Sunday, March 05, 2006

The economics of ethanol

Ethanol as an alternative fuel continues to spark controversy between those who see it as a real alternative to oil and those who believe that it is a net energy sink and a ploy to prop up agricultural subsidies. I decided to do some research this morning to answer the net energy question once and for all. Based on a 2005 study by the US Department of Agriculture, using 2001 data, the net energy balance of ethanol, applying energy credits for byproducts, is a positive 1.67. Not taking byproducts into account, the net energy balance is 1.06. So as a pure conversion process, ethanol production was only barely net energy positive in 2001.

The real promise of ethanol will come with the production of celluosic ethanol, which is just now on the verge of commercial viability.

Cellulosic biomass, dubbed the most abundant material on earth, holds tremendous promise as a feedstock for ethanol production due to its widespread availability and potential for high fuel yields. Examples of sources for cellulosic ethanol include corn stover, cereal straws, sugarcane bagasse, sawdust, paper pulp, small diameter trees, and dedicated energy crops such as switchgrass.

As with producing ethanol from grain, processing cellulosic sources extracts the fermentable sugars from the feedstock for distillation into alcohol. Unlike grain, the sugars in cellulose are locked in complex carbohydrates called polysaccharides, or long chains of simple sugars. Separating these complex structures into fermentable sugars is essential to the efficient and economical production of cellulosic ethanol.


How Much Ethanol?

A report from the U.S. Departments of Agriculture and Energy, “Biomass as Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply,” finds that biomass – any organic matter available on a renewable or recurring bases – has surpassed hydropower as the largest domestic source of renewable energy, and much potential remains.

The study outlines a national strategy in which one billion dry tons of biomass would displace 30 percent of the nation’s petroleum consumption for transportation. Last year’s production of ethanol rang in at 3.4 billion gallons, but that total could reach upwards of 80 billion gallons under the scenario drawn here.

Looking at just forestland and agricultural land, the two largest probable sources for biomass, the report found potential exceeding 1.3 billion dry tons per year. The Departments estimate this is enough biomass to meet more than one-third of this country’s current demand for transportation fuels.


Efficient, Economical Enzymes

Reducing the cost and improving the efficiency of converting cellulosic materials into fermentable sugars is one of the keys to progress. The Department of Energy’s National Renewable Energy Laboratory (NREL) has partnered with private biotech companies to make significant strides in this area.

Novozymes, a biotech company based in Denmark with operations in the U.S., began collaborative research with NREL in January 2001 to cut the cost of converting corn stover into sugars for the production of ethanol.

Last month the research partners announced that a thirty-fold reduction has been achieved in the cost of enzymes needed to produce ethanol from cellulosic sources. Now at a cost of 10 - 18 cents per gallon in laboratory trials, the company says that enzymes are no longer the main economic barrier to the commercialization of
this technology.


Another Avenue: Engineered Bacteria

A University of Florida researcher has developed a biotech “bug” that is capable of converting cellulosic biomass to ethanol.

Lonnie Ingram, Director of the Florida Center for Renewable Chemicals and Fuels, has developed genetically engineered E. coli bacteria that can convert all types of sugar found in plant cell walls into fuel ethanol. The bacteria produce a high yield of ethanol from biomass such as sugarcane residues, rice hulls, forestry and wood wastes, and other organic materials.

Ingram says he genetically engineered the E. coli organisms by cloning the unique genes needed to direct the digestion of sugars into ethanol, the same pathway found in yeast and higher plants. With the ethanol genes, he says that bacteria produce ethanol from biomass sugars with 90 to 95 percent efficiency.


Ready for Commercialization?

Bob Perlack of the Oak Ridge National Laboratory (ORNL) describes the industry as being in the early stages of commercialization. “There are many technical hurdles that must be overcome to make cellulosic ethanol production competitive. The recent increase in oil prices certainly helps improve the economics,” Perlack said.
He recommends the continuation of research and development, coupled with energy policy initiatives and incentives, to drive the process.

Joel Cherry from Novozymes believes that most of the pieces are in place. “We have what we need now to produce ethanol from cellulose. The key is to integrate the pieces into an economically competitive process and commercialize it.”
He says that Novozymes is working to address some barriers that remain, such as identifying enzyme mixes that work with other substrates and with other pre-treatments.

Abengoa Bioenergy, an ethanol producer in Europe and in the U.S., says they expect to initiate testing of Novozymes’ enzymes next year at their biomass fractionation process development pilot plant in York, Nebraska.

Ingram’s University of Florida technology has become Landmark Patent No. 5,000,000 through the U.S. Department of Commerce. It is being commercialized with assistance from the Department of Energy, and BC International Corp., based in Dedham, Massachusetts, holds exclusive rights to use and license the engineered bacteria.
Iogen Corporation, headquartered in Ottawa, Canada, is also planning their first full-scale facility to produce ethanol from cellulosic biomass sources. EcoEthanol™ is the patented name of Iogen’s cellulose ethanol process which uses enzyme hydrolysis to convert the cellulose into sugars.

The company is considering sites for the facility in Idaho or in Canada, and has been meeting with Idaho farmers to see if they can contract enough wheat and barley straw to make that location feasible. Iogen officials say the proposed plant could produce between 30 million to 50 million gallons of cellulose-based ethanol annually and would add a considerable revenue stream to the local area for the 500,000 tons of straw needed.

Next Step: Biorefineries

NREL and its partners say that the research conducted in this area is an important step toward realizing the potential of biorefineries. Biorefineries, analogous to today’s oil refineries, will use plant and waste materials to produce an array of fuels and chemicals – not just ethanol. Biorefineries will extend the value-added chain beyond the production of renewable fuel only.

Progress toward a commercially viable biorefinery depends on the development of pilot-scale, real-world processes for biomass conversion. With these new technologies for the production of cellulosic ethanol, its promise becomes closer to reality with each passing day.

Obviously large scale production of ethanol in quantities that can have a real impact on the supply side of the equation are several years off, but it seems that etanol's eventual place as a major source of energy is assured.


Blogger Harry Eagar said...

While no expert on this, I have had a chance to observe lots and lots of alternative fuel experiments in my county. This has led me to one conclusion: It (almost) never makes sense to pay money to turn one fuel into another fuel.

Bagasse, for example, is a good boiler fuel as it comes out of the mill. Building a multimillion-dollar plant to make liquid motor fuel out of it will seldom or never make sense.

Also, biomass is not cost-free, although sometimes it seems to be. I doubt soil-mining costs are included in anybody's budgets.

If you are troubled by an agricultural crop residue that has to be disposed of to keep down pests
(like rice hulls but not like corn stover), then your feedstock is not only free, but someone will pay you to take it off their hands.

Maybe. The most obvious source of liquid biofuel in the country is peanut hulls.

There is more oil (though not edible) in the hull than in the kernel, and it can be extracted by digestion. There are millions of tons of the stuff.

A lab-scale extraction process has been available for over 30 years -- I saw it in operation in Georgia in 1973 -- but so far it either doesn't scale up or it doesn't pay.

Another problem with biosources is that even when they are very big, they are small compared with petroleum/coal extraction.

A guy I know is making diesel from french fry oil in several locations, using technology from the NEL in Idaho. His big problem is collecting the oil.

Last year he did a test run on 3 tons of fish oil that is left over from processing Alaska pollack into fake crabmeat. Worked fine, though a bit smelly, and may prove to be a useful approach since otherwise the oil is troublesome to dispose of.

I believe the annual supply is around 300K T. A lot of stinky fish oil when you're the one who has to get rid of it, but not a very big contribution to overall fuel demand.

March 05, 2006 11:44 AM  
Blogger Oroborous said...

Switchgrass will make at least 1,000 gallons of ethanol per acre, per year, and it can be grown on land marginally or completely unsuited to other forms of agriculture. In experimental studies, carefully tended switchgrass acre plots have yielded up to 1,500 gallons per year, with 1,150 gallons of ethanol per acre per year being the norm on those experimental plots.

Most ethanol now in use is made from corn, and the total energy output/input ratio is about 1.2, meaning that the net energy gain from corn ethanol is about 21 percent. The energy output/input ratio for switchgrass is estimated at 4.4, representing a net energy gain of 334 percent.

The ratio is better with switchgrass because it doesn't require the nurturing of row crops, and it is perennial, eliminating the need for annual planting. When the energy required to make tractors, transport farm equipment, plant and harvest, and so on is factored in, the net energy output of switchgrass is about 20 times better than corn's.

Switchgrass also does a far better job of protecting soil, virtually eliminating erosion. And it removes considerably more CO2 from the air, packing it away in soils and roots. Switch grass roots extend very deep into the soil, and aren't removed when the plant is harvested, so the CO2 used to grow those roots is permanently removed from the atmosphere.
Switchgrass also offers excellent habitat for a wide variety of birds and small mammals, as it's very brushy.

At the turn of the last century, America's transportation system was fueled by biomass: 30 million horses and mules, give or take a few million, pulled buggies, hauled wagons, dragged plows, and so on.
According to Ken Vogel, a U.S. Department of Agriculture forage geneticist helping to develop and test switchgrass for use as an ethanol feedstock, replacing animal power with machine power freed up 80 million acres of U.S. land that had been used to grow grass and other feed for these millions of animals.

While many of those acres have suburbs on them today, if we were to place 20 million acres of currently fallow land under cultivation for switchgrass, and were able to produce 20 billion gallons of ethanol per year from that land, we could replace the gasoline produced by roughly 650 million barrels of oil*, which is approximately one week's worth of global demand for oil, or five weeks' worth of demand by American motorists.**

While we would get cleaner air, fewer deaths due to air pollution, more wildlife, the satisfaction of reducing the U.S. trade deficit by $ 40 billion a year, and more American jobs, what we would not get is cheaper fuel.

Still, I'm willing to pay an extra 50¢ a gallon for mass produced switchgrass E85, if it means less dependence on unstable foreign sources of fuel.

* Refineries in the U.S. can only produce about 20 gallons of gasoline from every 42-gallon barrel of crude oil that is refined. The rest of the barrel gets turned into other petroleum products like diesel fuel, heating oil, jet fuel, and propane.
Ethanol only contains about 2/3 the energy per gallon that gasoline does, so 50% more ethanol must be produced to replace any given amount of gasoline consumption.

** Americans currently use about 375 million gallons of gasoline every day.

March 05, 2006 6:17 PM  
Blogger Bret said...

I'm amused because even though the title of the post is "The economics of ethanol," the one thing not described is, well, the economics of ethanol. It is a nice technology overview of the subject though.

So how much will ethanol cost per gallon and what can be done to make it cheaper?


Why is ethanol from switchgrass 50 cents more per gallon than gas? It seems to me that anything with a sufficiently large
total energy output/input ratio simply needs adequate automation to bring the price way, way down, no?

March 05, 2006 9:57 PM  
Blogger Severi said...

To produce ethanol from switcgrass you must first break down the cellulose and hemicellulose to sugars. This requires a lot of enzymes. This is why the cost is greater. Ethanol from corn starch or sugar crops is much easier (cheaper) to produce.

March 06, 2006 12:36 AM  
Blogger Duck said...

The title is a little misleading, I was after the more general question of whether ethanol production had a positive net energy balance. Which, of course doesn't necessarily make it economical to produce.

March 06, 2006 7:55 AM  
Blogger Harry Eagar said...

At some point, you have to fertilize the switchgrass. You cannot just keep harvesting a crop forever.

March 06, 2006 10:47 AM  
Blogger Oroborous said...

Yes, we will have to fertilize switchgrass, but we have plenty of natural gas with which to make fertilizer. It's an additional cost, but a relatively minor one.

While massive-scale production of ethanol would surely bring costs down quite a bit, I'm not sure that it can ever be cheaper than gasoline.

After all, there's a reason that we moved away from ethanol and biodiesel at the beginning of the automotive age: Petroleum has a much better mass/energy ratio than does ethanol, and it's much cheaper than biodiesel or ethanol, because the prehistoric world bore the costs of growing the biomass.
It's like inheriting a house, instead of having to build one.

We need not switch due to concerns about running out of petroleum; North America alone could supply the entire world's current oil demand for 70 years, or probably keep up with the entire world's increasing demand for 40 years, and the non-North American world has known and suspected reserves roughly equal to N.A.'s.

Alcohol and biodiesel are somewhat less polluting than petroleum products, but to my mind the best argument for alt-fuels is that they would once again place more control over American fuel supplies into the hands of Americans.
I'm all for telling the Middle East to shove off, that they're welcome to deal with the ChiComs.

Let the Chinese worry about keeping a lid on things on land, and America will merely continue keeping the shipping lanes secure.
(Not because we're so benevolent, but to keep the Chinese Navy weak).

March 07, 2006 12:17 AM  

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