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Finale for (bio)fuel financing free-for-alls?

February 5, 2008

Winds of change for (bio)fuel financing

The winds of change are blowing. Regulators are starting to admit to overblown statements on the benefits of certain biofuels, with many European governments revising their subsidization programs. Vague government programs, created with the best intentions, have had some unintended consequences. It’s high time to pause and reflect on how effective these programs are.

The New York Times had a great “State of the Regulatory Industry” a few weeks ago that delves into the changing regulatory landscape and ever-controversial farm subsidies. Expect more stringency and less blanket funding for biofuel projects.

The impact of a litre of ethanol can vary widely depending on how it is produced. Where environmental impact is the concern, the means (of energy production) are more important than the end. Life cycle analysis is going to be considered, which will likely result in corn-based ethanol not making the new standards due to its (debatable) environmental benefits when full production costs are considered. Though don’t expect the same to happen in the US anytime soon, where the farm lobby has a much tighter grip on the levers of political power.

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  • http://www.icis.com/blogs/biofuels Biofuelsimon

    The economics of biofuel production will also slow the rate at which new plants are built. Not only is credit getting tighter and more expensive, but also the cost of corn has risen dramatically over the past 12 months. According to the FAO the annual average price of corn (US No2, US Gulf Friday) has risen 85% from $88.38/ton in 2000 to $164.26 in 2007. In the same period, the annual average price of wheat has grown 137% from $98.75/ton to $234.76/tonne.

    The rate of annual price change is accelerating. In 2007, according to these figures the price of a ton of corn in the US rose by 34% and the price of a tonne of wheat rose by 48 % compared to rises of around 24% for corn in 2006 and 34% for wheat in 2006.

    I’ve no idea what’s happened to the price of dried distillers grains, the usual second cash stream from plants, but with the volume of ethanol increasing then I’m going to guess that the price of distillers grains has fallen. Putting the squeeze on anyone trying to build a plant from scratch. And that ignores the price of fuel (also up over the past year) and the cost of water, which could also rise. Biofuels policy should reflect what’s best for the environment, not what’s best for special interest groups like farmers, bankers,bloggers or VC! ;=).

  • Pingback: Alternative Fuels Now » The end of the free for all…

  • TheSUBWAY.com

    It’s good to hear BP & GM talk about alternative fuels, but 50 years to implement is too long.

    http://money.cnn.com/2008/03/05/news/companies/bigoil_hydrogen/index.htm

    Perhaps this link will spark more attention:
    http://www.chevrolet.com/electriccar/

    It is GM’s electric concept car, the Chevy Volt. If more people begin to demand alternative fuel cars, we should be able to speed the rate at which the technology is developed.

  • stockpromoter07

    We found an interesting article about the problems with Ethanol on ConsumerReports.org:

    http://blogs.consumerreports.org/cars/2008/03/ethanol-e85.html

    “But there are some problems with increasing ethanol blends. Ethanol contains less energy than gasoline, so increasing the amount of ethanol in gasoline will likely result in lower fuel economy. Increasing standard fuel blends from zero to 10 percent ethanol, as is happening today, has little or no impact on fuel economy. In tests, the differences occur within the margin of error, about 0.5 percent. Further increasing ethanol levels to 20 percent reduces fuel economy between 1 and 3 percent, according to testing by the DOE and General Motors. Evaluations are underway to determine if E20 will burn effectively in today’s engines without impacting reliability and longevity, and also assessing potential impact on fuel economy.”

Kevin Downing @ MaRS

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Kevin currently manages initial client engagements with the MaRS Venture Group. He also administers a federal fund that provides mentorship to start-up companies across Ontario.

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