What is BioheatŪ?
BioheatŪ is a registered trademark for heating oil blended with
varying percentages of biodiesel for use in conventional oil burners.
Biodiesel is diesel fuel produced from domestic renewable resources
such as recycled vegetable oils, rendered animal fats, and virgin
oils (e.g. safflower, mustard, canola/rapeseed, cottonseed, jotropha,
camelina, and soy). Biodiesel can also be produced from algae.
Most existing residential and commercial oil burners are compatible
with bioheat blends up to at least 20 percent (20% biodiesel, 80%
heating oil). A recent report estimates that B20 Bioheat has the
following pollution benefits: CO2 (15% reduction), CO (12% reduction),
PM (12% reduction), NOx (20% reduction), SOx (20% reduction) and
Toxics (12-20% reduction). Just a 10 percent market penetration
of B20 bioheat in Massachusetts would displace 19 MGY of imported
oil and reduce CO2 emissions by an estimated 15,000 million metric
tons per year.
Roughly 69 percent of the U.S. heating oil market - or about 4 billion
gallons per year - is located in the northeast region. Bioheat can
cost slightly more per gallon (usually several cents per gallon)
than conventional heating oil, depending on the blend and the price
of oil. However, heating oil consumer alliances have eliminated
the additional expense, and at times the retail cost of Bioheat
has been lower than regular heating oil. In addition, there are
substantial local environmental and economic benefits to promoting
bioheat. There is substantial local private sector interest in distributing
bioheat and producing biodiesel.
Pennsylvania and Maine are using bioheat blends to heat public facilities.
Rhode Island has been using bioheat in the public school system
since 2002. New York provides a 1-cent per gallon consumer-side
tax credit for biodiesel use in bioheat (i.e. 20 cpg credit for
How should we promote the use of Bioheat?
One way to promote the use of Bioheat is to offer consumer-side
state tax incentives for purchasing bioheat. New York State currently
offers heating oil customers an income tax credit of 1 cent per
gallon of biodiesel used for Bioheat (i.e. 20 cents credit per gallon
of B20 Bioheat; 5 cents per gallon of B5 Bioheat). States could
adjust the incentive, dynamically or manually, based on relative
market prices of Bioheat and regular heating oil. The primary advantage
of consumer incentives is the benefit is guaranteed to reach the
consumer. The primary disadvantage is stakeholders must be willing
to commit resources to making consumers aware of the program.
A second way to promote the use of Bioheat is to offer distributor-side
incentives. Several states offer incentives to fuel wholesalers
and distributors to store, blend, and distribute non-petroleum transportation
fuels. For example, several states provide fuel wholesalers with
a tax credit for every gallon of "biodiesel blend" sold (usually
with a minimum blending percentage, e.g. 5 percent). A similar program
could be implemented by northeast states. Like the consumer-side
tax incentive, it could be dynamically or manually adjusted to create
price parity with regular heating oil. The primary advantage of
this approach is wholesalers are the decision-makers in the sector,
and are in the best position to change the market. The primary disadvantage
of this approach is there is no guarantee that savings will be passed
on to the consumer.
Of course, such incentives would be far less important if the state
or region enacts a fuel performance standard (e.g. Renewable Fuels
Standard) that encompasses the heating oil markets. A performance
standard would spur infrastructure investments as a natural consequence
of predictable market demand increases.