national association of state energy officials’ 2005 summer fuels outlook conference the national...
TRANSCRIPT
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National Association of State Energy Officials 2005 Summer Fuels Outlook ConferenceThe National Press ClubWashington, DCApril 7, 2005Douglas A. DuranteExecutive DirectorClean Fuels Development Coalitionwww.cleanfuelsdc.org
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Clean Fuels Development Coalition Constituency
AutomobileManufacturers
AlternativeFuel Providers
Clean Fuel Technology Developers
Federal and StateGovernments, Public andPrivate Organizations thatSupport Their Advancement
and the . . .
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U.S. Ethanol Industry -- EvolutionU.S. ethanol industry nearly legislated out of business as recently as 1997 by elimination of tax exemption.
Today, ethanol industry is in the midst of an unprecedented expansion.
Billions of dollars in capital investment.
Hundreds of thousands of jobs.
Unrivaled political support.
Can contribute to energy, agriculture, environment, and economic development.
How did this happen?
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Ethanol Identified with a Range of Public Policy Initiatives Over 25 yearsENERGYEnergy Security Act of 1978Alternative Motor Fuels Act of 1988Energy Policy Act of 1992Energy Policy Act of 2004/2005
ENVIRONMENTClean Air Act of 1990
AGRICULTUREFarm Bill of 2002Ag Appropriations Commodity Assistance Bills
TRANSPORTATIONHighway Bill of 1978
TAXES AND ECONOMIC DEVELOPMENTEnergy Tax Act of 1980Corporate Tax/Jobs Bill of 2004
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Ethanol production estimates based on year-to-date production from U.S. EIA.2005-2006 capacity estimates courtesy American Coalition for Ethanol.
Chart1
0.04
0.06
0.15
0.21
0.35
0.38
0.41
0.6
0.7
0.82
0.82
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
2.9
3.2
3.6
3.9
Billions of Gallons
U.S. Fuel Ethanol Production 1979-2006
Sheet1
'790.04
'800.06
'810.15
'820.21
'830.35
'840.38
'850.41
'860.6
'870.7
'880.82
'890.82
'900.83
'910.85
'920.93
'931.1
'941.19
'951.35
'961.03
'971.3
'981.42
'991.52
'001.62
011.77
022.7
032.9
043.2
05/E3.6
06/E3.9
Sheet1
Billions of Gallons
U.S. Fuel Ethanol Production 1979-2006
Sheet2
Sheet2
0.04
0.06
0.15
0.21
0.35
0.38
0.41
0.6
0.7
0.82
0.82
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
2.9
3.2
3.6
3.9
Billions of Gallons
U.S. Fuel Ethanol Production 1979-2006
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U.S. Ethanol PlantsCurrent and projected ethanol production in U.S.82 operating facilities 3.45 BGPY/2004600+ MGPY expansion/under construction, possibly 4+ BGPY/2006Source: Clean Fuels Development Coalition/American Coalition for Ethanol
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Ethanol Share of the Pie is Growing
Chart2
4
135
Billions of Gallons per Year
Sheet1
Billion of Gallons per Year
Ethanol4
Gasoline135
Sheet1
0
0
Billions of Gallons per Year
Ethanol Share of the Pie is Growing
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Factors Driving Ethanol DevelopmentContinued Need for Clean Fuels:
Federal RFG even without an oxygen requirement.
Carbon monoxide (CO) programs-Both federal and state requirements
CO2/Greenhouse gases-E-10, E-85 particularly effective
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Factors (Continued)Economic Considerations:
Extension of the tax exemption through 2010 USDA grants, incentives, loan guaranteesState incentivesIndustry efficiencies = greater yieldLow cost of money = high ROI
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Rural America Taking Charge!Plants Going up in Record Time with Larger Capacities and Investor/Owner FinancingSource: Clean Fuels Development Coalition
Chart6
17
18
30
14
Billion of gallons
Plant Capacity
Chart3
17
18
26
14
Billion of gallons
Plant Capacity
Number of Plants
Sheet3 (2)
Sheet3 (2)
17
18
26
14
Billion of gallons
Plant Capacity
Number of Plants
Sheet3
Sheet3
17
18
30
14
Billion of gallons
Plant Capacity
Sheet1
MonthsPercent
Jan20
Feb40
Mar70Up 10 10M17
Apr7010-20M18
May7020-50 M30
Jun6050M+14
Jul58
Aug62
Sep70
Oct75
Nov0
Dec20
Jan20
Mar40
Apr80
May
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More Growth Likely Through a Renewable Fuels StandardWould eliminate oxygen in federal RFG, helping to get more MTBE out of the system.
Would establish an annual requirement for refiners to have a modest percentage of their fuels renewably derived.
Establishes a flexible credits and trading program to meet the requirement.
Incentivizes biomass ethanol by giving it greater value in the trading program.
Incentivizes biodiesel, treating it equal to ethanol.
Newest version of this legislation (S.650) would create demand for 700 million gallons per year for the next 7 years!
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Lessons Learned From 20+ Years of IncentivesTax Incentives lifeblood of industry-Successful in making ethanol competitive-Critical element of project financing
BUT.
Economics alone insufficient market driver -- ethanol price swings too volatile
Most effective incentives tied to market assurance
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Most aggressive growth spurt for ethanol came from CAA as industry doubled in 1990s --10% annual growth -- doubled again in 4 yearsMost recent explosion in development due to assumption of either RFS or capture of MTBE market. Renewal of tax exemption never had the impact of a market driver like this.
Chart4
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
3.2
3.4
Gallons
Year
Billions of Gallons
1990-2003 (2)
1990-2003 (2)
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
3
3.4
Most recent explosion in development due to assumption of either RFS or capture of MTBE market. Renewal of tax exemption never had the impact of a market driver like this.
Figure 3. Most aggressive growth spurt for ethanol came from CAA as industry doubled in 1990s --10% annual growth
Gallons
Year
Billions of Gallons
Chart2
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
3
Gallons
Year
Billions of Gallons
Chart1
0.04
0.06
0.15
0.21
0.35
0.38
0.41
0.6
0.7
0.82
0.82
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
1.98
(E) = 2002 ethanol production estimated based on year-to-date production from U.S. EIA
Billions of Gallons
Sheet1 (2)
Sheet1 (2)
0.04
0.06
0.15
0.21
0.35
0.38
0.41
0.6
0.7
0.82
0.82
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
1.98
(E) = 2002 ethanol production estimated based on year-to-date production from U.S. EIA
Billions of Gallons
Sheet1
'790.04
'800.06
'810.15
'820.21
'830.35
'840.38
'850.41
'860.6
'870.7
'880.82
'890.82
'900.83
'910.85
'920.93
'931.1
'941.19
'951.35
'961.03
'971.3
'981.42
'991.52
'001.62
011.77
022.7
033.2
043.4
Sheet1
0.04
0.06
0.15
0.21
0.35
0.38
0.41
0.6
0.7
0.82
0.82
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
1.98
(E) = 2002 ethanol production estimated based on year-to-date production from U.S. EIA
Billions of Gallons
Sheet2
Sheet2
0.04
0.06
0.15
0.21
0.35
0.38
0.41
0.6
0.7
0.82
0.82
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
3.2
3.4
(E) Ethanol production estimated based on year-to-date production from U.S. EIA
Billions of Gallons
1990-2003
Most aggressive growth spurt for ethanol came from CAA as industry doubled in 19902 -- 10% annual growth -- doubled again in 4 years
1990-2003
0.83
0.85
0.93
1.1
1.19
1.35
1.03
1.3
1.42
1.52
1.62
1.77
2.7
3.2
3.4
Gallons
Year
Billions of Gallons
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Ethanol Demand from Renewable Fuels Standard in S.650Source: Clean Fuels Development Coalition
Chart2
4
4.7
5.4
6.1
6.8
7.4
8
Ethanol Demand
Year
Billions of Gallons/Year
EthanolDemand
EthanolDemand
4
4.7
5.4
6.1
6.8
7.4
8
Ethanol Demand
Year
Billions of Gallons/Year
Sheet2
YearEthanol Demand
20064
20074.7
20085.4
20096.1
20106.8
20117.4
20128.0
Source: Clean Fuels Development Coalition
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Political Support for Renewable Fuel StandardEthanol producersCorn growers/agriculture2/3 U.S. GovernorsAir quality officialsWater quality officialsMajority of U.S. SenateBush Administration (Clinton as well)Highway interests/road buildersAmerican Petroleum InstituteState petroleum councils
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Range in Ethanol Demand From Renewable Fuel Standard LegislationSource: Clean Fuels Development Coalition
Chart1
3.43.94
3.54.24.7
3.94.45.4
4.34.66.1
4.74.86.8
4.957.4
55.28
Under old RFS, production exceeds demand
Old RFS(HR.4)
New RFS (S.650) corrects demand/supply imbalance
Projected Demand Under Old RFS
Current/Projected Ethanol Production Under Old RFS
Projected Demand Under New RFS
Billions of Gallons
Sheet2 (2)
Sheet2 (2)
3.22.9
3.23.2
3.63.2
3.93.4
4.23.5
4.43.9
4.64.3
4.84.7
54.9
5.25
Current/Projected Ethanol Production
Projected Demand with Renewable Fuel Standard
Billions of Gallons
Ethanol Demand From Renewable Fuel Standard Versus Current/Projected Production
Sheet2
Sheet2
3.43.94
3.54.24.7
3.94.45.4
4.34.66.1
4.74.86.8
4.957.4
55.28
Under old RFS, production exceeds demand
Old RFS(HR.4)
New RFS (S.650) corrects demand/supply imbalance
Projected Demand Under Old RFS
Current/Projected Ethanol Production Under Old RFS
Projected Demand Under New RFS
Billions of Gallons
Sheet1
Current/Projected Reformulated Gasoline DemandProjected Reformulated Gasoline Demand with Opt-OutsProjected Demand Under Old RFSCurrent/Projected Ethanol Production Under Old RFSProjected Demand Under New RFS
20032.551.962.93.2
20042.551.963.23.2
20052.551.963.23.6
20062.602.003.43.94
20072.652.043.54.24.7
20082.702.083.94.45.4
20092.762.124.34.66.1
20102.812.164.74.86.8
20112.872.214.957.4
20122.922.2555.28
Current/Projected Reformulated Gasoline DemandProjected Reformulated Gasoline Demand with Opt-OutsProjected Demand with Renewable Fuel StandardCurrent/Projected Ethanol Production
20032.551.963.0638
20042.551.963.6508
20052.551.963.153.6508
20062.602.003.153.6508
20072.652.043.23.6508
20082.702.083.53.6508
20092.762.123.93.6508
20102.812.164.33.6508
20112.872.214.73.6508
20122.922.2553.6508
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Legislative OutlookEnergy remains a top priority for the 109th Congress.
Ethanol continues to be an area of consensus.
Renewable fuels standard likely to be included.
Biomass energy for power, fuels, and products must be part of the mix.
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Thank you! For more information log on to
www.cleanfuelsdc.org www.ethanolacrossamerica.net