Biofuel firms seek 30 percent tax credit
The advanced biofuel industry is pressing Congress to approve a 30 percent investment tax credit that it says is needed to help jumpstart production necessary to meet a national renewable fuel mandate.
Companies such as Blue- Fire Ethanol Fuels, Novozymes, Range Fuels and Verenium say that without the credit, they can’t raise enough equity to build the production facilities. It’s unclear yet how much support there is in Congress for the proposal.
Although a 2007 law mandates the use of advanced and cellulosic biofuel starting this year, no commercial bio-refineries will come online before 2011 at the earliest.
“The biggest problem right now is financing,” said Arnie Klann, chief executive of BlueFire Ethanol Fuels.
The principal cause, industry says, is a lack of funding after the economic crisis. Congress has approved loan guarantees through the Department of Energy (DOE), but delays in processing applications have stymied funding for many projects. Even if companies win loan guarantee approval, that only helps with debt. Lawmakers have also authorized production tax credits, but with financiers in the red, there’s only been a trickle from banks looking to take advantage of the credit.
That’s why firms such as Klann’s want the government to approve a 30 percent tax credit that could be claimed as cash, a strategy the administration used with great success for the renewable energy industry.
Around three dozen advanced biofuel firms and industry organizations last Wednesday urged the chairmen and ranking members of the House and Senate finance committees to include the tax credit in upcoming energy legislation.
“This incentive will enable biofuels developers to attract private capital on an accelerated basis to meet the ambitious volume requirements of the renewable fuel standard,” the firms wrote in a letter to the lawmakers.
For example, BlueFire has a plant in Lancaster, CA, that is fully licensed and permitted. “If we could get financing, we would be able to start construction in 30 days,” said Klann. He said that would mean 800- 900 jobs during construction and 135 for operations and maintenance over the long term. Although the company has been preliminarily approved for a DOE loan guarantee, “we still need to raise equity,” he said.
According to the National Renewable Energy Laboratory, a 50-million-gallon-a-year cellulosic biofuel refinery would cost around $250 million a year, compared to around $76 million for a corn ethanol plant. In order to lower costs for advanced biofuels, the government needs to help finance the transition, the industry says.
The companies recommended in the letter that the tax credits shouldn’t favor any particular advanced biofuel technology.
“Ideally, this incentive would operate as a necessary precursor to the production tax credit, and would present potential renewable fuels’ investors with a robust incentive to commit to these technologies,” the companies wrote.