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Will Congress renew renewables?We may win the third Gulf War--this one against the worst oil spill in history. But as the latest cap goes on the Deepwater Horizon well that has been gushing for months at the bottom of the Gulf of Mexico, the will of America does not appear to be swinging away from consumption of fossil fuels. Our government remains a Neverland of contradiction for renewable energy, promoting and incentivizing on one side while impeding expansion on the other. For the past decade, alternative energy production has caused significant change in the profit and loss statements of agricultural producers and agribusiness. Tax incentives to convert corn into ethanol have created an industry that has grown very quickly, but inaction in Washington, D.C., may soon cause the trend line to change direction. Congress will be in session for only 30 more days this year. The August break and a particularly troublesome election season will limit the amount of time the government will deal with new legislation and expiring programs. Ethanol tax credits run out at the end of 2010 unless they are renewed by congressional action. There are several arguments why this won't happen in a timely fashion, if at all. First, the biodiesel tax credit expired at the end of 2009 and has not yet been renewed. The most honest answer from biofuels advocates in Congress is that spending for other programs has taken all the money. Secondly, the Environmental Protection Agency is dragging its feet on allowing the ethanol blend to be expanded to 15 percent in unleaded gasoline. The new target date (think about this) is November. At that time EPA says it will complete testing on vehicles made in the last 10 years. If the decision is positive, it will likely be timed to enhance the position of the party in power. If the decision is negative or delayed past elections, it will diminish the clout of ethanol advocates and surely cause a backlash that will be felt from the ethanol producer to the corn farmer. I can sense the glee from the livestock industry if this happens, but the outcome may not be financially satisfying for that sector either. The 10-year development of infrastructure to produce ethanol has made a lot of positive changes for grain producers, whether they owned stock in an ethanol plant or not. Local ethanol plants have changed the basis level for grain delivery in favor of farmers, and the amount of money that has come to small communities from the new industry is significant. Feeding of ethanol byproducts has become a science with livestock producers. Utilization in rations has reduced cost and increased palatability. The livestock industry has realigned its production to become profitable, even with higher grain prices. Over time, biofuel production floats all boats that don't have a hole in them. This year, 4.5 billion bushels of corn (out of a total crop of 13 billion) will go into ethanol production. Next year, due to the uncertainty identified earlier, the usage is projected to be flat. Decisions of Congress and EPA and the focus of the administration will determine the direction of the line on the short term. In the longer view: Can ethanol survive in the marketplace without government support? It depends on demand from consumers and the cost of inputs. If corn comes down a dollar a bushel, that would make free market ethanol more competitive with $80-per-barrel oil. If exports remain strong, we can sell it to countries that value clean energy more than we do. In the go-go years of ethanol production, we've had predictions that we'd run out of corn. Even in very trying growing seasons, the crop has continued to increase in size. The price of corn has moved up from Loan Deficiency Payment level to remove the direct subsidy on corn production and shift it over to an ethanol subsidy. If government stops funding ethanol, it doesn't mean taxpayers will save any money. There has also been talk of cellulosic ethanol production from the byproducts of corn or other biomass. The latest word is that cellulosic ethanol can be produced at a commercial scale (1 billion gallons) in five years. However, the technology has been five years away for the last five years. It may come, but development is slow. Wind energy is increasing, but infrastructure is needed to move the electricity to the urban centers. Solar power has the same difficulties. Alternative energy is hard; oil is easy. Bringing a new industry through startup and into a contributing role is slow, while punching another hole in the sea floor and sucking up the petroleum can be done more quickly. Convincing consumers to use an ethanol blend is difficult. Filling up with "real gas" doesn't require any thought. I want to see the reaction of Americans to the first generation of electric cars, supposedly coming late this year. Will only the "greenies" embrace a small, battery-powered vehicle, or will a larger group commit to the new technology? If the reception is good and profitability grows, will the manufacturers build electric vehicles that can be used in suburban and rural communities? If that is the case and we move past biofuels to utilize electricity to power our automobiles, so be it. Just be careful when you trace the source of electricity, as you'll likely find that it is not coming from wind or solar but from a coal-fired plant somewhere in the middle of the country. Doesn't that put us right back where we started? Editor's Note: Ken Root is an independent agricultural journalist. He was named the 2009 Farm Broadcaster of the Year and was the 2008 winner of the Oscar in Agriculture. He is an Oklahoma native and an experienced print, radio and television journalist. He has spent the last five years as Lead Farm Broadcaster at WHO Radio in¬ Des Moines, Iowa. He and his wife Gail have two adult children and two grandchildren.
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