With Gasoline Prices Rising, Indiana Alternatives Can Help

April 09, 2012

On February 17, 2012 the IU Public Policy Institute released the findings of the Policy Choices for Indiana's Future.  Below is another installment of those findings found in the March 29, 2012 edition of Inside Indiana Business.


With gasoline prices rising,
Indiana alternatives can help




By Mark Maassel and Wallace Tyner

Co-chairs of the Policy Choices for Indiana's Future Energy and Environment Commission


Drive past your favorite service station, don't blink and you'll likely see the price of fuel go up.


While many factors contribute to the price we pay at the pump - discovery costs, taxes, refining and distribution, world politics, etc. - it's still largely an issue of supply and demand. There's limited oil supply. Global demand is growing. So the price climbs.



A principal way to affect prices is to reduce deman d and/or increase supplies. Ideally, we'd like to do that in a way that reduces America's dependence on foreign oil, increases our nation's energy security and protects our environment.


Fortunately, the recent "Policy Choices" study by the IU Public Policy Institute finds Indiana well positioned to help, and likely to create many jobs in the process.


Advanced biofuels

Indiana has significant potential to use its agricultural resources either for biofuels or biopower. In either case, we can grow cellulosic feedstocks (corn stover, miscanthus, switchgrass, forest residues, etc.), then collect and convert them into usable energy - biofuel for your car or biomass as a partial substitute for coal in a power plant. We can even combine biomass and coal to produce liquid fuel from two important Indiana natural resources.


Indiana could easily be a national frontrunner in the production of advanced biofuels. Corn stover is available in the northern part of Indiana, and new crops of switchgrass or miscanthus could be grown in the southern parts of the state.

In fact, Indiana has the natural resource capacity to support about five cellulosic biofuel plants using corn stover. And, of course, southern Indiana has large coal reserves.


A number of uncertainties currently limit the economic viability of producing these advanced fuels, including future oil prices, feedstock cost and availability, conversion costs and efficiencies, environmental impact of biofuels production and government policy.


But if state policymakers provide the right kinds of incentives and investments, the payoff - in terms of jobs, investment and environmental benefits - could be enormous. It's important that our elected officials act quickly, however, if we're to realize the potential first-mover advantages.


Electric vehicles

The transportation sector accounts for 27 percent of U.S. greenhouse gas emissions and 70 percent of its petroleum consumption. So it's no surprise that alternative sources of energy for transportation, such as electricity, are gaining popularity.


Alternative-fuel vehicles - all-electric, natural gas or hybrid - are all the rage. Already, Honda is manufacturing natural gas vehicles in Greensburg, Ind.


Indiana is well positioned to capitalize. One of Gov. Mitch Daniels' stated goals is to turn Indiana into "the electric vehicle state."


Indiana's advantages lie in its universities' scientific and engineering expertise and its substantial pool of trained labor with automotive manufacturing experience. Indiana also has shown its willingness and ability to offer competitive financial incentives to attract electric vehicle manufacturers.


Battery technology

Batteries are, of course, a critical component of electric vehicles. They also can be reused for electric grid storage long after they have become ineffective for cars and trucks. The battery's ability to store electricity on a large scale would make wind and solar energy more viable. It also would increase the availability and reliability of our electricity supply, stabilize the cost of electricity and help reduce greenhouse emissions.


Indiana is already a national leader in battery design and manufacturing with companies such as Delphi, Altair Nano, Ener1's Indiana-based EnerDel unit, and the military's battery center of excellence at NSWC Crane, as well as initiatives such as the Energy Systems Network.


An attractive investment climate, strong manufacturing base and extensive scientific expertise position Indiana well for even greater leadership in this industry.


The economic viability of designing and manufacturing batteries is, however, subject to variables such as energy prices and the availability of investment capital.


State government can help overcome those obstacles by incentivizing battery technology development and supporting the companies and universities advancing that technology.


The Policy Choices study called "An Environmentally Sound Energy Policy" (www.policyinstitute.iu.edu) outlines dozens of measures state officials could consider to advance Indiana's energy prowess, improve its environment and create jobs - as well as the potential pros and cons of each.


While none of these choices will necessarily reduce fuel prices in the short run, they will, over time, provide more stable prices, more domestically produced fuel and more Indiana jobs.


Maassel is president and CEO of the Northwest Indiana Forum. Tyner is co-director of the Purdue Center for Research on Energy Systems and Policy. They co-chaired the IU Public Policy Institute's Policy Choices Energy and the Environment Commission.