Economic and Policy Issues of Bioenergy Janaki R' R' Alavalapati Associate Professor, Resource Polic

1
Economic and Policy Issues of Bioenergy Janaki
R. R. AlavalapatiAssociate Professor, Resource
Policy and EconomicsSchool of Forest Resources
and ConservationUniversity of Florida,
Gainesville, Fl Presented at the Farm to Fuel
Summit, August 30-Sep. 1, Orlando, FL
2
Outline of the presentation

• Energy scenario in the US and Florida
• Driving forces for bioenergy
• Environmental economics of bioenergy
• Opportunities and challenges for bioenergy in
  Florida
• Bioenergy research and outreach at UF/IFAS
• Conclusions

3
Trends in U.S. Energy Production, Consumption
and Trade
Source USDOE/EIA, Annual Energy Review, 2004
4
Trends in Total U.S. Energy Consumption by Major
Source
Source USDOE/EIA, Annual Energy Review, 2004
5
Renewable energy in the USA, 2004
6
Energy scenario in Florida

• Florida is
• 5th in energy consumption per capita
• 3rd in total energy consumption
• 1st in biomass production
• Florida consumes 9 billion gallons of fossil
  fuel (97 of total energy consumption)
• Floridas future economy, quality of life, and
  security rely on access to clean, affordable, and
  sustainable energy sources (FL DEP 2006)
• Florida has major potential to produce bioenergy
  and agriculture forestry can offer solutions
  (UF/IFAS 2006)

7
Mapping the Biomass
With grateful acknowledgements to Bob Shleser
8
Driving forces for bioenergy

• Increasing demand for energy (200 billion
  gallons of fuel per year)
• Decrease in domestic production of oil
• Increase in oil imports
• Concerns for high dependency on foreign oil
• Increasing prices of crude oil

http//en.wikipedia.org/wiki/Oil_price_increases_o
f_2004-2006
9
Driving forces for bioenergy (Contd.)

• Over 1.3 billion dry tones of sustainable biomass
  per year available to displace 30 of U.S. fossil
  fuel consumption (Perlack et al. 2005)
• Decrease greenhouse gas emissions and generate
  other environmental benefits (Hill et al. 2006,
  Farrell et al. 2006)
• New markets, economic stimulation, and additional
  employment opportunities (Gordon 2006) in
• Growing collecting
• Processing and shipping
• Value added activities

10
Agri. biomass sources in Florida

• Sugar cane to ethanol (401,000
  ac)
• Citrus to ethanol
  (748,555 ac)
• Peanuts and soybeans to biodiesel (171,000 ac)
• Corn to ethanol
  (65,000 ac)
• Sweet sorghum (3,500 ac)

11
Forest biomass sources in Florida

• Mined lands for SRWC (200,000 ac)
• Forests (16,000,000 ac)

12
Environmental economics of bioenergy
(Alavalapati et al. 2006)
13
Costs benefits per kilowatt-hour electricity
production
Huh?!
14
Opportunities for bioenergy

• Energy policy
• The Energy Tax Act of 1978
• Tax credit of 0.51 per gallon for ethanol until
  2010
• The American Jobs Creation Act of 2004 a tax
  credit of 1.00 per gallon of biodiesel from oil
  crops and animal fats
• The Energy Policy Act 2005
• Renewable fuel standard (RFS) 4 billion gallons
  in 2006 and 7.5 billion gallons by 2012
• Cellulosic Biomass Program A gallon of ethanol
  produced from crop residues and tree crops can be
  counted as 2.5 gallons to satisfy the RFS

15
Opportunities for bioenergy

• Environmental policy
• EPA phased out lead with ethanol as an octane
  enhancer
• Clean Air Act
• Oxygenate methyl tertiary butyl ether (MTBE) is
  being phased out and replaced with ethanol

16
Opportunities for bioenergy

• Agricultural policy Farm Security and Rural
  Investment Act of 2002
• Federal Biobased Products Preferred Procurement
  Program (FB4P)
• Biodiesel Fuel Education Program
• Renewable Energy Systems and Energy Efficiency
  Improvements Program
• Value Added Grant Program Funds for farm
  families/businesses products such as ethanol and
  biodiesel
• Healthy Forest Restoration Act 2003 Funds to
  establish small-scale business enterprises to
  make use of biomass and small-diameter material
  and reduce wildfires threat

17
Floridas policies for renewable energies

• Energy Production Tax Credit
• Renewable Energy Technologies Investment Tax
  Credit
• Renewable Energy Equipment Sales Tax Exemption
• Renewable Energy Technologies State Grant Program
• Others

18
Challenges to bioenergy

• Controversy about energy yield ratios
• Ethanol from corn requires 29 more fossil energy
  than the ethanol fuel produced, biodiesel from
  soybeans, 27 (Pimental et al. 2005)
• More recent studies, however, claim net positive
  energy yields. 25 ethanol, 93 biodiesel,
  (Hill et al. 2006 Farrell et al. 2006)
• Market competitiveness
• Cost of ethanol production in Florida using
  sugarcane 2.50 citrus molasses 2.75 corn
  1.25 and sweet sorghum 3.00 (Rahmani and
  Hodges 2006)
• May take some time for cellulosic ethanol
  production to go commercial

19
Challenges to bioenergy

• External costs of fossil fuels and benefits of
  bioenergy are not fully reflected in market
  prices
• How much premium public would be willing to pay
  for biofuels?
• Incentive programs to support bioenergy must meet
  the green box criteria of WTO
• Potential competition between food and energy
  security (Brown 2005)

20
UF/IFAS Bioenergy research

• UF/IFAS has over 100 scientists and extension
  specialists working on
• Improving biomass feedstock development through
  genetic engineering and other improved practices
• Promoting lignocellulosic, microbial and bio
  conversion, and thermochemical technologies
  through industrial research and development
• Conducting environmental economic assessment of
  feed stock development and conversion to provide
  basis for policy formulation
• Expanding energy conservation and bioenergy
  extension activities

21
Conclusions

• Florida has great potential for biofuels
• Additional efforts to reduce the unit cost of
  biofuels would have high societal payoffs

THANK YOU