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Inside the plant, huge bales of wheat straw are shredded and then processed using the latest advances in biotechnology combined with the centuries-old art of fermentation and distillation. The location is a biorefinery, run by the Iogen Corporation, producing fuel-grade cellulosic ethanol from agricultural wastes.
This little-known means for producing ethanol recently received support from a most unlikely source. During a State of the Union speech, President Bush advocated commercializing “cutting-edge methods” for producing ethanol from wood chips, corn stalks and switch grass within six years. His ultimate goal: to replace more than 75 percent of our oil imports from the Middle East by 2025.
Can the United States produce cellulosic ethanol at prices competitive with gasoline, and in sufficient quantities to impact oil imports? Certainly, skyrocketing oil prices are changing the competitive landscape. At the same time, technology advances are driving down cellulosic ethanol costs and improving yields.
But realizing the technology’s potential will require changes on the nation’s farms, at our filling stations and in the cars we drive; changes pushed by coordinated and sustained public policy initiatives. Despite widespread support from diverse groups including farmers, automakers, environmentalists and members of Congress, it remains to be seen if the country will devote the resources required to replace imported oil with a domestically produced biofuel.
Ethanol: A Good Alternative
High oil prices are focusing attention on the energy security benefits of replacing gasoline with ethanol. But there are also environmental and economic advantages.
Filling your car with ethanol reduces emissions of greenhouse gases (GHGs), particulate matter and ozone-forming pollutants. Based on lifecycle analysis, cellulosic ethanol lowers carbon emissions by 80 percent over gasoline, according to Michael Wang of Argonne National Laboratories. Corn ethanol showed 20 to 30 percent reductions.
Replacing one-third of our oil with $100 billion worth of cellulosic ethanol will create an estimated 1 to 2 million jobs, according to Bruce Dale, chemical engineering professor at Michigan State University.
Collecting and selling crop residues benefit rural communities by providing a new source of income from existing acreage.
Beyond energy security, importing less oil will also lower the trade deficit. In 2005, the United States imported $132.2 billion of petroleum, with 25 percent—more than $31.9 billion—going to the Middle East.
Middle East imports are projected to increase to 30 percent by 2025.
Cellulosic ethanol is chemically identical to ethanol made from corn or soybeans. It can be produced from a wide variety of agricultural and industrial plant wastes, including corn stover, cereal straws, saw dust and paper pulp, in addition to crops grown specifically for fuel production, such as switch grass.
These feedstocks are a plentiful and largely untapped resource. A study by the Oak Ridge National Laboratory found available biomass “potentially exceeding 1.3 billion dry tons per year—enough to produce biofuels to meet more than one-third of the current demand for transportation fuels.” Agricultural residues represent the largest component in the study at 468 million tons. Currently, most agricultural residues are plowed back into the soil, composted, burned or disposed in landfills.
Perennial grasses, such as switch grass and other forage crops, account for the next largest component at 277 million tons. This type of feedstock offers both environmental advantages and the potential for large productivity increases, according to John Sheehan of the National Renewable Energy Laboratory (NREL). Switch grass has a deep-root system that anchors soils, preventing erosion and helping to build soil fertility. “It uses water efficiently, does not need a lot of fertilizers or pesticides, and absorbs them more efficiently,” said Nathanael Greene, senior policy analyst at the Natural Resources Defense Council (NRDC).
Ceres, Inc. is working on breeding perennial grasses to increase yields, improve growth on marginal acreage, and reduce the need for inputs such as fertilizers and pesticides. To date, the company has increased yields from five tons an acre to eight to nine tons an acre, according to Ceres President Richard Hamilton. “I think we will be over 10 tons an acre in the next few years, and in a 10-year timeframe we can get to 15 to 20 tons an acre.”
Economics and Efficiency
As with grain-based ethanol, production of cellulosic ethanol aims to extract the sugars from the feedstock for distillation into alcohol. But the sugars in cellulosic feedstocks are locked in cellulose and hemicellulose, complex carbohydrates found in the cell walls of plants. Reducing the cost and improving the efficiency of converting these feedstocks into fermentable sugars is one of the keys to a viable industry.
Enzymes—proteins that living organisms produce to speed up biochemical reactions—are used to break down or hydrolyze these complex carbohydrates into fermentable sugars. “The most important result of the last year or two has been the development of much-lower-cost enzymes by Novozymes and Genencor International,” Dale said. Under grants from the Department of Energy (DOE), the firms reduced enzyme costs from around $5 a gallon to 10-20 cents/gallon.
“In the enzyme camp, we have only scratched the surface of the potential of biotechnology to contribute to this area,” said Reade Dechton of the Energy Futures Coalition.
For the enzymes to efficiently unlock sugars, cellulosic feedstocks must first go through preparation and pretreatment processes to reduce the size and increase the surface area accessible to the enzymes. Process improvements in pretreatment technologies are focused on eliminating harsh chemicals, increasing yields and reducing both energy demand and capital costs. “The goal is to get the plant material to provide you with a lot of sugar without a lot of extra cost,” said Dale, who is working on the process.
“The three processes, pretreatment, enzymatic hydrolysis and fermentation, are highly interrelated,” Dale said. “While it is important to demonstration improvements in individual process components, it is actually as important to talk about progress in reducing integrated costs.”
SunOpta Bioprocess Group is focused on process improvements related to the integration of fiber preparation/pretreatment into the enzymatic hydrolysis process, and then the fermentation step. “You must integrate to maximize process outcome,” said Murray Burke, vice president and general manager at SunOpta. “We are continuously looking from the process to our capital costs as well as our variable costs. There are going to be major changes and improvements as we progress over time.”
The ultimate means of integrating the processing steps may be found in a promising technology called consolidated bioprocessing (CBP).
Dartmouth engineering professor Lee Lynd is utilizing CBP techniques to produce microbial systems combining both enzymatic hydrolysis and fermentation operations. “That is probably the ultimate in cost reduction for biological steps,” Dale said.
Moving the technology from the laboratory to pilot-scale and, ultimately, commercial-scale operations is a crucial step on the road to commercialization, Sheehan said. Iogen is the only company currently producing cellulosic ethanol at a demonstration-scale plant with a capacity of almost 1 million gallons per year.
“The purpose of the demonstration plant is to teach us what works and what doesn’t, what is scaleable and what isn’t, and to come up with the final design process for the commercial plant,” said Jeff Passmore, executive vice president of Iogen Corporation. “We have learned that you can’t do enzyme production and process development in isolation.”
Enzymes that performed well in the lab or pilot situation did not fare as well in 50,000-gallon tanks with feedstock containing inhibitors like dirt and rocks. Testing led to the development of a robust enzyme cocktail, composed of several types of enzymes, which can survive real-world industrial conditions and a less aggressive process that gave the enzymes a chance, Passmore said.
In Salamanca, Spain, Abengoa S.A is building a demonstration cellulosic ethanol plant slated for completion next spring. The plant will have the capacity to produce 2 million gallons of ethanol a year from wheat straw. “The first objective is demonstration of the enzymatic hydrolysis step,” said Gerson Santos, director of R&D for Abengoa Bioenergy. Enzymes supplied by Novozymes and other major suppliers will be tested in the process.
The Importance of Biorefineries
Essential to the economical and efficient production of cellulosic ethanol is the development of biorefineries. A biorefinery is analogous to a petroleum refinery, except that plant biomass, instead of petroleum, is used as the feedstock to produce a diverse set of co-products such as fuels, fertilizer and chemicals.
Biorefinery profitability is dependent not only on the production of ethanol, but also production of the co-products, Passmore said. Co-products provide revenue streams to offset processing costs, allowing cellulosic ethanol to be sold at lower prices while more effectively utilizing invested capital.
Just as in a petroleum refinery, the waste or byproducts from one stage of the production process become the input to another process or product. For example, lignin, a byproduct of enzymatic hydrolysis, can be burned to produce power. Currently, the lignin produced by Iogen’s demonstration plant is shipped to a local pulp mill, where it is used in boilers to produce electricity. “We have found out that it has 80 percent of the BTU value of coal,” Passmore said. “In a commercial-scale plant it would go straight into the power-generation boilers.”
In the short term, Passmore said he sees biorefineries producing power, fertilizer, acetic acid and carbon dioxide. In the future, additional co-products may include specialty chemicals and bioplastics.
DuPont, in conjunction with Diversa, NREL, Deere & Co and Michigan State University, is working on an $18.2 million DOE project to develop the biorefinery concept. The project envisions the entire corn plant producing ethanol and high-value chemicals for biobased materials like Sonora, used in textiles and carpeting.
Financing the first commercial cellulosic ethanol biorefineries has been difficult. “You have to find people willing to plunk down the big bucks to build the first plant,” said Greg Bohlmann, assistant director of process economics at SRI Consulting. “It is not a trivial amount of money, nor a trivial amount of risk involved in building a first-of-a-kind plant like this.”
Therein lays the catch. Commercial-scale plants require hefty investments estimated at $250-300 million. “Lenders will not lend to technology that has not been built to that scale before,” Passmore said. “This is not unique to cellulosic ethanol; this is true of any new technology.”
Yet building to scale is key to reducing capital costs. Burke has estimated capital costs for plants designed to produce anywhere from 1 million gallons a year to 100 million gallons a year. Capital costs per unit of installed capacity drop as the plants get bigger, Burke said, but “it does start to plateau between 80-100 million gallons a year.”
Sheehan believes the answer to the quandary is in the public sector underwriting part of the investment in the first four to five of the most promising technologies. He advocates using private sector due diligence processes to ensure the best projects are selected.
One of the provisions in the 2005 Energy Bill calls for government loan guarantees to fund cellulosic ethanol plants and other promising energy technologies. Loan guarantees reduce the risks to private investors by committing the federal government to back up the loan in the event of a default. The DOE still has not finalized the rules governing the awarding of the loan guarantees. Loan guarantees could help Iogen to build its first commercial-scale plant in the United States. The company is targeting September 2007 to start construction, and is currently engaged in a development program that includes $10 million in engineering design work for the new plant, Passmore said.
As the industry gains experience, capital costs are expected to drop, just as they did with petroleum refineries and corn-ethanol facilities. “The first plant is going to be more expensive than the second, third and 15th plant,” Passmore said.
According to Sheehan, one means to reduce capital requirements and risk while gaining commercial experience is to add cellulosic ethanol technologies to existing grain-based ethanol facilities. “This gets you over the huge capital investment hurdles that are associated with building a green field plant,” he said. “They already have the fermentation capacity and the ethanol recovery capacity.”
Abengoa, in collaboration with the DOE, is developing enzymatic hydrolysis processes and optimizing dry mill technology in order to integrate agricultural residues into existing ethanol facilities, Abengoa’s Gerson said. The company is constructing a biomass facility at the same site as a grain-based ethanol facility in York, Neb., to demonstrate the technology.
After a successful demonstration phase, Gerson expects to integrate the process at a commercial scale with an existing facility. “Other people are proposing to do green field facilities after the commercial demonstration,” he said. “We are not proposing to do that because we want to manage the capital and the risk.”
Feedstock Infrastructure
Transitioning to commercial-scale production of cellulosic ethanol also requires investments in technologies to facilitate the economic collection and shipping of agricultural residuals and energy crops to biorefineries. “Depending on the size of the plant, you are talking about needing anywhere from 400,000 tons to 800,000-900,000 tons of feedstock per year,” Passmore said. “That is a lot of material being collected and delivered.”
Transportation costs become a factor since biomass feedstocks are bulky. Economics dictate decentralizing biorefineries close to feedstock sources to minimize transportation costs.
In the case of Iogen, possible locations for a new commercial plant were selected by identifying areas with high agricultural residues of straw within a 100-mile radius, according to Passmore, who added that “one of the best straw basins happens to be in southeast Idaho.” The company is taking options on land in Idaho and has signed up more than 300 farmers to supply 400,000 tons of wheat and barley straw. Iogen has done the same in Saskatchewan, Canada.
Targeting wheat and barley straw as the initial feedstock makes sense since farmers already are harvesting the straw and grain simultaneously, explained Kevin Shinners, professor of agricultural engineering at the University of Wisconsin.
This is not a case with corn stover. Farmers currently use a multi-pass system. Shinners, in conjunction with John Deere, is working on making modifications to the front and back ends of combines, allowing both the corn and the stover to be harvested in a single-pass. “Every time a wheel hits the field, it costs you money,” Shinners said. “Single pass harvesting eliminates steps and produced a uniformly clean product. The goal is to develop machines and processes to harvest, store and transport in the most economic way for the producers.”
Currently, agricultural residues are collected and delivered in bales. Although this is a logical starting point, the system will become very inefficient moving the large tonnages required to replace 30 percent of our fuel, explained Dr. Richard Hess of Idaho National Laboratories.
Hess believes efficiencies can be greatly improved by getting the material processed or ground to reduce the particle size so that it will flow and work with handling and trucking systems. “You have to grind it up to put it into the conversion process,” Hess said. “So that grinding and preprocessing can give me some handling, labor and transportation advantages.”
Hess is quick to point out that one solution will not fit all parts of the country. In areas such as the West, Southeast and Southwest, agricultural residues and energy crops can be dried before handling. In the Northeast and Midwest, agricultural residues and energy crops are likely to be wet. “Every part of the country is going to assemble the pieces slightly differently,” Hess said. “It is a Chinese menu of unit processes, harvest systems, storage systems, preprocessing and transportation systems to deliver it to the plant.”
Demand Drivers
While research and process improvements are lowering the cost of producing cellulosic ethanol, efforts are also needed to grow the market for E85, a mixture of 85 percent ethanol and 15 percent gasoline. Light-duty cars and trucks can already run on gasoline containing 10 percent ethanol. But only flex-fuel vehicles (FFVs) can run on higher ethanol mixes.
Only about 5 million FFVs are on the road, and little more than 700 retail stations sell E85. “We need to solve the chicken and egg problem with E85,” said Jim Presswood, energy advocate at NRDC. “To do that, we need the vehicles as well as the infrastructure, pumps and pipelines.”
“Manufacturing flex-fuel vehicles is a trivial change,” Dechton added. “It costs less than $200 per vehicle. They are selling them now and people do not know that they are buying them.”
Proposals from NRDC and other organizations advocate requiring a growing percentage of new vehicles to be FFVs, and mandating a minimum number of E85 pumps at retail filling stations based on the number of FFVs registered. Other proposals call for increasing the Renewable Fuels Standard (RFS) and increasing the amount of cellulosic ethanol required in the standard.
Distribution of ethanol from the biorefinery to the filling station may also become an issue. Currently, tanker trucks and barges distribute ethanol. Pipelines are not used because ethanol picks up water found in low spots of the pipeline, according to Dale. He believes dewatering the ethanol at the delivery point can solve the problem.
“We have a huge investment, roughly $10 billion in infrastructure, tied up in delivering liquid fuels,” Dale said. “It is going to take some effort to bring other fuels into that mix.”
Provisions in the 2005 Energy Bill and other proposed measures are promising to move the technology forward. Once policies are implemented and appropriations made, Bohlmann believes we will see “the dam break open” with announcements of the first commercial-scale plants. Helping to maintain the momentum is not only the current high price of oil, but also the general perception that prices will remain high for the foreseeable future, Bohlmann explained. “There are investors starting to come out of the woodwork,” he said, pointing to Goldman Sachs’s recent announcement of a $25 million equity stake in Iogen.
Burke sees the commercialization of the industry happening faster than the six- to 10-year timeframe currently being discussed due to lessons learned from grain-based ethanol over the past 25-30 years. “The entire infrastructure for moving and selling this product is already in place,” Burke said. “You do not have to fight the battle of getting it into the market.”
Despite the enthusiasm, a lot of work remains. Appropriations still have not been made, nor have rules or implementation pathways been established for the loan program or production credits. Important areas, such as the Biomass R&D Act, have actually had their budgets cut by the current administration. It remains to be seen if all the programs and policies announced by the president will be funded at the levels specified, in a timely manner and over the sustained period needed to help reach the stated goal of breaking America’s oil addiction.
Diane Greer is a freelance writer and researcher based in New York, specializing in sustainable business, green building and alternative energy. Her articles have appeared in major magazines, newspapers and trade publications. She can be reached at dgreer@greerresearch.com.
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