Calvin wrote:Today, the bio-diesel program runs on "alternative energy tax credits". It costs about $1/gal to convert soybean oil into gasoline. So, with gasoline at $2.50/gal, guess what it costs for soybean - $1.50/gal, and the $1/gal tax credit is gravy that is pushing up the price of soybean and keeping the biodiesel producers from reducing their operating costs. There is technology out there to reduce the operating costs by $0.10 - 0.20 per gallon. Do you think any of the producers are interested in this at all? Of course not, they are *all* expending their capital and other resources in increasing their "throughput" so they can get more tax credits. Come 2008 year end, if the credits are not extended, expect to see the mother of all consolidations happen as millions of investors find their investments vaporize because of unscrupulous operators.
These numbers are meaningless unless backed up by reliable references.
There are quite a few companies out there who claim to produce ethanol under a dollar per gallon (cellulosic ethanol is touted to be the cheapest in few cents per gallon). There are different types of bio-fuels(ethanol,biodiesel etc) produced from different raw materials and processes. Some of them are expensive and some are cheaper. The whole debate gets really muddied when one specific case, which always happens to be the worst case, is used to bash all the bio-fuels...throwing the baby with the bath water, so to speak.
Since it is "India's Power Sector" thread, it helps to keep things in Indian context. cane,sorghum,jatropha,cellulose(waste materials) are likely candidates for ethanol/biodiesel production which will be efficient and have lower cost than corn/soyabean. The production costs are likely lower in India due to cheap labor. The key is developments in technology that drive down the cost for a given identified flow("raw material-process-fuel") suited to Indian conditions.
There are tons of oil-wallah blogs and clean-energy wallah blogs who are busy tarring each other, but the real issue drowns in the din. Can biofuel become part of the whole energy solution?
You might, personally, agree with these tax-reliefs - but the reality is that the governments have been notoriously bad at spotting innovations. 40 years of pushing ethanol in Brazil haven't made ethanol manufacture any more competitive with regard to gasoline on the international market. Perhaps you remember the Synthetic Fuels Corporation from the Carter years? The sooner government bureaucrats should get out of the business of business, the better we will be.
Brazil has no direct subisidies to ethanol today. The rise in FFV vehicles is consumer demand driven in last few years.
Oil-wallahs beat biofuel with the stick of subsidy , as if they never in the past or currently getting any sort of subsidy.