Biofuel projects "are essentially science projects at the expense of the taxpayers," says Nick VandenBrekel, CEO of Agrisys, which initially tried to turn algae into fuel but became convinced the process cannot make a profit and cannot compete with petroleum. [Photo: Jeffrey Camp]
Bonita Springs-based Algenol says it has developed a process to turn carbon dioxide into ethanol using algae. Fueled by a $25-million grant from the federal government and another $10-million incentive from Lee County to build a plant near the Southwest Florida International Airport, the company's executives had predicted Algenol would be producing fuel at a pilot-scale biorefinery by last August.
The company didn't break ground on the plant until October, however, and now predicts the facility will begin operating sometime this year. Elsewhere in Florida, several other biofuel facilities that were supposed to be operating in 2011 — from global companies such as BP to determined Florida players such as Bradley Krohn and his Highlands EnviroFuels — remain delayed.
The past five years have seen generous policies, incentives and grants to jumpstart the business of turning biological materials — corn, sugar cane, yard and forest waste, algae — into ethanol or other fuels. Yet despite millions in state grants and many millions more provided by the federal government as part of the stimulus package, here's what Florida has to show:
Among several dozen biofuel plants that have been proposed across Florida, about a dozen have received a final permit to operate, according to the Department of Environmental Protection. Only one — a University of Florida demonstration plant — is running. None is producing biofuel yet.
Florida's biofuel push began under Gov. Charlie Crist in 2006. He and many others saw in ethanol the promise of lower greenhouse gas emissions, reduced dependence on foreign oil and a boost for Florida's agriculture industry, which might grow any number of fuel crops, from cane and sweet sorghum to jatropha and switchgrass.
But the fledgling industry was hammered when private investment dried up in the economic downturn. Algenol, for example, struggled to raise the money it needed to keep planning, hiring and building despite its government backing and partnership with Dow Chemical — at least in the U.S. Executives say they ultimately secured $100 million from foreign investors.
|"The industry can survive without a tax credit," says Bradley Krohn of Highlands EnviroFuels. "But all biofuels — corn and sugar and cellulosic and everything else — are dependent on that renewable fuel standard."|
The state also terminated a $2.5-million grant to Vecenergy because of a lack of progress on its Port Manatee project and let expire without funding a $2.5-million grant to Clewiston-based Citrus Energy, which also had financing troubles.
The industry's slow progress, its reliance on subsidies and other issues are fueling a backlash nationally and here in Florida.
Even some biofuel entrepreneurs doubt the industry's viability.
Nick VandenBrekel founded Orlando-based Agrisys with a business plan focused on turning algae into fuel. But he's since dropped the idea of producing fuel and now plans to use algae to make food products. VandenBrekel says he's convinced that algal biofuel can't make a profit and can't compete with petroleum in today's market. Most biofuel projects, says VandenBrekel, "are essentially science projects at the expense of the taxpayers."
Critics are increasingly vocal about federal support for the industry, which includes a 54-cent-a-gallon tariff on ethanol imports and a subsidy of 45 cents a gallon for blending ethanol into gasoline. Sweeping federal legislation passed in 2007 requires the nation to gradually increase its use of renewable fuels, from 15 billion gallons this year to 21 billion by 2015 and 36 billion by 2022.
In Washington, several members of Congress have filed or signed onto bills that would ease or eliminate those requirements. In Florida, Republicans Sen. Greg Evers of Crestview and Rep. Matt Gaetz of Fort Walton Beach tried this legislative session to repeal the Florida Renewable Fuel Standard Act. If they are successful, Florida gas distributors would no longer be required to sell fuel containing 9% to 10% ethanol.
Gaetz describes Florida's standard as a "feel-good" remnant of the Crist era. Brazil's success at blending ethanol with gasoline refutes Gaetz's claim that ethanol damages car engines, but environmental issues remain a matter of debate. A recent National Academies report indicates that the federal standards may be ineffective in reducing greenhouse gas emissions and could have mixed economic and environmental impacts: Biofuels can have both negative and positive effects on water, air and land; impacts are highly dependent on local factors such as the type of feedstock and water availability.
Florida's ethanol champions plead for more time. Doing away with either the state or national standards would strike a huge blow to the Florida industry just as public investments are beginning to pay off, they say. "The industry can survive without a tax credit," says Krohn. "But all biofuels — corn and sugar and cellulosic and everything else — are dependent on that renewable fuel standard."
"Only a fraction of those that take the risk will be successful, and many companies will fall flat on their face. But they frankly are doing a great service too," says Algenol COO Craig Smith.[Photo: Algenol]
The industry "has tremendous potential in Florida, and the agriculture community is sitting here waiting for us to tell them what to grow and how to grow it and how we will transition the economy," says Joe Joyce, associate vice president at UF's Institute of Food and Agricultural Sciences, which built the plant with $20 million from the Legislature.
In Indian River County, California's New Planet Energy and global chemical giant INEOS broke ground last year on its vegetable-waste to ethanol plant, which is on track to achieve the first commercial-scale production in the state. The company got $50 million in Recovery Act funds, $2.5 million from Florida and a $75-million loan guarantee from the federal Department of Agriculture to build the plant. Now that it has begun construction and hired local workers, supporters say, the state and federal governments shouldn't turn their backs on the plant or the industry.
America's shift from petroleum to more sustainable fuel will take patience, Joyce and other advocates say, pointing to the time, subsidies and tax breaks that were given to develop the then-risky oil and gas business beginning in the 1920s.
At the Florida Biofuels Association, Executive Director Jeremy Susac says even if ethanol turns out to have ecological impacts similar to fossil fuels — which he disputes — we should still support them so we don't have to rely on foreign nations for fuel. "By 2030, 90% of your oil will come from either an oil field that does not exist now or from a foreign nation," Susac says.
"This is cleaner; it's readily available; and it's starting to break ground," he says. "Let's give it a chance."
At Algenol, COO Craig Smith compares the risk-reward profile of alternative energy with that of his previous industry, biopharmaceuticals. "If you're doing something that's never been done before and requires development of significant new technologies, that is going to take five or 10 years. Only a fraction of those that take the risk will be successful, and many companies will fall flat on their face."
Florida Agriculture Commissioner Adam Putnam, who took over the state's Office of Energy from DEP earlier this year, wants to deflate the hype while supporting an industry he calls "the potential sweet spot for rural economic development in Florida." He says he wants to move the state away from "picking winners and losers" and toward a policy that will best help private investors succeed in Florida.
Putnam hasn't decided whether to support Gaetz's bill. Analysts in his office say the federal standards — not Florida's — are the ones that will make or break the industry. Meanwhile, he's ordered an internal audit of all biofuels grants doled out by the state to help rebuild confidence and "figure out exactly what I've inherited."
"Legislators and myself are ready to go to a ribbon-cutting," Putnam says. "We've been to enough groundbreakings."