Future of Biofuels

World Future Society Conference
July 30, 2007
Minneapolis, MN

By Jim Lee

Biofuels is a topic that has been getting much attention lately, and is also an area that is changing rapidly.  So rapidly, in fact, that the presentation that I put together on this topic just six months ago needed to be almost entirely rewritten.  In a few minutes, we’ll go over some recent trends. 

I’d like to start by clearing up a popular misconception that biofuels are by nature exotic or sophisticated.  So, I’d like you to think of your two favorite food groups: I’m not talking about vegetables.  And, I’m not talking about meat.  I’m talking about Sugars and Fats. These simple compounds are the two basic sources of biofuels.

 Think about a can of soda.  What are the two main sweeteners that are used in soda?  Corn syrup and cane sugar.  And these also turn out to be the main sources of ethanol.  If you take sugar then ferment it into alcohol, and purify it through distillation, you have ethanol.  And if you ferment and distill corn, you get a very special type of ethanol that some people call “moonshine.” Needless to say, there are regions of our country that have generations of experience with this particular technology. 

 Now think about the other food group, which would be fats.   What kind of fats are in a… Oreo Cookie?  Oil – maybe canola oil or maybe peanut oil.  Biodiesel is essentially just that – a plant oil of almost any sort.   

Biofuels have been around since the beginning.  The early Ford Model T’s would run on ethanol, which was then sold at the country store.   

But, what has happened that changed biofuels from the last big thing to the next big thing?  One significant change is that a gasoline has increased from $1 a gallon to $3.25 a gallon in less than five years.  Let’s face it, we knew something was wrong when gasoline was cheaper than water.  It was just too good to last.

 And there are signs that our supplies of petroleum are not going to last forever.  Exxon stated in its annual report that it produced less oil in 2006 than it did in the previous year.  The largest oilfield in the world, the Ghawar in Saudi Arabia, produces 1/20^th  of the world’s supply of petroleum, is showing signs that it will also have less production this year than last. 

Meanwhile, here in the U.S. we import close to 60% of our petroleum.  Clearly there are some big opportunities for alternative fuels.

We are definitely beginning to see some regional differences in biofuel production.   In U.S., we’ve embraced bioethanol from corn production.  However, Brazil is the second largest producer of ethanol and it relies on sugarcane, which is roughly twice as productive per acre.  Meanwhile, Europe seems to be relying on biodiesel from rapeseed (although in the U.S. we call it “canola”, because it just sounds a bit more marketable.)   Most of Europe’s biodiesel production is coming from Germany, where there are government subsidies of $1.80 per gallon. 

 It’s doubtful that we will ever see most biofuels being used on a standalone basis anytime soon.  What we are seeing is that biofuels are getting blended in greater proportions.  I was surprised recently when I noticed that my Prius hybrid has been running on a 10% ethanol blend from local Conoco station for the past year!  This is sometimes called gasohol. 

 It is worth noting, that ethanol on a stand-alone basis, lacks the energy density of conventional gasoline and consumers report that they typically get only 80%-90% of their normal mileage when using high ethanol blends.  BP and Dupont are jointly working on an alternative process that produces biobutanol, which has a higher energy density (as measured by octane number) than ethanol.  Biobutanol can also be transported via pipeline.     

 Ethanol is not necessarily a permanent solution for the U.S. energy needs.  Dedicating all current U.S. corn and soybean production to biofuels would meet only 12% of our gasoline demand.    And this brings up another complication. 

 As a result of increased crop demand for ethanol production in the U.S., we’ve seen price spikes in multiple parts of the food chain.  Corn prices have gone up from $1.90 a bushel to over $4.00 a bushel earlier this year.  As a result, profit margins on ethanol production have been squeezed from $1.00 per gallon a year ago to $.03 per gallon this spring.  This is reflected in the price of ethanol stocks such as Archer Daniels Midland and Pacific Ethanol, both of which peaked last year. 

 Corn is an important feed product in both the dairy and the poultry industries.  So, we have also seen a 6% rise in milk over the past year, and a 20% increase in egg prices over the same time. 

 In January, we had the tortilla riots in Mexico City, with people protesting the high price of cornflour and lack of access to an important staple food. 

Meanwhile, barley is being displaced by heavily subsidized biofuel crops in Germany, where cheap beer could become a thing of the past.

 Also, in Indonesia last year, hundreds of thousands of acres of forestland were burned to make space for environmentally friendly palm oil crops. 

 Implications and contradictions abound.

 So, let’s look at some trends that are in place to make biofuels both more cost-effective and more sustainable.

 The First trend is a change in production methods to optimize energy production at the systems-based level. 

 We are beginning to see more and more ethanol plants being situated near conventional power production plants, where excess generated heat is re-used for drying and distillation. 

 VeraSun is planning to become the first company that co-produces ethanol and biodiesel fuel from the same feedstock.  After the ethanol-production process, the resulting distillers dried grains are then recycled for oil extraction to make biodiesel.  

 E3 Biofuels is proposing an even more efficient process, in which closed-loop ethanol plants provide an organic form of co-generation.  In this process, cattle are fed the waste byproducts of ethanol distillation.  The subsequent manure is collected for fermentation and re-distillation, with the leftover manure being used for fertilization of the soil. 

 The Second Trend is an increased number of applications of biotechnology within the energy industry. 

Biotech companies are working hard to increase crop productivity.  There is now corn that is genetically engineered specifically for higher ethanol production.  It has a higher starch content which enables it to produce 5% more ethanol.  Monsanto and Dupont are competing with each other in this area. 

Celllulosic ethanol is a sort of holy grail for the biofuel industry, because it would enable the extraction of ethanol from material such as paper, yardwaste, and municipal waste.  These are cheap, abundant sources of material that do not compete with existing agricultural crops.   

The problem of extracting ethanol from plant cellulose is that it is more difficult to isolate the sugar content.  It’s the same reason why we don’t eat trees – too much fiber and too hard to digest. 

There are two ways of breaking down cellulose into sugars.  Traditional chemical hydrolysis can be performed by attacking the cellulose with acid.   BlueFire Ethanols is one company that is improving this method with grant money from the U.S. Department of Energy. 

Enzymatic hydrolysis can be performed using genetically engineered organisms.   Iogen, a biotech located in Canada, is currently producing and selling a cellulose-based ethanol, using wheat straw as feedstock and a genetically enhanced fungus designed to hyperproduce cellulose-digesting enzymes.

Synthetic biology is a new field in which existing genes are not only described and analyzed, but in which new gene arrangements can be artificially constructed.  There is a company called Synthetic Genomics which is attempting to design a bacterium that “will do everything”.  It will break down sugar like a bacterium but ferment it like yeast.   To do this, they are exploring the modification of a simple bacteria from the human urinary tract, which has only 517 genes.  The bacteria still functions when even half of its genes are knocked-out and removed.  This will enable Synthetic Genomics to “upload” new genetic instructions into the bacteria like software code.

The Third trend is increased experimentation with a broad range of potential biofuel sources. 

 As we mentioned earlier, traditional food crops might not be the best source of biofuels.  Agricultural land and water resources are becoming increasingly precious.  Fortunately, biofuels can be harvested from a broad range of sources. 

My home state of Delaware is an example.  Currently, we have just one source of renewable energy in the entire state – and that unfortunately is landfill gas.  The Delaware Solid Waste Authority captures methane from landfill decomposition and converts it to a form of synthetic gas which is used to generate electricity for 7,000 homes.  This is a big deal for a state in which second highest point is now a landfill. 

Other interesting things are happening as well. 

Tyson Foods is partnering with Conoco and Syntroleum to create renewable biodiesel from animal fat. That means that sometime soon, there could be a chicken in every tank.   

In Arkansas, Bri Energy has developed a bioreactor filled with a patented bacteria which can use a blended feedstock of nontraditional materials, such as tires, consumer waste, fossil fuels, etc.  Bri Energy is expected to go into commercial production by next year.

But the most intriguing source for biofuels might be algae.   Algae is interesting because it has a fat content of up to 50%.  It has relatively little cellulose, and it doubles in mass every four hours.  Algae grows year-round and it lives on sunlight, carbon dioxide, and brackish water. 

It’s been estimate that algaculture can produce 100x more fuel per acre than corn crops, using 95% less water than conventional agriculture.   I’ve heard it said that algae can produce more oil in an area the size of a two-car garage than an entire football field of soybeans.

As an added plus, the carbon dioxide absorption from algae production can be used in some areas to create marketable carbon offset credits.

Bob Metcalf, a founder of 3Com and one of the engineers who led the development of the Ethernet is now heading a start-up called GreenFuel which is committed to cultivating biofuels from algae.  

Both GreenFuel and Greenstar Products ran pilot tests on algae production earlier this spring, and they both ran into exactly the same problem – the stuff grew faster than they could harvest it.  This is a great problem to have, and potentially a great opportunity.  (pause)

All if this is beginning to remind me of the 1967 film, The Graduate.  There is a classic scene where Walter Brooke gives Dustin Hoffman some advice.  An updated version would sound like this: 

I just want to say one word to you - just one word.  Are you listening?  Algae.  There’s a great future in algae.  Think about it.

If you’d like to learn more about biofuels and the future of transportation, you may want to catch the 2:00 presentation this afternoon with Massoud Amin, David Keenan, and Rolf Nordstrom. Thank you.