Department of Energy officials have spent seven years and $603 million to prove the commercial viability of biofuels, a major focus of the Obama administration's energy plan, but instead have missed their own goals and failed to make biorefineries commercially viable.

"We found that the Department had not successfully achieved commercial-scale operations even though the FOAs (Funding Opportunity Announcements) issued in 2006 and 2007 indicated that the proposed projects should be operational at the commercial scale within 3 to 4 years," the DOE inspector general said in a new report.

"Additionally, we found that the Department was not on target for achieving its 2014 production capacity goal of 100 million gallons of advanced biofuels."

The Energy Policy Act of 2005 required the DOE to demonstrate that advanced fuels like cellulosic biofuel, made from wood, grasses and other plants, are ready for the market and should be incorporated into energy strategies. The DOE's goal was to have three biorefineries running at commercial scale by 2012, and produce 100 million gallons of advanced biofuels by 2014.

But the largely stimulus-funded $929 million program has been troubled from the start. Six of the 15 projects given taxpayer dollars to make biofuels have been canceled after spending $75 million, according to the IG. The rest have encountered technical and financing problems and long environmental reviews.

DOE officials blamed the financial crisis and poor market conditions, but the IG identified another significant flaw in their program: Officials made their loan awards to projects they knew were not technically ready to produce biofuels at a commercial level.

"The Merit Review Committee for the 2006 FOA noted that none of the projects fully met the selection criteria and that each of the proposed projects possessed high-risk elements," the IG report said.

Not only did they move ahead with high-risk projects, but DOE officials actually more than doubled spending on the projects, despite being fully aware of their potential failure. The DOE increased funding from $160 million to $385 million in 2006, even though the projects had been identified as risky prospects.

The DOE claimed it met its 2012 goal of having three viable biorefineries, but none of them currently produces biofuels at a commercial scale, the IG said.

"As a result of the challenges we noted, the Department is likely to be further delayed in the successful implementation of a commercial-scale integrated biorefinery," the IG said.

"Additionally, project delays and terminations increase the risk of wasteful spending as the department may continue to fund projects that ultimately are terminated without achievement of the project objectives."

The IG recommended DOE officials ensure projects are technically ready at each stage before awarding funds for the next stage, and formally document both best practices and common reasons for delay or extra spending.

The Obama administration has been forced to keep lowering its biofuel requirements as producers struggle to keep up. The Environmental Protection Agency's 2013 Renewable Fuel Standard, which establishes the required levels of biofuel production each year, set a 6 million gallon target for cellulosic biofuels in 2013. That's less than half the level in the proposed standard released in February 2013, according to the U.S. Energy Information Administration, and far less than the 1 billion gallon goal set by the Energy Independence and Security Act of 2007.