EIA: Biofuels production to grow significantly, but short of RFS mandates

By Erin Voegele
posted December 18, 2009, at 9:26 a.m. CST

The U.S. Energy Information Administration released its Annual Energy Outlook 2010 (AEO2010) reference case on Dec. 14, which includes updated projections for U.S. energy consumption and production through 2035.

"Our projections show that existing policies that stress energy efficiency and alternative fuels, together with higher energy prices, curb energy consumption and growth and shift the energy mix toward renewable fuels," EIA Administrator Richard Newell said. "However, assuming no new policies, fossil fuels would still provide about 78 percent of all the energy used in 2035.

The EIA's reference case projections do not include the effects of potential future policies that have not yet become law, and only include technologies that are commercially available or can reasonably be expected to become commercially available over the next decade.

The AEO2010 estimates that U.S. consumption of liquid fuels will grow from 19 million barrels per day in 2008 to 22 million barrels per day in 2035. However, the EIA also expects that biofuels will account for all of the growth in liquid fuels, with consumption of petroleum-based liquid fuels remaining flat. As a result, reliance on imported oil is expected to decline significantly over the next 25 years.

While U.S. biofuels consumption is projected to grow, the nation is still expected to fall short of the 36 billion gallon renewable fuels standard (RFS) target in 2022. However, the RFS targets are projected to be exceeded by 2035.

Moreover, many of the EIA's current projections regarding the biofuels industry have been reduced since last year's estimates. In the AEO2009, the EIA made the following projections regarding the consumption of biofuels in 2022:

Corn-based = 15 billion gallons

Cellulose-based = 4.92 billion gallons

Other feedstock = 0.72 billion gallons

Imports = 1.04 billion gallons

Biodiesel = 2.81 billion gallons

Liquids from biomass = 2.94 billion gallons

Green liquids = 0.73 billion gallons

In the AEO2010, the EIA's projected consumption rates were adjusted to the following levels for 2022:

Corn-based = 14.23 billion gallons

Cellulose-based = 2.10 billion gallons

Other feedstock = 1.00 billion gallons

Imports = 1.77 billion gallons

Biodiesel = 2.60 billion gallons

Liquids from biomass = 2.74

Green liquids = 0.75 billion gallons

By 2035, the EIA projects that biofuels consumption will reach the following levels:

Corn-based = 15 billion gallons

Cellulose-based = 5.11 billion gallons

Other feedstock = 1.06 billion gallons

Imports = 5.10 billion gallons

Biodiesel = 2.94 billion gallons

Liquids from biomass = 12.50

Green liquids = 0.53

According to EIA analyst Peter Gross, the reduced expectations for cellulosic ethanol production and consumption in 2022 are due to the current state of the industry. In forming the projections included in the AEO2010, the EIA evaluated variables such as the current existence of cellulosic ethanol facilities, the technical maturity of those facilities, commercial viability and access to capital.

"Things are not looking as positive as … we thought last year for the industry," Gross said. "Basically, what has happened is we are pushing out the development of this industry a few years, which is why you will see that gap in 2022. In short, we have re-assessed our assessment of the cellulosic ethanol industry [taking into account] the current economic climate and the current status of the plants that are now in operation."

However, Gross stressed that the RFS mandates will be met at some point after 2022. "This is a delay we are projecting," he said. "Not an inability to meet the mandated production levels."