State subsidy programs

A number of states have implemented subsidy programs to encourage local biofuel production. These programs range from renewable portfolio standards (RPS) to state-wide blending requirements to low — and zero- interest loans for the construction of biorefineries. Blending requirements and RPSs both indirectly affect the economic feasibility of biorefineries by creating demand for their products. Blending requirements mandate the blending of certain volumes of ethanol with gasoline and biodiesel with diesel fuel (usually 5 vol%, although this varies by state) for fuel sold within the state. RPSs mandate that a certain amount of electricity sold within the state come from renewable sources such as a cellulosic ethanol biorefinery.

States have also attempted to attract biorefinery construction by offering low — or zero-interest loans to biofuel companies for their construction within the state. For example, drop-in biofuel company KiOR has received a zero-interest $75 million loan from the state of Mississippi for the construction of a commercial-scale catalytic pyrolysis and upgrading facility within the state (Dolan, 2011). Such loans improve the economic feasibility of recipient biorefineries by eliminating interest payments on initial capital costs. Unlike blending requirements and RPSs, favorable loans are generally directed at individual companies rather than made available for all qualifying producers.

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