Tuesday, November 17, 2009

AZ Biofuels Grant Program: A Missed Opportunity

If you had nearly $1 million to spend on advancing biofuels in Arizona, what would you do?

Here's my list:
  • Fund a program to incentivize restaurants to convert their waste vegetable oil into biodiesel. There are over 10 million gallons of WVO produced annually in the Phoenix area alone. The vast majority of this WVO goes into animal feed or is "missing" (presumably frequently going into the sewer system). Converting this WVO to biodiesel would have dramatic air quality and other benefits -- and would likely reduce the substantial costs to taxpayers associated with the hundreds of annual grease-caused sewer blockages in AZ. Prices in the WVO collection market don't reflect these air quality benefits or avoided municipal costs, however. Fixing this market flaw with a state-funded incentive program would yield us cleaner air and save real money for local governments.
  • Support the algae biofuels industry. Algae-derived biofuels ("green solar," to borrow Mark Edwards' nomenclature) are an incredibly promising, potentially transformational technology. Arizona should be a leader in this space: we have the necessary natural resources (sun, heat, wastewater, cheap flat land), leading-edge world-class university research (ASU Poly, ASU Biodesign), unrivaled pilot implementations by APS, and an array of entrepreneurs doing amazing work. Yet other regions such as San Diego, New Mexico, and even St. Louis are seen as algae leaders; Arizona isn't even on the map. The state could fund demonstration projects that enable researchers and entrepreneurs to connect, and that showcase Arizona's strengths in this area.
  • Explore innovative agricultural feedstock options that work in our climate. For example, researchers in AZ have suggested that former open pit mines in the state could be seeded with low-water-need crops that could be used as biofuels inputs. The state could support pilot projects that focus on agricultural approaches to biofuels that fit our unique circumstances, with a goal of not displacing food crops.
  • Support biodiesel co-ops. The biodiesel "homebrew" community -- individuals who collect WVO and convert it to biodiesel at home -- has been far in front of the commercial community in terms of getting clean-burning biofuels in tanks and on the road in Arizona. The independence, innovation and initiative of the homebrewers is admirable, yet there are some safety and other challenges associated with homebrewing. Co-ops can serve to balance interests, enabling the do-it-yourself ethos within a more manageable environment. Biofuels co-ops in Arizona have struggled for funding and regulator support, however. The state could fund a pilot project that demonstrates the value of co-ops for reducing homebrew-related risks and enabling grassroots-based innovation.
All of the ideas above focus on what DBI calls "sustainable regional biofuels" -- that is, creating biofuel locally, in a sustainable manner, and using it locally. The benefits of this approach are (1) environmental (cleaner air), (2) economic (keep more of the $4 BILLION that Arizonans spend on fuel in the state), and (3) security-related (e.g., make ourselves less vulnerable to a pipeline disruption).

The state of Arizona is currently spending $900,000 on the "Arizona Biofuels Conversion Program." The program focuses on subsidizing fueling-station owners or other businesses (e.g. fleet owners) who convert their fuel infrastructure to handle biofuels -- either E85 (ethanol) or biodiesel. The program provides up to 40% matching funds for a conversion project, up to a maximum of $30K. Another aspect of the program provides similar support for municipalities.

My reaction: eh. Given the big opportunities with biofuels, this program seems to be targeted at a narrow problem. Further, the benefits to Arizona appear modest: if this program leads to more stations carrying ethanol, for example, and more people start using it, that could help our local air quality problems. But, given that corn ethanol and soy biodiesel -- the primary types of biofuels that would be sold via the subsidized infrastructure for the foreseeable future -- are produced out of state, using processes that (arguably) cause some environmental and economic problems (e.g., excessive fertilizer run-off, displacement of food crops), it's not obvious that the net benefits of the program are that high.

I would have liked to see the program focus on fostering local production of sustainable biofuels. I believe that if we had a robust local supply, demand would follow. And if we had supply and demand, I think the infrastructure issues that are the focus of the program would potentially be unnecessary.

What would you do with $1 million?

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