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Why Corn-Based Ethanol Sucks

by Richard T. Stuebi

While it is increasingly recognized that subsidies for corn-based ethanol are bad policy, a nod must be given to C. Ford Runge, a professor at the University of Minnesota, for his pithy and merciless analysis in his note “Biofuel Backlash” published in the May/June issue of Technology Review.

In the space of just a few short paragraphs, Prof. Runge cites the work of Earth Track (a firm dedicated to exposing subsidies detrimental to the environment) projecting $400 billion of U.S. subsidies to ethanol between 2008-2022, notes a recent estimate by the Earth Policy Institute that the 2008 U.S. corn crop diverted for ethanol production would have been sufficient to feed 330 million people for a year, and provides a reference to modelling that indicates a near-doubling of greenhouse gas emissions due to changes in land-use patterns associated with corn-for-ethanol production.

It’s amazing that such awful policies, which are so adverse on so many dimensions, can survive. But, in the gameboard that is U.S. energy, environmental, and agricultural policy, only grand compromises supported by the big boys can get enacted — which are then extremely difficult to overturn when they are seen to be nothing more than gifts to their well-positioned and deep-pocketed sponsors and supporters.

Reiterating a point I’ve made before: I have nothing against ethanol per se. Cellulosic ethanol, if it can be accomplished cost-effectively, is a promising prospect for reducing greenhouse gases and reliance on Middle Eastern petroleum without chewing up valuable foodstuffs. But corn-based ethanol plainly sucks. And, the notion of using corn-based ethanol as a bridge to cellulosic ethanol is dubious at best.

The old adage says that a camel is a horse designed by committee. Would it were that U.S. biofuels policies were as lovely as a camel.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

Biofuel Industry Hopes to Recover with Next Generation Fuels

By John Addison. Scientists know how to make fuel from prairie grasses growing on marginal land. They know how to make fuel from fast growing trees with root systems that extend 25 feet into the ground, sequestering carbon emissions and enriching the soil. They even know how to make fuel from algae. They do all this in their labs every day. The problem is making cellulosic and algal fuel in large quantities at costs that compete with fuels from petroleum such as gasoline, diesel, and jet fuel.

This is my second article (previous article) from the 31st Symposium on Biotechnology for Fuels and Chemicals sponsored by NREL. 800 global bioscientists gathered in San Francisco to share their research and showcase their progress.

Their progress with biofuels from cellulosic sources is important. Some corn ethanol plants have closed. Once promising corporations, such as VeraSun, are now bankrupt. Lifecycle greenhouse gas emissions for fuel-from-food are being scrutinized. Industry would benefit from biomass that can be grown at much higher yields per acre than corn. Industries such as agriculture, wood, and paper would benefit from making money from waste and from having added revenue sources.

At the conference, Verenium (VRNM) shared their progress. In Jennings, Louisiana, they are producing 1.4 million gallons per year of cellulosic ethanol. The fuel can be mixed up to 10 percent with our current gasoline, saving us from needing almost 1.4 million gallons of foreign oil each year. Some might be delivered as E85. Instead of using corn, which requires high inputs of energy, nitrogen, fertilizer, and water to produce, Verenium is using a crop that produces eight times the energy required to process it – energy cane, a hybrid of sugar cane optimized as a fuel source not a food source.

Sugarcane and energy cane are part of Brazil’s energy independence, being the source of over 40 percent of their fuel. Now energy cane is being grown in some of the more tropical places in the United States. At a time when project financing is difficult, major partners are critical to financing larger commercial plants. In a joint-venture with BP, Verenium plans to build a 36 million gallon per year plant in Florida.

Dr. Stuart Thomas with DuPont Danisco Cellulosic Ethanol (DD, DNSCY.PK) outlined their plans to bring a 20 million gallon per year plant on line in 2012. They are evaluating non-food feedstocks with much higher yields per acre than corn, including switchgrass and sorghum. DuPont Danisco anticipates reaching parity with $60 to $100/barrel oil by 2015. The pilot plant will be in Tennessee which is providing $70 million of funding for ethanol from switchgrass.

The long-term potential for biofuels may not be in ethanol, but in renewable gasoline, biodiesel, bio-jet fuel, and biocrude. All contain more energy than ethanol, which only delivers 84,000 BTU/gallon. Gasoline delivers 114,000; biodiesel 120,000.

With better microbes and fewer process steps, Chief scientist Dr. Steve del Cardayre with LS9, presented plans to produce industry standard biodiesel from energy cane. The plant should be able to compete with oil at today’s prices by also producing other valuable outputs, such as chemicals which can be used to make detergents. Synthetic biology competitor, Amyris, is moving even faster in building process plants to convert energy cane into renewable hydrocarbons and bio-jet fuel.

Indeed, creating multiple products from a process plant is likely to be critical to having a profitable industry. Oil refining is profitable because fractional distillation creates many valuable products at one refiner:

· Naphtha which can be processed into chemicals and plastics
· Gasoline
· Jet fuel
· Diesel
· Heavy oils which can be processed into lubricants and asphalt

Gevo will build plants with mass efficiency of over 40 percent that can produce multiple products including:
· Bio-jet fuel
· Bio-diesel
· Isobutanol for other products

Gevo sees opportunities to buy existing moth-balled ethanol plants and retrofit for $30 million per plant, a fraction of building a cellulosic plant from scratch. Gevo’s yeast fermentation process produces heat and steam which would be valuable if co-located with industrial processes that benefit from combined heat and power.

By converting wood waste to next generation fuel, Mascoma has a significant potential to co-locate with existing paper mills and wood processing operations. The same is true for Range Fuels.

Enerkem is being paid to covert municipal solid waste into fuel as it targets 2011 to bring live a 9.6 million gallon per year plant in Edmonton, Canada, and a 20 million gallon per year plant in Pontotoc, Mississippi.

Beyond the cellulosic sources for fuel, covered in this article, is the potential for fuel from algae. A future article will examine the near-term challenges and long-term potential of algal fuel.

As this Symposium took place in California, in Copenhagen, Greenpeace protesters stopped all buses because they use biofuel from food sources. In the future, they may welcome biofuel from wood and waste sources as an alternative to gasoline from tar sands and jet fuel from coal.

This December, the leaders of the world will gather in Copenhagen, Denmark, to develop a framework for a more promising sustainable future. In Denmark they will be able to visit a new cellulosic ethanol plant developed by Inbicon. The feedstock will be an agricultural waste product – wheat straw. The plant will process 24 metric tons per day of wheat straw, ten times more than a demonstration plant that Inbicon only a few years ago. The plant will be more efficient and come closer to competing with refined oil because the operation will have three products creating three revenue streams:

1. 5.4 million liters ethanol year
2. 8,250 MT biofuel which will displace some coal used by a power plant
3. 11,250 MT of molasses which will be used to feed cattle

Can such operations displace all our need for petroleum? No, but in five years we will see commercial scale next generation biofuel operations. If oil is selling for $100 dollar per barrel, then cellulosic biofuels may lower our cost of fuel. In ten years, all such operations could displace 20 percent of our petroleum use and represent an important step towards energy independence.

Cellulosic ethanol is not the only sustainable solution that world leaders will see in Copenhagen. They will see at least 40 percent of the population commuting on bicycles, demonstrating an immediate and very cost-effective way to reduce our need for oil. Many delegates will ride on electric light-rail from the airport and notice the wind farms that deliver the electricity. Some will ride in electric cars that further demonstrate transportation that uses renewable energy.

Next generation biofuels promise to be part of a portfolio of solutions to our current climate and energy problems.

John Addison publishes the Clean Fleet Report and speaks at conferences. He is the author of the new book – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

Biofuel Industry – No Money, No Respect

For the moment, the price at the pump is reasonable. A spike in demand or a terrorist disruption, however, will quickly remind us that we are desperately dependent on oil as we continue to consume 140 billion gallons of gasoline per year. Even in these recessionary times of moderate demand, we are running out of easy to extract oil from dessert sands. We are turning to sources of unconventional oil, such as tar sands in Canada, to produce oil with ever increasing greenhouse gas emissions.

For a while corn ethanol looked like a promising way to end our addiction to oil. Now we are like the character in a Woody Allen comedy who explains, “I used to be a heroin addict; now I’m a methadone addict.” At a time when a billion people go hungry, many as a result of disappearing water on this heating planet, fuel from food is not the answer.

Needed is fuel from wood and waste, not food and haste. Some of the world’s best minds are focused on fuel from cellulosic and waste sources, in some cases from biological sources that remove CO2 from the air and enrich depleted soil. I am writing this article from the 31st Symposium on Biotechnology for Fuels and Chemicals sponsored by NREL. 800 global bioscientists have gathered in San Francisco to share their research and showcase their progress.

Many at the conference expressed concern and discouragement. Companies that were once darlings of Wall Street have gone bankrupt. Dozens of ethanol plants have closed as oil prices dropped. Many promising second generation plants cannot get built due to lack of project financing. People with the money see the risk as too high.

There continue to be zero commercial scale (20-million gallon per year and bigger) cellulosic ethanol plants, despite past glowing press releases that declared that they would now be running.

The biofuels industry is also under attack due to food-from-fuel and land use issues. Over one billion people are hungry or starving. Agricultural expert Lester Brown reports, “The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year.” Scientific American: Could Food Shortages Bring Down Civilization?

Europe, now California, and soon many U.S. states, now insist that land use must be considered in evaluating biofuels.

During the middle of the conference, a workshop for the media was held. The theme of the workshop quickly became clear – the industry problems were the fault of regulators and we the press.

Professor Bruce Dale, Michigan State University, dismissed corn/soy land use change as an “emotional issue.” He continued, “The California Low Carbon Fuel Standard is intellectually bankrupt.” To demonstrate the flaw of land use, he stated that replacing a gasoline powered vehicle with an electric vehicle would only increase the demand for coal power and therefore do nothing to reduce greenhouse gases.

The example is quite flawed. Automakers consistently tell me that their gasoline powered vehicles are about 15 percent efficient and their electric vehicles are 60 to 70 percent efficient. EVs need much less energy. Even if you could find an EV powered purely with coal, it would produce less lifecycle emissions than a comparable gasoline or corn ethanol fueled vehicle. According to the latest figures published by the U.S. Energy Information Administration (EIA), non-hydro renewable sources of electricity enjoyed double-digit growth during the past year while coal was down by 1.1 percent. Incremental demand for electricity is bringing more renewable energy on-line.

In fact, the California Low Carbon Fuel Standard (LCFS) is based on the peer-reviewed work of scientists using Argonne National Labs GREET model. The work, industry comments, and findings are all available at http://www.arb.ca.gov/fuels/lcfs/lcfs.htm

The LCFS encourages the reduction of greenhouse gas emissions per unit of energy delivered to the wheels of vehicles. The scientific analysis behind the LCFS includes these examples of grams of CO2e emissions per mega joule of energy:

Ø Gasoline Oil Refined 92
Ø Diesel ULSD Refined 71
Ø Diesel Coal-to-Liquid 167
Ø Biodiesel Midwest Soy 30
Ø Ethanol Corn with Coal Electricity 114
Ø Ethanol Cellulosic from Poplar Trees -12
Ø Electricity California Average 27

If the biofuels industry sees a future in biodiesel and cellulosic ethanol, the industry should be encouraged by the findings of the scientists contributing to the LCFS. On the other hand, if the industry is only betting its future on corn ethanol, then the regulation is a threat.

LCFS will not help the expansion of E85 stations for flexfuel vehicles. For the 2009 model year, the best rated car running on E85 in the United States was the Chevrolet HHR, with a United States EPA gasoline mileage rating of 26 miles per gallon, and an E85 rating of only 19 miles per gallon – and that’s the best from Detroit with mileage on all other U.S. flexfuel vehicles being worse. In other words, if you passed on using E85 and drove a hybrid with good mileage, you would double miles per gallon and produce far less greenhouse gas emissions than any U.S. flexfuel offering. Top 10 Low Carbon Footprint Four-Door Sedans for 2009

While the press was being scolded and air regulators were being metaphorically burned at the stake, most conference attendees had an afternoon to enjoy San Francisco. Many traveled using electric-powered buses and the hydro powered BART rapid transit system that carriers 100 million riders annually. So much for the press conference dismissing electric powered transportation as not being feasible.

Although attacking regulators, environmentalists, and advocates for the hungry will not save the biofuel industry, the federal government may save it. As the conference unfolded in California, a major announcement was made in Washington, DC, by U.S. Secretary of Energy Steven Chu when he announced that $786.5 million would be made available to accelerate advanced biofuels research and to help fund commercial-scale biorefinery demonstration projects.

One irony for the biofuel industry is that as oil prices increase, their economic model improves, but consumer demand for fuel moderates as consumers drive fewer miles, use more public transportation, and soon switch in growing numbers to electric vehicles. For decades, however, fuel will be in demand for many passenger vehicles, heavy-vehicles, long-distance goods movement, ships and airplanes. The opportunity is ripe for delivering fuel with lower lifecycle emissions. Promising cellulosic biofuel companies will be covered in my next article.

John Addison publishes the Clean Fleet Report. He is the author of a new book about the future of transportation – Save Gas, Save the Planet.

Ethanol – the Good, the Bad, the Ugly, the Beautiful

The Good

By John Addison. The 9 billion gallons of ethanol that Americans used last year helped drive down oil prices. For those of us who fuel our vehicles with gasoline, as much as 10 percent of that gasoline is ethanol. The Energy Independence and Security Act of 2007 requires that more biofuel be used every year until we reach 36 billion gallons by 2022.

Reduced oil prices are good. We can go from good to great, if we move past fuel from food and haste to fuels from wood and waste. Although the economics do not yet favor major production, pilot plants are taking wood and paper waste and converting it to fuel. Other cellulosic material is even more promising. Some grasses, energy crops, and hybrid poplar trees promise zero-emission fuel sources. These plants absorb CO2 and sequester it in the soil with their deep root systems. These plants often grow in marginal lands needing little irrigation and no fertilizers and pesticides, standing in sharp contrast to the industrial agriculture that produces much of our fuel.

Cellulosic biofuels are becoming economic reality. Norampac is the largest manufacturer of containerboard in Canada. Next generation ethanol producer TRI is not only producing fuel, its processes allow the plant to produce 20% more paper. Prior to installing the TRI spent-liquor gasification system the mill had no chemical and energy recovery process. With the TRI system, the plant is a zero effluent operation, and more profitable.

A Khosla Ventures portfolio company is Range Fuels which sees fuel potential from timber harvesting residues, corn stover (stalks that remain after the corn has been harvested), sawdust, paper pulp, hog manure, and municipal garbage that can be converted into cellulosic ethanol. In the labs, Range Fuels has successfully converted almost 30 types of biomass into ethanol. While competitors are focused on developing new enzymes to convert cellulose to sugar, Range Fuels’ technology eliminates enzymes which have been an expensive component of cellulosic ethanol production. Range Fuels’ thermo-chemical conversion process uses a two step process to convert the biomass to synthesis gas, and then converts the gas to ethanol.

Range Fuels in Georgia is building the first commercial-scale cellulosic ethanol plant in the United States. Phase 1 of the plant is scheduled to complete construction in 2010 with a production capacity of 20 million gallons a year. The plant will grow to be a 100-million-gallon-per-year cellulosic ethanol plant that will use wood waste from Georgia’s forests as its feedstock.

The Bad

Over one billion people are hungry or starving. Agricultural expert Lester Brown reports, “The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year.”

Corn ethanol that is transported over 1,000 miles on a tanker truck, and then delivered as E85 into a flexfuel vehicle that fails to deliver 20 miles per gallon is bad. GM and Ford have pushed flexfuel vehicles that can run on gasoline or E85, which is a blend with as much as 85 percent ethanol. For the 2009 model year, the best rated car running on E85 in the United States was the Chevrolet HHR using a stick-shift, with a United States EPA gasoline mileage rating of 26 miles per gallon, and an E85 rating of only 19 miles per gallon.

In other words, if you passed on using E85 and drove a hybrid with good mileage, you would double miles per gallon and produce far less greenhouse gas emissions than any U.S. flexfuel offering. Top 10 Low Carbon Footprint Four-Door Sedans for 2009

The problem is not the idea of flexfuel. You can get a flexfuel vehicle with good mileage in Brazil. The problem is that GM and Ford used their flexfuel strategy as an eay way out, instead of making the tougher choices to truly embrace hybrids and real fuel efficiency. Flexfuel buying credits and ethanol subsidies have created incentives to buy cars that fail to cut emissions.

A new paper – Economic and Environmental Transportation Effects of Large-Scale Ethanol Production and Distribution in the United States – documents that the cost and emissions from transporting ethanol long-distance is much higher than previously thought. Ethanol is transported by tanker truck, not by pipeline, although Brazil will experiment with pipeline transportation.

The Ugly

It’s a tough time to make money with ethanol. Major players, like Verasun, are in bankruptcy. For the industry, stranded assets are being sold for pennies on the dollar. With thin margins, low oil prices, and high perceived risk, it is difficult to get a new plant financed.

Activists worry about oil refiners, such as Valero, offering to buy ethanol producers such as Verasun. But oil companies can bring needed financing, program management, and blending of next generation biofuels with existing petroleum refined gasoline, diesel, and jet fuel.

Government mandates for more ethanol do not match today’s reality. Subsidies to industrial corn agriculture are not good uses of taxpayer money. Encouraging federal, state, and local governments with their 4 million vehicles to give priority to flexfuel vehicles with lousy mileage is government waste.

Not all government help is misplaced. Range Fuels large-scale cellulosic ethanol production was helped with an $80 million loan guarantee. The loan guarantee falls under the Section 9003 Biorefinery Assistance Program authorized by the 2008 Farm Bill, which provides loan guarantees for commercial-scale biorefineries and grants for demonstration-scale biorefineries that produce advanced biofuels or any fuel that is not corn- based.

The Beautiful

Beautiful is the transition to electric drive systems and the development of next generation biofuels. Last year, Americans in record numbers road electric light-rail in record numbers. In 2008, Americans drove 100 billion miles less than 2007. Americans also drove 40,000 electric vehicles.

Critics and special interests try to stop the shift to electric vehicles by wrongly stating that if there is coal power used, then there are no benefits. Mitsubishi estimates that its electric vehicle is 67 percent efficient, in contrast to a 15 percent efficient gasoline vehicle. Efficient electric drive systems lower lifecycle emissions. With the growth of wind, solar, geothermal, and other renewables, lifecycle emissions from electric transportation will continue to fall. For example, my main mode of transportation is electric buses and rail that use hydropower. My backup mode is a Toyota Prius that I share with my wife.

Long-term we will continue to see the growth of electric drive systems in hybrid cars, plug-in hybrids, battery electric, fuel cell vehicles, light-rail, and high-speed rail. Over decades, the use of internal combustion engines will decrease, but the transition will take decades, especially for long-haul trucks. During these decades we can benefit from next generation biofuels that will replace corn ethanol and biodiesel from food sources.

Shell has a five-year development agreement with Virent, which takes biomass and converts it to gasoline – biogasoline. Gasoline, after all, is a complex hydrocarbon molecule that can be made from feedstock other than petroleum. Unlike ethanol, biogasoline has the same energy content as gasoline. Unlike cellulosic ethanol alternatives, Virent produces water using a bioforming process, rather than consuming valuable water. Virent has multi-million dollar investments form from Cargill, Honda, and several venture capital firms. Biogasoline will be its major initial focus. Its technology can also be used to produce hydrogen, biodiesel, and bio jet fuel.

Sapphire is an exciting new biofuels company backed with over $100 million investment from firms such as ARCH Venture Partners, the Wellcome Trust, Cascade Investment, and Venrock. The biotech firm has already produced 91-octane gasoline that conforms to ASTM certification, made from a breakthrough process that produces crude oil directly from sunlight, CO2 and photosynthetic microorganisms, beginning with algae.

The process is not dependent on food crops or valuable farmland, and is highly water efficient. “It’s hard not to get excited about algae’s potential,” said Paul Dickerson, chief operating officer of the Department of Energy’s Office of Energy Efficiency and Renewable Energy “Its basic requirements are few: CO2, sun, and water. Algae can flourish in non-arable land or in dirty water, and when it does flourish, its potential oil yield per acre is unmatched by any other terrestrial feedstock.”

Scale is a major challenge. Producing a few gallons per day in a lab is not the same as producing 100 million gallons per year at a lower cost than the petroleum alternative. Yet, some of our best minds are optimistic that it will happen in the next few years. We will see fuel from marginal lands, from crops and algae that sequester carbon emissions. The fuel will blend with existing gasoline, diesel, and jet fuel, and run in all engines, not just those with low mileage.

Some think that such a transition is as impossible as an interception with a 100 yard run for a touchdown in a Superbowl. It is exciting when the impossible happens.

John Addison is the author of the new book – Save Gas, Save the Planet – which is now available at Amazon. He publishes the Clean Fleet Report.

Ethanol in the Tank

by Richard T. Stuebi

The news seems everywhere these days that ethanol is dead as a doornail:

October 21, Financial Times: “Investors Suffer As U.S. Ethanol Boom Dries Up”
November 5, Bloomberg: “VeraSun Doomed; Goldman Stops Ethanol Stock Coverage”

It’s easy to pin the tough times for ethanol on the left-right combination of precipitous declines in oil/gasoline prices and the global credit crunch. True, ethanol plants are capital-intensive, and a reduction in product price is never a good thing for any producer.

But I believe the issue is less about fuel prices and capital markets than about corn.

Many have long been skeptical about corn-based ethanol purely from an economic perspective. Of course, as has been amply documented, corn ethanol has been the beneficiary of some pretty substantial subsidies, without which much less ethanol would have made it to market. But earlier this year, even when oil was nearing $150/barrel and gasoline was over $4.00/gallon, a number of U.S. ethanol producers were having financial difficulties.

Why? Because corn prices were rising even faster than fuel prices. Remember: these refineries make money as a function of the spread between feedstock and product price, not of the product price itself. If the feedstock price is rising faster than the product price, then even if the product price is at historical highs, producers can be squeezed.

Until ethanol demand surged in recent years (propelled by increasing government mandates), the linkages between corn and fuel prices were weak. However, as a recent article by columnist Doug Saunders of The Globe and Mail in Toronto points out, “food is no longer just food”. In Saunders’ terms, “there has been a “bushels-to-barrels-to-Btus convergence”. After all, both oil and bread have calorific content, and technologies now are allowing one to be swapped for the other, depending upon which is more economic in a particular market.

This then leads to the other “black mark” against (corn-based) ethanol: the so-called “food vs. fuel” debate. To many observers, it is unethical to be using products fundamental to human food consumption as a substitute for petroleum-based fuels, as this added demand for foodstuffs bids up prices and makes eating more expensive — especially problematic for the world’s poor (see 2007 article on this topic by C. Ford Runge and Benjamin Senauer in Foreign Affairs). This has led Jean Zigler of the United Nations to recently declare that biofuels are a “crime against humanity”.

A strongly argued counterpoint is offered by Robert Zubrin and Gal Luft. With pretty significant substantiation, they claim that increases in the price of corn have not been driven by any push to produce ethanol. Instead, they find that all of the increase in corn prices has been due to the combined factors of increased natural gas prices (thereby raising the price of fertilizer), increased transportation and processing costs (due to higher gasoline/diesel prices), and increased demand for corn in massive rapidly-growing developing economies (e.g., China). In short, according to Zubrin and Luft, ethanol is not to blame for woes facing corn consumer.

That may or may not be so. But, it seems unarguable that corn is to blame for the woes facing ethanol.

President-elect Obama may be a “supporter” of ethanol, but unless and until cellulosic ethanol technologies become viable, ethanol will have a hard time becoming — and staying — a major player in the transportation fuel game.

This is especially the case when factoring in the massive investment required to convert the U.S. infrastructure of distribution, retailing and vehicle tanks from gasoline to ethanol-capable. And, this is even more so the case considering that biofuels innovators are actively working on technologies that enable biogasoline — gasoline from bio-feedstocks.

With all these strikes against ethanol, it’s no wonder all the obituaries are being written.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Biofuel Innovators with Alternatives to Oil

By John Addison (5/14/08). Oil soars to $125 per barrel and economies around the world sputter or fall into recession. Enough is enough. Many biofuels can be blended with gasoline and diesel refined from oil, then pumped into our existing vehicles. Even making our fuels with ten percent biofuel and ninety percent refined oil is enough to drop demand for oil and send the price south.

At the moment, this approach has major drawbacks. Food prices are soaring as more ethanol is made from corn, and biodiesel from soy and palm oil. Rain forests are being slashed and burned to increase production of soy and palm oil. Next generation biofuels, however, promise to minimize these downsides while ending our dependency on oil.

“Once viewed as an environmentally-friendly, silver bullet alternative to fossil fuels, biofuels have recently become “public enemy number one” in regard to rising food prices. But what role does the growing biofuels market really play in the current food crisis?” Asks James Greenwood, President and CEO, Biotechnology Industry Organization, who goes on to answer the question.

“There are a number of factors contributing to rising food costs. Poor harvests over the past year in Australia, Canada, South America and Eastern Europe. Protectionist tariff policies affecting the rice-producing nations of South Asia. A weak dollar is driving up the demand for U.S. exports of grains, a dynamic exacerbated by hedge fund and pension fund managers who are pouring unprecedented levels of investment in grain commodities. Growing incomes and meat-eating preferences of an emerging middle class in countries like India and China are increasing global demand for animal feed and the fuel required for production and transport. But the most significant factors driving up food prices are ever-rising energy and transportation costs.

“In coming years, biotechnology will allow us to create biofuels from non-food crops, crops that yield more per acre, require less fertilizer and are more tolerant of drought and other adverse conditions. These scientific breakthroughs will only enhance the world’s ability to feed and fuel itself in a responsible and sustainable way. As biofuels production transitions to these second and third generation biofuels, biotechnology will play an essential role in providing the world with cleaner fuel and more affordable food.”

The U.S. Agriculture Department projects that the combination of a shrinking corn crop and the swelling appetite for corn ethanol will keep the price of the nation’s largest crop in record territory into 2009. USDA economists expect U.S. farmers to produce 12.1 billion bushels of corn, down 7.3% from the record 13.1 billion bushels they harvested in 2007, as farmers grow more soy.

In the U.S., ethanol is currently in far greater demand than biodiesel. By law, 36 billion gallons of ethanol must be in use by 2020 in the USA. This ethanol will primarily be blended with gasoline. E10, a blend of ten percent ethanol and ninety percent petroleum refined gasoline will be common. By contrast, in the U.S. most diesel fuel is consumed by heavy vehicles with expensive engines that must run for years. Warranties can be voided and maintenance cost increase unless the diesel fuel meets exacting standards.

Biofuel innovators were discussed and presented at the Platts Advanced Biofuels Conference, which I attended. With improved biofuels we will achieve increased energy security while reducing greenhouse gas emissions. This article examines short-term and longer-term biofuel solutions.

In the heart of Silicon Valley, Khosla Ventures is funding innovative solutions for clean transportation and other major global problems. Brilliant innovators such as Vinod Khosla and Samir Kaul are involved in a number of companies creating cleaner fuels with cellulosic ethanol, biomass gasification, and synthetic biology.
Platt conference keynote speaker Vinod Khosla predicts that within five years fuel from food will no longer be competitive with cellulosic ethanol. He also predicts, “In five years, oil will be uncompetitive with biofuel, even at $50 per barrel, though oil will take longer to decline in price.”

Khosla Ventures identifies several sources of cellulosic ethanol. “There are four principal sources of biomass and biofuels we consider (1) energy crops on agricultural land and timberlands using crop rotation schemes that improve traditional row crop agriculture AND recover previously degraded lands (2) winter cover crops grown on current annual crop lands using the land during the winter season (or summer, in the case of winter wheat) when it is generally dormant (while improving land ecology) (3) excess non-merchantable forest material that is currently unused (about 226 million tons according to the US Department of Energy), and (4) organic municipal waste, industrial waste and municipal sewage.” Khosla Papers and Presentations

Sugarcane is the currently the most efficient feedstock for larger scale ethanol production. While corn ethanol delivers little more energy output than the total energy necessary to grow, process, and transport it; sugarcane ethanol delivers eight times the energy output as lifecycle energy input. Also, sugarcane typically produces twice as much fuel per acre as corn.

Brazil produces almost as much sugarcane ethanol as the United States produces corn ethanol, but at a fraction of the energy cost. Sugarcane is also grown in the southern U.S., from Florida to Louisiana to California.

Brazil is free from needing foreign oil. Flex-fuel vehicles there get much better mileage than in the U.S. If you drive into any of Brazil’s 31,000 fueling stations looking for gasoline, you will find that the gasoline has a blend of at least 20% ethanol, as required by law. 29,000 of the fueling stations also offer 100% ethanol. Ethanol in the U.S. is normally delivered on trucks, increasing its cost and lifecycle emissions. Brazil’s largest sugar and ethanol group, Cosan SA announced the creation of a company to construct and operate an ethanol pipeline.

Most sugarcane is grown in the southern state of Sao Paulo. Economics do not favor its growth in rain forests, although those who favor blocking its import make that claim. It is cattle, soy, palm oil, logging, and climate change that most threaten the rain forests. Some environmentalists are concerned that a significant percentage of Brazil’s sugarcane is grown in the cerrado, which is one of the world’s most biodiverse areas. The cerrado is rich with birds, butterflies, and thousands of unique plant species. Others argue that without sugarcane ethanol, more oil will come from strip mining Canadian tar sands and from a new “gold rush” for oil in the melting artic.

“In addition, the residue of sugarcane ethanol, bagasse, can be used for further energy production. While this may likely be used for generating carbon-neutral electricity, it could also be used in cellulosic biofuel production, potentially generating an additional 400-700 gallons per acre.” (CA LCFS Technical Analysis p 87-88)

Sugarcane growers are planning the development of varieties that can produce a larger quantity of biomass per hectare per year. These varieties are being called “energy cane” and may produce 1,200 to 3,000 gallons of ethanol per acre, contrasting with 300 to potentially 500 gallons of ethanol from an acre of corn.
Although sugarcane ethanol is currently the low-cost winner, long-term economics are likely to favor cellulosic sources.

In his keynote speech, Vinod Khosla sited promising sources such as paper waste, wood waste, forest waste, miscanthus, sorghum, hybrid poplar trees, winter cover crops, and perennial crops have deep roots and sequester carbon. Cellulosic ethanol could potentially yield 2,500 gallons per acre.

Large-scale reliance on ethanol fuel will require new conversion technologies and new feedstock. Much attention has been focused on enzymes that convert plant cellulose into ethanol. Because cellulose derived ethanol is made from the non-food portions of plants, it greatly expands the potential fuel supply without cutting our precious food supplies.

Pilot plants are now convert wood waste into ethanol. Over the next few years, much larger plants are likely to come online and start becoming a meaningful part of the energy mix. In Japan, Osaka Project, Verenium utilizes demolition wood waste as a feedstock in producing up to 1.3 million liters of cellulosic ethanol annually. A second phase, planned for completion in 2008, will increase production to 4 million liters per year. Verenium Ethanol Projects

Norampac is the largest manufacturer of containerboard in Canada. Next generation ethanol producer TRI is not only producing fuel, its processes allow the plant to produce 20% more paper. Prior to installing the TRI spent-liquor gasification system the mill had no chemical and energy recovery process. With the TRI system, the plant is a zero effluent operation, and more profitable.

The spent-liquor gasifier is designed to processes 115 Metric tons per day of black liquor solids. The chemicals are recovered and sent to the mill for pulping; the energy is recovered as steam which offsets the production of steam using purchased natural gas. All thermal energy in the plant is now renewable.
Producing cellulosic ethanol over the next few years is unlikely to be cost competitive with oil refining, unless other benefits accrue such as Norampac’s improved plant efficiency, savings in energy, heat, steam, reduction of plant waste, and/or production of multiple products from the plant. In the longer term, 100 million gallon per year cellulosic plants may be profitable without byproduct benefits.

Another Khosla Ventures portfolio company is Range Fuels which sees fuel potential from timber harvesting residues, corn stover (stalks that remain after the corn has been harvested), sawdust, paper pulp, hog manure, and municipal garbage that can be converted into cellulosic ethanol. In the labs, Range Fuels has successfully converted almost 30 types of biomass into ethanol. While competitors are focused on developing new enzymes to convert cellulose to sugar, Range Fuels’ technology eliminates enzymes which have been an expensive component of cellulosic ethanol production. Range Fuels’ thermo-chemical conversion process uses a two step process to convert the biomass to synthesis gas, and then converts the gas to ethanol.

The U.S. Department of Energy is negotiating with Range Fuels research funding of up to $76 million.
Range Fuels was awarded a construction permit from the state of Georgia to build the first commercial-scale cellulosic ethanol plant in the United States. Ground breaking will take place this summer for a 100-million-gallon-per-year cellulosic ethanol plant that will use wood waste from Georgia’s forests as its feedstock. Phase 1 of the plant is scheduled to complete construction in 2009 with a production capacity of 20 million gallons a year.

Abengoa Bioenergy, also announced the finalization of a $38-million collaboration agreement signed with the DOE for the design and development of the Hugoton, Kansas cellulosic ethanol plant which will process over 11 million gallons of ethanol per year with renewable energy as a byproduct. The biomass plant will be situated next to a conventional grain-to-ethanol plant with combined capacity of 100 million gallons, using scale to make cellulosic ethanol more cost-competitive. Abengoa Bioenergy will invest more than $500 million in the next five years in their production of biomass into ethanol in the U.S., Brazil, and Europe.
Poet, the nation’s largest ethanol maker with 22 plants now turning out 1.2 billion gallons a year, plans to open a 25-million-gallon cellulosic facility in 2009 alongside its expanded grain ethanol plant in Emmetsburg, Iowa. Corn cobs from local fields will supply it. Ethanol 2.0

Ethanol is not the only bio-game in town. Many European cars and most U.S. heavy vehicles use diesel not gasoline. New generations of biodiesel, biobutanol, and synthetic fuels are being developed that could be blended with diesel or replace it. Some of these fuels could also be blended with gasoline and jet fuel. BP and DuPont have teamed to produce biobutanol which has a higher energy density than ethanol, can be delivered in existing pipelines, and can be blended with a wider range of fuels.

Amyris will use synthetic biology to develop microorganisms that produce biofuels. LS9 Inc. is in the early stage of using synthetic biology to engineer bacteria that can make hydrocarbons for gasoline, diesel, and jet fuel.

Algae have the potential to be an efficient producer of oil for biodiesel with byproducts of including hydrogen and carbohydrates which could be converted into ethanol. Biodiesel from algae can be done today. The challenge is to make production large scale and cost effective. Ideal forms of algae need to be developed. Oil must be “brewed” with the right solution, light, mixing and stirring. Cost-effective photobioreactors must be developed.

“If we were to replace all of the diesel that we use in the United States” with an algae derivative, says Solix CEO Douglas Henston, “we could do it on an area of land that’s about one-half of 1 percent of the current farm land that we use now.”

Mike Janes, Sandia National Labs, is even more optimistic, “Recent studies using a species of algae show that only 0.3 percent of the land area of the U.S. could be utilized to produce enough biodiesel to replace all transportation fuel the country currently utilizes….In addition, barren desert land, which receives high solar radiation, could effectively grow the algae, and the algae could utilize farm waste….With an oil-per-acre production rate 250 times the amount of soybeans, algae offers the highest yield feedstock for biodiesel.”

At the Platts Advanced Biofuels Conference, most algae experts, from scientists to CEOs of algael fuel companies, see challenging years ahead before cost-effective commercial scale production of biofuel from algae will be possible. As one expert quipped, “The greatest progress to scale is being done by Photoshop.”
A number of companies are actively exploring the potential for fuel from algae. “Algae have great potential as a sustainable feedstock for production of diesel-type fuels with a very small CO2 footprint,” said Graeme Sweeney, Shell Executive Vice President Future Fuels and CO2. Shell is investing in using algae to produce fuel.

These innovators will only make a difference if they receive funding and distribution. Some of the energy giants are helping. Shell is recognized as the largest biofuel distributor among the “oil majors.” Shell has invested heavily in Choren biomass-to-liquids (BTL) in Europe. Shell has invested in Iogen, a maker of cellulosic ethanol catalysts and technology.

Biofuels have the potential to provide solutions for energy security and transportation with a much smaller carbon footprint. Other solutions include reduction in solo driving due to urban density and corporate programs, public transit, more fuel efficient vehicles, and the shift to electric vehicles that require no fossil fuel or biofuel. The new biofuels have the potential to encourage sustainable reforesting and soil enrichment. Biofuel 2.0 provides a path to fuel from wood and waste, not food and haste.

John Addison publishes the Clean Fleet Report. He owns a modest number of shares of Abengoa.

Is Ethanol’s Carbon Footprint Bad? It Depends.

In the cleantech and carbon worlds, the carbon footprint of ethanol, whether from corn or sugar feedstocks and fermentation processes, or enzymatic or thermochemical cellulosic sources, is always good fodder (or perhaps, “fuel”) for debate.

And depending on which process and which study you personally ascribe to, the answer on how carbon clean ethanol looks depends. In most debates centering on corn fermentation, for example, the studies cite a range from say, 20 to 30% less carbon intensive than gasoline, to 20 or 30% more. This begs one very big question in my mind, what’s the difference? How does the same ethanol in my car have a possible carbon footprint range that wide?

The true answer lies in the ground we walk on. When I started to read a few of the studies and articles about them, an interesting fact emerges, the difference depends in large part on which land gets counted. Most of ethanol’s carbon footprint falls into one of several categories, in roughly ascending order (depending on the source and process), the fuel used to make it, the fuel used to grow the feedstock, the carbon content of the fuel itself, and the lost carbon not sequestered in the vegetation that would have been on the land used to grow the feedstock.

The last one, land use change, is the bugaboo. For example, if you assume that all the land used to produce the ethanol feedstock is already in production, you tend to find a carbon footprint at the low end of the range, since there is little net reduction in the carbon sink, and ethanol looks pretty good. If you assume that all the land used to produce the ethanol feedstock came from forests that had been chopped down, or marginal land that produces very low yields, you tend to find a carbon footprint at the high end of the range, and ethanol looks bad. Thought about another way, ethanol made from corn or sugar that displaces human or animal food production is likely to be relatively greenhouse gas friendly comparedd to ethanol made from corn or sugar that comes from new land put into production just for ethanol. The same logic applies to cellulosic ethanol sources, though not quite to the same degree. Interesting conundrum.

As usual, the devil’s in the details, and people tend to use the case that best addresses their agenda. Personally, I’m buying all my ethanol from land that is already in production, so my carbon footprint must be good. The rest of you can buy the OTHER ethanol with all the bad carbon footprint.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Greentech blog.

Ethanol Under Pressure

by Richard T. Stuebi

A good friend of mine sent me a provocative email the other day:

“Last year, your government spent more than $8 billion of your tax dollars to achieve the following results:

  • Dramatically increase the emissions of carbon dioxide and other greenhouse gases into the atmosphere
  • Accelerate the destruction of the Amazon rainforest
  • Raise the price of milk, bread, beef and other grain-dependent products by more than 20%
  • Increase world hunger

How did they do this? Two words: ethanol subsidies. Did I mention that the amount of corn it takes to produce enough ethanol to fill the tank of your typical SUV one time could feed the average person for one year (350 days)?”

This is one person’s “grabber” for an April 7 article by Michael Grunwald in Time magazine entitled “The Clean Energy Scam”. It presents yet another negative portrait of corn-based ethanol as a flawed technology — and flawed policies to support it.

However, to avoid throwing the baby out with the bathwater, it’s important to emphasize to the phrase “corn-based”. While it’s increasingly clear that corn-based ethanol is of dubious merit except to the major agri-businesses like ADM (NYSE: ADM) and Cargill that benefit from the government’s largesse, that’s not to say that the potential future emergence of cellulosic ethanol wouldn’t be a good thing all-around.

The only debate is whether the current push for corn-based ethanol is really a useful bridge to — or even a propelling force for — the advancement of cellulosic ethanol. Certainly, ethanol proponents like uber-VC Vinod Khosla (see some of his papers and presentations) think that corn-based ethanol is helping pave the way to a cellulosic future, by helping change the fueling infrastructure from gasoline to ethanol. Meanwhile, a growing chorus of contrary voices doesn’t see the cellulosic promise at all, and focus their angst on the real and present problems generated by corn-based ethanol.

If cellulosic ethanol never makes it out of the lab and into the market, then the rush for corn-based ethanol will indeed have been an expensive dead-end — and will provide more food for the fodder of those who claim that government policy involving preferential subsidies should not pick technology winners.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Cellulosic Ethanol – Always the Bridesmaid?

I have a new set of predictions for ethanol technology, and so far my predictions on ethanol have been dead on. Cellulosic ethanol has been the thin film of the ethanol industry, always the bridesmaid. But perhaps, like with the breakthrough by First Solar (NASDAQ:FSLR), it’s time is coming.

I have written extensively on the topic of ethanol and biofuels, including an early 2006 analysis of the VeraSun (NASDAQ:VSE) IPO right before its pricing that predicted an appropriate price at the time in the range of $2.77 to $8.82 share. The business has grown since then, but EBITDA margins have slipped even farther than I predicted they would, but the forward PE has come right into line with my predictions way back then. After listing well above my range, the stock hit a high north of $30 before pulling back until it is finally in my original lrange, trading in the $7-8 per share range.

Nearly two years ago in mid 2006 I did another article on predictions for cellulosic ethanol:

My Predictions on the Ethanol Market:

  1. The corn market will likely be able to handle significantly more corn based ethanol production through substituting corn from the animal feed market than is currently anticipated.
  2. Cellulosic ethanol will come on line to replace a lot slower than anticipated – even when the technology arrives.
  3. The early cellulosic plants will likely be residual based, perhaps corn stover from fields already producing for corn ethanol – NOT purpose planted fuel crops.
  4. Cellulosic technologies that allow fuel switching and co-firing will have an advantage.
  5. Because of the transport issues – cellulosic ethanol will be relegated primarily to vertically integrated plants like the biomass power industry for the near future (where the operator owns its own fuel supply). They will struggle to compete on price with corn based ethanol.
  6. And if ethanol succeeds like DOE expects, our beef prices are headed up.”

And then I wrote an article in late 2006 entitled “Are Ethanol Companies Risky Investments?” for AltEnergyStocks.com. The conclusion – yes, of course.

“In the short run ethanol stocks are in a land grab phase ramping to meet demand, and some of these stocks may do well while demand still outstrips supply and the industry is still small, but when this dynamic changes – watch out as the margin pressure will be brutal, and could turn already aggressively valued stocks into a dot bomb style free fall as per gallon profits get crushed. So, make your profits while you can!”

So here are my new cellulosic ethanol predictions:

Prediction #1 – Both market entry and market share for the next several years in ethanol will roughly be governed by this ranking on preferred processes (with some allowance for process that involve more than one), and given feedstock, scalability, yield, and transport issues, sugar cane and corn fermentation will remain the market and cost leaders for some time.

  1. Fermentation
  2. Thermochemical
  3. Catalytic
  4. Enzymatic
  5. Wildcards

Roughly the farther down we go on this ranking the higher the risk of failure, the higher the current cost, the more difficult the scalability (if you swap #1 and #2), the higher the reliance on future technological advances, and the higher the requirements for vertical integration to make the economics work.

Prediction #2 – As ethanol and biofuels scale into significant portions of our fuel supply chain, most of the profits will be made by energy, refining companies, and Ag companies, who are more likely to build rather than to buy when it comes to expansion.

Prediction #3 – Despite all protestations to the contrary, ethanol and biofuels will continue to be our highest cost liquid fuel for at least a decade, though at $100 crude oil prices, even a high cost fuel can be competitive. Note: As I have said many times before, on a fully integrated direct cost basis, gasoline from oil can be profitably found, manufactured and distributed down well into the sub $0.50/gallon range, depending on the nature of the resource base in question, where as even the lowest cost forms of ethanol today are well over double that. Just because crude oil prices are north of $100 per barrel, does not mean that the COST of gasoline is higher than that of ethanol, it means that the PRICE of gasoline is high enough that the higher cost ethanol can be economically produced and sold. The implication is obviously that he who owns the reserves (either oil in the ground or corn in the field) will continue to do well.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Cleantech blog.

Cleantech Blogroll Review: Sulfur, Flipper, and Cellulose

by Frank Ling

Sulfur Batteries

The EPA has banned sulfur in gasoline but not in batteries. Sulfur, in the form of a sodium salt, has been used as large-scale storage systems. Pioneered in Japan, these batteries are gaining acceptance in the US as a reliable form of energy storage.

Due to the intermittent nature of wind energy, storage systems are needed to make wind power more reliable. The sodium sulfur battery is not only affordable and compatible with these turbines, they are robust and responsive to the output of the generators.

Jim Fraser writes in the Energy Blog:

The 50-kilowatt battery modules, 20 in total, will be roughly the size of two semi trailers and weigh approximately 60 tons. They will be able to store about 6.5 megawatt-hours of electricity, with a charge/discharge capacity of one megawatt. When the wind blows, the batteries are charged. When the wind calms down, the batteries can be used to supply energy to the grid as needed.

Such systems will can power up to 500 homes for over six hours.

Whale Inspired Wind Turbines

The shape of sea creatures have inspired the design of ships. Now, they are also inspiring the design of blades used in wind turbines.

Like the wings of an airplane, the blades can also suffer from drag, reducing it’s overall efficiency. Now, a company in Canada has developed a new design that greatly improves the efficiency.

Hank Green writes in EcoGeek:

Using these little “tubercles,” a new firm in Toronto has created fan blades that have 32% less drag and are, overall, 20% more efficient at moving air. The new design could lead to similar gains in wind turbines, though the testing and certification process for turbine efficiency takes some time.

For an in-depth analysis of the science behind these modified blades, take a look at the paper recently published in Physical Review Letters.

Cellulosic Ethanol Dead on Arrival?

Clearly, cellulosic ethanol would have much more environmental benefits to corn-based fuel. Scientists believe that cellulosic technology may be viable within five to 10 years but there are many logistical issues that have yet to be solved.

Robert Rapier in R-Squared Energy Blogwrites:

…you still have to haul all of this biomass to the plant, convert the cellulose (and get a low concentration of ethanol for your efforts), and then get rid of a sopping wet mess of waste biomass. Sure, it can be burned – if you spend a lot of energy drying it first. Because of the very nature of the process, I don’t believe this challenge will be solved…

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

2007 Roundup

by Richard T. Stuebi

As has become my custom, with the year drawing to a close, I now look in the rear-view mirror and try to distill what I see. In no particular order, here are my top ten reflections on 2007:

1. Popping of the ethanol bubble. Not long ago, it seemed like anyone could get an ethanol plant financed. Now, no-one will touch them. Why? Corn prices have roughly doubled, and producers can’t make money selling ethanol into the fuel markets when having to pay so much for feedstock. Along with the increasing realization that public policies so far to build ethanol markets has largely been for the financial benefit of big agri-businesses such as Arthur Daniels Midland (NYSE: ADM), ethanol has now become a dirty word to many. Progress on cellulosic ethanol technologies may not happen fast enough to redeem seriously diminished public perceptions about ethanol generally.

2. Continuing photovoltaics bubble. For illustration of this phenomenon, let’s take a look at First Solar (NASDAQ: FSLR). Nothing whatsoever against the company; indeed, they make a very fine product. It’s just that their share price has increased by a factor of 10 — from $27 to nearly $280 — in one year. At current levels, the company’s market cap is $20 billion, at a P/E ratio of over 200. I know the solar market is hot, but geez, c’mon. A 10x return in one year on a publicly-traded stock is simply not supposed to happen.

3. Increasing costs for wind energy. For many years, wind energy has become more competitive, as the industry matured and production efficiencies were tained. However, with increasing prices for virtually all commodities (e.g., steel, copper, plastics) and a weakening dollar against the Euro (note that most turbines are made in Europe), the economics of wind are unfortunately moving in the wrong direction right now.

4. Gore as rock star. First, an Oscar for An Inconvenient Truth. Then, the Nobel Peace Prize. To top it off, becoming a partner at top-notch venture capital firm Kleiner Perkins. What next for the what-could-have-been 43rd President? Whatever it is, at least the cleantech sector now has its iconic poster-child.

5. Cheers to Google. Google (NASDAQ: GOOG) has gotten into the cleantech game in a big way by creating an initiative with the mission to develop and launch renewable energy technologies that produce electricity more cheaply than coal. Once that aim is achieved, renewable energy will rapidly become ubiquitous, and we really will start getting on a path of serious carbon emission reductions.

6. Death of the incandescent lightbulb. Early in 2007, Australia led the way to ban incandescents, to force a shift to more energy efficient lighting technologies (fluorescents for now, perhaps eventually LEDs). Amazingly quickly, the U.S. followed suit, passing an energy bill by year-end that effectively phases out incandescents by 2014. This should have a major energy efficiency impact, and yield a big cut in greenhouse gas emissions, in a relatively short amount of time.

7. Tightening CAFE — finally! After decades without change, the U.S. Congress finally acted to impose more stringent corporate average fuel economy (CAFE) standards for auto/truck manufacturers. The main milestone is a 35 mpg combined car/light-truck standard by 2020. For the first time, trucks are now part of the CAFE equation, closing the loophole that helped propel SUVs to prominence. Strengthening CAFE is probably the most important thing that American politicians could do to actually make a meaningful dent in reducing dependence on Middle Eastern oil.

8. Uncertain future for coal. On the one hand, MIT released a major study entitled “The Future of Coal” that compels a radical R&D push to commercialize technologies for carbon capture and sequestration (CCS), underscoring the reality that coal-fired electricity generation is going to be a major factor for a long time. On the other hand, I don’t see any such coal R&D push actually happening, nor even that much progress on CCS. A recent statement by the U.S. Department of Energy concerning its oft-touted FutureGen program for piloting CCS technology indicates a possible retrenchment. Meanwhile, Pacificorp — which is owned by Warren Buffett’s legendary holding company Berkshire Hathaway (NYSE: BRKA and BRKB) — recently cancelled a coal CCS project in Wyoming, with a spokesman quoted as saying that “coal projects are no longer viable.” Ouch.

9. Oil at $100/barrel. Starting the year at about $60/barrel and then promptly falling to near $50, oil prices increased steadily from February to November, reaching the high-90’s. I suspect we’ll see $100/barrel sometime in 2008; I don’t suspect we’ll see oil below $40/barrel very much anymore. Even at prices not long ago considered absolutely stratospheric, it appears that there’s been very little customer/political backlash so far: the world doesn’t seem to be ending for most Americans.

10. Serious dollars betting on energy technology. There’s been a lot written about the big surge in venture capital invested in new energy deals. I find even more intriguing the increasing amount of corporate and public sector investment in new energy R&D. As perhaps the most prominent example, in the U.K., the government has pledged up to $1 billion over the next 10 years in matching support to private investments in the Energy Technologies Institute, which includes the participation of such leading corporate lights as BP (NYSE: BP), Shell (NYSE: RDS.A and RDS.B), Caterpillar (NYSE: CAT), Electricite de France (Euronext: EDF), E.ON (Frankfurt: E.ON), and Rolls-Royce (London: RR.L). That’s a lot of money and corporate weight in the mix. I can’t imagine that such an initiative will produce nothing of use.

Best wishes to you and yours for 2008. Let’s hope it’s a good year, even better than the one wrapping up.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

California’s Low Carbon Diet

By John Addison (12/5/07). When Coke and Pepsi were in the middle of their diet wars, California was an early battle ground. It is a state which tends to do much in excess, including drinking colas. In fact, only a handful of countries spend more money on beverages. Parties of happy and surprisingly fit youth were shown on TV commercials drinking their beverage of choice.

Now millions of Californians are being targeted as early adopters for a low carbon fuel diet. More miles, less carbon emission. It is the law. Executive Order S-1-07, the Low Carbon Fuel Standard (LCFS), calls for a reduction of at least 10 percent in the carbon intensity (measured in gCO2e/MJ) of California’s transportation fuels by 2020. Low Carbon Fuel Standard Program

Successful implementation of the LCFS will be critical to California’s even more ambitious law, the California Global Warming Solutions Act (AB-32), which requires California’s 2020 greenhouse gas emissions to not exceed 1990 emissions. The challenge is that in 2020, California’s population will be double 1990.

Because transportation is the main source of greenhouse gases in California, it is urgent that Californians use vehicles with better miles per gallon and that less greenhouse gases be emitted from the use of each gallon of fuel.

The world will learn from the successful implementation of LCFS because gasoline and diesel are currently becoming more carbon intense. There has been a shift from oil that is easy to get, to extraction and refining that increases greenhouse gases, as we make gasoline from tar sands, coal-to-liquids, and a future nightmare of shale oil. For example, monster earth movers strip-mine northern Alberta, extracting tar sands. Elizabeth Kolbert reported in the New Yorker that 4,500 pounds of tar sand must probably be mined to produce each barrel of oil. The converting of tar sands to petroleum will require an estimated two billion cubic feet of natural gas a day by 2012. Carbon intensity includes all the emissions from the earth movers and all the natural gas emissions from refining.

“All unconventional forms of oil are worse for greenhouse-gas emissions than petroleum,” said Alex Farrell, of the University of California at Berkeley. Farrell and Adam Brandt found that the shift to unconventional oil could add between fifty and four hundred gigatons of carbon to the atmosphere by 2100. Article

So, how can California reduce the carbon emission from fuel use? As a major agricultural state, E10 ethanol will be part of the solution. E10 can be used in all gasoline vehicles including 40 mile per gallon hybrids and in the new 100 mile per gallon plug-in hybrids being driven by early adaptors. Higher percentage blends of next generation ethanol are even more promising. Biodiesel is better at reducing carbon intensity than corn ethanol. Most heavy vehicles have diesel engines, not gasoline. Exciting new European diesel cars are also starting to arrive.

There are over 25,000 electric vehicles in use in California. Heavy use of electricity for fuel would take California far beyond the minimal target of a ten percent reduction in carbon intensity. This is especially true in California where coal power is being phased-out in favor of a broad mix of renewable energy from wind, geothermal, solar PV, large-scale concentrated solar, ocean, bioenergy and more.

California Low Carbon Fuel Standard Technical Analysis documents that there is a rich diversity of sources for biofuels within the state and in the USA including the following in million gallons of gasoline equivalent per year:

In-state feedstocks for biofuel production Potential volume
California starch and sugar crops = 360 to 1,250
California cellulosic agricultural residues = 188
California forest thinnings = 660
California waste otherwise sent to landfills = 355 to 366
Cellulosic energy crops on 1.5 million acres in California = 400 to 900
California corn imports =130 to 300

Forecasted 2012 production capacity nationwide Potential volume
Nationwide low-GHG ethanol = 288
Nationwide mid-GHG ethanol = 776 to 969
Nationwide biodiesel = 1,400
Nationwide renewable diesel = 175

A variety of scenarios have been examined with detailed analysis by U.C. Berkeley, U.C. Davis, and stakeholder workgroups that include technical experts from the California Energy Commission and the California Air Resources Board. Several scenarios are promising including one that would achieve a 15% reduction in carbon intensity with the following percentage mix alternate fuels and vehicles of some 33 million light duty vehicles by 2020:

Fuels:
Low-GHG Biofuel 3.1%
CNG 1.7%
Electricity 0.6%
Hydrogen 0.4%
Low-GHG FT Diesel .9%
Sub-zero GHG Biofuel 3.9%

Vehicles:
CNG vehicles 4.6%
Plug-in hybrid vehicles 7.4%
Flex-fuel vehicles 34.7%
Diesel vehicles 25.5%
Battery electric vehicles 0.5%
Fuel cell vehicles 1.9%

The ultimate mix will be determined by everyday drivers in their choice of vehicles and fuels. Low emission choices are becoming more cost-effective with the growth of electric vehicles, waste and renewable hydrogen, fuel from biowaste and crops grown on marginal land, and even fast growing poplar trees that absorb more CO2 than is emitted from resulting biofuels. The alternatives make fascinating reading for those interested in future scenarios for fuels and vehicles:

California Low Carbon Fuel Standard Technical Analysis and Scenario Details
California Low Carbon Fuel Standard Policy Analysis

California’s ambitious goals to reduce greenhouse gas emissions will benefit by the increased motive energy per CO2e that is described in these scenarios. California will also benefit from vehicles that will go more miles with the same energy input. Vehicles are getting lighter and safer as high-strength carbon fibers and plastics replace heavy metal. The shift to hybrids and full electric-drive systems allow replacement of heavy mechanical accessories with light electric-powered components. Hybrids allow big engines to be replaced with smaller, lighter engines. Pure electric vehicles can eliminate the weight of engines and transmissions. Less fuel weight is needed. Aerodynamic vehicles are becoming more popular.

Employer programs are leading to more flexible work, less travel, and increased use of public transit. Demographics may also cause a shift to more urban car sharing, use of public transit, bicycling, walking, and less solo driving. It can all add-up to a celebration of low-carbon living.

John Addison publishes the Clean Fleet Report which includes over 50 articles about clean transportation.

Triple-Digit Oil Prices Ahead?

by Richard T. Stuebi

Last week, as reported on Yahoo!, the chief economist of the investment bank CIBC went on record that “We’re in a world of triple digit oil prices for the foreseeable future,” beginning by the end of 2008.

Increasingly, I’ve been hearing through the grapevine prognostications of $100/barrel oil. I put a lot more weight on CIBC’s view than on Hugo Chavez’s. Why? Based in Canada, CIBC prides itself on being a banker of note to the huge Canadian oil and natural resources industry. Besides, Canadians in general seem less prone to hyperbole than we Americans (or Venezuelans). As a result, I expect that a firm such as CIBC doesn’t put out such statements very lightly.

What does $100 oil mean? By my calculations, each additional $10/barrel increase in oil prices, translates to about $0.40/gallon in gasoline prices — assuming no changes in oil transportation costs, oil refinery economics and oil taxation. So, if we’re seeing gasoline close to $3.00/gallon today with oil at $80/barrel, I would expect almost $4.00/gallon at $100 oil.

Higher prices for motor fuels should provide further support for the emergence of biofuels markets (both ethanol and biodiesel). Although biofuels continues to receive lots of public sector push and mass-market discussion, the economics of biofuels have suffered recently, as feedstock prices (for corn and soybeans, respectively) have been bid up by surging demand for biofuel production. The price spreads between feedstock and fuel have become so narrow that biofuels producers now have little opportunity for profit. With higher prices in motor fuels markets, there is more prospect for investments in new biofuel production to be profitable, and for existing biofuel producers to return to reasonable profitability.

Perhaps more interestingly, higher oil prices will provide greater impetus — both from the government and from private sector investments — for the development of next-generation biofuel technologies (e.g., cellulosic ethanol, algae-based diesel), coal-to-liquids and gas-to-liquids projects, oil shale retorting approaches, and the hydrogen infrastructure. These are very capital-intensive and long-term opportunities that many parties are leery of pursuing, in the fear that oil prices will fall back to lower levels and render the efforts uncompetitive and therefore wasted.

If we are truly going to wean ourselves off of oil, we really need high oil prices for a long duration, in order to provide ongoing economic sustenance and continuing urgency for the development of these new energy technologies. The forecast of triple-digit oil prices should therefore not be something to dread, but rather something for economic opportunists to seize.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Blogroll Review: Sinks, Oranges, Woz

by Frank Ling

Power Bathroom

For many years, the Japanese have recycled sink water for their toilets. Now an American company is taking it further.

WaterSaver Technologies from Kentucky has developed the AQUS system, which Philip Proefrock at EcoGeek says:

“…collects the water from a bathroom sink and filters and disinfects it before it gets re-used as flush water for an adjacent toilet. (There is nothing that would prevent this from being used in a large-scale LEED project either.)”

The toilet can save up to 7300 gallons of water each year.

According to the Word Water Council, that’s enough water to produce 2 kg of beef. :)

Orange-ol

Apparently you can get more out of oranges than just orange juice. Some guys have figured out how to convert the citrus peel into ethanol.

Jim Fraser at the EnergyBlog says:

“FPL Energy said that ethanol from citrus peel could result in a new Florida industry producing over 60 million gallons of fuel per year, which could replace about one percent of Florida’s annual gasoline.”

If only they had a way to make Pine-sol smell orangy….oh wait, I guess they already have. :)


Green Woz

Al Gore, Leonardo DiCaprio, and Cameron Diaz are all out there pushing for a greener future. But it doesn’t hurt to have more celebrities out there to garner support.

Steve Jobs (from his own blog!) quotes his old buddy Steve Wozniak as saying he wants to reduce his emissions:

“I have a long dream to build my own house in a very energy-efficient approach. That’s going to be very soon. It uses the right kind of wood that serves as a heater and as an air conditioner.”

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

Fuels from Wood and Waste not Food and Haste

By John Addison (7/3/07) Americans are screaming for lower gasoline prices. In São Paulo, Brazil, the price of gasoline is R$2.43/liter, ethanol is only R$1.48/liter, disclosed Brazil’s National Petroleum Agency. Brazil has reduced its petroleum dependency by 40% with sugarcane ethanol.

The United States and Brazil together produce about 90 percent of global fuel ethanol. In the United States the current benefits of ethanol are far behind Brazil.

“Thanks in large part to the Renewable Fuels Standard (RFS)—a legislative mandate for increased renewable fuels use that passed as part of the Energy Policy Act of 2005—the corn ethanol industry is expanding at an unprecedented rate in the United States. The 115 ethanol plants operating in April 2007 have the capacity to produce 5.75 billion gallons per year (BGY) of ethanol, and an estimated 86 plants under construction are expected to produce an additional 6.34 BGY of capacity within the next 18 months (RFA, 2007). The cumulative total capacity—more than 12 BGY by 2009—far exceeds the RFS blending mandate of 7.5 BGY by 2012, and has been the driving force behind skyrocketing corn prices in the last 12 months.” – World Resources Institute

In the United States, ethanol has reduced our petroleum dependency by about 5%. That amount is rapidly increasing. Many states require ethanol as an oxygenating agent in gasoline, replacing MTBE and tetraethyl lead. A growing number of states are requiring that gasoline be sold with a blend of 10% ethanol (E10).

There is a heated debate about whether ethanol helps the environment. If you live in Brazil, the answer is “yes.” In Brazil, ethanol is processed from sugarcane, which produces over eight times more energy than the fossil energy used in its production. In the United States, ethanol is currently produced from corn. Brazil can achieve yields of 2,500 gallons of ethanol per acre. The U.S.; 300 to 500 gallons per acre.

The United States could immediately lower gasoline prices, reduce our need for foreign oil, and lower emissions by importing sugarcane ethanol from Brazil. Instead, we impose a 54 cent per gallon tariff and generally make importation difficult. Instead we subsidize corn ethanol.

There is only a 20% reduction in greenhouse gases, source-to-wheels with corn ethanol in blends of up to E10, because the process of making corn ethanol uses diesel farm equipment, fertilizer from fossil fuel, coal produced electricity, and diesel fuel rail and delivery trucks. Since E10 is 90% gasoline, the blended fuel’s reduction of greenhouse gases is about 2%.

Corn ethanol is controversial. Corn farmers and others betting on high corn prices love it. Enthusiasts of energy independence support it. Some scientists show a net energy gain; some, a loss.

“Abusing our precious croplands to grow corn for an energy-inefficient process that yields low-grade automobile fuel amounts to unsustainable, subsidized food burning,” says the Cornell professor Dr. Pimentel, who chaired a U.S. Department of Energy panel that investigated the economic and environmental impact of ethanol production.

To analyze corn ethanol, one needs to look at corn-to-tank and tank-to-wheels. The real problem is in the tank-to-wheels use in U.S. flex-fuel vehicles (FFV).

If E85 (85% ethanol, 15% gasoline) corn ethanol is used is any of the 6 million GM and Ford flex fuel vehicles on U.S. streets, then greenhouse emissions increase. Most FFVs are fuel guzzlers; fueled with E85, they are corn guzzlers. In 2007 the best rated car running on E85 was the Chevrolet Impala, with a United States EPA mileage rating of 16 miles per gallon in the city and 23 on the highway when fueled with E85. For a typical U.S. year of driving, the annual fuel cost would be at $1,657 and 6 tons of CO2 would be emitted by this FFV when running on E85.

By contrast, the EPA rating for a Toyota (TM) Prius running on gasoline was 60 miles per gallon in the city and 51 on the highway. The Prius would have an annual fuel cost of $833 and only emit 3.4 tons of CO2.
A big problem is that ethanol cuts miles per gallon by about 27%. The energy content of E85 is 83,000 BTU/gallon, instead of 114,000 BTU/gallon for gasoline. To make matters worse, Dr. Pintel calculates that it takes 131,000 BTU to create a gallon of ethanol. Even by 2030, the U.S. Energy Information Administration (EIA) projects that only 1.4% of ethanol use will be E85. The vast majority will be for blending to 10% with gasoline.

The EIA forecasts that ethanol use will grow from 4 billion gallons in 2005 to 14.6 billion gallons in 2030, but only 0.2 billion gallons will be E85 by 2030.

To save gas and help save the planet, pump E10 into a gasoline miser. Don’t pump E85 into a corn guzzler. Although Dr. Pintel’s 2001 finds would also show E10 as a bad idea, U.S. agriculture has improved yields from 300 gallons of corn ethanol per acre to closer to 500 gallons in some areas, in part by using more fertilizer. The problem is now the vehicles, not the ethanol.

U.S. agriculture will be a big winner without any need to spend more tax dollars funding E85 stations, subsidizing corn ethanol, nor by blocking Brazilian ethanol and keeping gasoline prices high. Agriculture will be a bigger winner by growing cellulosic corps with much higher yields per acre than corn.

Large-scale reliance on ethanol fuel will require new conversion technologies and feedstock. Much attention has been focused on enzymes that convert plant cellulose into ethanol. Because cellulose derived ethanol is made from the non-food portions of plants, it greatly expands the potential fuel supply without cutting our precious food supplies. According to a joint study by the U.S. Departments of Agriculture and Energy, the nation has enough biomass resources to sustainably meet well over one-third of current U.S. petroleum needs if cellulosic technologies and resources are employed.”

In the heart of Silicon Valley, Khosla Ventures is funding innovative solutions for clean transportation and other major global problems. Led by Vinod Khosla, they are involved in a number of companies creating cleaner fuels with cellulosic ethanol, biomass gasification and synthetic biology.

Samir Kaul, General Partner with Khosla Ventures, was a keynote speaker at the GreenVest 2007 Conference. Leading venture capitalists were captivated by his thoughts about creating an innovation ecosystem and building a portfolio of cleantech and biotech companies. Samir was a biochemist at Venter’s Institute for Genomic Research (TIGR). Samir Kaul is also a Harvard MBA who successfully founded and built several bioscience companies. With Vinod Khosla, he founded Khosla Ventures.

Samir Kaul sees cellulosic ethanol potential yields of 2,500 gallons per acre. One of Khosla Venture’s portfolio companies is Mascoma, which is innovating in enzymes, organisms and ethanol production processes.

Another Khosla Ventures portfolio company is Range Fuels which sees fuel potential from timber harvesting residues, corn stover (stalks that remain after the corn has been harvested), sawdust, paper pulp, hog manure, municipal garbage, and more that can be converted into cellulosic ethanol. In the labs, Range Fuels has successfully converted almost 30 types of biomass into ethanol. While competitors are focused on developing new enzymes to convert cellulose to sugar, Range Fuels’ technology eliminates enzymes which have been an expensive component of cellulosic ethanol production. Range Fuels’ thermo-chemical conversion process uses a two step process to convert the biomass to synthesis gas, and then converts the gas to ethanol. The U.S. Department of Energy is negotiating with Range Fuels research funding of up to $76 million.

Range Fuels was awarded a construction permit from the state of Georgia to build the first commercial-scale cellulosic ethanol plant in the United States. Ground breaking will take place this summer for a 100-million-gallon-per-year cellulosic ethanol plant that will use wood waste from Georgia’s forests as its feedstock. Phase 1 of the plant is scheduled to complete construction in 2008 with a production capacity of 20 million gallons a year.

Ethanol is not the only bio-game in town. Many European cars and most U.S. heavy vehicles use diesel not gasoline. New generations of biodiesel, biobutanol, and synthetic fuels are being developed that could be blended with diesel or replace it. Some of these fuels could also be blended with gasoline and jet fuel. BP and Dupont have teamed to produce biobutanol.

Amyris and SunEthanol plan to use synthetic biology to develop microorganisms that produce biofuels. Khosla Ventures backed LS9 Inc. is in the early stage of using synthetic biology to engineer bacteria that can make hydrocarbons for gasoline, diesel, and jet fuel. LS9’s acting CEO, Douglas Cameron, is former director of biotechnology research at Cargill and chief scientific officer at Khosla Ventures.

The more that global customers recognize the value of green fuels, the faster will be their replacement of petroleum fuels. Carbon emissions cap-and-trade agreements are being implemented in a growing number of nations and U.S. states. The carbon market is expected to reach $40 billion by 2010. Leading investors and major corporations will convene at the Carbon Finance World this September 18-20, 2007, in Chicago to look at the opportunities.

Future vehicles will get improved mileage and use an increased mix of biofuels and fuels from synthetic biology. Expect to see a high growth of cleaner fuels from woods and waste, not food and haste. Look forward to true source-to-wheels solutions to energy independence and reduction of greenhouse gas emissions.

John Addison publishes the Clean Fleet Report.