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Robert Rapier

Robert Rapier

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Next Generation Biofuels: 5 Near-Term Challenges

The U.S. Department of Agriculture (USDA) has just issued a report detailing the outlook and challenges of next generation biofuels. I provided some input during the drafting of the report, which hopefully was of some use. Here I select five pessimistic projections from the report. In the next essay I will select five optimistic projections.
The report is:

Next-Generation Biofuels: Near-Term Challenges and Implications for Agriculture
Here are five findings from the report that promise to strongly influence the country’s direction on next generation fuels.

1. Production and Capital Costs

Next Generation Biofuels

“Estimated production and capital costs for next-generation biofuel production are significantly higher than for first-generation biofuels.” The report quotes costs for a 100 million gallon biochemical conversion plant (e.g., cellulosic ethanol) at $320 million, and the costs for a 100 million gallon thermochemical conversion plant (e.g., gasification and conversion to liquid fuels) at $340 million. The report states that this is “more than three or four times those for corn ethanol plants.”

2. Biomass Feedstock Costs

Biomass

The report suggests that the presumed costs for purpose grown biomass have likely been underestimated. It cites POET, for instance, as assuming a $40 to $60 per ton price for corn cobs. But the report states “the range of prices may underestimate the cost of increasing biomass yields on marginal lands and the incentives required for harvesting, gathering, and delivering bulky material to the biorefinery” and “dedicated energy crops would need to compete with the lowest value crop such as hay which has had a price exceeding $100 per ton since 2007.” In a previous essay I identified this as one of the bad assumptions many biofuel producers today are making: That biomass costs will be low or even negative in the future as demand ramps up.

3. Algae Conversion Costs

Algae

The report repeats the mantra that you have heard from me many times: “Production cost estimates (net of capital costs) for growing and converting algae to fuel are significantly higher than for first- and next-generation biofuels, ranging from $9 per gallon to $35 per gallon.” As I have noted before, I think people confuse the ease of growing algae with the ease of growing it commercially and turning it into fuel.

4. Support for Cellulosic Ethanol May Be Short-Lived

Ethanol

The report suggests that support for cellulosic ethanol may be short-lived: “Given the limited market for ethanol as a gasoline additive (due to the E10 “blend wall”) and as a gasoline substitute (because of slow development of the E85 market), developers and investors may turn away from cellulosic ethanol in favor of production of another class of next-generation biofuels, petroleum substitute fuels. These so-called ‘drop in’ fuels can be used as gasoline or diesel substitutes in current vehicles without limit and distributed seamlessly in the existing transportation fuel infrastructure.” The report further states “There may be a shift in favored technologies underway. Several companies planning to be operational with some of the larger plants in the next several years plan to use thermochemical approaches or other processes that produce biobased petroleum-equivalent fuels.” My position on this is clear: I believe that thermochemical approaches are more scalable and less energy intensive than most biochemical approaches.

5. Scale

Scale

Fiberight is forecast to be the leading cellulosic ethanol producer for 2010 – with a production capacity of 130 barrels per day. To put that into perspective, the very small oil refinery I used to work at in Billings, Montana had a capacity of 60,000 barrels per day.

The bits I extracted are all themes that I have addressed here many times. In a nutshell, they relate to the fact that many would-be next generation fuel producers are making unrealistic assumptions about things like feedstock costs. Thus, where they project falling costs based on their optimistic projections, the USDA report forecasts that their biomass costs will be much higher than expected.

But there were some bright notes, which I will address in the next essay.

By. Robert Rapier

Source: R Squared Energy Blog


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