The Energy Information Administration (EIA) has lowered its projection for cellulosic ethanol production in 2011, which means investment in next generation biofuels is more important than ever.

In a recent letter to Environmental Protection Agency (EPA) administrator Lisa Jackson, EIA administrator Richard Newell noted that they are now projecting cellulosic ethanol production will be just 3.94 million gallons next year, below the 5.3 million gallons projected in May as the target under the Renewable Fuels Standard in 2011. The estimate is based on EIA’s analysis of current projects and publicly available information regarding the potential for future projects. The agency anticipates only four companies will be capable of producing cellulosic ethanol next year.

Renewable Fuels Association President and CEO Bob Dinneen says encouraging investment in cellulosic ethanol is critical to meeting the goals of the RFS and should be important to the new Congress. “In that context, there will have to be a robust debate about how best to assure the continued growth and evolution of the ethanol industry, how to effectively attract capital to cellulosic ethanol technologies, how to commercialize other advanced biofuels like algae and butanol,” Dinneen said during a conference call with reporters this morning. “I constantly talk about not just the growth in the industry, but the evolution of the industry, and that means allowing the commercialization of new technologies to continue.”

According to Dinneen, an expanded cellulosic biofuels producer tax credit with a broader range of eligible advanced biofuels and the ability to allow developers to elect a refundable 30% investment tax credit would be a good way to help advanced biofuel commercialization.