As the Senate takes up energy and climate policy, how will the research and development of new biofuels be addressed in legislation? During today's OnPoint, Lee Edwards, CEO of Virent Energy Systems Inc. and chairman of the Advanced Biofuels Association, discusses the policies needed to level the playing field for new biofuels technologies. He also explains how the Gulf oil spill is affecting investments and operations for advanced biofuels companies.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Lee Edwards, CEO of Virent and chairman of the Advanced Biofuels Association. Lee, thanks for coming on the show.
Lee Edwards: Glad to be here.
Monica Trauzzi: Lee, energy and climate are in full focus on the Hill this summer. How are advanced biofuels playing into the policy discussion?
Lee Edwards: Well, for us this is a critical time. There is so much pending legislation that has, I think, a very important impact on the long-term viability of new technologies to help the country reduce its dependency on crude now that, right now, through the Advanced Biofuel Association members, which is about 26 companies in total, we're trying to give greater understanding and insight that there are a significant number of great opportunities to change the frame in terms of widening the flexibility of the feedstocks used in making better molecules into the liquid fuels chain in particular so that we can go through and become less dependent on crude oil and more sustainable in the overall liquid fuel transportation mix, having the economic benefits that include job creation and reduction in CO2 emissions.
Monica Trauzzi: When we talk about new technologies we always hear the discussion about leveling the playing field. How close are we to actually evening out that playing field for these new technologies?
Lee Edwards: Well, I think we're getting increasingly closer to be able to do that, because there's been clear evidence that what starts to really matter is the energy density of the molecules that we're making into liquid fuels. In a lot of the new technologies that are emerging to the members of the ABFA, we've been able to demonstrate that you get more miles per gallon, you can completely integrate without blend wall limitations, and also you get the benefit of being able to use existing logistics in transportation infrastructure.
Monica Trauzzi: So, does this also mean more money from the government?
Lee Edwards: Well, that's going to play a critical role as a bridge in my opinion, because all of the technologies that have potential to make a difference and help reduce our dependency on crude oil do require capital investment to be able to compete with the likes of the oil industry today. And that capital is expensive and right now, in the business environment, raising money for new ventures, deploying new technologies is not easy. So, I think there is a role with the government to help us make this bridge to provide some stability through the policies that are implemented and to access financing so that these first plants can be constructed and we can demonstrate the true potentials.
Monica Trauzzi: But you do have money coming in from the private sector. There are many oil companies who have invested ...
Lee Edwards: Right.
Monica Trauzzi: In advanced biofuels.
Lee Edwards: Right.
Monica Trauzzi: You know, we're talking about a lot of money here. How long will you continue to need money from the government?
Lee Edwards: Well, that's a good question and what I believe you'll see is that we'll get a combination of collaboration partnerships. Private enterprise absolutely is committed in making new investments in new technologies that provide returns. However, right now, I think because of the imperfections in the market, for example there is no price on carbon. The overall environmental benefits are not clear. The societal benefits for greater energy independence is also not fully valued in the price. I think we will need some short-term help and short-term is probably in the range of five to 15 years to help get scale delivered and help show that we can build molecules and compete successfully with crude without subsidy long-term.
Monica Trauzzi: Is the BP oil spill having any impact on your industry, the business prospects?
Lee Edwards: Well, I think for us it just creates the increased awareness of the sensitivities to crude oil production. It is high risk and can be high cost and we'd like to be able to provide a series of options that are much more regionally deployed using renewable feedstocks that can be grown every year and convert them to molecules in the liquid transportation fuels very similar to those that are in the system today from crude oil.
Monica Trauzzi: You're looking ahead to the next Farm Bill as a key piece of legislation for your industry. So what specifically are you hoping that bill will accomplish?
Lee Edwards: Well, there are a number of things. The Farm Bill is one of many that give us the opportunity to talk about how can we get the level playing field when it comes to accessing a variety of feedstocks to give farmers an incentive to work with the industry as we grow and as we emerge so that they can increase their returns accordingly, so that we can play into a way to disrupt the first generation corn ethanol that exists today. We have better molecules, we can use a range of feedstocks to improve our case and we also will make a higher and stronger environmental impact at the same time.
Monica Trauzzi: So, when might we see these new technologies actually come online and be fully deployable in the U.S.?
Lee Edwards: Well, I think this is the big race. You know there's a great deal of enthusiasm and optimism for this. Several plants are under construction right now. There are even more that are pending financing, so with the successful availability of financing through either loan guarantees or more affordable traditional debt through the banking system or through strategic investments with large companies that are able to afford, with the balance sheets that they've got, a diversified portfolio, I think then you'll see a significant number of new plants coming on stream within the next five years to make larger volumetric impact into the marketplace.
Monica Trauzzi: Which technologies hold the most promise?
Lee Edwards: Well, there are a number that are promising and I think, you know, on behalf of the membership of the Advanced Biofuels Association we hope many win. We're not in a position where there's only going to be one pathway to success and we need many so that we can go from 10 percent to 15 percent to 20 percent to 30 percent of the overall liquid fuels mix. The technologies in general that I think we'll win will make better molecules, they will be able to convert a wider variety of feedstocks, and they will have a significant improvement in the CO2 intensity relative to refined gasoline from crude oil.
Monica Trauzzi: What's your take on the level of emphasis the Obama administration has been placing on these new technologies in advanced biofuels?
Lee Edwards: Well, I think they've got a really challenging job because there are a number of technologies in a number of areas in the energy space that need to be considered. We've been very encouraged with what we've been hearing lately in the intent of the administration and we want to work closely to ensure that those intents are appropriately operationalized in policies that give some long-term stability and can be operationalized so that companies can actually access the funding that could be promised through those programs.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.
Lee Edwards: OK, thank you for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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