The Future of Fuels
Change in Energy Policy is Driving
Development of New Plants in the Southeast
With rising concerns over the nation's dependence on foreign
oil, the pain of higher gas prices and warnings about global
climate change, renewable and clean-burning fuels are taking
center stage in the political arena - a trend that could lead
to billions of dollars in new projects throughout the Southeast
in the coming years.
The move toward renewable and alternative energy sources,
such as biofuels and nuclear power, has gained traction ever
since President Bush warned the nation during his 2006 State
of the Union address that "America is addicted to oil."
During January's State of the Union, Bush backed up that
assertion with aggressive new targets that would require increased
production of new fuel sources. In his address, Bush asked
Congress to set a goal of reducing projected gasoline usage
in the United States by 20 percent in the next 10 years. To
reach that goal, Bush suggested setting a mandatory fuels
standard to require 35 billion gallons of renewable and alternative
fuels in 2017.
That goal is nearly five times the current target of 7.5
billion gallons by 2012 as laid out in the Energy Policy Act
With a Congressional shift in power to the Democrats, those
policies could gain traction. During the Democratic response
Bush's address, Sen. Jim Webb, D-Va., promised the party would
help spur "a wave of entrepreneurial growth in the form
of alternate energy programs."
U.S. Reps. Earl Pomeroy, D-N.D., and Kenny Hulshof, R-Mo.,
helped set the tone for energy policy early in the new Congress,
proposing the Renewable Fuels and Energy Independence Promotion
Act of 2007 on their first day in session. The bill would
extend tax credits to biofuel producers.
With demand, regulations and incentives in place, the market
is seeing a construction boom of homegrown solutions. There
are 111 ethanol plants operating in the United States with
the capacity to produce 5.4 billion gallons, according to
the Renewable Fuels Association. But another 75 are under
construction and eight are undergoing expansions, representing
another 6.1 billion gallons of capacity.
The biodiesel market also experienced tremendous growth in
2006, expanding from fewer than 50 plants nationwide at the
beginning of the year to 98 by late December, according to
the National Biodiesel Board. During that time, production
has nearly tripled as average output has grown from 6 million
gallons annually per facility to 12 million gallons with some
new plants producing up 80 million gallons.
To date, the bulk of activity has been in the Midwest where
the dominant feedstock for ethanol production, corn, is abundant.
However, growing demand has prompted companies to look at
regional plants in areas such as the Southeast, says Matt
Hartwig, spokesman for the Renewable Fuels Association.
"There are some large gasoline markets in the Southeast,
especially when you look at places like Atlanta and parts
of Florida," he says. "A lot of developers see a
need for local plants to feed that demand."
Georgia is positioning itself as the hub of biofuel production
in the region. The state is already home to the Southeast's
only operating ethanol plant, Wind Gap Farms in Baconton,
Ga. The plant produces 400,000 gallons annually using brewery
waste from the Miller Brewing Co. and Anheuser-Busch.
But Gov. Sonny Purdue is looking to woo even more renewable-fuel
producers, proposing tax credits for projects and funding
for biofuel research. The state also guarantees permitting
turnarounds within 90 days for biofuel projects.
Companies are hearing the message, says Jill Stuckey, director
of alternative fuels for the state of Georgia. Stuckey says
she is working with about 30 firms that are looking to build
ethanol and biodiesel plants in the state.
"I've been working for 11 years in alternative fuels,"
she says. "For the first 10 years, nobody called me.
Now the phone is ringing off the hook. We have the potential
of being the Saudi Arabia of alternative fuels in this region."
In January, ground was broken on a $113 million ethanol plant
in Camilla, Ga. Expected to produce 100 million gallons annually,
it would be the first large-scale ethanol plant in the Southeast.
Minnesota-based Fagen is the turnkey design-builder of the
facility. The plant is scheduled to open in spring of 2008.
CoastalXethanol, a division of New York-based Xethanol Corp.,
is in discussions to build a plant near Savannah. The company
formed the division to focus on opportunities in Georgia,
South Carolina and northern Florida. The company plans to
develop up to 250 million gallons of ethanol capacity in the
Biodiesel is also growing. BullDog BioDiesel is converting
a former tire plant in Ellenwood, Ga., into a $10 million
biodiesel facility. Work began in late 2006. Alterra Bioenergy
opened its 6-million-gallon plant in Wilkinson County, Ga.,
in 2006. U.S. Biofuels of Rome, Ga., expanded its facility
last year as well.
In North Carolina, Raleigh-based Agri-Ethanol Products is
looking to roll out up to 20 ethanol plants in the eastern
U.S. The company is planning to build a $211 million, 108-million-gallon
plant in Aurora, N.C. The company has also looked at sites
in the Batesville-Leesville area.
Terry Ruse, chief operating officer of AEP, says the company
has financing available for up to 20 plants and plans to build
at least 10 facilities from Mississippi to New York. Ruse
estimates that based on current standards of 10 percent ethanol
blends in gasoline, there is annual demand for up to 1.9 billion
gallons in Florida, Georgia and the Carolinas.
"We're starting in North Carolina and will go in concentric
circles outward," he says.
Like Georgia, Florida is looking to attract biofuel producers
with incentives. The state's proposed Renewable Energy Technologies
& Energy Efficiency Act offers up to $6.5 million in tax
credits for ethanol construction. But so far, few producers
are stepping up to the table. U.S. EnviroFuels is planning
to build an $80 million plant near Tampa, but recently put
plans to build a second facility near Port Manatee on hold.
Meanwhile Gate Ethanol, a division of Jacksonville-based
Gate Petroleum, scrapped its plans to build a $160 million
30 million gallon ethanol plant in Jacksonville, citing costs
Ruse says his company is wary of Florida because of the cost
of shipping corn to plants in the state.
"We would only build in the far north of Florida,"
The real promise for biofuel production in the region is
based on emerging technologies. Although corn is the prominent
feedstock for facilities, researchers are working on new "cellulosic"
processes that will use more indigenous resources. Analysts
argue that development of such technologies is essential to
meet recommended standards proposed by the Bush administration.
Production of 35 billion gallons of ethanol would use up the
entire U.S. production of corn, according to industry estimates.
C2 Biofuels of Atlanta is working with researchers at the
Georgia Institute of Technology to build a plant that would
use wood pulp. Other researchers have suggested the future
use of plant waste from the citrus industry as feedstock for
biofuel plants in Florida.
The potential nationwide capacity for corn ethanol plants
based on available corn supplies is between 15 billion and
20 billion gallons, says Paul Kamp, regional sales manager
with Williamsburg, Va.-based ethanol plant design-builder
Delta-T. But once cellulosic techniques emerge, the market
could hit 60 billion gallons.
"Corn ethanol is just the beginning - the bigger opportunities
have yet to unfold," he says.
Major investment banks could also spur significant development
of production facilities. While co-ops of farmers and other
local businessmen have overseen the bulk of biofuel production
in the past, Wall Street now sees significant upside to investment.
"Wall Street has all of a sudden taken a look at what's
going on in the Midwest," the Renewable Fuel Association's
Hartwig says. "They are saying, 'If the farmers out there
can figure out how to make money off of this, what are we
With expanding opportunities, more contractors and designers
are expected to enter the market. Several turnkey companies
like Fagen and Delta-T offer standard facility designs, overseeing
permitting through construction. Fagen has opened a regional
office in Greenville, S.C. Another firm, Lurgi PSI, is based
While biofuels are starting to mature in the marketplace,
nuclear plants are experiencing a renaissance in the public
energy debate. The Bush administration helped pave the way
for the first nuclear plants to be built in the country in
nearly 25 years with the Energy Policy Act of 2005. The legislation
provides $4.3 billion in tax breaks for nuclear projects,
$2 billion for support of delays and cost-overruns and loan
guarantees for innovative technologies.
Dozens of power companies are lining up to add nuclear plants
to their grids. Progress Energy is considering several projects,
including a 3,000-acre site in Levy County, Fla., near its
existing Crystal River Energy Complex.
Although Progress Energy has not decided to build on the
site yet, permits could be filed in 2008 with construction
possible by 2010.
Progress Energy is also considering a nuclear site near New
Hill, N.C. Applications could be filed this year with approvals
possible by 2010.
The population boom in the Southeast is a main driver for
Southern Company's plans to expand its nuclear generation.
The company estimates that by 2030, 40 percent of the U.S.
population is projected to live in the region with four million
new residents expected in Georgia alone.
"We're not really considering the government incentives
- we have clear business drivers for pursuing nuclear generation
based on need for additional base load," a company spokesperson
says. In August, the company filed an application for an early
site permit for two new nuclear units at its Plant Vogtle
site in Waynesboro, Ga.
The company is also working on a joint agreement with Duke
Energy for a potential nuclear station in Cherokee County,
S.C. Duke is the developer and licensed operator, but the
Southern Company would be a co-owner. Construction would begin
no sooner than 2010.
Santee Cooper and South Carolina Electric & Gas are also
considering building a new reactor at their co-owned V.C.
Summer Nuclear Station site near Jenkinsville, S.C. Permitting
could be completed by 2010.