E.R.S. economist reviews hurdles for next generation of biofuels

by Editorial Staff
Share This:

WASHINGTON — While a dramatic expansion in production of next-generation biofuels will be needed to achieve ambitious targets in the Energy Independence and Security Act (E.I.S.A.), progress toward the commercialization of the new technologies has been slow and major hurdles remain to be overcome, according to the U.S. Department of Agriculture.

A status report, “Next-Generation Biofuels: Near-Term Challenges and Implications for Agriculture,” by William Coyle, appeared in the May issue of Amber Waves, published by the Economic Research Service of the U.S.D.A. Mr. Coyle is an economist with the E.R.S.

To reach E.I.S.A. targets, biofuel production will need to reach 36 billion gallons by 2022, three times current levels. Next-generation biofuels, principally from cellulose, are expected to reach 16 billion gallons by 2022, on track to surpass corn ethanol use.

Biomass for the next generation biofuels is expected to be non-food sources, including wood waste; crop residues; dedicated energy crops such as switchgrass, energy cane and biomass sorghum; municipal solid waste and algae.

“While some next-generation processes that yield biobutanol or petroleum-equivalent fuels will use corn and other first-generation feedstocks, overall next-generation biofuels likely will have less direct impact on food crops than first-generation biofuels,” Mr. Coyle said.

While more than 30 companies are working on next-generation fuels, production in 2010 is expected to be a fraction of what had been predicted. Most of the companies are working on cellulosic ethanol, a fuel identical to corn ethanol.

“Because ethanol provides only two-thirds of the energy of gasoline and faces blending and transportation constraints, some companies are developing products like green gasoline, green diesel and biobutanol, which are closer substitutes for fossil fuels,” Mr. Green said.

Early in 2010, the Environmental Protection Agency reduced the cellulosic biofuels mandate for this year to 6.5 million gallons from 100 million gallons. The E.R.S. is projecting actual production this year may reach 10 million gallons with capacity jumping to 200 million gallons by 2012. Capacity of next generation biofuels may reach 88 million gallons by the end of the year (less than capacity from a single new corn ethanol plant), but sector capacity should top 350 million gallons by 2012. The first major plant, which will produce petroleum equivalents and will open in 2010, will use animal and vegetable fats as a biomass source.

Poet, L.L.C., Sioux Falls, S.D., which has an operating pilot plant in South Dakota, may have the first commercial plant to produce cellulosic ethanol, to be co-located with an existing corn ethanol plant in Emmetsburg, Iowa. The plant is scheduled to be operational in late 2011 or early 2012. It will use corn cobs as feedstock. The current model for many other companies is to open a pilot plant in 2010 (less than 1 million gallons of capacity) with future plans to expand.

While interest is running high in biomass sources such as algae and municipal waste, agriculture will need to play a central role if next generation biofuels are to hit the ambitious targets set for 2022, Mr. Coyle said.

“Biomass inventory and other analyses by the U.S. Department of Energy, U.S.D.A. and E.P.A. conclude that of all potential sources of biomass, U.S. agricultural sources (crop residues and energy crops) are the most significant,” he said.

Topping the list of challenges that must be overcome for next-generation biofuels to emerge as a major energy source is the high costs of production and construction costs for “untested technologies and processes on a large scale.”

“Capital investment costs for cellulosic ethanol plants are estimated at three to four times those for first-generation biofuel plants,” Mr. Coyle said. “These are the costs incurred in the purchase of land, buildings, construction, and equipment and represent the total cost to bring a project to a commercially operable status. According to 2004 estimates of the D.O.E.’s (Department of Energy) Energy Information Administration, capital investment costs for biomass-to-liquid facilities ranged from $650 million to $900 million for a 100-million gallon capacity plant, compared with $130 million to $230 million for a similar-sized corn ethanol plant. Other more recent studies estimate lower capital investment costs to $320 million to $340 million for cellulosic ethanol plants, suggesting that these costs could be trending downward despite significant increases since 2003 in material and energy costs.”

In 2007, the U.S.D.A. pegged cellulosic ethanol production costs at $2.65 per gallon, versus $1.65 for corn-based ethanol. Mr. Coyle cited another report indicating farmers need to be paid $40 to $60 per dry ton for enough feedstock for 12 billion to 20 billion gallons of cellulosic ethanol from agricultural biomass, prices consistent with what Poet expects to pay for corn cobs when its plant opens in 2011.

“For farmers to shift to production of dedicated energy crops such as switchgrass, however, farm prices would need to compete with the lowest value crops, such as hay, whose price has exceeded $100 per ton since 2007,” Mr. Coyle said.

The new Biomass Crop Assistance Program in the Food, Conservation and Energy Act of 2008 offers assistance of up to $45 per dry ton to producers of eligible biomass. The program is aimed at helping lower feedstock costs and facilitate timely availability of supply to biorefineries, Mr. Coyle said.

To attract capital to build next-generation biofuel plants, companies have used a variety of strategies, including venture capital, government grants and loan guarantees, as well as alliances with large corporations. Venture capital has been a “crucial source,” Mr. Coyle said, noting that availability was hurt by the 2009 global recession. In December 2009, 19 projects were selected by the U.S.D.A. to receive $564 million as part of the federal stimulus program. All told, the federal government has committed more than $2 billion to next generation biofuels development.

Large corporations partnering on next-generation biofuel projects include all of the largest oil companies together with a mix of other corporate giants such as General Motors, Weyerhaeuser, Novozymes, Honeywell, Dow Chemical and DuPont.

Mr. Coyle offered several examples of the different kinds of bulky material that will need to be delivered and stored at cellulosic biofuel plants. These included:

• Poet — working with regional corn producers to supply cobs for its commercial combined-corn-and-cellulosic facility in Iowa, to be opened in 2011.

• ZeaChem Inc. — working with GreenWood Resources, Inc. to supply poplar trees for an initial output of 250,000 gallons of biofuel per year in 2010 at its plant in Boardman, Ore.

• Noble Foundation — partnering with Oklahoma Bioenergy Center to develop 1,000 acres of switchgrass in anticipation of the 2011 opening of Abengoa Bioengergy’s cellulose plant in Kansas.

• State of Tennessee — providing subsidies to more than 60 farmers to grow switchgrass to help meet feedstock demand at a DuPont Danisco plant in Vonore, Tenn.

• Verenium-BP joint venture — signed a long-term lease for 20,000 acres to grow energy cane and forage sorghum to help meet feedstock needs for a future 36-million-gallon-per-year cellulosic ethanol plant in Highlands County, Fla.

An impediment for both corn ethanol and cellulosic ethanol going forward includes the “blend wall.” Car maker warranties for non-flex-fuel vehicles cover only cars using gasoline with a maximum ethanol share of 10% because higher blends may damage the engine and other components. In 2009, ethanol accounted for 7.9% of U.S. gasoline use, or 10.8 billion gallons.

“Reaching the E.I.S.A. target for cellulosic and corn-based ethanol by 2022 will require raising the 10% blend standard for regular vehicles and expanding use of the gasoline substitute, E85 — a mixture of 85% ethanol and 15% gasoline,” Mr. Coyle said.

“In 2009, the E.P.A. deferred until mid-2010 a decision to raise the 10% standard to 15%, at least for cars manufactured since 2000,” he said. “Expanding the use of E85 will

require development of an infrastructure to distribute and dispense E85 and expanded manufacture of vehicles capable of using it. Currently, 9 million of about 235 million cars and other light vehicles in the United States are E85-capable, and 2,200 of the nation’s 160,000 gas stations are set up to dispense E85.

“Given the limited market for ethanol as a gasoline additive (due to the E10 blend wall) and as a gasoline substitute (because of the slow development of the E85 market), developers and investors may turn away from cellulosic ethanol in favor of production of green fuels. These green fuels are also called ‘drop-in’ fuels because they are close substitutes for gasoline or diesel and can be used in current vehicles without limit and distributed in the existing transportation fuel infrastructure. There are a number of companies now developing drop-in fuels, including Amyris Biotechnologies; LS9, Inc.; and Rentech, Inc. Among the 19 bioenergy companies recently awarded D.O.E. grants, half are developing biobased drop-in fuels.”

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.



The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.