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Feature Articles : Mar 15, 2009 (Vol. 29, No. 6)

U.S. Biofuels Market Off and Running

Experts Say that Ethanol Will Penetrate 100% of Gasoline Market in Next Few Years
  • Ellyn Kerr

Biofuels are already entrenched in the U.S. transportation fuels market, but not everyone may realize this. Yet, according to the Energy Information Association, by the end of 2008, U.S. ethanol facilities were producing up to 668,000 barrels per day (still short of the same-period ethanol demand of 683,000 barrels/day, according to the Renewable Fuels Association).

Even cellulosic ethanol has established itself. As of January, several companies—including Iogen, Abengoa Bioenergy, and Poet— have pilot-scale cellulosic plants in operation. And widescale commercial cellulosic ethanol should be available by 2011.

Today’s commercial supply consists primarily of corn ethanol. The U.S. Renewable Fuel Standard (RFS) dictated by the 2007 Energy Security and Independence Act calls for 36 billion gallons of biofuels to be blended into the gasoline supply by 2022. Of these, 21 billion must be noncornstarch-derived, i.e., second-generation fuels such as lignocellulosic-derived ethanol.

It is expected that in the next few years, ethanol will have penetrated 100% of the gasoline market, offsetting total volumes of gasoline sold by approximately 25%. E10 (10% ethanol-in-gasoline blend) will soon be ubiquitous throughout the U.S.

Challenging Landscape

Still, the securing of ongoing capital for construction of large-scale production poses significant hurdles. Major dry-mill corn ethanol producer VeraSun Energy, whose 16 facilities had a combined annual online production capacity of 1.64 billion gallons, filed for Chapter 11 bankruptcy protection in November. The company recently announced a $280 million deal, subject to approval of its Bid Procedures and Sale Motion, to sell five existing production facilities, plus one in development, to oil refiner Valero Energy.

In early February, forestry feedstock company Lignol Energy suspended a cellulosic ethanol collaboration with Suncor Energy. An $80 million demonstration plant in Colorado had been planned, supported by a $30 million grant from the U.S. Department of Energy (DOE). Lignol cited current economic conditions as the cause behind ending negotiations.

Meanwhile Alico (a land-management company) and Iogen, two of six recipients of a collective $385 million DOE award to develop cellulosic ethanol refineries in the U.S., abandoned their projects. (Iogen is continuing development of cellulosic ethanol plants in Canada.)

Debate over GHG Emissions

Further, there are potential regulatory hurdles for next-generation fuels. The RFS requires cellulosic fuels to reduce greenhouse gas emissions by 60% over gasoline, versus a 20% reduction for corn ethanol. A challenge exists, however, in exactly how to measure these reductions for biofuels producers aiming to meet the targets.

At issue are questions about carbon effects of land-management techniques—whether land allocated for biofuels causes downstream market effects that indirectly increase production by greenhouse gas (GHG)-emitting industries elsewhere.

EPA insiders are reportedly concerned over conclusions of a February 2008 Science paper by Searchinger et al. Biofuels researchers argue that it is unprecedented to translate market effects into carbon costs and that, given the lack of a means to accurately measure such indirect effects, EPA’s flawed models could stall cellulosic and other biofuels development at a critical juncture.

Companies like Ceres are designing agricultural products to substantially increase biomass yields, to favorably tip energy balances and decrease the relative GHG emissions per area of land of biomass. This past December, Ceres launched its Blade Energy Crops brand of high-yield switchgrass cultivars, among other genetically designed species such as high-fiber sugarcane and high-biomass sorghum.

Monsanto also has offerings in the works for increased feedstock yields. An ongoing collaboration with Mendel Biotechnology centers on crop testing, breeding, and seed production for perennial grass seed varieties; and R&D in a joint venture with Cargill is focused on a processing system for increased corn yield for fuel and other applications.

Monsanto recently positioned itself in the global sugarcane ethanol market, with its December acquisition of Brazilian genomics agribusiness Alellyx and its sister company CanaVialis, reportedly the world’s largest private sugarcane breeder.

Building the Cellulosic Ethanol Supply

All the major players—in agbiotech [Archer Daniels Midland (ADM), Monsanto, Cargill], automotive and fuels (GM, Shell, BP), chemicals (Dow Chemical, DuPont), and the DOE government national labs (Sandia, National Renewable Energy Laboratory, Idaho, Oak Ridge, etc.)—have cast bets on cellulosic ethanol through research collaborations and/or funding. The main enzyme producers (Novozymes, Genencor/Danisco, DSM, and Verenium) have also entered the cellulosic ethanol market.

Poet is accepted to be the world’s largest ethanol producer, with a total capacity of over 1.5 billion gallons per year across 26 facilities. In November, Poet saw an $8-million, pilot-scale, 20,000-gallon-per-year cellulosic plant come online in South Dakota—a precursor to its $200 million commercial-scale cellulosic Project Liberty ethanol plant due to begin production in 2011. Corn cobs provide the main feedstock.

Poet cites the standard list of commonly mentioned advantages of biofuels: national security/oil-independence, and improved environmental footprints. Mark Stowers, Ph.D., Poet’s vp of R&D, cites a University of Nebraska–Lincoln study showing a greater-than-50% reduction in GHG emissions of corn ethanol over gasoline. Using biomass for steam and harnessing landfill (methane) gas for production energy can further reduce corn ethanol GHG emissions by 60%. Life-cycle analysis by Argonne National Laboratory shows emissions from cellulosic ethanol to be 85% lower.

“With production facilities located in rural America, jobs creation is another major component of what we’ve achieved as an industry,” Dr. Stowers says.

The company’s BPX process converts cornstarch to ethanol enzymatically, without heat, and, according to Poet, reduces energy costs, increases yields, reduces emissions, and improves upon the industrially useful coproduct, dry distillers grains (used for livestock feed).

Poet also employs its BFrac™ fractionation process, which separates corn kernels into three streams: endosperm for fermentation into ethanol, and germ and fiber for oils, feed, and other products. And the fibrous component can itself be used as a primary feedstock for cellulosic ethanol.

One main challenge to a mature ethanol industry, in the opinion of Dr. Stowers and others, is the EPA regulatory cap of 10% ethanol for blending in automotive fuels. “There is a lot of lobbying activity to remove that cap, to allow the industry to reach RFS mandates and firm up the market for cellulosic ethanol,” he says.

Project Liberty should be producing commercially in 2011, after which Dr. Stowers predicts “fairly rapid deployment of the technology. A five-year window is not unreasonable, provided mid-level blends of 15 to 20 percent are permitted. Most science points to acceptability of E15/E20 in the fleet, and pumps are already available that handle mid-level blends.”

Cellulosic Market

Despite declining gasoline demand and idle production capacity industrywide, Suncor, Lignol, Mascoma, Verenium, and DuPont Danisco Cellulosic Ethanol (DDCE) are confident in the future market and are looking to have first supplies of commercially available cellulosic ethanol available by 2011.

“We are aggressively pursing our green agenda, to have a demonstration plant online by December 2009, a cob-based commercial biorefinery in 2011/2012, and a switchgrass plant within a year to 18 months after that,” says Jack Huttner, vp of commercial and public affairs at DDCE and one of the early advocates for large-scale industrial biotechnology. Planned capacity is 25–50 million gallons, depending on the number of facilities the company ultimately decides upon.

According to Huttner, to be truly competitive in the cellulosic ethanol space requires several components: financial strength, engineering depth, broad technical competence, and long-term, economical supply of biomass. DDCE’s parent DuPont is providing pretreatment and ethanologen (ethanol-producing organisms) technology to the DDCE venture; Genencor (a Danisco division) is contributing its expertise in biocatalysis.

But as to biomass: “Right now, you can’t get a ten-year contract for 150,000 or 500,000 tons of biomass. The logistics are starting to come into shape. DDCE and others are organizing the corn cob supply chain and looking to dedicated energy crops, to firm up those upstream feedstock supplies,” says Huttner.

In the short term, RFS has called for 100 million gallons of cellulosic fuel by 2010, going to one billion in 2013. Though the industry may lag a bit, Huttner credits legislative initiatives, including loan guarantees from the USDA/DOE, reverse auctions for production incentives, and the RFS itself, with a necessary forward pull.

“By 2010/2011, the appropriations rules will be established and will run for a five- to six-year period. So between 2012 and 2018, the cellulosic ethanol industry will either make it or break.”

Given the average $200 million investment needed to build a commercial-scale ethanol facility, such incentives are critical, at least until companies have a few large-scale production facilities in place and a ready market. In the meantime, companies like DDCE are scaling up from pilot demonstration and optimizing their production processes to be able to meet forecast demand. The RFS mandate for 15 billion gallons of corn ethanol (an additional 2–5 billion capacity beyond what is currently online) strengthens the corn ethanol infrastructure as a foundation for the next-generation fuels.

“People lose track of the fact that we’re essentially creating a completely new industry,” adds Huttner. “You cannot go out and buy a bone-dry ton of biomass to your specification; nobody is growing it, nobody is collecting it. That poses a fundamental challenge. It’s like imagining what the website for Netflix will look like before there’s even a fiber optic system. It’s because we’ve been talking seriously about biofuels for 10 years already that people think it’s supposedly now just a matter of turning a switch on. Now we’re ready to actually start the work.”

Ironically, several companies, including Amyris Biotechnologies and LS9, are gearing up to produce green analogs of traditional biofuels that are drop-in compatible with current petroleum fuels.

Gevo is among these, but is unique, it says, in focusing on a specific platform molecule—isobutanol—that is convertible into several product streams: not only straight-up gasoline, but also traditional refinery end-products like rubber and solvents.

“Isobutanol in its own right has ready markets,” says Pat Gruber, Ph.D., CEO. “It’s a solvent and can be developed as a fuel blend stock. Derivatives like isobutylene yield intermediates for processing into gasoline, diesel, jet fuels, plastics, and fibers. Our products are either hydrocarbons or are hydrocarbon-like, so they can be sourced directly to refiners.” The opportunity, he says, is for better biofuels that by-pass entirely certain inherent infrastructure and technical problems with ethanol.

Gevo’s philosophical approach differs, Dr. Gruber states, in that it is focused on a molecule in use industrially today and with a ready market, uses known unit operations (“boring, vanilla technologies”), can be produced in existing ethanol plants, and can feed into traditional refineries with little to no change to existing infrastructure.

With an alcohol-production platform originally based on a modified E. coli licensed from UCLA, and other technological tweaks, Gevo says it can produce isobutanol (and other alcohols) using biobased processes and renewable resources, at up to 50% cost reductions over petroleum-based alcohol production.

In essence, Gevo is positioning itself to become a long-term supplier of industrially useful intermediates for chemicals production that also have utility as fuels and as fuel additives. In fact, Dr. Gruber made ASTM-spec gasoline that a recent Colorado news clip showed him pouring into the gas tank of his own Jeep.

This past Fall, Gevo entered into an agreement with ICM, which designs and constructs ethanol plants, for production of isobutanol and hydrocarbons from retrofitted ethanol plants. And in January, Gevo partnered with Bye Energy, an energy and aviation-fuel company, to supply renewable fuels for small and medium-sized airports.

“This technology isn’t decades away,” Dr. Gruber insists. Gevo is due to be producing isobutanol at commercial scale by 2010. 

Points to Consider

  • Within the next few years, ethanol will penetrate 100% of the gasoline market, offsetting total U.S. gasoline volumes sold by approximately 25%.

  • Corn ethanol dominates the U.S. ethanol market.

  • U.S. legislation mandates 36 billion gallons of biofuels in production by 2022, 21 billion of which must be non-cornstarch-based.

  • With economic pressures, some ethanol producers (corn and second-generation) have ceased operations. Development of lignocellulosic ethanol facilities is proceeding nonetheless.

  • Companies like Poet, DuPont Danisco Cellulosic Ethanol, and Gevo plan to be producing lignocellulosic ethanol at commercial scale by 2011/2012.

  • Isobutanol and other next-generation biofuels are in the works and can be chemically identical to current petroleum-based gasoline and refined products, but produced with renewable feedstocks and methods with better environmental footprints.