Sunday, May 13, 2007

Agriculture-Based Renewable Energy Production

Agriculture-Based Renewable Energy Production

Randy Schnepf
Specialist in Agricultural Policy Resources, Science, and Industry Division, Congressional Research Service

RL32712
Updated March 7 2007

Summary
Since the late 1970s, U.S. policy makers at both the federal and state levels have enacted a variety of incentives, regulations, and programs to encourage the production and use of agriculture-based renewable energy. Motivations cited for these legislative initiatives include energy security concerns, reduction in greenhouse gas emissions, and raising domestic demand for U.S.-produced farm products. Agricultural households and rural communities have responded to these government incentives and have expanded their production of renewable energy, primarily in the form of biofuels and wind power, every year since 1996.

The production of ethanol (the primary biofuel produced by the agricultural sector) has risen from about 175 million gallons in 1980 to nearly 4.9 billion gallons per year in 2006. The U.S. ethanol production capacity has also been expanding rapidly, particularly since mid-2006, with important implications for the food and fuel sectors. Current ethanol production capacity is 5.6 billion gallons per year (February 28, 2007), with another 6.2 billion gallons of capacity under construction and potentially online by late 2008.

Biodiesel production is at a much smaller level, but has also shown growth rising from 0.5 million gallons in 1999 to an estimated 200 million gallons in 2006.

Wind energy systems production capacity has also grown rapidly, rising from 1,706 megawatts in 1997 to an estimated 11,603 megawatts by December 31, 2006.

Despite this rapid growth, agriculture- and ruralbased energy production accounted for only about 0.7% of total U.S. energy consumption in 2006.

Key points that emerge from this report are:

*substantial federal and state programs and incentives have facilitated development of agriculture’s renewable energy production capacity;

*rising fossil fuel prices improve renewable energy’s market competitiveness, whereas higher costs for feedstock and plant operating fuel (e.g., natural gas) dampen profitability;

*technological improvements for biofuel production (e.g., cellulosic conversion) enhance its economic competitiveness with fossil fuels;

*farm-based energy production is unlikely to substantially reduce the nation’s dependence on petroleum imports unless there is a significant decline in energy consumption; and

*ethanol-driven higher corn prices have raised concerns from corn users over rising food and feed costs, as well as the potential for increased soil erosion and chemical usage from substantially expanded corn production.

This report provides background information on farm-based energy production and how this fits into the national energy-use picture. It briefly reviews the primary agriculture-based renewable energy types and issues of concern associated with their production, particularly their economic and energy efficiencies and long-run supply.

Finally, this report examines the major legislation related to farm-based energy production and use. This report will be updated as events warrant.

Contents
Introduction . . . . . 1
Agriculture’s Share of Energy Production . . . . . 3
Agriculture-Based Biofuels . . . . . 5
Ethanol . . . . . . 5
Ethanol Pricing Issues . . . . . 7
Corn-Based Ethanol . . . . . . 9
Ethanol from Cellulosic Biomass Crops . . . . . 19
Methane from an Anaerobic Digester . . . . . 24
Biodiesel . . . . . 26
Wind Energy Systems . . . . . 32
Public Laws That Support Agriculture-Based Energy Production and Use . . . . . 40
Tariff on Imported Ethanol . . . . . 40
Clean Air Act Amendments of 1990 (CAAA; P.L. 101-549) . . . . . 40
Energy Policy Act of 1992 (EPACT; P.L. 102-486) . . . . . 40
Biomass Research and Development Act of 2000 (Biomass Act; Title III, P.L.
106-224) . . . . . 41
Energy Provisions in the 2002 Farm Bill (P.L. 107-171) . . . . . 42
The Healthy Forest Restoration Act of 2003 (P.L. 108-148) . . . . . 45
The American Jobs Creation Act of 2004 (P.L. 108-357) . . . . . 45
Energy Policy Act of 2005 (EPACT; P.L. 109-58) . . . . . 46
Tax Relief and Health Care Act of 2006 (P.L. 109-432) . . . . . 49
Agriculture-Related Energy Bills in 110th Congress . . . . 49
State Laws and Programs . . . . . 49
Administration Proposals . . . . . 50
State of the Union (SOU) 2006 . . . . . 50
State of the Union (SOU) 2007 . . . . . 50
USDA’s New Farm Bill Proposal (January 2007) . . . . . 51
For More Information . . . . . 51
Renewable Energy . . . . 51
Biofuels . . . . . 51
Wind Energy Systems . . . . . 54

List of Figures
Figure 1. U.S. Motor Vehicle Fuel Use, 2006 . . . . . 6
Figure 2. Ethanol versus Gasoline Prices, 1991-2006 . . . . . 8
Figure 3. U.S. Ethanol Production: Actual & Projected, versus the
Renewable Fuels Standard (RFS) . . . . . 9
Figure 4. Corn versus Ethanol Prices, 1991-2006 . . . . . 12
Figure 5. U.S. Biodiesel Production, 1998-2006 . . . . . 27
Figure 6. Soybean Oil vs. Diesel Fuel Price, 1994-2006 . . . . . 29
Figure 7. U.S. Installed Wind Energy Capacity, 1981-2007P . . . . . 33
Figure 8. Natural Gas Price, Wholesale, 1994-2006 . . . . . 36
Figure 9. U.S. Areas with Highest Wind Potential . . . . . 39

List of Tables
Table 1. U.S. Energy Production and Consumption, 2006 . . . . . 3
Table 2. Energy and Price Comparisons for Alternate Fuels,
September-October 2006 . . . . . . 4
Table 3. Ethanol Production Capacity by State, February 25, 2007 . . . . . 7
Table 4. Ethanol Dry Mill Cost of Production Estimates, 2002 . . . . . . 11
Table 5. U.S. Diesel Fuel Use, 2005 . . . . . 28
Table 6. U.S. Potential Biodiesel Feedstock, 2005-2006 . . . . . 31
Table 7. Installed Wind Energy Capacity by State, Ranked by Capacity
as of December 31, 2006 . . . . . 34

Source [http://www.nationalaglawcenter.org/assets/crs/RL32712.pdf]

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