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Sandie Allen
Colin South, Mascoma president, helped the state craft the biofuels bill as a member of the Advanced Biofuels Task Force.
Friday, August 8, 2008
New Biofuels Act aims to fertilize cluster growth with consumer demand
By Efrain Viscarolasaga
MHT's Cleantech Forum
Similar to the $1 billion Life Sciences Act signed by Massachusetts Gov. Deval Patrick this spring, the recently enacted Clean Energy Biofuels Act aims to accelerate the growth of a burgeoning industry cluster in the state, and it may already be having an impact.
While the life sciences act provides for direct funding and support of corporate activities such as physical expansion of research, the creation of manufacturing facilities and the attraction of large companies from outside the region, the biofuels act, signed July 28, takes a more subtle approach, targeting consumer demand for alternative fuels.
That demand, said industry insiders, will help the Massachusetts biofuels industry — less mature than the biotechnology industry — establish the customer base necessary to attract long-term funding for its own move into local manufacturing and widespread job creation.
The ramifications of the act are already being felt. According to executives at the Northeast Biofuels Collaborative, “three or four” companies have contacted the collaborative about building biofuel plants in the state since the act was signed, though he could not disclose their names. In addition, earlier this week ethanol technology developer Verenium Corp. landed $90 million in funding through a strategic alliance with energy giant BP PLC.
The act includes two provisions for generating demand in the consumer market. First, gasoline substitutes (such as ethanol) made from the cellulose of feedstocks — which include switchgrass, agricultural waste and forest products — are exempt from the state gas excise tax. In addition, all diesel and home heating oil will have to contain an alternative fuel component, with a mandate of 2 percent biofuel in 2010 and 5 percent by 2013.
“Basically, you have a high-risk market with a high-risk investment in (biofuels) companies,” said R. Brook Coleman, founder and president of the Northeast Biofuels Collaborative. “The point of this bill is to provide a tangible incentive to fuel buyers in the state and reduce the risk of investment in these companies.”
While Massachusetts has no ethanol production facilities or major biodiesel plants in operation, the state is home to a cluster of companies aimed at bringing biofuels to market. The community includes ethanol developers, such as Verenium and Mascoma Corp. in Cambridge, University of Massachusetts Amherst spinout SunEthanol Inc. in Hadley, and BioEnergy International LLC in Quincy, as well as biodiesel producers, including Berkshire Biodiesel in Pittsfield and Twin Rivers Technologies Inc. in Quincy.
Funding needed
Many of those companies have received initial investments, some substantial. Mascoma, for example, has raised more than $61 million in private funding. But to turn research into production facilities and jobs, most will need additional funding.
“When we go to market, we need to reduce the risk for investors as much as possible,” said Colin South, president of Mascoma and a member of the Advanced Biofuels Task Force, which helped provide the legislature with recommendations regarding the state of the local biofuels industry.
In terms of building production facilities, the biodiesel side of the industry is expected to reap the benefits in the short term, while ethanol production plants may take longer, mostly because the land and traditional crops needed to produce large amounts of feedstock for ethanol fermentation is not readily available in Massachusetts.
In Pittsfield, Berkshire Biodiesel is raising capital for the construction phase of a 52 million gallon per year facility, scheduled to open in the middle of next year. According to executive vice president Lee Harrison, the act will help the company close that financing.
While executives from both Mascoma and Verenium said their eventual goal is to also build plants in the Bay State, both are beholden to the availability of feedstock. SunEthanol, however, may have a leg up on both. Although the company is much younger (founded in 2006) and less mature, its proprietary Q Microbe is aimed at producing ethanol from almost any organic biomass, which opens the company to locally available feedstocks such as waste products from wood and paper manufacturing, as well as farming, such as cranberry waste.
“The fact that Massachusetts has stepped up and become the first state to do this will certainly make us do everything possible to build a production facility in Massachusetts,” said Jef Sharp, SunEthanol executive vice president.
A ‘Clean’ Sweep
The Clean Energy Biofuels Act wasn’t the only piece of legislation passed in the recent session aimed at advancing Massachusetts’ clean energy sector
The Green Communities Act, passed on July 2, promotes the use of energy-efficient lighting and other products through utilities; allows independent power generators to sell power back to the grid at competitive rates (“net-metering”).
The Oceans Act, passed on May 28, allows for the development of wind, wave and tidal power generation sites in state waters.
The Global Warming Solutions Act, July 31, creates a statewide greenhouse emissions cap and mandates an 80 percent reduction (from 1990 levels) in carbon emissions by 2050 — one of the most stringent laws in the country.
The Green Jobs Bill, waiting for the governor’s signature, pledges $68 million to the creation of a Clean Energy Technology Center to support R&D, entrepreneurship and workforce development in the clean energy sector.
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