The U.S. Energy Information Administration (EIA) recently announced that the country’s cellulosic biofuels production totaled about 20,000 gallons last year, way below the 500 million gallons target set by Congress with the Energy Independence and Security Act of 2007.
Several companies, EIA reports, combined to produce about 20,000 gallons of fuels using cellulosic biomass — e.g., wood waste, sugarcane bagasse — from commercial-scale facilities in late 2012. EIA estimates this output could grow to more than 5 million gallons in 2013 as operations ramp up at several plants. Additionally, EIA reports that several more plants with proposed aggregate nameplate capacity of around 250 million gallons could begin production by 2015.
Although cellulosic biofuels volumes are expected to grow significantly relative to current levels, they will likely remain well below the targets envisioned in the Energy Independence and Security Act of 2007. That law set a target level of 500 million gallons of cellulosic biofuels for 2012 and 1 billion gallons for 2013, growing to 16 billion gallons by 2022.
According to EIA, the projects were designed to produce ethanol or drop-in biofuels (fuels that are direct replacements for petroleum-based gasoline or distillate fuels) as well as steam.
Using technology known as combined heat and power, this steam can both be consumed internally as a process-heat source and used to generate power. The power can also be used internally to operate pumps and other electrical equipment or sold to the electrical grid, giving these projects the potential to consume no fossil fuels, EIA said.
A number of the projects may also generate a solid co-product with the potential for use as a fertilizer. To the extent that feedstock for these processes are waste products and little to no fossil fuel inputs are required for their conversion, greenhouse gas emissions could be as much as 80 percent to 90 percent below those of petroleum products on a life-cycle basis.
Despite the growth potential over the next several years, the path to commercial biofuels has not been smooth, according to EIA. They said that a number of biofuels projects, including one from BP Biofuels in Highlands County, Fla., have been canceled before starting major construction. In addition, many projects have experienced delays in their commercialization attempts.
EIA said several reasons underpin slow growth in the commercialization of biofuels:
- Difficulties obtaining financing in the aftermath of the debt crisis.
- Technology scale-up difficulties at startup companies.
- Strategic corporate shifts because of increased availability of low-cost natural gas.
EIA said all of its forecasts and projections made since the passage of the Energy Independence and Security Act of 2007 anticipated large shortfalls between the renewable fuel standards (RFS) targets and the volumes of cellulosic biofuels sold. Despite this, EIA said its forecasts and projections to date “have proven to be too optimistic, as volumes have been below expectations.”
“Looking forward, important challenges remain for cellulosic biofuel production,” EIA reports. “Total production costs for many of these first-of-a-kind projects remain higher than the cost of petroleum-based fuels on both a volumetric and energy-content basis. Cellulosic ethanol also faces the same market and regulatory challenges to increasing its share of the fuel market that is faced by other types ofethanol.
Meanwhile, EIA reports that U.S. crude oil production exceeded an average 7 million barrels per day (bbl/d) in November and December 2012, the highest volume since December 1992. The end-of-year data were reported on Feb. 27 in EIA’s Petroleum Supply Monthly.
“Increasing oil production in North Dakota and onshore Texas drove the increase in U.S. crude oil production over the last several months (although crude oil production in North Dakota took a dip in November, before increasing again in December),” EIA said.
At the same time that U.S. crude oil is increasing and crude oil exports are down, gasoline prices are rising and the efforts to grow biofuels, such as E15, are under attack.
Bob Dinneen, president and CEO of the Renewable Fuels Association, said the debate about E15 “should be one of consumer choice.”
“There is no requirement that gasoline marketers offer E15 and no mandate for consumers to buy it,” he said. “However, for those marketers that want to offer their customers a higher octane alternative to petroleum, E15 is a great option.”
As gasoline prices across the country continue to climb, Dinneen said it’s “threatening household budgets and economic recovery alike, ethanolcontinues to provide consumer savings at the pump.” Last week, when Dinneen made his comments,ethanol was priced about 80 cents below the wholesale costs of gasoline.
“Depending on the study you choose, the increased use of ethanol in 2011 saved consumers between $0.89 and $1.09,” Dinneen said. “Those savings would only be enhanced by the use of ethanol in higher blends.”
A different opinion was offered in a 2012 Congessional Budget Office report. The study found that it costs taxpayers $1.78 in subsidies for each gallon of gasoline that corn-based ethanol replaces.
Dinneen said to leave the market artificially constrained further limits market opportunities for next-generation biofuels very close to commercialization and is “missing an opportunity to meaningfully increase America’s use of renewable fuels and reduce our dependence on imported oil.”
According to EIA: “While liquid fuels and electricity are expected to be the primary products of this industry in the near term, many companies are developing technologies to produce intermediate chemicals from cellulosic biomass as well, including butanediol, polymers, succinic acid, paraxylene, and others. Over the medium to long term, these technologies have the potential to improve business.”