Posts tagged “cellulosic ethanol”
A few people have asked if I can reproduce more of my Forbes columns here, because they don’t like wading through the ads there to get to the content. This week I wrote an update on the progress toward cellulosic ethanol commercialization, and given my previous coverage on the topic (especially Why I Don’t Ride a Unicorn to Work) this seems like an appropriate subject to discuss here.
Last week the U.S. Environmental Protection Agency (EPA) announced that during the first quarter of 2016, just over 1 million gallons of cellulosic ethanol were produced. In fact, production for the month of March jumped 64% from the previous month to 446,000 gallons produced, the highest levels of the modern era. Production this year is well ahead of the pace in 2015, when 2.2 million gallons of cellulosic ethanol were produced for the entire year.
So, have we finally reached the long-promised realization of commercial cellulosic ethanol? CONTINUE»
The USDA recently updated the numbers on the energy balance of corn ethanol in 2015 Energy Balance for the Corn-Ethanol Industry. Today returning guest Todd “Ike” Kiefer scrutinizes the numbers in the report and he raises some critical questions about the data and methodology.
Previously Mr. Kiefer wrote an article critical of the Navy’s efforts to promote biofuels in a periodical that is sent to Congress and top military leaders. The article was entitled Energy Insecurity: The False Promise of Liquid Biofuels (discussed here). He also wrote a guest article here in the past called EPA’s Sleight of Hand on Cellulosic Fuel Rule Change. His biography can be found at the end of the article.
I would remind readers that while I may agree with much, if not most of what Mr. Kiefer writes, these are his opinions. I have not taken a close look at this USDA paper myself, so it is possible that we could have a difference of opinion on some element(s) of the analysis. I don’t know that to be the case, but until I read the paper myself I offer up that caveat. CONTINUE»
Ten years ago a visionary named Vinod Khosla gave a presentation called Biofuels: Think Outside the Barrel. It seems to have disappeared from his Khosla Ventures website, but you can find an archived version here. In that presentation Mr. Khosla outlined his vision for biofuels. He projected that ethanol produced from biomass – aka “cellulosic ethanol” – would scale up rapidly. From zero commercial production in 2006, Khosla foresaw the first 100 million gallons of cellulosic ethanol hitting the market in 2008 (see Slide 78), ramping rapidly to 2.5 billion gallons in 2011, 14.6 billion gallons in 2015, and ultimately 173 billion gallons per year by 2030. Combined with corn ethanol production, he believed cellulosic ethanol could totally end U.S. dependence on petroleum for transportation fuel – but he needed to get the government on board to foot some costs.
Khosla addressed potential obstacles in his presentation. Certainly cellulosic ethanol wouldn’t fail because of technology. There were too many companies working on it. The magic of Moore’s Law and black swans would be the ticket to success. (As an aside, he doesn’t seem to understand the black swan theory, as he frequently cites these “high-profile, hard-to-predict, and rare events” as an expected outcome). The only real barrier he could identify was those despicable oil companies, who had to be shaking in their boots that this 100-year old upstart technology would spell their demise.
But he would deal with the oil companies through legislation by forcing them to purchase this product that had yet to be commercialized. So he lobbied, and he testified before Congress. He lost a vote or two, but he was instrumental in getting cellulosic ethanol mandates included in the Renewable Fuel Standard (RFS) in the Energy Independence and Security Act of 2007. The EPA was charged with implementing the RFS, and they based the mandated volumes on the amount that potential cellulosic ethanol producers claimed they would be able to produce. For 2010 the EPA was counting on 100 million gallons of cellulosic fuels based on claims primarily from two companies associated with Vinod Khosla: Range Fuels and Cello Energy. CONTINUE»
In last month’s article Where are the Unicorns?, I discussed the fact that the commercial cellulosic ethanol plants that were announced with great fanfare over the past couple of years are obviously running at a small fraction of their nameplate capacity. In fact, April was a record month for cellulosic ethanol production according to the EPA’s database that tracks this information, but that meant that at least 8 months into the learning curves for these plants actual production for that month was only about 6% of nameplate capacity.
May’s numbers are now in, and the situation has gotten worse. After reporting 288,685 gallons of cellulosic ethanol in April, May’s numbers only amounted to 114,018 gallons. This is only about 2.4% of the nameplate capacity of the announced commercial cellulosic ethanol plants. If we use year-to-date numbers, the annualized capacity is still less than 3% of nameplate capacity for facilities that cost hundreds of millions of dollars to build. Let that soak in. POET alone spent $275 million, with U.S. taxpayers footing more than $100 million of that bill. Abengoa reportedly received $229 million from taxpayers for its project. For this (plus however much that was spent by INEOS), the combined plants are running at an annualized capacity of 1.7 million gallons of ethanol, which would sell on the spot market today for $2.6 million. CONTINUE»
Congress Mandates Cellulosic Ethanol and The EPA Tracks It
The U.S. Environmental Protection Agency (EPA) is tasked with tracking compliance under the Renewable Fuel Standard (RFS2) that was set in the Energy Independence and Security Act of 2007 (EISA). Obligated parties under the RFS2 must demonstrate compliance with Renewable Identification Numbers (RINs), which the EPA created to track RFS2 compliance. A RIN is a 38-character number assigned to a gallon equivalent of renewable fuel produced or imported. For corn ethanol, 1 gallon of ethanol produced generates 1 RIN. Other kinds of biofuel generates RINs at different rates which are defined by the EPA. For certain gaseous biofuels, such as di-methyl-ether (DME) and bio-methane (methane typically produced from sewage sludge or manure), the EPA has specified that 77,000 British thermal units (BTUs) of fuel are 1 gallon of renewable fuel equivalent. Not coincidentally, this is the energy content of 1 gallon of ethanol.
Obligated parties that produce or own RINs must register with the EPA, and RIN generation and transaction data is available from the EPA Moderated Transaction System (EMTS). A RIN is attached to each gallon of renewable fuel (or equivalent) as it is transferred to a fuel blender. After blending, RINs are separated from the blended gallon and are used by obligated parties (blenders, refiners, or importers) as proof that they have sold renewable fuels to meet their RFS mandated volumes. An obligated party can purchase RINs to satisfy their obligations, and that’s exactly what many obligated parties do. CONTINUE»
A few years ago, I wrote a post about the US Environmental Protection Agency’s (EPA) attempt to mandate a non-existent fuel into existence, and then fine refiners for not buying this fuel. That post was called “Why I Don’t Ride a Unicorn to Work“, and was designed to call attention to federal biofuel mandates that weren’t grounded in reality.
But what if I call a rhinoceros a unicorn? Does that mean unicorns then exist?
This week we have a guest post from Todd “Ike” Kiefer, who argues that this is effectively what the EPA has done. By declaring that the definition of cellulosic biofuels is ambiguous, the EPA has signaled that non-cellulosic feedstocks can qualify for full cellulosic tax treatment. Mr. Kiefer explains.
Previously Mr. Kiefer wrote an article highly critical of the Navy’s efforts promote biofuels in a periodical that is sent to Congress and top military leaders. The article was entitled Energy Insecurity: The False Promise of Liquid Biofuels (discussed here). His biography can be found at the end of the article. CONTINUE»
Ask and Ye Shall Receive
Last week, The Economist posed the following question: “What happened to biofuels?” The biofuels in question are so-called second generation biofuels that are produced from trees, grasses, algae, — in general, feedstocks that don’t also have a use as food. The appeal is obvious to anyone concerned about the world’s dependence on petroleum, and further worried that a major shift to biofuels will cause food prices to rise. So let’s address that question.
Entrepreneurs Revive a Century-Old Idea
About a decade ago, a number of entrepreneurs began to use their political influence to convince the US government that the only things keeping the US from running our cars on advanced biofuels was lack of government support, and interference from oil companies. These advocates eventually won over enough political support that state and federal governments began to funnel large amounts of taxpayer dollars into advanced biofuel ventures. President Bush spoke of running cars on switchgrass in his 2006 State of the Union address.
The federal government sought to deal with supposed oil company intransigence with a mandate requiring gasoline blends to contain growing volumes of corn ethanol initially, but starting in 2010 advanced biofuels as well. The federal government mandated that by the year 2022 the fuel supply had to use 36 billion gallons of biofuels, with 21 billion gallons coming from advanced biofuels. CONTINUE»
This week, the EPA announced that it was adjusting the Renewable Fuels Standard (RFS) in order to reflect market realities. As originally proposed earlier this year, the rule called for 14 million gallons of cellulosic ethanol, but the final rule sets a requirement for 6 million gallons of cellulosic ethanol this year.
However, as all the news stories focus on how the EPA has “backed down”, what goes overlooked is that there is finally a cellulosic biofuel industry in which commercial production has started.
KiOR’s biorefinery in Columbus, Mississippi started commercial production in March using wood chips to produce cellulosic fuels, and Ineos just announced on July 31 that their Indian River BioEnergy plant in Florida has begun operations to make biofuels from plant waste. Both of these are now operating at full commercial scale. Whether they’re making money yet, we don’t know, but the fact that they’re producing large volumes of cellulosic biofuels may be a historic turning point. These developments are important steps towards developing a real advanced biofuel industry that can help move us toward a point where we have other options for how to fuel our cars and trucks.
First Qualifying Cellulosic Ethanol
Last year, to much fanfare, the first batch of qualifying cellulosic ethanol was produced (i.e., it qualified for credits under the EPA program for certifying ethanol for sales). I reported on the development at that time.
Western Biomass Energy LLC, a subsidiary of Blue Sugars Corporation (previously KL Energy) reported the major milestone of claiming the first cellulosic ethanol tax credits under the RFS2 for a 20,069 gallon batch of cellulosic ethanol produced from bagasse (sugar cane waste) in April 2012.
However, regular readers are aware that for years I have been deeply skeptical that cellulosic ethanol as envisioned by — and ultimately mandated by — the US government will be an economic and scalable fuel option. The obstacles to success are significant, and I have described them in detail on many occasions.
In my previous column — Why I Don’t Ride a Unicorn to Work — I used an analogy to describe the US government’s approach to cellulosic ethanol mandates. In brief, they have mandated that something that does not exist — commercial cellulosic ethanol volumes — be blended into the fuel supply in the hopes that they can incentivize the industry into existence. They decided to require gasoline blenders to purchase the fuel, which as it turns out was a bit of a problem since it didn’t exist.
Last week the court sided with the American Petroleum Institute in a lawsuit against the Environmental Protection Agency (EPA) over the mandates. The court ruled that the EPA — which was responsible for determining the mandated volumes each year — based their projections on wishful thinking rather than on sound analysis (See the court decision here).
So how did the EPA respond? Less than a week after the court ruled that the EPA had based their cellulosic ethanol projections on wishful thinking, the EPA set the 2013 cellulosic ethanol mandate at 14 million gallons — up from last year’s mandate of 8.65 million gallons. Given that only around 20,000 gallons of qualifying cellulosic fuel was produced in 2012 — about 0.2% of the final mandated volume — the EPA’s decision to increase the 2012 mandate by over 60% is odd to say the least. It seems like they have doubled down on last year’s wishful thinking with an even larger dose of wishful thinking. CONTINUE»