When the US Energy Information Administration released its annual energy outlook pre-release earlier this month, biofuels industry publication Biofuels Digest was hit with six press releases from the biofuels community in the space of two hours. The final version of the EIA's energy outlook through 2040 won't come out until the spring, but the 16-page preview was enough to set off an avalanche of biofuel industry outcry.

The EIA's Annual Energy Outlook 2013 projection is less optimistic about the ability of advanced biofuels to take a larger share of the liquid fuels market. For the 2013 forecast, biomass use is expected to reach 4.2 quadrillion British thermal units (Btu) in 2035, compared to 5.4 quadrillion Btu listed in the 2012 AEO report.

Still, the longer-term trend is up. The 2013 report thinks that we will reach 4.9 quadrillion Btu in 2040, up from 2011's prediction of 2.7 quadrillion Btu. But why did the forecast drop so far from the 2012 report to the new version? According to the EIA's energy outlook, "The increases are much smaller than those in AEO2012, however, as a result of diminished FFV [flex fuel vehicle] penetration, a smaller motor gasoline pool for blending ethanol, and reduced production of cellulosic biofuels."

The EIA thinks gasoline prices will jump 25 percent – diesel by 37 percent – in 2011 dollar terms.

While biofuel use is expected to be lower than initially anticipated, the AEO 2013 is bullish about growth in other facets of energy production – solar and wind are expected to go up; light crude oil and natural gas are expected to go way up. Sales of FFVs in 2035 are expected to drop to about half what they were in the previous report – 1.3 million, or less than half the 2.9 million FFV sales expected in the 2012 report.

There's bad news in the report for consumers – the EIA thinks gasoline prices will jump 25 percent – diesel by 37 percent – in 2011 dollar terms. If you add in 2.5 percent annual inflation, that will come out to $8.62 per gallon for gasoline and $9.86 for diesel. The cause of this increase is expected to be rising crude oil prices.

Battery electric vehicles also had their numbers diminished – 119,000 units sold in 2035, down 65 percent from the expected numbers in the 2012 report. The EV sales decline is expected to be offset by increased sales of hybrid and plug-in hybrid vehicles, a full 20 percent higher than they were in the 2012 report.

As for Biofuels Digest's take on the situation, the EIA's adjusted numbers for biofuels weren't entirely unexpected. In 2007, there were high hopes for ethanol and biodiesel to take off through a combination of E85 ethanol demand and rising availability of flex-fuel vehicles.

The slow deployment of cellulosic biofuels threw off expectations.

That didn't happen. Rising corn prices made E85 less economical for motorists, and the food vs. fuel battle reduced enthusiasm even further. The slow deployment of cellulosic biofuels threw off expectations that were part of the targets set in the Energy Independence and Security Act of 2007. The price of fuel is a key issue – higher blends of ethanol, such as in E15, and developing low-cost biodiesel and renewable diesel for an expanding truck market – could be another tough hill to climb for adoption of biofuels if the prices go up.

If nothing else, the dramatic year-to-year changes in predictions for things three decades away shows that crystal balls are often difficult to read. And the EIA could be wrong about the future of biofuels. It was in a past report. "Keep in mind EIA has a history of grossly underestimating the ingenuity and productivity of the American renewable fuels industry. In its 2001 projections, released just 10 years ago, EIA predicted the U.S. would produce just 2.8 billion gallons of ethanol in 2011 – in actuality, we produced nearly five times that amount last year," said Bob Dinneen, president and CEO of the Renewable Fuels Association.

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