2005 was marked by considerable growth in the field of biomass and
biofuels, spurred by a combination of high energy prices, concerns over
the geopolitical ramifications of the country's heavy reliance on foreign
oil, and a crystallizing view that renewable energy technologies can offer
new avenues for economic stimulus -- all factors in addition to the
positive environmental attributes.
History and Introduction
In 2001, at the request of Senate committee staff, EESI published its
white paper,
The 2002 Farm Bill: Revitalizing the Farm Economy Through
Renewable Energy Development, because of EESI's concern that the 2002
farm bill needed to address the opportunities of farm-produced renewable
energy. The
Farm Security and Rural Development Act of 2002 (P.L.
107-171) , signed into law May 2002, was the first farm bill to
contain an energy title and include significant incentives for biomass
production and use.
The energy title encouraged federal procurement of bio-based products,
provided grants and loans for renewable energy projects, and funded vital
research and development in bioenergy. Subsequently, Congress had been
working on a new comprehensive energy bill for several years, which
finally passed this year -- the
Energy Policy Act of 2005 (P.L.
109-190) also has significant provisions to boost biomass use. This
year, hurricanes, sky-rocketing oil and natural gas prices, and national
security concerns have created a ripe atmosphere for biomass-related
legislation to finally garner much broader attention and support.
Funding and Appropriations
Despite increasing interest in biomass, the beginning of the year started
out once again with the Administration's FY06 budget request slashing
funding for Sec. 9006 (Renewable Energy & Energy Efficiency Systems
Grants/Loans program) and Sec. 6401 (Value-Add program which also provides
grants to farmers and rural businesses). Thankfully, Congress restored
full funding for Sec. 9006 and $20.5 million for Sec. 6401, an increase
from FY05.
Unfortunately, both Sec. 9006 and Sec. 6401 have suffered cuts in this
reconciliation process despite ongoing efforts on the part of EESI and
other renewable energy organizations across the country. Funding for Sec.
9006 in FY07 was reduced to $3 million in discretionary funding, which is
down from $23 million in mandatory funding; thereby reducing the baseline
to such an insignificant number that it essentially eliminates the
program. Sec. 6401 did not take such a severe cut; the baseline was spared
for FY07, which stands at $40 million, but the bill called for all funds
which are unobligated by October 1, 2006 to be reclaimed by the Federal
government.
Grants totaling $20.8 million were awarded to 150 applicants from 32
states under the Sec. 9006 program in 2005. Of these funds, over $7
million will be used for biomass-related energy projects, such as the
production of biofuels or methane from anaerobic digesters. Similarly, the
Value-Add program funded 169 projects, some of which help develop
marketing and production of energy from biomass, with over $14.4 million
this year.
Additionally, in the Department of Energy's (DOE) FY06 appropriations
bill, the DOE biomass R&D program received a little over $91.6 million,
however, this includes more than $52.3 million in earmarks, making more
than 57 percent of the funds already pegged for 'special' projects as
opposed to core program R&D.
Energy Policy Act of 2005 (P.L. 109-190)
After more than ten years, Congress has finally passed a new energy bill.
Although there are many provisions in the Act that send policy in the
wrong direction, there are a host of biomass-related provisions, most
notably the Renewable Fuel Standard (RFS), which will more than double the
current market for biofuels. The RFS requires that 7.5 billion gallons of
biofuels (including ethanol and biodiesel) be utilized by 2012. Moreover,
one gallon of cellulosic ethanol or waste-derived ethanol will be counted
as 2.5 gallons. After 2012, the 2.5-to-one ratio no longer applies. But,
the RFS will annually require a minimum of 250 million gallons of
cellulosic biomass fuels.
Other significant provisions enacted by the Energy Policy Act of 2005
include the Renewable Energy Production Tax Credit, which was extended for
another two years, and the Clean Renewable Energy Bonds (for public
power), which are vital to obtaining project financing for the renewable
energy industry. Additionally, Senators Lugar (R-IN) and Harkin (D-IA),
worked to include significant biofuels, bio-based products and biopower
provisions in the Energy Policy Act of 2005, thereby providing legislation
for grant-and-loan and loan guarantee programs which will now give biomass
renewable energy projects a step-up in the growing renewable energy
market. There are specific provisions authorizing funding to spur
development of cellulosic biofuels facilities and integrated biorefineries.
State and Private Biomass Initiatives
As many industries are finding out, it has been easier to enact and
implement biomass-related energy programs on a state level. Currently,
five states including California, Ohio, Hawaii, Minnesota and Montana have
either a RFS or have passed legislation to use biofuels on a state level.
Furthermore, many states provide biomass incentives to create market
demand or to help new biofuels producers get established. For instance,
Oklahoma passed a tax credit, which will provide 20 cents/gallon of
biodiesel, produced for the first five years, with a maximum annual
payment of $5 million. North Dakota Governor John Hoeven signed a number
of bills on Earth Day for support of renewable energy technologies
including wind, hydrogen, biodiesel, and ethanol. Incentives for ethanol
production include $3.25 million for new and existing ethanol plants in
the state, $1.35 million for the expansion of existing plants, and a 20
cents per gallon tax credit for retail sales of E85 (HB 1478). North
Dakota passed a complementary bill for biodiesel.
On the biopower side (biomass for electricity production), 21 states have
enacted a Renewable Portfolio Standard (RPS). An RPS is a requirement
created by the government that mandates a certain percentage of a
utility's overall energy capacity or energy sales be derived from
renewable resources, including biomass. Moreover, as with biofuels, many
biopower incentives have been passed on a state level to encourage
biopower production. The state of Washington, for example, passed a
Production Tax Credit, which will provide a 15? per kilowatt-hour
incentive for small scale renewable energy producers using either solar,
wind or anaerobic digester technology. Similarly, Iowa enacted legislation
creating two separate production tax credits for electricity generated by
eligible renewable energy facilities, including solar thermal electric,
photovoltaics, landfill gas, wind, biomass, hydrogen and anaerobic
digestion.
New Biomass-related Federal Bills
Many new bills have been introduced this year, illustrating that biomass
is becoming a more prominent interest for many policymakers. In
particular, biofuels legislation has been introduced because of high
petroleum prices and perceived national and energy security threats
because of the Iraq war and our growing reliance upon imported oil. One of
the most recent examples of biofuel legislation is the simultaneous
introduction of the
Fuel Choices for American Security Act of 2005
(H.R.4409, S. 2025), introduced by Rep. Kingston (R-GA) and co-sponsored
by more than 25 other House members and introduced by Senator Bayh (D-IN)
and co-sponsored by nine other Senators.
These bills were introduced, "To promote the national security and
stability of the United States' economy by reducing the dependence of the
United States on foreign oil through the use of alternative fuels and new
vehicle technologies, and for other purposes." However, this description
fails to illustrate the positive impacts that the bill could have on
flex-fuel vehicles, R&D for biofuels, alternative fuel fueling stations
and a wide variety of other biomass-related technologies. Furthermore, the
Health Care for Hybrids Act, introduced by Rep. Inslee (D-WA) on
the House side (H.R. 4370, S.2045) and Senator Obama (D-IL) on the Senate
side, would provide incentives to the auto industry to accelerate efforts
to develop more energy-efficient vehicles to lessen dependence on oil.
Many other biopower and biofuels bills were introduced in 2005 including
Rep. Gutknecht's
'10 by10 Act' (H.R. 4357), Rep. Gordon's
Advanced Research Projects Agency-Energy Act (H.R. 4435), Senator
Harkin's
Fuel Security and Consumer Choice Act (S. 1994), Senator
Cantwell's
20/20 Biofuels Challenge Act of 2005 (S.1609), Rep.
Kaptur's
National Defense Authorization Act for Fiscal Year 2006
(H.R. 1815) and a number of other important bills.
Biomass: 2006 and Beyond
It is apparent that next year will see more biomass initiatives because of
increasing concerns for national and energy security. New biomass
legislation is already being developed and as more Members of Congress see
how biomass-to-energy technologies will benefit their states, more actions
will be taken on this legislation. As part of this trend, the country will
see more biomass initiatives in the agriculture and transportation
sectors, both of which will play a huge roll in reducing oil consumption
in the United States.
Biomass activities will be focused on the annual appropriations process
and the reauthorization of the farm bill. There is sure to be another
fight to protect funding for the energy title of the farm bill and the new
biomass programs in the energy bill. However, this year will be
exceptionally difficult because of a tighter budget and cuts made through
budget reconciliation.
Biomass used to displace petroleum, especially in the transportation
sector, will take center stage next year. Transportation Flexible fuel
plug-in hybrids offer the potential to decrease dependence on oil in the
transportation sector while improving air quality. One new initiative that
will kick off in 2006 is the Austin Energy National Plug-in Partner
Campaign, which will help build a market for gas-optional plug-in hybrids.
The national campaign will help demonstrate to automobile manufacturers
that a market for flexible-fuel Plug-in Hybrid vehicles (PHEVs) exists
today.
As education about biomass increases in the coming year, renewable energy
advocates will have another great energy resource to rally around.
