pathways toward an integrated transportation and distribution network for conventional and ethanol fuels and after extensive discussion and analysis, identified three likely phases of biofuels infrastructure expansion.

Between 2008 and 2010, phase 1a will occur. Ethanol production will increase to 12 billion gallons per year. The existing multi-modal transportation network will be used to transport ethanol from production centers in the Midwest to demand centers on the coasts; rail will play a major role.

Between 2010 and 2015, phase 1b will occur. During this phase, corn ethanol production will increase from 12 to 15 billion gallons per year. Absorbing this level of ethanol production will require the broad-based uses of a 10-percent ethanol blend and increased usage of higher-ratio blends, such as E85. Existing transportation and blending networks will be stressed from the required blended amounts of ethanol, requiring additional infrastructure investment.

After 2015, the U.S. will enter phase 2, in which ethanol and advanced biofuels production expands beyond 15 billion gallons per year. Further evolution of the transportation and distribution infrastructure will depend on several factors, including the geographic distribution of supply and demand centers, mandate certainty, import volumes, flexible fuel vehicle (FFV) production, and successful market penetration of E85 or higher-ratio fuels, if ethanol becomes the cellulosic biofuel of choice.

Based on these findings, the task force developed several recommendations:

A growing number of FFVs will be needed to absorb biofuels. Further consumer and manufacturer incentives may be needed to accelerate the market penetration of FFVs. Simultaneously, consumer acceptance of FFVs will depend in part on expanded access to E85 (or higher-ratio blends) at retail stations in urban and rural areas.

The number of different blends that fuel refiners must produce to meet state-level specifications should be reduced or limited to enable a more efficient biofuels transition.

Permitting processes need to be streamlined and simplified to reduce costs and lead times for infrastructure investment.

Market confidence in the government's commitment to the RFS is a prerequisite for timely private large-scale biofuels investments. Current public incentives and subsidies should be refocused to include a greater emphasis on biofuels transport, refueling infrastructure and related vehicle technologies given the industry's current state of development. Loan guarantees or tax credits could be effective ways to support needed infrastructure investments.