Encouraging Sustainable Growth at 300 MMgy

NBB recommends a moderate, steady approach to RFS2 volumes
By Erin Voegele | November 21, 2011

Last year, a newly appointed National Biodiesel Board committee began to meet relative to its goal of analyzing all possible constraints to the production, transportation and consumption of biodiesel in the U.S. to develop recommendations to the U.S. EPA regarding future renewable fuel standard (RFS2) volumetric compliance levels. The group would then advise the NBB on what recommendations it should make to EPA.

The committee made its recommendation to the NBB this summer, outlining a sustained growth of the volume mandate over a five-year period that would start at 1.3 billion gallons in 2013 and increase by 300 million gallons per year. This would increase the volume requirement for biomass-based diesel to 2.5 billion gallons by 2017.

Gene Gebolys, CEO of World Energy and chairman of this NBB working group, stresses that the volume mandates recommended by his committee are conservative by design. “The group took a constrained approach to determining what these numbers should be,” Gebolys tells Biodiesel Magazine. “The objective was to determine volume levels that will allow for sustainable growth for the biodiesel industry without overreaching our ability to meet them. At our first meeting we talked about what we wanted to accomplish and what we wanted to avoid. We are very clear that we wanted to avoid creating periods of feast and famine in the industry. We didn’t want to overreach, and we didn’t want to be so cautious [as] to not allow for meaningful growth.”

Econometric modeling was used to help the committee determine what a sustainable path forward would be. According to Gebolys, the committee looked at issues spanning every component of production, from feedstock to processing, distribution and end use.

Alan Weber, partner at Marc-IV Consulting and lead economic advisor to the committee, explains that conservative data was used to populate the model. For example, the committee only evaluated feedstocks that the EPA has approved pathways for. “We also felt like we wanted to be very conservative as we looked into the future,” he says. The group took a hard look at world gross domestic product growth and made a special effort not to minimize potential impacts of global policy. In addition, Weber notes that when the group looked at technology advances, it only accounted for those that have already been proven.

“There were those amongst us that would have liked to get to the 2.5 billion gallons faster, but at the end of the day the consensus of the group was that getting there in a more measured, methodical, and conservative way was the way to go,” Gebolys says.  He also notes that the NBB’s recommendation for 2013 is almost identical to the 1.28 billion gallons the EPA has approved, showing the two groups have come to similar conclusions independently.

In addition to encouraging the EPA to step up biomass-based diesel mandates in a sustainable fashion, the committee has also asked that the agency provide industry with nonbinding indications of where they anticipate volume mandates could be set over a five-year period. That outlook is meant to help the obligated parties, biodiesel producers, and distribution providers to become more efficient through additional market transparency.

It is likely that the committee will continue its work on an annual basis. While its current numbers are conservative, Gebolys stresses that this doesn’t mean the NBB can’t modify its recommendations in the future. In fact, it may do so if future analysis indicates a faster rate of sustainable growth is possible.

—Erin Voegele

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