After seven years, the Department of Energy (DOE) has failed to meet its goals for commercial scale biofuels refineries, according to a new report from the DOE's Inspector General.
To anyone following the ongoing technical and financial troubles in the biofuels industry, the Inspector General's assessment of the results isn't a big surprise. But the audit provides an official progress (or, lack of progress) report of the government's $603 million biofuels push.
"The EPAct [Energy Policy Act] mandate to demonstrate the commercial application of integrated biorefineries had not been met and the Department was not on target to meet its biofuels production capacity goal," wrote Inspector General Gregory H. Friedman in the report.
According to the audit, 40 percent of projects (six out of fifteen) selected under Funding Opportunity Announcements were scrapped by DOE because recipients failed to meet targets -- but not before $75 million was spent. The nine other projects being funded by DOE "have experienced technical and/or financial problems" that have caused two-year delays in the build out of production facilities.
These delays have forced numerous changes to national targets. Last year, DOE revised its 2014 target for producing 100 million gallons of advanced biofuels down to 80 million gallons after half of the projects that were supposed to contribute were scrapped. And last month, the Environmental Protection Agency (EPA) revised its target for 11 million gallons of cellulosic fuels down to 6 million gallons -- a goal that will still be very difficult to hit.
The Energy Information Administration reported in February that commercial cellulosic biofuels production capacity was only at 20,000 gallons. It predicted that the industry could feasibly scale up to 5 million gallons by the end of the year, but that would still be far short of EPA's revised targets.
The problems plaguing the advanced biofuels industry have been wide-ranging, some beyond DOE's control. For example, after the financial crisis in 2008, companies found it very difficult to secure funds for scaling their plants. This caused long delays or forced a number of companies to drop plans altogether. Numerous venture-backed biofuels companies have attempted to raise funds on the public market, only to halt their IPO plans due to poor market conditions.
However, the inspector general criticized DOE for not doing a better job of validating the technologies it was investing in.
"The Program awarded funding for commercial-scale projects even though the proposed technology had not been fully validated at pilot-scale or demonstration-scale facilities," wrote Friedman. "In our opinion, if the Department had validated the technology at the pilot and/or demonstration scales, it would have had greater assurance that the projects were ready to move to commercial scale."
The push to fund projects came after the bipartisan Energy Independence and Security Act of 2007, which revised the 2005 renewable fuels standard and established targets for cellulosic ethanol, biodiesel and drop-in fuels that cut greenhouse gas emissions by at least 50 percent. The target put pressure on DOE, EPA and the Department of Agriculture to find ways to support the nascent industry in order to meet yearly targets for second-generation biofuels. This led to incomplete technical reviews at DOE, according to the inspector general's report.
"Program officials acknowledged the projects selected were not fully ready for commercial-scale operations and that the projects were high-risk. However, they indicated that the EPAct required them to move forward with commercial-scale projects and the experience gained from the projects would enable them to accelerate development and commercialization efforts by increasing their knowledge of feedstock systems, process operations, and providing a better understanding of scale-up issues for future facilities," wrote Friedman.
The review points out that funds were not misspent within the strict confines of the program. It simply concludes that many of the investments were not ready for prime time due to poor market conditions and insufficient reviews.
"The Program's challenges in meeting its performance goals occurred primarily because selected projects were not at the level of technical readiness needed for commercial development," wrote Friedman.