Cleantech, Biofuels and Fuel Diversification

Bio fuels along with solar are rapidly becoming one of the twin cylinders of the Cleantech industry. Jim Fraser on the Energy Blog has a very interesting blog this week triggered by Washington Post article about the availability of biofuels feedstocks as a limiting/contributing factor to bio fuels growth.
My belief is that if the economics work, the market manages to push the envelope a lot further than a resource availability study would have predicted, and if the economics do not work, nothing happens anyway. Private industry proves to be extremely more innovative and resourceful than the study can ever predict.
So I never feel that these types of analyses add a huge amount of value beyond initiating a debate. We did an earlier blog about an NREL analysis questioning whether the ethanol industry would have to move towards cellulosic technologies as too much of the US corn crop was needed for animal feed. Our analysis, the current superior economics and lower switching costs of corn based ethanol will win out. Farmer’s are smart, the substitute rather rapidly when the economics are in their favor. We expect to see signficant subsitution of corn into fuel crop use over feed at much lower prices than others have. The real drivers keeping corn ethanol afloat over cellulosic will be sheer process economics (most cellulosic process are not only more costly, the feedstock has severe transport issues), and ease of switching costs (relatively high with new crops like switchgrass, and very low with corn).
The Energy Blog’s response to this debate is to champion fuel diversification, PHEVs, EVs, fuel blends, bio fuels, etc., as the solution. With this I wholeheartedly agree. The idea of fuel diversification and fuel switching as a core part of the US energy strategy and the Cleantech debate needs a lot more attention.
4 replies
  1. Ted Kniesche
    Ted Kniesche says:

    I attended the Clean Tech conference in San Francisco last week and the "ethical issue" of food crops versus fuel crops came up briefly during one of the panel discussions. The challenges of fuel diversification, as well as the issue surrounding the availability of feedstock for both corn-based ethanol and cellulosic ethanol ignores a critical dimension in the debate, namely that of free trade. Renewable energy has the potential, if effectively lobbied for by the biofuel industry, to make a generational breakthrough in the area of global trade policy. The key impediment to progress in current free trade discussions are farm subsidies in the form of the US Farm Bill and the European Common Agricultural Policy, or CAP. Rich country farm subsidies deter poor country farmers from producing goods and selling them onto the world market in any meaningful way. The advent of renewable energy could forge a monumental breakthrough in one of two ways: 1) the financial boost that renewable energy will undoubtedly provide to US and European farmers should make it more likely that governments will find it easier to reduce or eliminate farm subsidies and import tariffs in the coming decade, and 2) alternatively, as demand for viable feedstock grows, foreign agricultural markets will prove to be a welcomed source for additional product, thus creating a market for poor country agriculture that does not currently exist.In either (or both) scenario(s), agriculture should become an increasingly competitive, global marketplace that utilizes the farming potential of not only the United States and Europe, but also Africa, Asia, South America and Central Europe. While this view assumes a favorable policy environment, it is difficult to imagine a scenario where politicians continue to favor a minority of rich country farmers at the cost of energy independence, national security, and securing cheap, renewable energy sources outside the reach of OPEC. In this longer-term view, it matters less how much domestic agricultural capacity the United States has for fuel crops and it challenges skeptics who believe that ethanol penetration won't exceed 30% of the gasoline market. Technology alone could shatter this prediction, but a smarter trade regime could help the capacity issue as well.As plant yields improve exponentially through advances in biotechnology and genetic engineering in the coming decades, the US and other agricultural markets will drastically improve their ability to produce more fuel from less land than we are capable of today. However, if international trade policy recognizes the dawn of the renewable energy age as an opportunity for a "Great Compromise" between rich and poor farmers in a stagnant free trade process, then the structural (man-made) barriers to a truly global bio-feedstock economy could very well be torn down. In addition to greater efficiencies in energy generation and broader fuel diversification, a closer look at the benefits of better trade policy should be atop the agenda of every policy maker, business leader and consumer in the advancement of biofuels as a viable energy substitute. Breakthroughs in trade policy may alleviate any perceived "ethical" issue haunting businesses that worry about having to choose between food and fuel crops. A greater opening of foreign agricultural markets for both fuel and food crops should leave plenty of capacity to go around.

  2. Alex K.
    Alex K. says:

    Hello Everyone!I just finished watching and reading V. Khosla's Biofuels presentation on Google Techtalk and must say that the way he delivered that presentation really made various ideas that have been swirling around in my head to converge! At 25, I am still quite young but I would like to already start making the broad strokes of what could end up being a business plan in this rapidly growing market. The reasons are numerous, but I could sum it up in the word "elegant". I just don't think business gets better than this…Great growth potential, profit margins, socially/environmentally conscious and helpful, in touch with nature, science, engineering, technology, and the list of "elegance" goes on and on for me…I am currently employed as Commercial Director and serve in the board of my family's company which focuses on Retail (Apparel) in Europe. (And yes, I know how completely irrelevant to this market it is! Wink )I am starting to prepare myself both personally and financially for this venture, and want to be ready in 3-4 years to start something in the Biomass/Ethanol market. Already though, I am troubled by several serious questions regarding a possible startup into this market. Pardon me for the list, I just feel that some guidance at this early stage could help me set the proper initial conditions for a venture into this field.-Isn't this wave coming so rapidly that even in 3 years, and even in Europe/Eastern Europe, it will already have been sighted on by a bigger, and more relevant company making a move into this market? (i.e. THink big farming company, big regional oil players, medium size gasoline distributors etc.)-Isn't this market too just waiting to be pounced on by the big energy companies once they realize that this (Alternative Energy + Dip in Oil Prices) is bound to happen with them or without them?-Aren't big farming companies very well positioned and entrenched with huge barriers for any outsiders interested in moving into this side of the market? (i.e. Either the farming side or a manufacturing side with a vertical operation-from farming to retail).-What does a simple enterpreneur with no engineering, farming, or scientific background, bring to the table that others won't eventually bring (Expertise, Synergies, Cash, Distribution Networks, Vertical Operations etc.)? Even with some good enterpreneurial talent + cash / venture capital, won't somebody else probably be better equipped and positioned to take advantage of this coming wave?-Even if all the above proves to be wrong (i.e. No one gets there in time, talent is enough to put something good together) what ends of the market would you reccomend depending on growth potential, profit margins, and low barriers to entry? ( i.e. Farming, Plants, Distribution, Retail etc)-If there was one post-graduate field you would reccomend I pursue in order to help me better prepare myself for a venture into this market, what would it be? (I am thinking an MBA from MIT for starters).-What is the most suitable business model with best chances and potential for a startup in the range of $50 mil? (I am thinking 40% of that to be equity with $10mil of that out of my own pocket and the rest from venture capital/angel investors)-Also, do you guys think that cellulosic ethanol will be even more hands off to medium-sized startups?

    • Mr advanced biofuel
      Mr advanced biofuel says:

      If you are in a postion to invest anything even similar to what you have described than we should talk. I am working alongside a company, with a technology now over a decade in the making and ready for commercialization. They are producing extremely high-grade, super clean burning fuel (gasoline, diesel, jet fuel) that is drop-in ready, meaning unlike ethanol or biodiesel this is compatible up to 100% with any vehicle and produces as good or better energy content than regular petro (and nearly twice that of ethanol) . (Response too long–continued on next comment below)

    • Mr advanced biofuel
      Mr advanced biofuel says:

      Fuel will blend right into the existing fuel infrastructute with no special pumps at the gas station. They can produce these fuels cheaper than regular petro and from almost anything including garbage, wood or forest waste, agriculture waste, sewage, any plastic, or even old tires. All of this is done with ZERO stack emissions and very little water–with no carbon footprint (actually removes carbon so it is a negative carbon footprint). Additionally, each plant produces lots and lots of very cheap electricity and sells the majority back to the grid. Like I said, this is commercial-ready–not test tube science that happened in a lab somewhere once. I don't get paid to raise money but I may be able to point you in the right direction. This is the stuff that the world doesn't know exists–yet. Send me a message and maybe we can talk.

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