Delivering Renewable Results

Solid Canadian backing for renewable fuels mandates and positive benefits from biofuels energized the Canadian Renewable Fuels Summit.
By Susanne Retka Schill | January 04, 2010
A single phrase captures the essence of the Canadian biofuels industry—"We're delivering," said Canadian Renewable Fuels Association President Gordon Quaiattini at the organization's annual summit held in Vancouver, British Columbia, in early December. "We're delivering the jobs and growth that Canadians so badly need. We're delivering greenhouse gas (GHG) reductions that Canada requires. We're delivering for farm families looking to diversify. We're delivering for the forestry sector that sees renewable fuels as a new source of growth and vitality and we're delivering for all those who worry about the security and abundance of clean and affordable transportation fuels." Quaiattini cited three recent reports supporting his claim.

The day the summit opened, the CRFA released an analysis of the economic benefits from the southwestern Ontario farmer-owned corn ethanol plant, Integrated Grain Processors Cooperative. When it was being built, the IGPC plant had a net job creation of 1,152 "person years" and a direct investment in the region of $276 million. Local governments gained $7.7 million in direct benefits to the municipal tax base while the provincial government benefitted $44.24 million and the federal government close to $70 million. With the 150 MMly (40 MMgy) plant in production since fall 2008, it now provides 55 jobs and $53.7 million in additional local spending each year, according to the economic analysis done by Doyletech of Ottawa. The municipality realizes reduced welfare costs and increased property taxes totaling $629,000 annually while the provincial and federal governments see benefits of $5.2 million each.

Quaiattini also cited a life-cycle analysis (LCA) conducted on renewable fuel production from Canadian plants between April 2008 and March 2009. Ontario-based Cheminfo Services Inc. used the GHGenious model to conduct the analysis and found that ethanol reduced GHG emissions by 62 percent compared to traditional fossils. Eight corn- and wheat-based ethanol plants representing 648 MMly of ethanol production, about 65 percent of the country's active ethanol capacity, were analyzed during the data reporting period.

Such results have earned impressive support for renewable fuels, as illustrated by a public opinion survey released by CRFA at the summit. The survey, conducted by Praxicus Public Strategies, showed 89 percent of Canadians believe renewable fuels are part of a move toward a low-carbon economy; 84 percent recognize renewable fuels boost economic activity and employment in rural communities; 82 percent believe any plan to tackle climate change should include renewable fuels to lower GHGs; and 85 percent view renewable fuels as a source of value-added production and new high-tech employment. Support for a renewable fuels standard was only slightly lower at 78 percent, while 86 percent of Canadians believe the country needs a long-term plan to boost production of renewable fuels in Canada. "I've worked in politics for over 20 years," Quaiattini added, "and these are numbers any politician would die for."

Politicians Voice Support
Two government officials addressing the summit demonstrated the degree of public support is understood by politicians. The British Columbia Minister of Energy, Mines and Petroleum Resources, Blair Lekstrom, voiced strong support for Canadian biofuels in his welcoming remarks. "Anytime we work towards diversifying markets for our agricultural sector, it is a good thing," he said.

Lisa Raitt, the Canadian Minister of Natural Resources, also expressed support for biofuels in a videotaped presentation to the summit. She pointed to the stakeholder roundtables her department hosted in 2009 as the government began to implement its $2.2 billion investment in a renewable fuels strategy. Of the 57 applicants to the ecoEnergy program, 23 agreements have been signed, she said, supporting existing Canadian producers and new projects under development.

The Canadian renewable fuels standard takes effect in September, mandating a 5 percent renewable content in gasoline, followed by a 2 percent renewable content in diesel and heating oil in 2012. In a panel discussing the political landscape in Ottawa, Scott Reid, a partner in Feschuk-Reid, referred to the government support—the mandates and $2 billion in financing—as "monster wins" with both conservatives and liberals including renewables in their platforms. "Your fundamental job is to remind and reinforce that [supporting renewable fuels] is good politics," he told the Canadian industry. Reid's fellow panelist, Tim Power, Summa Strategies, echoed that, adding that in the next election cycle "biofuels need to frame themselves in the economic discussion rather than the environmental."

Expansion Anticipated
The mood among ethanol producers at the summit was upbeat. "Prices have recovered, relative profitability is not too bad," said Tim LaFrance, president of Terra Grain Fuels, a 150 MMly wheat ethanol plant at Belle Plaine, Saskatchewan. "The ethanol industry is looking forward to September 2010 when the E5 mandate creates a market for 2 billion liters a year," said Jeff Passmore, executive vice president public affairs for Iogen Corp. and the outgoing chairman of CRFA. "We need 400 million liters of new capacity to cover that." He expects most of that will come from grain-based ethanol because the Canadian standard has no carve out for cellulosic ethanol, unlike the U.S. However, while so much of Canadian biofuel policy and industry development lags behind the U.S., the Canadian cellulosic ethanol industry is on an equal footing with its neighbors to the south. "We are at the same stage in both countries," said Vincent Chornet, CEO of Enerkem Inc. Several companies at the summit described their technology developments occurring on both sides of the border, and spoke of the disadvantage to Canadian production when U.S. policies, such as the Biomass Crop Assistance Program, provide new areas of support to U.S. projects. As Passmore pointed out during the conference, the Canadian industry is dwarfed by its neighbor. U.S. ethanol production alone is about the same size as Canada's entire gasoline consumption. The Canadians are also well aware that the debates surrounding land use issues and GHG reduction estimates would impact their industry, with presentations from several U.S. speakers, including Bob Dinneen from the Renewable Fuels Association, covering the controversy and the industry response.

Global Update
Despite the controversies surrounding biofuels, a recent market analysis conducted by the Global Biofuels Centre concluded ethanol will see an 80 percent increase in demand worldwide from 2009 to 2015. Tammy Klein, executive director of the Global Biofuels Centre for Hart Energy Consulting, said the growth drivers are not just the U.S. and Europe. "Many countries see biofuels the same way as Canada and the U.S.—supporting rural economic development, reducing greenhouse gases and also, many of these countries are energy insecure." With next generation biofuels not likely to be available commercially in sufficient quantities by 2015 to meet GHG-driven biofuels targets, she expects expansion of sugarcane-based ethanol in not only South America but in the Asia Pacific region as well. The ethanol share of the market is expected to reach a 30 percent penetration in Latin America, with Brazil continuing to supply 89 percent of the exportable surplus. In North America, gasoline demand is expected to decline by 2015 driven by gains in fuel efficiency. Ethanol's penetration into the North American market could increase with intermediate blends. Brazil is likely to quadruple ethanol exports to the U.S. to help meet renewable fuels standards that won't be attainable with advanced biofuels produced domestically, she added.

As for Europe, Klein said the standards in development ultimately may exclude most imports. "We don't know how the EU can meet its renewable energy directive targets," she said. She also predicted that the anticipated EU sustainability standards for biofuels will be challenged in the World Trade Organization as a protectionist trade barrier. At a recent international meeting, she noted "the change in tenor was astonishing" from the European Commission representative who openly admitted they would have to consider WTO implications. "Brazil is watching the EC closely," she added, "and Brazil has a history of winning WTO cases." If a WTO suit successfully challenges Europe's sustainable biofuels policy, it could also impact U.S. policy as well.

Klein urged the group of Canadian Renewable Fuels Association members to be proactive about involvement in policy development and the work being done on sustainability standards, not only in dialoguing with nongovernmental organizations but engaging with governments and organizations such as the Roundtable for Sustainable Biofuels. "The complaint from the RSB is they don't have enough industry participation, and not enough producer involvement," she said.

Perspectives on the Decade Ahead
In his remarks, CRFA's incoming chairman, Doug Hooper, CEO of Canadian Bioenergy Corp., reflected on the state of the Canadian industry at the close of a decade. "This has been the coming of age decade for biofuels with capacity being built," he said. "We got the attention of government and held on to it." In the next 10 years, the energy sector will be transformed with emerging carbon policies presenting opportunities and challenges, he said, predicting that trade disputes will grow over different views on the proper carbon accounting. "Green protectionism is going to be normal," he said.

Avrim Lazar, CEO of the Forest Products Association of Canada, also described a progression in the development of climate change policy that indicates where the discussion surrounding renewable energy is headed. The first generation of climate change responses involved finger pointing, platitudes and good will gestures, followed by a second generation of policy development. "Kyoto was second generation because it was done in slices," he said. "Cap and trade offsets are a second generation response because it's like paying someone else to diet," he added. The third generation response is beginning to emerge now, and ultimately requires "a deep retooling of the economy, the changing of the fuel source." The third generation will be holistic, including total carbon accounting and incorporating nature's cycles, he predicted. "If any industry is well situated [for the third generation of climate change policy developments], it is this industry," he said. EP

Susanne Retka Schill is an editor at BBI International. Reach her at sretkaschill@bbiinternational.com or (701) 738-4922.