Report: biofuel distribution remains a bottleneck in the U.S.

The US Government Accountability Office (GAO) has released [*.pdf] an small report on its experience with utilizing biofuels in its fleet. The document shows some of the bottlenecks that must still be removed before the green fuels can penetrate the market on a large scale. It also provides some policy recommendations.

The GAO was asked to describe the status of and impediments to expanding biofuel production, distribution infrastructure, and compatible vehicles as well as federal policy options to overcome the impediments. The organisation was also asked to assess the extent to which the US Department of Energy (DOE) has developed a strategic approach to coordinate the expansion of biofuel production, infrastructure, and vehicles and has evaluated the effectiveness of biofuel tax credits. GAO interviewed representatives and reviewed studies and data from DOE, states, industry, and other sources. It also did some tests with its own fleet.

Especially the logistics and distribution of finished biofuel products remains a problem:

Existing biofuel distribution infrastructure has limited capacity to transport the fuels and deliver them to consumers. Biofuels are transported largely by rail, and the ability of that industry to meet growing demand is uncertain. In addition, in early 2007, about 1 percent of fueling stations in the United States offered E85—a blend of about 85 percent ethanol and 15 percent gasoline—or high blends of biodiesel, such as B20 or higher.

Increasing the availability of E85 at fueling stations is impeded largely by the limited availability of ethanol for use in high blends. Several policy options, such as mandating their installation, could increase the number of biofuel dispensers in stations. However, until more biofuel is available at a lower cost, it is unlikely that more fueling stations would lead to significantly greater biofuels use.

When it comes to the end user and his car, the hurdles are high but can be taken because of a commitment by major car manufacturers to offer biofuel capable vehicles:

In 2006, an estimated 4.5 million flexible fuel vehicles (FFV) capable of operating on ethanol blends up to E85 were in use — an estimated 1.8 percent of the nearly 244 million U.S. vehicles. The number of FFVs may increase substantially because of a recent commitment by DaimlerChrysler, Ford, and General Motors to increase FFV production to compose about 50 percent of their annual production by 2012.

Several policy options, such as a tax credit for FFV production, could increase the number of FFVs, the GAO says, but this would likely have little impact on biofuel use until E85 is less expensive and more widely available:
bioenergy :: biofuels :: energy :: sustainability :: ethanol :: biodiesel :: logistics :: distribution :: United States ::

The GAO thinks the US Department of Energy has not yet developed a comprehensive approach to coordinate its strategy for expanding biofuels production with the development of biofuel infrastructure and production of vehicles:

Such an approach could assist in determining which blend of ethanol — E10, E85, or something in between — would most effectively and efficiently increase the use of the fuel and what infrastructure development or vehicle production is needed to support that blend level.

In addition, DOE has not evaluated the performance of biofuel-related tax credits, the largest of which cost the Treasury US$2.7billion in 2006. As a result, it is not known if these expenditures produced the desired outcomes or if similar benefits might have been achieved at a lower cost.

The GAO recommended that:

1. the Secretary of Energy collaborate with public and private sector stakeholders to develop a strategic approach that coordinates expected biofuel production with distribution infrastructure and vehicle production, and
2. the Secretary of Energy collaborate with the Secretary of the Treasury to evaluate and report on the extent to which biofuel-related tax expenditures are achieving their goals.

The US DOE reviewed a draft of this report and generally agreed with the findings and recommendations.

More information:
U.S. Government Accountability Office: Biofuels: DOE Lacks a Strategic Approach to Coordinate Increasing Production with Infrastructure Development and Vehicle Needs - June 2007.