Traditional biofuel use has long been with us, the future challenge is to focus on environmentally sound, and economically justifiable, advanced biofuel systems
In 2002, fossil fuels supplied 86 percent of
the energy consumed in the United States. We
also imported over half of the petroleum we used
and we project that our dependency will continue
to grow. Since the U.S. economy is so closely
tied with petroleum products and oil imports,
small changes in oil prices or disruptions in oil
supplies can have an enormous impact on the
American (and for that matter the entire Global)
economy. We understand that we will always
rely on fossil fuels. But, we also understand that
value of developing technologies using renewable
energy sources, including biomass, and the
important role it can play in energy security,
economic growth, and the environment.
The central focus of the current DOE
Biomass Program is an integrated approach to the
simultaneous production of liquid fuels, power,
and products in what we call the industrial
biorefinery. This biorefinery would produce a
suite of products much in the manner of an oil
refinery. These biorefineries would be like the
petrochemical facilities on the Gulf Coast of the
US, but instead of crude oil streams, they would
biofuels, particularly with larger biofuel systems, most developing
countries can be expected to rely on fossil fuels rather than biofuels for
meeting their largest industrial and transport fuel demands. This view is
clearly a function not only of the limited, if not negative, net financial
benefits for some large biofuel systems, but also to a great extent of the
higher financial risks and administrative and operational complexity
associated with such systems.
The major exceptions are competitive biofuel systems that rely on
wastes. In fact, competitive, efficient biofuel waste systems should be
encouraged by national and international agencies, particularly in the
rural industrial sector in which the savings to the country from the
promotion of these industries are significant. Future analyses should
look closely at those firms or private entrepreneurs who can and are
making money on biofuel use rather than potential users with no
experience in deriving profits from biofuels.
Whereas at present biofuel provides limited, but important, economic
potential in the industrial and transport sectors, biofuel systems are still
the least-cost and primary option on a financial and economic basis in
the residential cooking sector for most developing countries. In fact, the
greatest global potential for biofuel programmes could be from energy
conservation through improved technological innovation in this sector.
As Smith hypothesizes, a modern biofuel transition is needed whereby
modern efficient systems replace traditional ones. ~1 Thus, current
support of such biofuel programmes needs to be strengthened.
The lack of macro-level analyses of biofuel systems raises the need for
greater study of employment generation, internal market stimulation,
and net foreign exchange effects. Besides the oil security issues, biofuels
may have other economic benefits such as taking advantage of existing
indigenous resources, stimulating more efficient commodity production
systems, absorbing excess rural labour, and increasing rural incomes.
These factors need to be seriously compared and coupled with private
market incentives. The impact on financial viability and system
reliability of the seasonal nature of biofuel supplies, as contrasted with
most fossil fuels whose use can be delayed or suspended for future use,
is a critical research issue that has been ignored. This factor has
important risk implications on long-term biofuel use. It is clear from the
Philippines’ experience that if some countries choose a biofuel strategy
because they place a premium on diversifying their energy base and
stimulating internal markets, they must ensure adequate biofuel
supplies will exist at reasonable costs to the consumer. Poor market
development, or conversely competitive product markets for biofuels,
are often key reasons for private and public biofuels schemes’ failures or
successes.
Despite the marked relative price changes for biofuels v fossil fuels at
present, it is important that volatile crude oil prices do not lead to a
general apathy in energy planning in areas where biofuels or other fuels
such as hydro or solar are appropriate. For instance, falling crude prices
have only slightly affected rural diesel oil or kerosene prices in some
countries with high import duties or taxes. However, it is obvious that
setting aside their economics, the organizational barriers to implementing
biofuel strategies are extremely high. Historically, biofuel
programmes have required more institutional coordination and cooperation
at the regional, national and international agency levels than is
often possible. Thus, costly fossil fuel or hydro projects have been more
attractive, and in practice more feasible, to the public sector than many
small or medium-scale biofuel projects.
Since these recommendations are based on limited field data, both
financial and economic, it is important to highlight the tentative nature
of these findings. Reliable financial cost data from operational systems
is limited and often quite aggregated. The macro-level impacts that
might favour biofuel use, such as income generation, market development
and balance of payments effects, are even more uncertain and still
require serious analysis. These studies are essential since many benefits
from biofuel use are not reflected in a financial analysis.
Given the high profile biofuels have received over the past decade,
this lack of data is troubling. Yet the limited amount of actual biofuel
substitution for fossil fuels in most developing countries suggests serious
economic as well as non-economic barriers must exist. At a minimum,
greater evaluations of past projects by these countries and international
agencies should occur to identify more definitively the full private and
social comparative advantages of various fuels. While much technical
progress has been made, at present the current research focus should be
on appropriate systems, either fossil fuel or biofuel, with the greatest
economic and social promise. The breadth of biofuel substitution
certainly is less than originally envisioned. While traditional biofuel
use has long been with us, the future challenge is to focus on environmentally
sound, and economically justifiable, advanced biofuel systems.
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