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  • bluecheese4u bluecheese4u Mar 27, 2008 2:17 AM Flag

    VeraSun Energy, made a deal with Kroger, to sell its E85 @ 20 convenience stores

    VeraSun Energy, made a deal with Kroger, to sell its E85 @ 20 convenience stores

    Hopes are high, as are the hurdles, for alternative fuel
    By Holly Hubbard Preston Published: March 14, 2008

    Biofuel, a technology once championed by Henry Ford and Rudolph Diesel, is roaring back into public consciousness after almost a century of oblivion.

    Among the factors contributing to its comeback are soaring oil prices, climate concerns and government anxiety over dwindling oil reserves. The combination has led more than 40 governments to enact biofuel consumption mandates that not only set annual targets for adoption but also provide tax incentives and subsidies to the companies supporting this emerging technology.

    To varying degrees, it is working. As of 2007, WorldBioPlant.Com, a database service created to track biofuel development, reports that there were 954 biofuel plants - 386 biodiesel and 565 bioethanol - in 56 countries with a cumulative output capacity in excess of 43 billion gallons, or 163 billion liters. Dig down into who is helping fund such projects and big oil names like Royal Dutch Shell, BP and Chevron come up, as do automakers like Daimler, General Motors and Volkswagen who get tax credits for producing vehicles that can burn "green" fuel.

    Retailers, a vital link in the chain, are also beginning to jump on board. Last month, a biofuel producer in the United States, VeraSun Energy, made a deal with Kroger, a leading U.S. grocery chain, to sell its 85 percent ethanol blend at 20 of its convenience store locations in Texas. The fuel, known as E85, is intended for the small but growing rank of flex-fuel vehicles capable of running on either conventional gasoline or on high-percentage blends.

    That the deal was done in Texas, home of many of the biggest U.S. oil companies, is symbolic of the growing interest in and legitimacy of biofuels as an alternative energy source. Whether and when that interest will translate into big profit for makers of biofuel is harder to gauge.

    Biofuels account for a minuscule part of the overall fuel market. Biofuel sales reached $25.4 billion in 2007 - trailing only wind power, at $30 billion, in the alternative space - and are projected to grow to $81.1 billion by 2017, according to Clean Edge, a research firm in Oakland, California. Alternative fuels of all types, including fuel ethanol and biodiesel as well as synthetic crude and fuels, accounted for only about 2.6 percent of total fuel output in 2006, according to data released by Goldman Sachs International at the end of last year. Even with continued government support, alternative fuels are not likely to exceed more than 5 percent of the market by 2015, Goldman said.

    "Biofuels in this country are clearly supported by government policy and not economically viable on their own," said Marc Levinson, a senior commodities research analyst for JPMorgan. By support, Levinson is referring to

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