Wednesday, March 22, 2006

Earmarking Alternative Energy

Here's another interesting energy-related article from Salon, this one describing a potential biofuels industry in Maine, based on the conversion of trees and sawmill scrap into ethanol and biodiesel. It sounds wonderfully bucolic, and it is loaded with ingredients that voters love: energy independence, jobs, and environmental stewardship. What legislator could resist setting aside a bit of money for this? But is it worth the candle?

Before digging into the numbers, I should mention that the biofuels technologies involved hold great promise. When produced from materials other than food crops, ethanol and biodiesel can provide significant net energy benefits, though their costs aren't yet competitive with petroleum products on an apples-to-apples, i.e. pre-motor fuels tax basis. Despite my overall preference for setting targets instead of choosing technologies, this is a generally worthy area for federal R&D.

Turning to the specifics, the article suggests that within 15 years Maine could produce half its motor and heating fuel needs from this source, though it also points out that this approach would be not necessarily be suited to less heavily forested states. Maine accounts for 0.9 % of the US landmass, but only 0.4 % of our population. Accordingly, the implied biofuels volume translates into 46,000 barrels per day, or about 0.2 % of total US oil demand. Although small in absolute terms, this is substantial relative to the current biofuels industry, with total US ethanol production amounting to 220,000 barrels per day in 2004. Still, no matter how you slice it, the potential impact of the Maine biofuels initiative on our national energy supply and demand balance is quite modest.

Now, I've frequently taken issue with those who've argued against an oil or gas project on the basis that its contribution would be insignificant relative to total US demand, so I'm not about to commit that sin myself. Our energy supply is made up of tens of thousands of parts, few of which are material compared to the whole. But that doesn't mean that a small project's total cost shouldn't be commensurately modest, particularly given the real risk in this case that some of the key technologies involved may not actually work out.

It turns out that this effort is getting about a million dollars of Department of Energy money directed via the Congressional "earmark" process. A megabuck isn't very much in the context of either the total federal budget or the world of energy investments. However, the earmark tag makes me wonder if the Maine projects in question were really the biofuels technology demonstration projects the DOE would have chosen without intervention by a couple of pivotal moderate Republican Senators. As a result, as I said recently about a much larger, highly controversial energy project in my own back yard, I don't have enough information to know if this effort is a winner or a dog, but I have just enough to raise some questions.

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