Kentucky has the potential to develop thousands of jobs in the renewable-fuels industry, but it will take a lot of work and investment to achieve that, according to a state task force.
A full-scale system to produce fuel for power plants and vehicles made from renewable sources such as grass and wood chips could create 10,000 lasting jobs in 15 years, many in farming areas of the state, and generate billions in economic activity, the task force said in a report.
If the state required utilities to burn a certain amount of renewable fuel — called biomass — to produce electricity, that would help develop such an industry, the report said.
It would boost the market for biomass, creating an incentive for farmers, woodland owners and businesses to make the changes and spend the money necessary to build the bioenergy industry.
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"We need to ensure demand," said Frank Moore, director of the state Division of Biofuels.
There probably will be a proposal in the state legislature during the current session requiring power plants in Kentucky to burn biomass along with coal, said Len Peters, secretary of the state Energy and Environment Cabinet.
The administration also is looking at using existing state economic incentives to help boost the bioenergy industry but is not considering new spending on that effort, Peters said.
The task force did not set a target level of how much electricity should be generated using renewable fuel. That level could be set by legislation.
Utilities would have to modify power plants to burn dried, pelletized grass to meet such a standard, the task force's report said, meaning it could increase the cost of making electricity.
But burning renewable fuel also could reduce the cost of mandates to control carbon emissions, the report said.
Nick Comer, spokesman for East Kentucky Power Cooperative, said the utility is concerned that a requirement to burn a certain amount of biomass could have a negative effect on the affordability and reliability of the electricity it produces.
The co-op burns gas pulled from landfills and is part of a research project to burn a type of grass called switchgrass in generating power.
However, the co-op sees challenges in making sure it could get a steady, good-quality supply of biomass year-round at competitive prices, Comer said.
Gov. Steve Beshear set up the task force to study the state's biomass and biofuels potential.
Biomass refers to organic material — such as corn, grass, wood and even manure — that can be burned or converted to fuel.
Ethanol produced from corn, to be used in gasoline, is a common example of a biofuel. However, trees and grasses are likely to be the most common "energy crops" of the future, the task force said.
Kentucky has a large amount of land, including reclaimed mined land, that could be used to produce biomass, the report said.
The task force based its conclusions on estimates of non-food biomass resources only, meaning the state could develop a large-scale bioenergy industry without hurting food production.
Some grazing and hay land could be converted to production of energy crops, however, which would drive down the number of cattle produced in the state, the report said.
More than two dozen other states have required utilities to use some level of renewable-fuel sources in generating electricity, and the U.S. House of Representatives approved a requirement for renewable energy and efficiency measures to meet 20 percent of electricity demand by 2020.
The Senate has not approved that bill, and it isn't clear when, or whether, it will. The measure includes a controversial plan to cap greenhouse-gas emissions from sources such as power plants — which scientists say cause harmful global warming — and trade pollution credits.
Critics have said that provision would hurt the domestic coal and manufacturing industries, for instance, and drive up electricity rates, though opponents and supporters disagree on the costs and benefits of cap-and-trade rules.
It is "highly probable," however, that the federal government will require the use of renewable-fuel sources in generating electricity at some point, the state biofuels task force said in its report.
If that happens and Kentucky has not developed its own system to produce and use renewable fuels in power plants, the state probably would have to buy renewable electricity from elsewhere, the task force said.
That means Kentuckians would face higher electricity costs without getting the jobs or other benefits of producing renewable fuel here, according to the task force.
With a comprehensive bioenergy system, there would be jobs across the state in producing biomass from energy crops and forests, processing it into fuel and delivering it to users, the task force said.
For instance, the report envisioned a network of up to 100 terminals around the state to dry and compact material such as switchgrass into a form that could be burned in power plants or converted to fuel for cars and trucks.
"As we move forward in renewables, we would like to see some corresponding economic development and job growth that goes with it," Peters said.
David Moss, spokesman for the Kentucky Coal Association, said the association does not see the creation of a large-scale bioenergy industry as a threat to coal.
"We're definitely in favor of all forms of energy production," he said.
There is already a federal law requiring the use of renewable sources to make fuel for cars and trucks. Kentuckians use 10 percent biofuels in more than 70 percent of the gasoline they buy, according to the task force report.
Because the federal rule requires increasing use of bio fuels, however, the state needs to increase its capacity to produce them, or it will import nearly 90 percent of the renewable fuels it needs by 2022, the task force said.
Kentucky has two commercial-scale ethanol plants and two biodiesel plants with another under construction, according to the report.
Mark Haney, president of the Kentucky Farm Bureau, said that there are a lot of questions and issues to be resolved before the state can develop the kind of bioenergy industry envisioned in the task force's report, but that doing so would provide significant opportunity for farmers.
"We're certainly supportive of this," said Haney, of Pulaski County, who was on the task force.
The report recognized the state faces many hurdles in boosting the use of renewable fuels — everything from the need to research biomass production and increase yields to setting up a system to store, process and deliver renewable products to power plants and motor-fuel producers.
And it cautioned that safeguards should be considered to make sure a bioenergy industry is sustainable. For instance, over-harvesting of timber is one potential downside of wide-scale biomass production, so the state should consider rules to guard against that, the report said.
It would require investment totaling more than $10 billion from public and private sources to reach the level of renewable-fuel production discussed in the report.
"It's a huge economic potential and a huge challenge. But it can be done," Moore said.