-----

Resources



Market News

 September 06, 2007
Florida: the Dark Horse in the Alternative Energy Race?

 When California's eco-active governor Arnold Schwarzenegger and venture capitalist-turned-ethanol-apostle Vinod Khosla held court in Miami a few weeks ago to heap praise on Governor Charlie Crist's new climate change proposal, it seemed that Florida's rise to an alternative energy paradise was well underway.

Following the path Schwarzenegger sketched out in the Golden State, Crist unveiled a mixture of mandates and incentives aimed at capping the levels of greenhouse gas emissions, increasing consumption of biofuels (ethanol and biodiesel) and requiring that 20 percent of electricity generated in Florida be derived from renewable resources.

Similar initiatives, some implemented decades ago, birthed the development of the solar and wind industries in California and Texas, as well as corn ethanol in the Midwest. Energy prices increases over the last four years turned green into gold for alternative energy producers in these states, making the financial fortunes of farmers, entrepreneurs and big businesses alike.

By almost any gross measure, Florida is the largest untapped market for alternative energy in the U.S. At 23.5 million gallons of gasoline sold per day, we are the third largest transportation fuels market according to the Department of Energy but the volume of biofuels currently consumed is negligible.

Similarly, $17.8 billion spent on electricity every year makes the state the fourth largest electricity market in the country, but only 3.7 percent of the nation's renewable energy is generated in the Sunshine State.

In the wake of Crist's announcements, the key question being debated here is simple: What would a greener Florida look like? After all, our state's late arrival to the clean energy party stems in part from the fact that neither large-scale wind projects (no wind) nor large-scale solar projects (too much cloud cover) are viable here.

Florida Farm to Fuel, a crowded if somewhat less star-studded conference hosted by Florida's Commissioner of Agriculture after Crist's announcements, revealed that the types of renewable technologies most likely to play to Florida's strengths, namely biodiesel, closed loop biomass and cellulosic ethanol, remain some years away in terms of large scale commercial viability.

The smart money is betting that in the short run, Florida will have to import ethanol to reach its policy goals. Brazil's status as both Florida's largest international trading partner and the world's low-cost producer of ethanol make it the obvious near-term source of GHG-compliant renewable fuel.

Gate Petroleum Company, a Jacksonville based petroleum distribution company shelved plans to construct its own (Midwestern corn-based) ethanol production facility in favor of a bio-fuels port storage terminal convenient for import from Brazil. Because of ethanol's distinct transportation and storage requirements, infrastructure investment by distributors will be key to making the fuel more widely available here.

The first renewable fuel likely to be generated in large volumes locally is biodiesel. Made from a variety of animal and vegetable oils, cheap oil is the key to making biodiesel competitive. The key to cheap oil: getting a maximum yield of bio-oil per quantity of land and nutrients used in production.

Particularly in the southern part of the state, Florida's climate could yield high volumes of bio-oil rich crops. Xenerga, an Orlando-based, vertically integrated producer of biodiesel, has already identified and patented a strain of jatropha, a high yielding crop, and is looking to partner with local farmers. PetroAlgae, based in Melbourne, is looking to grow and harvest algae for bio-oil with the potential for even higher yields per acre.

After tourism, agriculture is Florida's largest industry and if high-yielding energy crops do prove to grow successfully in Florida, farmers will have a powerful incentive to join together in co-ops to finance biodiesel refineries and accelerate wide-scale distribution. Such co-ops have proved a successful hedge against market fluctuations for farmers in other parts of the country as well as a source of great wealth. David Kolsrud, President of DAK Renewable Energy, pointed out that a $1,000 investment in his Minnesota corn-based ethanol co-op in 1997 is worth $97,000 today.

Depending on the type of legislation enacted, solar energy could also be a key contributor to a greener Florida. Photovoltaic technology, although expensive on a wholesale-basis, is proven and financeable. If, as Crist proposed, utilities are obligated to pay retail rates to solar energy producers, rather than the lower "avoided cost" rates they currently pay, Florida's electric consumers, whose bills are 10 percent higher than the national average, will likely begin to take advantage of Federal and state subsidies by installing their own photovoltaic power systems.

Cellulosic ethanol, a more efficient but complicated method of converting plant matter to ethanol is not predicted, even by optimists like Vinod Khosla, to be commercial before 2012. Nonetheless, Florida stands as good a chance as any in the hunt to commercialize cellulosic ethanol, if only because of the diversity of routes being pursued here.

An enzymatic technology developed by the University of Florida has been licensed by Massachussetts-based enzyme manufacturer Verenium. Alico, a large Florida agricultural company and landowner has received Federal and State grants to commercialize a gasification/fermentation technology. A more specialized approach is being pursued by utility company Florida Power & Light, which teamed up with local technology company Citrus Energy to construct a plant specifically to refine citrus waste into ethanol. If any of these technologies are successful, the cost of producing ethanol from Florida's plentiful biomass could decrease dramatically.

Another fundamental change to Florida's environmental and energy profile will come if and when we begin to grow our own fuel for baseload electric generation. No carbon trading regime is in place here yet and Florida utilities, the largest source of GHG emissions after transportation fuels, have focused on getting cheaper traditional technologies that reduce carbon emissions like nuclear and coal gasification recognized as "green."

Neither nuclear energy nor coal is considered entirely green, however, and carbon caps can drastically change the economics of electric generation. Green Circle Bio Energy, a Scandinavian owned company, is scheduled to complete a plant this year in Northern Florida that will ship 750,000 tons of wood pellets per year to CO2-conscious European power plants, where they will be co-fired with coal. As carbon caps kick in, Florida's utility companies are likely to start co-firing biomass grown here as well, particularly as we approach the first GHG reduction deadline in 2017.

Progress Energy, the state's second largest utility company, is not waiting until then, it has signed a power purchase agreement with Biomass Investment Group to purchase power from a 130 MW closed-loop biomass project to be located in central Florida as well as a separate contract with Atlanta-based Biomass Gas & Electric for purchase of electricity from a 75 MW wood-waste fueled biomass gasification plant in Northern Florida

Some of these technologies will bring a greener future to the sunshine state, just as some will end up disappointing investors, entrepreneurs and policy makers alike. The kinds of change envisioned by Crist and Khosla in Miami will require a revolutionary change in the way that Florida currently generates energy. To quote Thomas Friedman, "A revolution without sacrifice where everyone is a winner? There's no such thing."

Despite these risks, the potential size of the market and greener political climate have set the stage for Florida to eventually catch up with and perhaps even surpass states that are already further down the green path.

is a partner with US Global, LLC, a South Florida company that funds companies and develops projects in energy, technology and real estate. Benoit is primarily responsible for the firm's energy related activities, and is currently focused on identifying alternative and renewable energy investment opportunities in Florida.