Opportunity for profitable investments in cellulosic biofuels

Research efforts to allow large-scale conversion of cellulose into biofuels are being undertaken in the US and EU. These efforts are designed to increase logistic and conversion efficiencies, enhancing the economic competitiveness of cellulosic biofuels. However, not enough attention has been paid to the future market conditions for cellulosic biofuels, which will determine whether the necessary private investment will be available to allow a cellulosic biofuels industry to emerge. We examine the future market for cellulosic biofuels, differentiating between cellulosic ethanol and ‘drop-in’ cellulosic biofuels that can be transported with petroleum fuels and have equivalent energy values. We show that emergence of a cellulosic ethanol industry is unlikely without costly government subsidies, in part because of strong competition from conventional ethanol and limits on ethanol blending. If production costs of drop-in cellulosic biofuels fall enough to become competitive, then their expansion will not necessarily cause feedstock prices to rise. As long as local supplies of feedstocks that have no or low-valued alternative uses exist, then expansion will not cause prices to rise significantly. If cellulosic feedstocks come from dedicated biomass crops, then the supply curves will have a steeper slope because of competition for land.     

Lifecycle economic analysis of biofuels: Accounting for economic substitution in policy assessment

This paper develops a lifecycle economic analysis (LCEA) model that integrates endogenous input substitution into the standard lifecycle analysis (LCA) of biofuel that typically assumes fixed-proportions production. We use the LCEA model to examine impacts of a pure carbon tax and a revenue-neutral tax-subsidy policy on lifecycle greenhouse gas emissions from cellulosic ethanol using forest residues as feedstock in Washington State. In a model allowing for input substitution in the cellulosic ethanol feedstock, conversion, and transportation process, we consider energy source substitution (woody biomass for coal in the cellulosic ethanol conversion plant and biodiesel for diesel in feedstock production and feedstock and ethanol transportation) as well as substitution of capital and labor for energy in all stages of the lifecycle. We find that ignoring endogenous input substitution by using standard LCA leads to substantial underestimation of the impact of carbon tax policies on carbon emissions. Both tax policies can substantially reduce carbon emissions by inducing substitution among inputs. The revenue-neutral tax-subsidy policy reduces emissions more effectively than the carbon tax policy for carbon tax rates currently in place throughout most of the world. It stimulates substitution of woody biomass for coal and biodiesel for diesel at much lower tax rates when accompanied by corresponding subsidies for reduced emissions from renewable sources.     

Biofuel production: Challenges and opportunities

It is increasing clear that biofuels can be a viable source of renewable energy in contrast to the finite nature, geopolitical instability, and deleterious global effects of fossil fuel energy. Collectively, biofuels include any energy-enriched chemicals generated directly through the biological processes or derived from the chemical conversion from biomass of prior living organisms. Predominantly, biofuels are produced from photosynthetic organisms such as photosynthetic bacteria, micro- and macro-algae and vascular land plants. The primary products of biofuel may be in a gas, liquid, or solid form. These products can be further converted by biochemical, physical, and thermochemical methods. Biofuels can be classified into two categories: primary and secondary biofuels. The primary biofuels are directly produced from burning woody or cellulosic plant material and dry animal waste. The secondary biofuels can be classified into three generations that are each indirectly generated from plant and animal material. The first generation of biofuels is ethanol derived from food crops rich in starch or biodiesel taken from waste animal fats such as cooking grease. The second generation is bioethanol derived from non-food cellulosic biomass and biodiesel taken from oil-rich plant seed such as soybean or jatropha. The third generation is the biofuels generated from cyanobacterial, microalgae and other microbes, which is the most promising approach to meet the global energy demands. In this review, we present the recent progresses including challenges and opportunities in microbial biofuels production as well as the potential applications of microalgae as a platform of biomass production. Future research endeavors in biofuel production should be placed on the search of novel biofuel production species, optimization and improvement of culture conditions, genetic engineering of biofuel-producing species, complete understanding of the biofuel production mechanisms, and effective techniques for mass cultivation of microorganisms.     

Socio-economic aspects of different biofuel development pathways

There are several policy drivers for biofuels on a larger scale in the EU transport sector, including increased security of energy supply, reduced emission of greenhouse gases (GHG), and new markets for the agricultural sector. The purpose of this socio-economic cost analysis is to provide an overview of the costs of meeting EU biofuels targets, taking into account several external costs and benefits. Biofuels are generally more expensive than traditional fossil fuels, but the expected increasing value of GHG emission reductions will over time reduce the cost gap. High crude oil prices significantly improve the economic benefit of biofuels, but increased demand for biomass for energy purposes is likely to increase the price of biofuels feedstock and biofuels costs. The key question is to what extent increasing oil prices will be passed on to biofuels costs. Socio-economic least costs for biofuels production require a market with a clear pricing of GHG emissions to ensure that this factor is included in the decision-making of actors in all links of the fuel chain.     

Optimizing biofuel production: An economic analysis for selected biofuel feedstock production in Hawaii

Hawaii’s agricultural sector has an immense supply of natural resources that can be further developed and utilized to produce biofuel. Transformation of the renewable and abundant biomass resources into a cost competitive, high performance biofuel could reduce Hawaii’s dependence on fossil fuel importation and enhance energy security. The objectives of the study are to evaluate the economic feasibility of selected bioenergy crops for Hawaii and compare their cost competitiveness. The selected feedstock consists of both ethanol and biodiesel producing crops. Ethanol feedstock includes sugar feedstock (sugarcane) and lignocellulosic feedstock (banagrass, Eucalyptus, and Leucaena). Biodiesel feedstock consists of Jatropha and oil palm.The economic analysis is divided into two parts. First, a financial analysis was used to select feasible feedstock for biofuel production. For each feedstock, net return, feedstock cost per Btu, feedstock cost per gallon of ethanol/biodiesel, breakeven price of feedstock and breakeven price of ethanol/biodiesel were calculated. Leucaena shows the lowest feedstock cost per Btu while banagrass has the highest positive net returns in terms of both feedstock price and energy price.The second approach assumes an objective of maximizing net returns. Given this assumption, biofuel producers will produce only banagrass. As an example, the production of bioenergy on the island of Hawaii is illustrated where 74,793 acres of non-prime land having a “warm and moist” soil temperature and moisture regime are available. Using average yields (static optimization), banagrass production on this acreage can yield 8.24 trillion Btus of energy (ethanol). This satisfies the State’s 10% self-sufficiency energy goal of 3.9 trillion Btus by 2010. Incorporating risk through variability in crop yields and biofuel prices separately shows banagrass as having the highest probability for receiving a positive net return. Banagrass is the leading candidate crop for biofuel production in Hawaii and the State of Hawaii ethanol goal can be achieved by allocating non-prime lands for banagrass production without compromising prime lands currently allocated for agricultural food production in Hawaii. Physical, environmental and socio-economic impacts should be accounted for in evaluating future biofuel projects.     

Economics of small-scale on-farm use of canola and soybean for biodiesel and straight vegetable oil biofuels

While the cost competitiveness of vegetable oil-based biofuels (VOBB) has impeded extensive commercialization on a large-scale, the economic viability of small-scale on-farm production of VOBB is unclear. This study assessed the cost competitiveness of small-scale on-farm production of canola- [Brassica napus (L.)] and soybean-based [Glycine max (L.)] biodiesel and straight vegetable oil (SVO) biofuels in the upper Midwest at 2007 price levels. The effects of feedstock type, feedstock valuation (cost of production or market price), biofuel type, and capitalization level on the cost L⁻¹ of biofuel were examined. Valuing feedstock at the cost of production, the cost of canola-based biodiesel ranged from 0.94 to 1.13 $ L⁻¹ and SVO from 0.64 to 0.83 $ L⁻¹ depending on capitalization level. Comparatively, the cost of soybean-based biodiesel and SVO ranged from 0.40 to 0.60 $ L⁻¹ and from 0.14 to 0.33 $ L⁻¹, respectively, depending on capitalization level. Valuing feedstock at the cost of production, soybean biofuels were cost competitive whereas canola biofuels were not. Valuing feedstock at its market price, canola biofuels were more cost competitive than soybean-based biofuels, though neither were cost competitive with petroleum diesel. Feedstock type proved important in terms of the meal co-product credit, which decreased the cost of biodiesel by 1.39 $ L⁻¹ for soybean and 0.44 $ L⁻¹ for canola. SVO was less costly to produce than biodiesel due to reduced input costs. At a small scale, capital expenditures have a substantial impact on the cost of biofuel, ranging from 0.03 to 0.25 $ L⁻¹.     

Economic feasibility of algal biodiesel under alternative public policies

The motivation for this research was to determine the influence of public policies on economic feasibility of producing algal biodiesel in a system that produced all its energy needs internally. To achieve this, a steady-state mass balance/unit operation system was modeled first. Open raceway technology was assumed for the production of algal feedstock, and the residual biomass after oil extraction was assumed fermented to produce ethanol for the transesterification process. The project assumed the production of 50 million gallons of biodiesel per year and using about 14% of the diesel output to supplement internal energy requirements. It sold the remainder biodiesel and ethanol as pure biofuels to maximize the rents from the renewable fuel standards quota system. Assuming a peak daily yield of 500 kg algal biomass (dry basis)/ha, the results show that production of algal biodiesel under the foregoing constraints is only economically feasible with direct and indirect public policy intervention. For example, the renewable fuel standards' tracking RIN (Renewable fuel Identification Number) system provides a treasury-neutral value for biofuel producers as does the reinstatement of the renewable fuel tax credit. Additionally, the capital costs of an integrated system are such that some form of capital cost grant from the government would support the economic feasibility of the algal biodiesel production.     

Stakeholders' perceptions on challenges and opportunities for biodiesel and bioethanol policy development in Thailand

Thailand is Southeast Asia's largest promoter of biofuels. Although, Thailand promotes the use of biofuels, it has yet to achieve its policy targets. This paper focuses on the first generation biofuel development in Thailand and examines the perceptions of seven stakeholder groups to guide further policy development. These stakeholders were feedstock producers, biofuel producers, government agencies, car manufacturers, oil companies, non-profit organizations and end users. It combines a Strengths, Weakness, Opportunities and Threats (SWOT) framework with an Analytical Hierarchy Process (AHP) framework and a TOWS Matrix for analysis of stakeholder's perceptions to propose priorities for policy development. Five policies were of high priority for development of biofuel. These are: (1) promoting biofuel production and use in long term through government policies, (2) revising government regulations to allow sale of biofuel products to other domestic industries while keeping retail prices of blended biofuels below those of regular ethanol and biodiesel, (3) improving farm management and promoting contract farming, (4) expanding cultivation area and yield without affecting food production and environmental sustainability, and (5) balancing biofuel feedstock use between the food and energy industries.     

Biofuel excision and the viability of ethanol production in the Green Triangle,Australia

The promotion and use of renewable energy sources are established priorities worldwide as a way to reduce emissions of Greenhouse Gases and promote energy security. Australia is committed to reach a target of 350 ML of biofuels per year by 2010, and incentives targeted to producers and consumers have been placed. These incentives include zero excise until 2011 for the ethanol produced in Australia and gradual increase of the taxation rates reaching the full excise of 0.125 AUD per litre by 2015. This paper analyses the viability of the second generation ethanol industry in the Green Triangle, one of the most promising Australian regions for biomass production, by comparing the energy adjusted pump prices of petrol and the produced ethanol under different taxation rates and forecasted oil prices. Major findings suggest that under the current conditions of zero fuel excise and oil prices around 80US$ per barrel ethanol production is viable using biomass with a plant gate cost of up to 74 AUD per ton. Moreover, the forecasted increase in oil prices have a higher impact on the price of petrol than the increased ethanol excise on the pump price of the biofuel. Thus, by 2016 feedstock with a plant gate cost of up to 190 AUD per ton might be used for ethanol production, representing a flow of 1.7 million tons of biomass per year potentially mitigating 1.2 million tons of CO₂ by replacing fossil fuels with ethanol.     

第二代和第三代生物燃料发展现状及启示

第二代生物乙醇以生物质为原料,包括纤维素乙醇和纤维素生物汽油两种产品。目前已建有示范装置和/或工业装置的纤维素乙醇生产技术包括硫酸/酶水解-发酵技术、硫酸水解-发酵技术、酸水解-发酵-酯化-加氢技术、酶水解-发酵技术。业内专家认为,用酶替代硫酸水解是纤维素乙醇生产的发展方向。目前已经和准备进行示范装置试验的纤维素生物汽油生产技术包括快速热解-加氢改质技术和BioForming技术。第二代生物柴油主要以动植物油脂为原料,通过催化加氢生产非脂肪酸甲酯生物柴油,它是理想的优质柴油调合组分。生产第二代生物柴油的加氢技术包括加氢脱氧、回收丙烷和其他轻烃气体、脱水、异构化和裂化、蒸馏等5个步骤,主要有NExBTL可再生柴油生产技术、Ecofining绿色柴油生产技术、Haldor Topsoe可再生柴油生产技术、EERC可再生柴油生产技术。第三代生物燃料有两种:一种是以海藻油为原料生产乙醇、丁醇、喷气燃料和柴油,海藻培养(生长)和萃取海藻油是核心步骤,目前尚处于初期阶段;另一种是以生物质原料通过气化合成生产汽油、喷气燃料和柴油,重点是开发生物质气化技术,降低生产成本。我国应借鉴国外发展第二代和第三代生物燃料的做法,把技术开发工作做深做细做透,搞清楚原料的供应情况;目前我国生物柴油主要采用酯交换法生产脂肪酸甲酯,应考虑开发和采用加氢法生产第二代生物柴油,并努力扩大除麻风果油以外的原料来源;同时应加大海藻生物燃料和生物质气化合成生物燃料的开发力度。     

Optimal locations for second generation Fischer Tropsch biodiesel production in Finland

A country level spatially explicit mixed integer linear programming model has been applied to identify the optimal Fischer Tropsch biodiesel production plants locations in Finland. The optimal plant locations with least cost options are identified by minimizing the complete costs of the supply chain with respect to feedstock supply (energywood, pulpwood, sawmill residuals, wood imports), industrial competition (pulp mill, sawmill, combined heat and power plants, pellet industries) and energy demand (biodiesel, heat, biofuel import). Model results show that five biodiesel production plants of 390 MWfeedstock are needed to be built to meet the 2020 renewable energy target in transport (25.2 PJ). Given current market conditions, the Fischer Tropsch biodiesel can be produced at a cost around 18 €/GJ including by-products income. Furthermore, the parameter sensitivity analysis shows that the production plant parameters such as investment costs and conversion efficiency are found to have profound influence on the biodiesel cost, and then followed by feedstock cost and plant size. In addition, the variations in feedstock costs and industrial competition determine the proportion of feedstock resource allocation to the production plants. The results of this study could help decision makers to strategically locate the FT-biodiesel production plants in Finland.     

Liquid biofuels potential and outlook in Iran

Iran’s diversity of terrain and climate enables cultivation of a variety of energy crops suitable for liquid biofuels production. In Iran, the easily and readily available biofuel feedstock today for production of bioethanol is molasses from sugar cane and sugar beet. There is also about 17.86 million tons of crops waste from which nearly 5 billion liters of bioethanol could be produced annually. This amount of bioethanol is sufficient to carry out E10 for spark ignition engine vehicles in Iran by 2026. There is also enormous potential for cultivation of energy plants such as cellulosic materials and algae. Iran has 7%of its area covered with forest products which are suitable sources for liquid biofuels such bioethanol and biodiesel. Iran also has a long tradition of fishing in Caspian Sea and Persian Gulf with about 3200 km coastline and on inland rivers. The produced fish oil and other plant oils such as palm tree, jatropha, castor plant and algae are suitable biodiesel feedstock. Out of 1.5 million tons of edible cooking oil consumed in Iran annually, about 20% of it can be considered as waste, which is suitable biodiesel feedstock.This quantity along with the other possible potential feedstock are favorable sources to carry out B10 step by step until 2026.     

Investigating pellet charring and temperature in ultrasonic vibration-assisted pelleting of wheat straw for cellulosic biofuel manufacturing

Biofuels are only alternative solution for liquid transportation fuels among different kinds of renewable energy. To avoid the competition with the food, cellulosic biomass has been proposed as feedstock for manufacturing of cellulosic biofuels. Costs associated with collection, transportation, and storage of cellulosic biomass account for more than 80% cost of the feedstock. By processing cellulosic biomass into high density pellets, handling efficiency of cellulosic feedstocks can be improved, leading to costs reduction in transportation and storage. Ultrasonic vibration-assisted (UV-A) pelleting is a recently developed pelleting method, which can not only produce higher density but also break the lignin shell, to some extent, to increase cellulose accessibility and then increase sugar and biofuel yield. The reported investigations on UV-A pelleting provided little information about the relationship between charring and pelleting temperature under different input variables of pelleting. In this paper, effects of different input variables of pelleting on both charring ratio and pelleting temperature were studied. This paper, for the first time, reported the relationship between charring ratio and pelleting temperature. The obtained results will be helpful in understanding the mechanism of UV-A pelleting and providing guide to control pellet charring for a higher biofuel yield.     

Fossil energy savings and GHG mitigation potentials of ethanol as a gasoline substitute in Thailand

One of the Thai government's measures to promote ethanol use is excise tax exemption, making gasohol cheaper than gasoline. The policy in favour of biofuels is being supported by their contribution to fossil energy savings and greenhouse gas (GHG) mitigation. An analysis of energy balance (EnB), GHG balance and GHG abatement cost has been done to evaluate molasses-based ethanol (MoE) in Thailand. A positive EnB of 19.2 MJ/L implies that MoE is a good substitute for gasoline, effective in fossil energy savings. GHG balance assessment based on the baseline scenario shows that emissions are most likely to increase with the substitution. Scenarios using biogas captured from spent wash treatment and rice husk to substitute coal used in ethanol conversion give encouraging results in improving the GHG balance. However, the higher price of MoE over gasoline currently has resulted in high GHG abatement costs, even under the best-case scenario. Compared to the many other climate strategies relevant to Thailand, MoE is much less cost effective. Governed by the rule of supply and demand, a strong fluctuation in molasses price is considered the main cause of volatile MoE price. Once supplies are stable, the trend of price drops would make MoE a reasonable option for national climate policy.     

Optimal plant size and feedstock supply radius: A modeling approach to minimize bioenergy production costs

Bioenergy production involves a series of interrelated activities associated with feedstock production and feedstock-to-energy conversion. Thus, decisions on bioenergy production and deployment should be based on the simultaneous consideration of the entire supply chain. Based on cost minimization of both feedstock production and energy conversion, we develop a generic framework for determining the optimal bioenergy conversion plant size, the corresponding feedstock supply radius, and bioenergy production costs. The theoretical framework elucidates the relationships among activities along the bioenergy supply chain, suggesting strategies for enhancing the cost competitiveness of bioenergy. Such relationships as well as applications of our theoretical model are further illustrated using cases of producing electricity and cellulosic ethanol from biomass.     

Impacts of facility size and location decisions on ethanol production cost

Cellulosic ethanol has been identified as a promising alternative to fossil fuels to provide energy for the transportation sector. One of the obstacles cellulosic ethanol must overcome in order to contribute to transportation energy demand is the infrastructure required to produce and distribute the fuel. Given a nascent cellulosic ethanol industry, locating cellulosic ethanol refineries and creating the accompanying infrastructure is essentially a greenfield problem that may benefit greatly from quantitative analysis. This study models cellulosic ethanol infrastructure investment using a mixed integer program (MIP) that locates ethanol refineries and connects these refineries to the biomass supplies and ethanol demands in a way that minimizes the total cost. For the single- and multi-state regions examined in this study, larger facilities can decrease ethanol costs by $0.20–0.30 per gallon, and placing these facilities in locations that minimize feedstock and product transportation costs can decrease ethanol costs by up to $0.25 per gallon compared to uninformed placement that could result from influences such as local subsidies to encourage economic development. To best benefit society, policies should allow for incentives that encourage these low-cost production scenarios and avoid politically motivated siting of plants.     

Competition between biofuels: Modeling technological learning and cost reductions over time

A key aspect in modeling the (future) competition between biofuels is the way in which production cost developments are computed. The objective of this study was threefold: (i) to construct a (endogenous) relation between cost development and cumulative production (ii) to implement technological learning based on both engineering study insights and an experience curve approach, and (iii) to investigate the impact of different technological learning assumptions on the market diffusion patterns of different biofuels. The analysis was executed with the European biofuel model BioTrans, which computes the least cost biofuel route. The model meets an increasing demand, reaching a 25% share of biofuels of the overall European transport fuel demand by 2030. Results show that 1st generation biodiesel is the most cost competitive fuel, dominating the early market. With increasing demand, modestly productive oilseed crops become more expensive rapidly, providing opportunities for advanced biofuels to enter the market. While biodiesel supply typically remains steady until 2030, almost all additional yearly demands are delivered by advanced biofuels, supplying up to 60% of the market by 2030. Sensitivity analysis shows that (i) overall increasing investment costs favour biodiesel production, (ii) separate gasoline and diesel subtargets may diversify feedstock production and technology implementation, thus limiting the risk of failure and preventing lock-in and (iii) the moment of an advanced technology's commercial market introduction determines, to a large degree, its future chances for increasing market share.     

Blending under uncertainty: Real options analysis of ethanol plants and biofuels mandates

The value of a representative ethanol producer, that benefits from both low and high gasoline prices in the short-run, is modeled. Ethanol producers make a modest competitive profit in the mandate-induced region of production. A low price of gasoline increases the demand for blend ethanol and consequently increases the profit of ethanol producers. On the other hand, when gasoline becomes costlier than ethanol, the capacity constraints of the biofuels sector bind and ethanol producers gain large quasi-monopoly margins. This is an interesting example of a market where two commodities are complement up to a point and then substitute after that. We postulate the value of an ethanol producer as a strangle option consisting of two real options: the option to substitute gasoline at times of expensive crude oil and the option to expand supply of blend at times of cheap gasoline. Using a dynamic model we show that the higher volatilities of crude oil and ethanol costs increase biofuels firms' value. We also find non-monotonic relationships between the value of an ethanol plant and several underlying variables, including gasoline price level. We estimate the value provided by a 10% blend mandate to be around $150,000,000 for a representative ethanol unit. Our results offer a novel view of oil and feedstock price risks in contrast to the common belief that considers those risks as a negative factor for the biofuels sector.     

Modeling biomass procurement tradeoffs within a cellulosic biofuel cost model

We develop a long-run cellulosic biofuel cost model that minimizes feedstock procurement and processing costs per gallon. The distinguishing feature of the model is that it accounts for the procurement tradeoff between the intensive margin (biomass producers' participation rate) and extensive margin (biomass capture region). To investigate the extent to which this procurement tradeoff affects processors' cost-minimizing decisions, we apply the model to switchgrass ethanol production in U.S. crop reporting districts. Results suggest that location characteristics will determine the extent to which processors can reduce their total procurement costs by offering a higher biomass price to increase participation near the plant and reduce transportation costs.     

Woody biomass availability for bioethanol conversion in Mississippi

This study evaluated woody biomass from logging residues, small-diameter trees, mill residues, and urban waste as a feedstock for cellulosic ethanol conversion in Mississippi. The focus on Mississippi was to assess in-state regional variations and provide specific information of biomass estimates for those facilities interested in locating in Mississippi. Supply and cost of four woody biomass sources were derived from Forest Inventory Analysis (FIA) information, a recent forest inventory conducted by the Mississippi Institute for Forest Inventory, and primary production costs. According to our analysis, about 4.0 million dry tons of woody biomass are available for production of up to 1.2 billion liters of ethanol each year in Mississippi. The feedstock consists of 69% logging residues, 21% small-diameter trees, 7% urban waste, and 3% mill residues. Of the total, 3.1 million dry tons (930 million liters of ethanol) can be produced for $34 dry ton^?1 or less. Woody biomass from small-diameter trees is more expensive than other sources of biomass. Transportation costs accounted for the majority of total production costs. A sensitivity analysis indicates that the largest impacts in production costs of ethanol come from stumpage price of woody biomass and technological efficiency. These results provide a valuable decision support tool for resource managers and industries in identifying parameters that affect resource magnitude, type, and location of woody biomass feedstocks in Mississippi.