U.S. energy policy needs a stronger vision for the future

 

By Shashi Menon, CEO of EcoEngineers

 

The following article was published in the Des Moines Register on June 5, 2019.

Now that the U.S. Environmental Protection Agency (USEPA) has approved the year-round use of gasoline blends containing 15% ethanol (E15), the agency should take steps to bolster the nation’s most important renewable energy policy – the Renewable Fuel Standard (RFS) – by providing incentives to farmers and ethanol producers to produce low-carbon ethanol.

One of the most serious flaws in the RFS is that it doesn’t allow ethanol made from corn starch to qualify as an advanced biofuel, which earns a premium price in the marketplace.

The USEPA can encourage ethanol plants and the farmers who supply them with corn to adopt more sustainable practices by making it economically beneficial to do so.

Here’s how it can do that:

The USEPA’s approval of year-round sales of E15 means an additional 7 billion gallons of ethanol will be needed annually to meet demand at 100% market penetration. This additional ethanol supply for E15 should be classified as an advanced biofuel under the RFS.

Doing so will provide an incentive for corn ethanol plants in Iowa and other states to cut their carbon footprint by employing wind and other green energy measures. Ethanol plants also can lower their carbon emission scores by purchasing corn that is grown with sustainable farming methods such as raising cover crops, employing no-till cultivation measures, and reducing chemical fertilizer applications.

If it is classified as an advanced biofuel, ethanol going to meet E15 demand could earn a $0.50 to $0.90 premium per gallon. At a yield rate of 2.9 gallons per bushel, that is about $1.45 to $2.61 in added value for each bushel of corn used to produce the ethanol.

By classifying ethanol used for E15 as an advanced biofuel, the USEPA can provide significant economic incentives to corn farmers and ethanol producers who are supplying the country with domestically produced low-carbon fuel to adopt practices that are better for the nation’s soil and water.

 

Other regulatory changes

The USEPA should also remove two regulatory uncertainties facing the ethanol industry by increasing the volume of biofuels that will be blended with gasoline after 2022 and by boosting renewable fuel use through a reset of the RFS blending requirements for the years 2020-22.

The first uncertainty concerns what happens to the RFS after 2022. It’s a common misconception that the RFS ends in 2022. It does not. When Congress laid out its vision for the RFS in 2007, it only decreed a schedule through 2022 that set minimum renewable volume obligations (RVOs) for biofuels that must be blended with gasoline.

Therefore, after 2022, the USEPA is expected to continue implementing the RFS without the congressionally mandated RVOs. Absent congressional action, EPA administrators could set a post-2022 schedule of RVOs that increases renewable fuel use. Such a change would deliver the benefits of a strong biofuel policy to rural America while simultaneously helping curb greenhouse gas emissions.

As for the RFS reset, it is expected that the USEPA will propose a rule this year that resets the statutory RVO schedule for 2020 through 2022. That means the agency could increase (or decrease) the amount of renewable fuels that refiners must blend with gasoline in the next three years.

EPA should use its reset rule-making authority to lay out its vision for a robust biofuel sector rooted in American agriculture and emphasize the broader benefits that the nation’s energy policy provides to rural America. A strong RFS with bold biofuel blending goals can spark innovation in farming practices, build rural infrastructure and inject money into rural economies.

 

What the EPA can learn from Iowa

Iowa has always led the nation in leveraging energy policy to create markets for agricultural commodities, build infrastructure and create jobs.

In 2017, the Iowa Economic Development Authority (IEDA) went through a long and rigorous process to craft a state energy plan that is holistic and market-friendly. The Iowa energy plan calls for leveraging Iowa’s strength – its rich agricultural sector – to diversify its energy sources.

One of the key elements of the plan calls for leveraging Iowa’s abundant biomass supplies to secure a strong energy production mix and recommends investing in projects that improve Iowa’s soil health and water quality, two of Iowa’s most important assets. The plan recommends using Iowa biomass resources, such as crop residue and animal manure, to produce renewable fuels.

The USEPA should follow Iowa’s example and create more farm revenue, promote sustainable farming and bolster the nation’s homegrown energy sector by setting aggressive biofuel targets and opening advanced biofuel incentives to low-carbon ethanol production.

 

Shashi Menon is Chief Executive Officer of EcoEngineers. Under his leadership, EcoEngineers has become a nationally and internationally recognized leader in audit, compliance management and renewable energy consulting in the biofuel/low carbon community. Mr. Menon holds over 20 years of business strategy and business development experience in finance, commercial real estate investments, and renewable energy consulting. He is actively engaged in science-based studies and research efforts that identify the role of policy in creating value for environmental services produced. He has worked closely with federal and state regulators and the biofuel community  to frame policies that enable successful projects.