The cleantech industry boom is reshaping the global processes by which energy demand is supplied. Governments the world over are rethinking, redefining, and reshaping the energy equation. The planet's leading economies have all introduced and begun full-scale implementation of government mandates – legislation that practically guarantees growth in the cleantech sector.
The U.S. Renewable Fuel Standard (RFS) 1 program was created under the Energy Policy Act (EPAct) of 2005, and expanded under the Energy Independence and Security Act (EISA) of 2007. The RFS MANDATES the volume of renewable fuel required to be blended into transportation fuel; from 9 billion gallons in 2008 to 36 billion gallons by 2022, representing roughly 30% of all petroleum used in the U.S.
U.S Renewable Fuel Mandate: 30% of Total Supply in 10 Years
(shown against backdrop of U.S. Transportation Energy Use)
U.S. Transportation Sector Energy Use: 2006 – 2030
Data Source: U.S. Energy Information Administration (EIA)
RFS Mandates are striking when shown against the backdrop of energy use in the Transportation Sector:
1 Green Gasoline fuels – like XGasoline™ – are expected to grow dramatically between 2010 and 2030.
2 The greatest percentage increase for Green Gasoline is anticipated between 2009–2015. These fuels are expected to grow by about 200–fold in the U.S. alone.
3 The energy use growth path for Green Gasoline fuels over the next 10 years is 1,000–fold.
U.S. EPA: RFS UPDATE
During the early years of RFS implementation (2005–2009), the unforeseen international and inter–industry impacts of converting food stock, (such as corn into ethanol for fuel), raised a large warning flag, highlighting the fact that further developmental criteria were essential.
The U.S. RFS was quickly updated by the DOE and EPA in 2009 with the introduction of Renewable Fuel Standard 2 (RFS–2) 2, which added tougher Greenhouse Gas (GHG) emission requirements and guidelines regarding the carbon footprint of the fuels produced. According to the U.S. EPA: "RFS–2 lays the foundation for achieving significant reductions of greenhouse gas emissions from the use of renewable fuels, for reducing imported petroleum, and encouraging the development and expansion of our nation's renewable fuels sector."
Under the RFS–2 mandate, qualified biofuels – which must have 50% – 60% reduction in GHG (greenhouse gas) emissions – are to be blended with petrofuels by obligated parties – refiners, importers, and blenders.
Per RFS–2, first–generation biofuels are capped in growth and new categories are defined. XPetroleum™ fuel qualifies for all segments of the new RFS–2 mandate shown below.
RFS–2 volume requirements represent:
10% of the U.S. fuel supply in 2009
30% of the projected U.S fuel supply in 2022
RFS–2: Only Qualified Biofuels are Future Eligible
(Must Have 50% – 60% reduction in GreenHouse Gas Emissions)
U.S. Renewable Fuel Standard 2: 2009 – 2022
Data Source: U.S. Environmental Protection Agency (EPA), RFS–2
While many second generation efforts have failed to meet RFS–2 criteria, XFuels technology and XPetroleum™ fuels comfortably exceed the RFS–2 guidelines for all categories.
Over the last few years, countries around the globe have announced substantial steps in the transition to a green economy, including green investments in their economic stimulus packages and systematic budgetary spending, together with the development of national policies to facilitate the transition.3
According to analysis by HSBC,4
approximately 15% of the global fiscal stimulus funds committed for 2009–2010 alone (which exceeded $3.1 trillion), were regarded as "green" in nature.
"The world market MANDATES already in place for biofuels are projected to ensure sales surpass $300 billion a year by 2022."
Source: Pike Research / Government Reports
PLUS... The global market for green power and the world's growing need for petroleum solutions of any kind comfortably puts the TOTAL near-term sales opportunity at well over one trillion dollars per year.5
Information follows below on:
- The BRIC 6 countries – Brazil / Russia / India / China
- The countries of Mexico and South Korea – (considered comparable to the BRICs by analysts)
- The European Union (EU)
As of 2010, Brazil 7 was the world's second largest producer of ethanol fuel and the world's largest exporter. In 2009, Brazil produced 6.57 billion gallons (24.9 billion liters), representing roughly 37% of the world's total ethanol used as fuel. Brazil, along with the United States, led the industrial production of ethanol fuel in 2009, accounting together for almost 90% of the world's production. Considered by many to have the world's first sustainable biofuels economy – by many accounts Brazil has been the biofuel industry leader and a policy model for countries around the world.
- In 1976 the Brazilian government made it mandatory to blend anhydrous ethanol with gasoline; with the blend fluctuating from 10% to 22%, and requiring an adjustment on regular gasoline engines.
- In 1993 the mandatory blend was fixed by law for the entire country at 22% anhydrous ethanol (E22) by volume, but with flexibility (by the region's Executive) to set different percentages of ethanol within pre-established boundaries.
- In 2003 limits were officially set at a minimum of 20% and a maximum of 25%.
- In 2007 the mandatory blend country-wide officially became 25% of anhydrous ethanol and 75% gasoline (E25).
Biodiesel formally entered the scene in Brazil, with the introduction of Federal Law #11,097/2005, which defined and established a legal mandate for use of biodiesel as a fuel.
- The law authorized the use of a 2% blend of biodiesel (B2) until 2008 when B2 became compulsory nationwide.
- While the initial draft of Brazilian regulation had also forecast the increase of the mandatory blend to 5% (B5) by 2013, the swift increase of the Brazilian industrial capacity and the likely oversupply of biodiesel in the domestic market led the National Council of Energy Policy (Conselho Nacional de Politica Energética– CNPE) to adopt requirements for higher blends.
- Resolution #2 of March, 2008 set a 3% blend (B3) as of July 2008.
- Resolution #2 of April, 2009, increased the blend to 4% (B4) as of July 2009.
- Resolution #6 of September, 2009, finally set the blend at 5% (B5) as of January 2010.
As one of the world's leading producers and exporters of oil and gas, the country of Russia 8 has generally had a limited interest in biofuels... but the country's position is evolving. As of 2010, the Russian government has officially stated its national objective is to make Russia 40 percent more energy-efficient by 2020. The government plan defines the need to support small energy-generating projects, like biofuels, by establishing a realistic tax policy and subsidized interest rates. While there have been limited attempts at the federal level to promote the production of biofuels, there are certainly a growing number of activities at the regional level. The growing demand for biofuels in Europe and other nations is driving the emerging Russian biofuels industry, in line with the country's existing export orientation.
One of the principal facts in support of Russia's potential future role as a leader in the biofuels sector, is the fact that Russia has the world's largest repository of black earth, a soil rich in organic matter that produces strong agricultural yields. According to estimates, as much as 60% (49 million hectares), of Russian black earth is idle. Russia's total arable land reserves, (suitable for cultivation), are even larger; and crop yields on existing farmland could be increased 2-3 times with technology modernization. In short, Russia has the opportunity to increase both harvested area as well as efficiency of its yields to become a global energy-crop market powerhouse.
Source: Russian Biofuels Association
Two major legislative acts in Russia stimulate the development of renewable energy sources:
- Federal Law "On Electrical Energy Industry" that identifies types of renewable energy resources and authorities of the government of the Russian Federation in the sphere.
- Government Resolution on the priorities through 2020 for increasing energy efficiency from renewable sources adopted by the Russian Government on January 8, 2009. The new resolution indicates a number of measures that are aimed at improving electrical power originating from renewable sources. The government resolution established a goal to increase the share of renewable sources of energy in Russia as follows:
- 2010: 1.5 percent (8.5 billion kW/hour)
- 2015: 2.5 percent (14.1 billion kW/hour)
- 2020: 4.5 percent (80 billion kW/hour)
Overall production of thermal (fossil-fuel) energy generated from renewable sources is expected to increase from the current volume of 63 million gallons, to 121 million gallons in 2020.
India 9 is the fifth largest primary energy consumer and fourth largest petroleum consumer in the world. The country's growing population and swift socio-economic development has stimulated an increase in energy consumption across all major sectors of the Indian economy.
Most of India's energy requirements are met through imports, due to the country's limited domestic energy resources. Analysts estimate India meets more than 76 percent of its petroleum demand through imports. Indian petroleum consumption increased from 84 million tons in Indian Fiscal Year (IFY) 1997/98 to over 136 million tons in IFY 2009/10.
- The National Policy on Biofuels was approved by the Government of India (GOI) on December 24, 2009.
- The biofuel policy encourages the use of renewable energy resources as alternate fuels to supplement transport fuels (gasoline and diesel for vehicles) and proposes a target of 20 percent biofuel blending by 2017.
China 10 is the largest consumer of energy in the world. The country's oil consumption has been growing rapidly – at an average of 6.5% annually – for the first ten years of this century (2000 – 2010). China currently faces increasing reliance on foreign oil imports, and has consequently given high priority to developing renewable energy sources including biomass, hydro, solar, and wind.
China has developed a system of biofuel industry standards. The country has also successfully implemented small and medium-sized pilot projects, most of which are state-owned. The NEA estimates the current supply of nonfood feedstock in China is sufficient to produce 10 million tons of biofuel annually.
China's Renewable Energy law is among the most aggresive in the world. The law – if well applied – has the power to positively impact the global renewable energy markets on an extraordinary scale.
All government ministries are guided by and directed to enforce the Renewable Energy Law which specifies industrial policy and a framework for a renewable energy. In 2009 alone, China saved $1 billion by substituting biofuels for foreign oil imports.
Source: Russian Biofuels Association
The Renewable Energy Law:
- Supports China's policy efforts to encourage bulk purchases of renewable energy by China's electric utilities and independent power producers in order to drive down costs and speed the broad introduction of renewable energy technologies.
- Encourages the development and implementation of new renewable energy policies that establish aggressive targets for national and provincial renewable energy deployment, including "mandatory market share" (a.k.a., renewable portfolio standards) programs, public benefits wires charges, wind concession programs, and renewable energy pricing regulations.
- States that 16 percent of all primary energy consumed in China is to come from renewable sources.
- States that China is to have 137,000 MW of renewable power generation capacity, including 30,000 MW each for biomass and wind, by 2020.
Mexico 11 is a net exporter of crude oil, but the country imports gasoline and fuel additives. It currently has an overall trade deficit in petroleum products due to the recent rise in global oil prices and a higher volume of imports, due to a spike in gasoline demand. (In 2007, Mexico imported about 42% of its gasoline and 14% of the diesel demanded by the transportation sector.)
The country of Mexico's biofuel public policies are based on three elements:
- The potential for renewable energy sources in Mexico to reduce fossil-fuel dependency, and address unpredictable changes in oil prices. (Diversifying energy sources represents a critical task for the Government of Mexico (GOM), because although the country is a large crude oil producer, it imports a large amount of oil-derived products.)
- Mexico is committed to reducing gas emissions related to fossil fuels by using "cleaner" environmentally friendly fuels.
- A very delicate element of the Mexican economy is rural development. Because many production methods for biofuels use agricultural commodities as feedstock, the relationship with agriculture is crucial, and the political pressure is high to use biofuels for the promotion of rural development – without giving rise to a "food vs. fuel" debate.
Following the creation of Mexico's Bio-fuel Development Commission, the GOM launched an InterAgency Bio-Fuel Strategy (Estrategia Intersecretarial de los Bioenergéticos), emphasizing three key elements of GOM biofuel policy: (1) reduction of fossil fuel dependency, (2) developing environmental-friendly fuels, and (3) rural development.
Mexico has begun to define public policy strategy in a way that demonstrates its commitment to establish a formal biofuels industry that will empower fuel additives derived from agricultural commodities.
- The general consensus between the GOM, researchers, agricultural associations and private organizations, is that Mexico should introduce at least 5% of biodiesel in the transportation sector by 2012, with some organizations pushing for 10%.
- Because Mexican Standard NOM-086-SEMARNAT-SENER-SCFI-2005 – Fossil Fuel Specifications, defines that gasoline commercialized in Mexico should have no more than 2.7% (in weight) of fuel oxygenate, the GOM has begun by aiming to produce 200 million liters of ethanol per year, which will be used in a 2% mix with the gasoline, starting with distribution in Guadalajara.
In late 2009, Korea 12 announced an ambitious plan to cut the country's greenhouse gas emissions by 4 percent by 2020, compared to 2005 levels. This translates to a 30% reduction of Korea's projected carbon dioxide levels in 2020. Experts agree the increased use of renewable fuels in the transportation sector will play a key role in meeting this objective.
The country's Biodiesel Supply Plan (BSP) modifications begin in 2011, and include updates to improve:
- Target blend ratios (former blend ratio was set at 2% – up half a percentage point from 2009)
- Industry Tax Breaks
- Biodiesel Feedstock Sources
- The implementation of Renewable Fuel Standards
Although Korea's Ministry for Food, Agriculture, Forestry and Fisheries (MIFAFF) is conducting research projects to develop locally–produced feedstock to diversify its in-country fuel options, the demand for imported feedstock is expected to remain strong for the calculable future.
The European Union (EU) 13 has set an ambitious binding target for renewable energy by 2020, and has included provisions which ensure renewables will be given priority access to the energy supply networks, ensuring the maximum possible proportion of green energy will be used.
The EU Commission began publicly considering the promotion of biofuel use for transportation in a 2001 communication on alternative fuels.
- In 2003, the first biofuels directive was adopted by the EU, requiring member states to set indicative targets for reaching minimum quantities of biofuels in transport fuels of 2% in 2005, and 5.75% by 2010.
- In 2007, as world leaders began to acknowledge the growing threat of rising oil prices and accompanying lack of energy security, along with climate change, EU leaders committed to boosting renewable energy use to 20% of overall power generation by 2020.
- In 2008, this pledge was transformed into a proposal for a Directive on renewable energies, and presented by the EU Commission in January.
The 2008 directive has the following provisions:
- An interim target for renewable transportation fuels of 5% by 2015. (Of this, a 20% proportion must come from non-food/non-feed fuels – including those from biomass and electricity or hydrogen produced from renewables.)
- A mandatory 10% target for renewable transportation fuels by 2020. (Of this, a 40% minimum proportion must come from non-food/non-feed fuels – including those from biomass and electricity or hydrogen produced from renewables.)
- The proportion of fuel coming from food or feed crops has been restricted.
- The "sustainability criteria" have been strengthened; ensuring transportation fuels from biomass must achieve a greenhouse gas savings of at least 45% compared with conventional fuels (rising to 60% in 2015).