Kenneth Norris, Contributing Editor, Pulp & Paper International
Jan. 21, 2011
Biofuels rang in the New Year with a bang. In December 2010, President Barack Obama signed a bill that temporarily extends the $1-per-gallon production tax credit for biodiesel and other diesel fuel created from biomass, along with other energy efficiency and renewable provisions, through 2011. This is good news for the industry, signaling a continuing, if tenuous, commitment to developing alternative fuels. But the clock is ticking. It will take more than tax incentives to turn the next generation of biofuels into a profitable and sustainable market, and something investors can really get excited about.
The future of biofuels lies in the development of "drop-ins". There are currently two types of liquid biofuels in development, ethanol and so-called drop-in fuels, which are hydrocarbons that have a similar molecular composition to the petroleum-based fuel used today. Ethanol's side of the story is well known. While Brazil has capitalized on domestic sugar plantations to fuel a still-growing market, America's use of corn and coal powered distilleries has required massive subsidies to keep ethanol in the country on life support. According to a recent article in The Economist, turning a profit with today's ethanol would require the price of crude oil to exceed $120 a barrel.
Drop-ins, in comparison, offer substantially more benefits than ethanol. Made to mimic petroleum-based fuels more closely, they can be used in a wider variety of engines, including car, diesel and jet engines. And since drop-ins can be made with a more consistent quality than ethanol, they require less distillation, which in turn lowers overall greenhouse gas emissions. More importantly, while ethanol production has focused on using food crops (corn, wheat and sugarcane) as the feedstock, drop-ins can employ a stronger range of feedstocks, including wood, energy grasses, and even waste material.
Forests powering electric cars?
Current development efforts have centered on wood and grasses as the most viable cellulosic feedstocks for drop-ins. In the early going, grasses' supporters have taken the lead in development efforts, but wood is also a strong possibility and should not be counted out. Either one could certainly help augment energy requirements almost immediately, but wood-based feedstocks are already abundant and diverse. Planting grass to meet biofuel production demand, in contrast, would take land away from other more productive uses. With respect to long-term production, forests seem to be the stronger option for biofuel feedstock, and they offer more environmental benefits, including higher carbon sequestration levels.
The rise of the electric car is more good news for drop-in biofuels. Where the current state of liquid-based biofuels is aimed at cars, drop-ins can be used to power the electrical generators that in turn power the cars. This goes above and beyond even the wildest dreams of ethanol producers. Using drop-ins for low-carbon generators would also further reduce emissions and possibly overall energy requirements. In fact, a gradual shift to electric cars just could be the missing ingredient that puts drop-in biofuel development back on the fast track.
Ken Norris is a US based contributing editor to PPI magazine and the RISI community website and can be contacted at: firstname.lastname@example.org