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Biofuels: Helping to Move the Industry to the Next Level

November 16, 2010 - 6:25pm

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Yesterday, I had the pleasure of speaking to members of the cellulosic biofuels community and its value chain at the 5th Annual Cellulosic Biofuels Finance & Investment Forum in Washington, D.C. The Summit is dedicated to discussions on taking biofuels to the next level by first focusing on the policy, regulatory and financial solutions that will enable industry scale-up, and then investigating the pathways and strategies for transitioning to the biorefineries of the future. During the dialogue, I took the opportunity not only to provide an update on the Energy Department's Loan Programs Office (LPO) and the application process, but also to discuss what the Administration is doing to advance the development of the nation’s biofuels industry.

The Administration is committed to tripling production in the next 12 years and acknowledges that biofuels uniquely offer a near-term replacement for petroleum transportation fuels. The Department’s role in this effort includes supporting basic research in the sciences and advancing technology development and commercialization of affordable biofuels produced from non-food sources. For example, over the past two years, the Department’s Office of Energy Efficiency and Renewable Energy’s Biomass Program announced more than 40 projects and a commitment of over $850 million to projects focused on cellulosic biofuels and next generation hydrocarbon fuels. The Advanced Research Program Agency – Energy’s Electrofuels Program supports 13 projects and represents a novel approach to biofuel production that leverages non-photosynthetic organisms and chemical or electrical energy to convert carbon dioxide to infrastructure compatible liquid fuels. In addition, the Department’s Bioenergy Research Centers focus the most advanced biotech resources on biofuels production and the scientific knowledge generated will help lay the foundation for bio-based products, methods and tools that the emerging biofuels industry can use.

Since biofuels projects need time to develop, they have often received other forms of Federal financing assistance by the time they apply for a loan guarantee. Programs such as those mentioned above set the stage in the biofuels production process – from pilot- and demonstration-scale to full-scale – and open the door for companies to apply for Department of Energy loan guarantees. LPO is looking for credit-worthy projects and ranks applications based on both technical and financial elements. For example, while it is not required, applicants are strongly encouraged to have supply and offtake agreements at the time they apply. In addition, applicants must have a minimum of six to eight months operating and performance data sourced from their advanced pilot and demonstration project.

LPO has a robust pipeline to include biofuels projects and recognizes the industry’s challenge in getting projects financed. It is working hard with the industry to find ways to reduce risk and increase its access to capital. We look forward to continuing our relationship and dialogue with the industry.

Jonathan Silver is executive director of the Loan Programs Office.

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