December 14, 2006

Decentralizing the BioFuels Industry

Grist, the clever and controversial environmental news and commentary website, has put together a special series of stories on biofuels called Fill 'er Up.

The series is broken down into three sets of about ten articles each under the general headings of: "Uh, bio-what? Explainers and resources", "Count me in: Profiles of proponents", and "Not so fast: Issues and implications".

One title that leapt out at me concerns the subject of decentralization of energy sources. It may be idealistic to think that energy generation will one day be in the hands of the consumers. More likely, regional self-reliance is possible with each culture and geopolitical entity on the planet capable of producing its own needs based on its own unique combination of resources and climate. To be sure, there will always be a need for grid management to help insure that supply and demand are balanced.

However, the benefits of decentralization are hard to deny. By regions becoming more energy self-reliant the production and consumption of energy will be more dispersed and less subject to geopolitical control and coercion. The supply will be greatly enlarged, over-consumption will be regionalized, accidents will have more localized effect, indigenous economies will be strengthened, and the commerce of fuels and carbon credits will be enhanced.

Below is an abridged version of the article. I recommend reading the entire article from the source and reading the descriptions of the articles located at Grist. There is also a lively blog area for reader commentary called Gristmill.

By the People, For the People
Toward a community-owned, decentralized biofuel future
By David Morris for Grist

Biofuels won't single-handedly solve the climate crisis, nor will they deliver energy independence. But a base of widely dispersed, farmer- and citizen-owned biofuel plants can displace significant amounts of fossil fuels -- while also building local economies.

What follows is a strategy for tweaking existing federal energy and farm policy to create such an energy landscape...

To date, public policy, at least at the federal level, has ignored the ownership structure of renewable-energy production facilities. That may be because until very recently America's biofuels industry was largely locally owned. In 2003, some 50 percent of all existing ethanol refineries and perhaps 80 percent of all proposed plants were majority-owned by farmers. But in the last two years, that ownership equation has been reversed. Today, 80 percent or more of new ethanol production is coming from absentee-owned plants.

Congress should give locally owned bio-refineries a boost. If the national biofuels mandate were increased, as many expect it will be, there would be less justification for financial incentives that simply encourage consumption. Congress could then turn its attention to fashioning incentives to encourage the most beneficial kind of production.

How might that occur?

One step is to transform the federal biofuels incentive from a pump credit -- that is, an incentive that goes to the blender of ethanol and gasoline -- to a direct payment to the ethanol producer, with higher rewards accruing to locally owned plants. Minnesota did something similar to this with its state ethanol incentive in the mid-1980s, to good effect.

With an energy policy in place to encourage local ownership of bio-refineries, Congress should make locally owned rural energy production an integral component of farm policy when the Farm Bill comes up for reauthorization in 2007.

When Congress reconvenes in January, it will have the opportunity to fashion a far-reaching Farm Bill that marries agricultural and energy goals, and aligns rural prosperity with energy security. But it will only take advantage of that historic opportunity if it accepts a basic proposition: ownership matters. The ownership structure of agriculture, not the demand for agricultural products, will decide the future of rural America, and perhaps the future of world agriculture. And bioenergy can be the lever that stabilizes our farms, even as it helps wean us from fossil fuels.

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