March 3, 2013

The following post used as a resource:  Biofuels Digest:  “Advanced Biofuels Leadership Conference, 2013”:  Washington D.C., April 15—17, 2013

Did you know there is a mandate from our federal government for the production of 36 billion gallons of biofuels by 2022?   In looking at production in 2013, we must ask the question—Is there anyway that can be accomplished?  Anyway at all?

In Washington, the US Energy Information Administration (EIA) released a map and commentary on its website this week — indicating the spread of commercial-scale cellulosic biofuels, while cautioning that “EIA’s forecasts and projections to date have proven to be too optimistic, as volumes have been below expectations.”

EIA went on to state: “Looking forward, important challenges remain for cellulosic biofuel production. 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 of ethanol.”    I feel that one key factor in all of this is the cost of biofuels production relative to the cost of petroleum-based fuels.  When these costs are equivalent or less, we just may have a ballgame.  The jury is still out on this one.

At the same time, the EIA map detailed the growth of the cellulosic biofuels sector from 20,000 of production in 2012, to 5 million gallons in 2013 and an expected 250 million gallons in nameplate capacity by 2015.  Let’s take a look at the map given below:



These numbers, while reflecting impressive growth rates, are going to be well short of original targets set back in 2007, which aimed for 1 billion gallons of (ethanol equivalent) capacity by 2013.

Which raises the question — is there any way here on Earth that anyone could develop a scenario under which the advanced biofuels pool could reach anywhere near its 21 billion gallon target by 2022?   Critics say no, and have called for a fundamental rethink of the Renewable Fuel Standard — not only in its volumetric targets, but in its mechanisms — in fact, several bills introduced in this Congress and the last have called for outright repeal.  That repeal, depending upon economic conditions, is still being considered.

What exactly would a scenario look like under which the advanced biofuels pool could come anywhere near 21 billions gallons — in the face of scale-up challenges, timing problems, capital shortages, the ethanol blend wall, and lack of acceptance of the higher ethanol blends available on the market today (such as E85).

Well, actually, there is one. The key is to look closely at the targets — which aim for 21 billion gallons of “Ethanol-equivalent volume” on an energy content basis. Because they have higher energy densities, biobutanol, biodiesel and renewable diesel and gasoline count for a multiple of gallons (1.3. 1.5, 1.7 and 1.5 respectively) when calculating compliance.  This is a very significant statement.  The energy content of certain biofuels can be almost twice the content of petroleum-based fuels.  Very important consideration indeed.

And, it’s worth noting that obligated parties have an extra year for compliance under RFS2 rules — meaning that they could hit their targets in 2023 and meet their obligations under RFS2.

How would such a scenario work? Keep in mind, scenarios are scenarios — and in this case we are looking far down the track on early-stage technologies. Some of the companies we mention may come well short of their potential — others could emerge and substantially over-deliver on today’s expectations.

Scenario time

Here’s one compliance scenario and commentary on the likelihood of each sub-sector target being reached.



Biodiesel. 4 billion gallons by 2022. That’s a stretch target all right — but the sector has been growing fast. Up from sub-500 million gallons a few years back — the NBB is forecasting that the industry’s production is expected to reach as high as 1.5 billion gallons this year, up 50 percent over 2012. At those growth rates, it’s a no-brainer to hit 4 billion gallons — the constraining element is going to be sourcing affordable feedstock. That’s an awful lot of waste oils — though crude jatropha oil is expected to be on world markets at scale by 2022 at prices as low as $99 per barrel — prices that SG Biofuels are consistently affirming.

Biobutanol. 7.5 billion gallons by 2022. In our scenario, we have converted over 50 percent of the US ethanol fleet (which has nearly 15 billion in production capacity). With at least four conversion technologies expected to be available (Green Biologics, Cobalt, Gevo and Butamax) — and with a compelling business case and the ethanol blend wall to consider — the conversion numbers are not themselves all that daunting. Plus, there are more than a dozen plants already in early adopter groups or making the conversion.

Renewable diesel. In our scenario, we looked for as much as 1.5 billion gallons of capacity to be available globally and supplying fuels to the US. Certainly the capacity-building scenario is feasible enough. The industry will complete nearly 800 million gallons in capacity in the 2010-2013 period when Diamond Green Diesel opens later this year. Issues will be acceptance of palm oil as a feedstock, and fuel cost. If affordable jatropha oil indeed comes on the market by 2022 in large quantities, this could well be a no-brainer — and we rate that a toss-up.

Cellulosic ethanol – POET’s network. POET-DSM certainly has the technology now, and says it could install up to 1 billion gallons of capacity in its own network by 2022 — and hopes to add-on 1 billion more through licensing technology to third parties. These numbers are contained in POET’s own long-range plan.

Cellulosic ethanol – others. ZeaChem, Fulcrum, Bluefire, Beta Renewables, Mascoma, DuPont, Fiberight, INEOS and Abengoa are expected to complete first commercials by 2015. Our 1 billion scenario here would require each of those companies (or others coming along) to build just north of 100 million gallons in capacity, each, by 2022. That’s 2-4 more projects each, depending on capacity. Certainly that’s do-able. Certainly there’s enough cellulosic feedstock for these kinds of volumes.

Not to mention a scenario like the Sweetwater cellulosic-ethanol option — in which that company supplies renewable cellulosic sugars to be fermented at conventional ethanol refineries. Two customers already signed up there. All comes down to finance.

KiOR cellulosic biofuels. KiOR hopes to build 250 million gallons in capacity by mid-decade in Mississippi alone — in our scenario, we looked for 1 billion gallons from this company. Rob Stone at Cowen & Company has modeled KiOR’s capacity at 2.3 billion gallons by 2022.

Other drop-in diesels. There’s a lot of other companies targeting drop-in fuels — heading for scale by 2022. Sapphire Energy, for example, is aiming for 1 billion gallons by 2025. There’s Cool Planet and Joule Unlimited coming along, too, just to name two closely-followed companies. And Amyris or Solazyme, for example, could be producing fuels to add in to the totals here. Our scenario calls for 1.5 billion gallons by 2022. That would require each of the above-mentioned companies to deliver 300 million gallons in fuel capacity by 2022. That’s do-able — though we may see this sector in particular embracing the joys of high-value chemicals.

Brazilian sugarcane ethanol. Brazilian ethanol counts towards RFS2 totals in the advanced biofuels pool. Brazil is expected to be ramping up capacity and is targeting exports. Another path here might well me added capacity from US ethanol plants, using a combination of sorghum feedstocks and energy from biogas to qualify as an advanced biofuel.

Summing it up

So, what did we come up with?  8 sub-sectors with stretch targets but no moon shots.

Overall, the scenario requires 11.5 billion gallons of ethanol distribution and 7.5 billion gallons of biobutanol. We see that as fully achievable using the existing E10 blending limits, and a 16 percent waiver in the case of biobutanol. Biodiesel would be blending at just north of 5 percent, and that’s expected to be compliant with what infrastructure will tolerate by then. The remainder comes in the form of drop in fuels.

The Bottom line

The target is a real stretch, but feasible. No miracle technologies required — all of the projects cited are well along in their development, and there are no hail-Mary expectations from any of them. It will come down less to construction timelines and more to affordable capital and feedstock.

Those remain big question marks.




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