Essay About Biofuels Digest

By Matt Daily

May 18 (Reuters) - After a decade of promise, advanced biofuels makers are entering a crucial make-or-break period with the first of a new generation of production facilities about to come on line.

The new facilities are designed to take biofuels beyond corn-based ethanol and begin to shift the industry to "advanced" fuels made with a lower carbon footprint derived from products that will not compete with demand for food.

Many of the companies are turning to cellulosic plant materials, animal waste and plant oils to churn out millions of gallons of ethanol, diesel, jet fuel or components for gasoline.

Driving the industry are U.S. government targets stretching out a decade that call for fuel suppliers to blend billions of gallons of the new biofuels into the U.S. gasoline and diesel pools, on top of the corn ethanol that already makes up about 10 percent of the gasoline market.

The targets have helped biofuel companies develop strategies and lay out expansion plans, but they do not rely on the tax incentives or subsidies that helped the solar and wind industries.

Aside from the federal volume targets, "these guys in almost all cases are not relying on subsidies," said Rob Stone, an analyst at Cowen & Co in Boston.

But even with the growth and new investments, investors will likely have to wait for the technology to prove itself over the coming years before receiving big payoffs.

Among the most anticipated of the new production plants is KiOR Inc's Columbus, Mississippi, facility. The company expects to begin production in the second half of 2012 and turn wood products into components, or blendstocks, that can be used in gasoline and diesel fuel.

The KiOR plant will process farmed Southern Yellow Pine trees at the equivalent of about $25 per barrel of oil, or about one-quarter the price U.S. crude oil.

Nearly 400 million gallons of new biofuels production is expected to go on line this year in the United States, according to data compiled by industry publication Biofuels Digest.

Another 1.7 billion gallons of additional capacity is forecast to start up from the beginning of 2013 through 2015, bringing total capacity to nearly 2.3 billion gallons.

Among others under construction are Altair's Washington plant, which will produce jet fuel from carmelina, an oily flowering plant; and Diamond Green's facility in Louisiana, which will convert animal fat and used cooking oil into diesel fuel under a joint venture with refiner Valero Energy Corp .

Many of the nascent biofuels companies have been working for years to develop technology that can cheaply turn cellulosic sugars or waste materials into energy and have even attracted investment from the world's top oil companies.

Those advances have come in several areas. Researchers have developed new biochemical catalysts to break down tough cellulosic material, used new techniques to turn solid materials into gas and created advanced 'hydroprocessing' refining methods to break heavy hydrocarbons into lighter, more easily burned fuels.

BP Plc, Royal Dutch Shell, Chevron Corp and Total SA have all taken stakes in companies that focus on a wide variety of fuels from traditional sugar cane ethanol to gasoline and diesel.

Still other companies, including Gevo Inc and Butamax, a joint venture of BP Plc and Dupont, are building plants to produce biobutanol from corn starches or other agricultural products to produce 'drop-in' components for gasoline or chemicals with a higher energy content than traditional ethanol.

"I think there's room for multiple fuels to contribute to the fuel mix," Butamax CEO Paul Beckwith said in an interview.

Gevo, which is locked in a patent lawsuit with Butamax, expects to start up a converted ethanol plant next month that will produce butanol using corn cellulose as a feedstock. It expects to shift to materials such as switch grass, waste wood products or agricultural by-products such as corn cobs and stalks and sugarcane bagasse in the future.

INVESTORS MAY NEED TO BE PATIENT

Authorized under the 2007 Energy Independence and Security Act, the Environmental Protection Agency's Renewable Fuel Standard 2 calls for 21 billion gallons of advanced biofuels to be delivered annually by 2022, on top of a target of 15 billion gallons of corn-based ethanol.

The advanced biofuels target could be reduced if producers fail to bring adequate production on line and oil industry lobby group the American Petroleum Institute has already filed a lawsuit challenging the goal as unrealistically high.

Companies that are required under the EPA rules to buy biofuels to meet the target can instead purchase credits based on actual volumes produced through the Renewable Identification Number system, or RINs. While not a direct subsidy, those RINs can be worth between about $2 to $5 per gallon for biofuel producers, although the RIN market remains in its infancy.

A separate $1.01 gallon subsidy for cellulosic biofuels is set to expire at the end of this year and industry experts do not expect the U.S. Congress to extend that incentive. So far, its impact has been modest because fuels that would qualify for it have only been produced in low volumes.

With a capacity of 62.5 million gallons per year, KiOR's $222 million Columbus plant will be the largest of its kind in the United States and is expected to produce fuel at about $1.10 per gallon, well below the current NYMEX wholesale gasoline price of nearly $3 per gallon.

KiOR has already sold the planned output from the plant to Hunt Refining, FedEx Corp and Catchlight Energy, a joint venture between Chevron and forest products company Weyerhaeuser Co.

KiOR and others such as Codexis Inc, Amyris Inc , Solazyme Inc and Renewable Energy Group Inc have all successfully tapped into the public markets, although their shares have all fallen below their launch prices.

Given the diverse slate of fuels, feedstocks and company strategies in the industry, investors may need to be patient to see which companies emerge as the best in the sector.

"We're still very early from an investment perspective of picking winners," Cowen said.

Another 300 companies are trying to develop technology to break into the market, according to Mike Ritzenthaler, an analyst with Piper Jaffray in Minneapolis, with perhaps 20 of those potentially on track to seek IPOs in the next few years.

"All of these guys are looking for money," Ritzenthaler said.

Still, Canadian-based Enerkem's move to pull its planned $138 million IPO showed that Wall Street may be growing wary of pouring new money into the sector.

Investors viewed Enerkem's municipal solid waste-to-biofuels technology as too risky because it has never been shown to work in large quantities and the company forecast its losses would grow as it sought to build production plants.

"Early on, investors were willing to look out four or more years, but now they want to see positive EBITDA," Ritzenthaler said.

Enerkem said in its filings that it planned to make bioethanol at $1.50 to $1.70 per gallon, although analysts feared the company's cheap waste feedstocks could grow scarce if competitors emerged.

Still, several other companies have filed with the U.S. Securities and Exchange Commission for public stock offerings, including Genomatica, Myriant, Mascoma Corp, Coskata, Fulcrum Bioenergy, BioAmber and Elevance Renewable Sciences Inc.

Mascoma, which has received financial backing from Valero Energy, Marathon Oil Corp and a General Motors Co investment fund, has said it was targeting operating costs of $1.77 per gallon for ethanol produced from hardwood.

Coskata, backed by France's Total, expects a commercial plant in Alabama to produce fuel-grade cellulosic ethanol from softwood at an unsubsidized operating cost of less than $1.50 per gallon.

CREATING AN INDUSTRY WITH TECHNOLOGY

Crucial to making the fuels economic is securing an ample, economic stream of feedstocks that can be cheaply turned into fuel, industry executives.

Renewable Energy Group, whose shares debuted in January, produces biodiesel from animal, plant oil and recycled restaurant oils, says feedstocks have typically been between 85 percent to 90 percent of the cost of producing the fuel.

The company has about 210 million gallons of capacity and has more than 100 suppliers for its feedstock.

"We are really trying to use these things that have a great carbon footprint and are messy to deal with," CEO Daniel Oh said. "What we've essentially done is create real optionality across the feedstocks."

Even with the growth expected over the next few years, many industry executives are wary of promising an energy revolution that could lead to unrealistic expectations.

"What we're doing is we're creating an industry with technology," said Kevin Weiss, CEO of Byogy Renewables, which makes jet fuel and gasoline from ethanol. "It's pioneering for the next 20 to 30 years. It's not pioneering for tomorrow." (Reporting By Matt Daily in New York; Editing by Patricia Kranz and Andre Grenon)

1 July 2011

Facts about the many different types of biofuel: their sources, use and environmental impact.

Wood fuel

The original biofuel, as used in the discovery of fire and a firm favourite for millions of years.

Jargon: ‘Biomass’ usually means wood.

Current use: Around 90 per cent of all biofuel use is locally harvested wood, charcoal and dung for small cooking stoves. Thirty-eight per cent of the world’s population rely on this energy, and its pollution kills around 1.5 million people per year. The single biofuel technology that could provide the greatest benefit to the world is probably the cleaner-burning wood stove.

New ‘biomass’ power stations are springing up around the US, and are proposed for Britain. Where the extra millions of tonnes of wood per year will come from is not yet clear.

Methane from waste

Methane from sewage and domestic waste – in use for thousands of years.

Jargon: Biogas or biomethane.

Current use: With the help of new anaerobic digesters (which convert food waste into methane gas and organic fertilizer), around 30 million homes in China and India now make their own cooking and heating gas in this way. Also has potential as vehicle fuel – but waste is not an unlimited resource, and overall more energy (and carbon) would be saved by producing less waste in the first place! Some companies are talking about making biogas by fermenting new crops rather than from waste, which would have the same problems as liquid biofuels (see 4-7).

Recycled cooking oil

Waste oil from restaurants and fast-food joints which is reprocessed into fuel.

Jargon: Confusingly, fuels made from vegetable oils are often referred to simply as ‘biodiesel’, whether they are recycled or made from new crops.

Current use: There’s only a limited amount of waste oil sloshing around. Even if all the available waste oil in the US were poured into its cars, it would replace less than 0.1 per cent of the nation’s liquid fuels.

Ethanol and biodiesel

Ethanol is made from sugary or starchy crops such as corn, sugar cane, wheat, sugar beet and barley. Biodiesel is made from oily crops such as soybean, rapeseed, oilseed and oil palm.

Jargon: ‘First generation’ biofuels.

Current use: These make up nearly all of the existing liquid biofuels. The biggest producers are the US (around 40 billion litres of corn ethanol per year) and Brazil (25 billion litres of sugar cane ethanol). Biodiesel production is much lower – less than 20 billion litres per year for the whole world.

Many countries are already blending these biofuels in with their transport fuel supply – around 3 per cent biodiesel in the EU, and 10 per cent ethanol in the US

Liquid biofuel from wood and grasses

High-yielding non-food crops which can be grown on so-called ‘marginal land’.

Jargon: Cellulosic, or ‘second generation’ biofuels.

Current use: Still at the research stages. The plan is to make ethanol or other liquid fuels from the carbon in the cellulose of plants like elephant grass and willow. ‘Marginal land’ is a brilliantly vague term – most land in the world is being used by someone for something, or is important for ecosystem maintenance. This technique could be useful for growing some specialized fuels on a limited scale under careful control, but otherwise it could gobble up grazing land, wilderness, or end up on arable land anyway to improve yields and make a bigger profit.

Liquid fuels from agricultural waste

From waste such as corn stover – the leftover bits which aren’t eaten by humans.

Jargon: Sometimes grouped together with second generation biofuels, sometimes termed third generation. They’re also cellulosic (made from the carbon in cellulose).

Current use: Also still at the research stage. This could be a useful source of liquid fuel on a local, well-managed scale, but in mass production it could end up creating serious problems. Some ‘wastes’ like straw have many other uses that would need to be provided by other materials instead; crop residues are also important natural fertilizers, and would need to be replaced by alternative inputs.

Algal fuels

These can be macro-algae (seaweed) or micro-algae (pond scum). Can be grown in the sea or in tanks, and so don’t require agricultural land.

Jargon: Second, third, or even fourth generation, depending on whom you speak to.

Current use: This supposed ‘wonder fuel’ is still in development (and not expected for at least a decade). The huge seaweed farms proposed for the ocean could cause the same sort of problems – reduced biodiversity, unpredictable knock-on ecosystem effects and fertilizer leakage – as land-based monocultures. Tiny oil-producing algae in tanks still need large amounts of space, water, sunlight – and, crucially, nutrients. No-one is clear where these nutrients will come from – the algae will be competing with food crops here, especially for phosphates. The algae are expected to be genetically modified to churn out as much oil as possible – so what happens if (or when) they get loose into streams, rivers and reservoirs?

Sources

WGBU, Future Bioenergy and Sustainable Land Use 2008; nin.tl/mig7A6

Biofuels Digest nin.tl/itTSti

Dept of Biological and Agricultural Engineering, University of Idaho nin.tl/m7vYcF

nin.tl/kXqazR

World Bank Policy Research Working Paper 5364. Biofuels: Markets, Targets and Impacts, July 2010.

REN21, Renewables 2010: Global Status Report, September 2010. nin.tl/kKowSx

ETC Group, The New Biomasters: Synthetic Biology and the Next Assault on Biodiversity and Livelihoods, February 2011.

Photos: Md. Didarul Alam Chowdhury / Drik / Majority World; Daniel under a CC Licence; stellar678 under a CC Licence; tallpomlin under a CC Licence; 24oranges.nl under a CC Licence

This article is from the July/August 2011 issue of New Internationalist.
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