An Uncertain Future for the Renewable Fuels Standard 2 (RFS 2)

Emerson’s Alan Novak, who leads the alternative energy industry team, shares his thoughts on the future of the U.S. Renewable Fuels Standard 2.

When the Renewable Fuels Standard 2 was put in place as part of the Energy Independence and Security Act of 2007, it was anticipated that increasing volumes of advanced biofuels (either drop-in petroleum equivalents or non-grain based alcohols) would become available to meet an ever-larger share of the US transportation fuels market.

This has not proven to be the case. The volume of advanced biofuels available today remains relatively small, with potential producers having run into multiple challenges. Technical challenges in scaling first of a kind technologies, uncertain feedstock availability and not least the global economic downturn have all conspired to lengthen the timeline for bringing advanced production technologies to market.

Conventional grain (primarily corn) based ethanol remains the dominant biofuel in the US market and will likely remain so for the near future. Ethanol production currently consumes approximately 40% of the US corn crop and, without significant changes to the RFS 2 mandate, has saturated the US market biofuel market allotted to it.

A number of discussions are under way in Washington regarding the nature and amount of subsidies to the ethanol industry, impact of ethanol production on food prices, gasoline/ethanol blend percentages, waivers to the RFS 2 mandate, and other industry related topics. All of which makes attracting investment capital even more difficult.

For an example of the type of discussion currently occurring in DC see a recent article on Opisnet, House Lawmaker Takes Aim at Repealing Entire RFS.

Will any definitive (and positive) changes for the US biofuels industry emerge in the near future? It’s hard to say, but a lack of certainty is definitely making it harder to attract capital and may be putting the future of the RFS 2 mandate in jeopardy.

Posted Friday, October 7th, 2011 under Energy.

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