Advances in Cellulosic Ethanol Technologies January 2009 Contact: jjacobi@scottmadden.com
Contents Cellulosic Ethanol Overview Cellulosic l Ethanol Technology Costs, Funding and Investment Major Policies and Industry Players Biorefineries Summary SWOT Analysis Appendices Appendix 1: Summary of Technology Development Goals Appendix 2: Per Acre Economics 1
Cellulosic Ethanol Overview
Overview In 2006, ethanol (produced from sugar cane in Brazil and corn in the US) was a global industry of over 12 billion gallons per year Major agriculture and food conglomerate, Archer-Daniels-Midland (ADM), produced 1 billion gallons of corn based ethanol in 2005, which was more than 25% of the U.S ethanol production and 11 % of the world total Due to the pressure on commodity supply and prices, a range of innovative companies are looking to find better and cheaper ways to make ethanol from nonfood crops There are conflicting projections on whether corn will be able to meet the growing ethanol feedstock needs A 2006 New Energy Harvest report states that if the US reaches its Renewables Fuel Standard (RFS) goal for 2010, the limits of feedstock supply will be reached (and still only supply approximately 6% of light duty vehicle fuels); some estimates have corn-based ethanol running out of land at 15 billion gallons/year The report further implies that for ethanol to significantly reduce oil imports and improve national oil security feedstocks must shift from grains to cellulose such as corn Stover, wheat straw, and rice husks, or other sources Support for second generation fuels is certainly near the top of the US government s biofuels agenda In addition to recent extensions of the Federal Production and Investment Tax credit programs, the Emergency Economic Stabilization Act contains provisions that half of new cellulosic biofuels plants can be written off immediately against a company s tax bill provided they come on line before 2013 To move beyond current ethanol technologies, there needs to be a variety of alternative fuels, including ethanol produced from cellulosic materials like grasses and wood chips The US has abundant agricultural and forest resources that can be converted into biofuels recent studies by the US Department of Energy (DOE) suggest these resources can be used to produce enough ethanol 60 billion gallons/year to displace about 30% of our current gasoline consumption by 2030 Sources: The Clean Tech Revolution, Ron Pernick and Clint Wilder, HarperCollins Publishers, 2007; New Energy Finance Monthly Briefing, Volume V issue 20, December, 2008 3
Overview (Cont d) Currently, there are no commercial cellulosic ethanol refineries the ethanol we use is derived primarily from corn kernels, a form of starchy biomass When manufacturers produce ethanol from corn, they use enzymes to convert starches to simple sugars and yeasts to ferment the sugars into ethanol Cellulosic biomass contains sugars as well, but they are much harder to release than those in starchy biomass. To complicate matters, the process of releasing the sugars produces by-products that inhibit fermentation, and some of the sugars from cellulosic biomass are difficult to ferment All this makes cellulosic ethanol production complicated and expensive to displace petroleum, cellulosic ethanol must be cost competitive Current research includes both biochemical (chemicals, enzymes, and fermentative microorganisms) and thermochemical (heat and chemical) processes For the biochemical processes, research is focused on pretreatment, hydrolysis, and fermentation steps as well as process integration and biomass analysis For the thermochemical processes, research focuses on catalyst development, process development, and process analysis Sources: The Clean Tech Revolution, Ron Pernick and Clint Wilder, HarperCollins Publishers, 2007; New Energy Finance Monthly Briefing, Volume V issue 20, December, 2008 4
The Maturity of Various Biofuels Technologies FUEL SOURCE BENEFITS MATURITY Grain / Sugar Ethanol Biodiesel Green Diesel Corn, sorghum, and sugarcane Produces a high-octane fuel for gasoline blends Made from a widely available renewable resource Commercially proven fuel technology Vegetable oils, fats and Reduces emissions Commercially proven fuel greases Increases diesel fuel lubricity technology Oils and fats, blended with crude oil Offers a superior feedstock for refineries A low sulfur fuel Commercial trials underway in Europe More Ma ature Cellulosic Ethanol Grasses, woodchips, and agricultural residues Produces a high-octane fuel for gasoline blends DOE program is focused on a The only viable scenario to replace 30% of U.S. commercial demonstration by petroleum use 2017 Butanol Corn, sorghum, wheat and sugarcane Offers a low volatility, high energy density, water tolerant alternate fuel BP and DuPont in the process of producing Butanol Pyrolysis Any lignocellulosic biomass Offers refinery feedstocks, fuel oils, and a future source of aromatics or phenols Several commercial facilities produce energy and chemicals Syngas Liquids Diesel/Jet Fuel From Algae Hydrocarbons Various biomass as well as fossil fuel sources Microalgae grown in aquaculture systems Biomass carbohydrates Can integrate biomass sources with fossil fuel sources Produce high quality diesel or gasoline Offer a high yield per acre and an aquaculture source of biofuels Could be employed for CO 2 capture and reuse Demonstrated on a large scale with fossil feedstocks, commercial biomass projects under consideration Demonstrated at a pilot plant in the 1990 s Could generate synthetic gasoline, diesel fuel, Laboratory scale research in and other petroleum products academic laboratories Less Mature 5
Cellulosic Ethanol vs. Corn-based Ethanol Cellulosic ethanol has several advantages over corn-based ethanol, but it is currently more expensive Attribute Corn-based Cellulosic Renewable Resource Yes Yes Primary Feedstock Domestic corn Non-edible biomass: grasses, woodchips, agricultural residues Economics Borderline in certain regions Starch in corn is easily accessible and convertible into sugars Restrictively higher cost Converting cellulose into sugars that can be fermented is more complex and thus more expensive Production Process Dry or wet milling Complex biochemical or thermochemical processes Impact on Land Can leave soil exploited Requires significant fertilizer and pesticide id use Less erosion and better soil fertility than food crops Lower inputs of energy, fertilizer and pesticides are needed d to grow grasses Quantity Potential in US Greenhouse Gases Efficiency Source: MIT Technology Review Many experts estimate that cornbased ethanol producers will run out of land at around 15 billion gallons of fuel Requires fossil fuels during production; quantity is dependent upon methods used Growing corn for energy requires more land and will compete with demand for these crops as food The National Resource Defense Council (NRDC) estimates cellulosic sources should allow for up to 150 billion gallons of ethanol by 2050 Lower need for fossil fuels during production, resulting in less GHG emissions throughout lifecycle An acre of grasses or other dedicated ethanol crop could produce more than two times the gallons of ethanol as an acre of corn, partly because the entire plant can be utilized 6
Cellulosic Ethanol Technology
Feedstock Several different feedstocks can be used to produce cellulosic ethanol, including agricultural and forest residues and dedicated cellulosic crops. While woodchips and agricultural residues may be the main sources of cellulosic ethanol during developmental stages of the industry, in order to reach commercial scale production, dedicated crops will most likely be needed to meet quantity and quality demands In 2005 the UDSA and DOE engaged in the Billion Ton Study to investigate whether land resources in the US are adequate to sustain production of over 1 billion dry tons of biomass annually, enough to displace approximately 30% of our current consumption of liquid id transportation t ti fuels The report concludes that approximately 1.3 billion dry tons of biomass could be available for bioenergy and biorefinery industries by mid-21 st Century with modest changes in agricultural and forestry practices, while still meeting demand for forestry products, food and fiber The Office of the Biomass Program estimates t that t approximately 250 million try dons will be available by 2017, increasing alongside the cellulosic ethanol industry Assuming 100 gallons per dry ton, this results in approximately 25 billion gallons/year Currently the two largest sources of cellulosic feedstock are forestry resources and corn stover, both of which can leverage markets and infrastructure already in place for the pulp/paper and the corn grain industries Sources: NRDC; Billion Ton Study, USDA and DOE; US DOE Office of Science; US Ethanol Industry: The Next Inflection Point, BCurtis Energies & Resource Group 8
Feedstock (Cont d) Development of dedicated energy crops, such as switchgrass and perennial trees, will take longer and is dependent upon the development of cellulosic ethanol technologies and facilities, as farmers will be unwilling to plant large areas until a market is guaranteed Dedicated energy crops, such as switchgrass, offer several advantages over corn Higher yield per acre Lower need for fertilizers and herbicides Perennial growth Less soil erosion Greater soil fertility Switchgrass Recently Miscanthus, another perennial grass, has been getting significant ifi attention ti for its quick growth and giant size. Miscanthus yields greater biomass per acre than switchgrass, which already produces approximately two times as much biomass per acre as corn. Some estimates show Miscanthus s can yield ~20 tons/acre, as compared to 7-15 tons/acre for switchgrass Sources: Biofuels: Think Outside the Barrel, Vinod Khosla Environment News Service 9 Miscanthus after one year of growth
Ethanol from Cellulosic Biomass Cellulosic ethanol production differs from the simple milling process used to derive corn-based ethanol. The difference in process is due to the recalcitrance of the biomass used, its resistance to attacks from bacteria, fungi, insects and extreme weather. It is much more difficult to breakdown cellulose into its component sugars, and therefore a more complex process is required There are two methods of producing ethanol from cellulosic biomass: biochemical and thermochemical Source: Michigan State University 10
Biochemical Production A great deal of research and activity is currently underway to address the challenges presented in each stage of cellulosic ethanol production. The primary challenge remains: efficiently and cost-effectively breaking down cellulose Production Step Description Challenges Pretreatment Hydrolysis Fermentation In this step the cellulose is separated from the hemicellulose and lignin that surround it in a protective sheath Pretreatment methods include physical, chemical and biological processes, with physical and chemical most prevalent This step breaks down the cellulose into its component sugars to allow for fermentation Both chemical and enzymatic (biological) hydrolysis methods exist; however most current activity is focused on enzymatic methods The mixture resulting after pretreatment and hydrolysis is called hydrolyzate During fermentation, microorganisms convert the sugars in the hydrozylate into ethanol Microorganisms used are primarily fungi and bacteria High cost of enzymes and pretreatment technology is a major challenge of cellulosic ethanol Often pretreatment techniques that are most effective at breaking down hemicellulose also create severe conditions that degrade the sugars; use of enzymes has helped maintain milder conditions and effectiveness Production or purchase of cellulase enzymes, the enzymes that break down cellulose, is currently very expensive Many cellulases act very slowly; improvements are needed to increase activity and efficiency As with pretreatment, some hydrolysis methods are so harsh that they can create toxic degradation products that hinder fermentation High solids, toxic compounds and increasing ethanol concentration in the hydrolyzate make it toxic to the fermenting microorganisms Both 5-carbon and 6-carbon sugars are freed during hydrolysis; however, known yeasts and bacteria cannot naturally ferment both types of sugar Complicating matters further, often optimizing i i conditions in one step will impact performance of another step. Balancing trade-offs to determine the best combination is needed to optimize the process Source: NREL 11
Thermochemical Production Thermochemical conversion of ethanol has not received as much attention as biochemical conversion, but this process may be more suited to biomass that has higher lignin content, such as forest products and mill residues. Cellulosic biomass can be made of 10-25% lignin-rich cellulose, which cannot easily be converted biochemically Gasification Syngas Conversion Distillation During the gasification step, heat and chemicals are used to break the cellulose down into synthesis gas, or syngas Syngas is primarily CO and H2 After gasification, the resulting syngas must be reassembled into products such as ethanol Since the syngas created from biomass is not clean, it must be distilled to remove contaminants such as tar and sulfur that interfere with the conversion of syngas into products Thermochemical conversion is much faster than biochemical conversion and can more easily handle high lignin content; however, challenges remain for this process as well During syngas conversion, the catalysts used to convert syngas into ethanol also make other products; the process needs to be refined in order to be more selective for synthesizing ethanol The presence of tars and other contaminants in the syngas hinders ethanol production Scalability remains a concern for the technology moving from pilot plants to commercial-scale facilities will present complex challenges Sources: NREL MIT Technology Review 12
Research Efforts and Achievements Several organizations are conducting research and developing demonstration operations in hopes of pushing the industry through the many challenges on the way to commercial-scale cellulosic ethanol production Pretreatment NREL NREL and other companies are now using enzymes in pretreatment to break down hemicellulose. l Typically the more effective pretreatment methods create harsh conditions that degrade the sugars. If enzymes are used to further break down hemicellulose after pretreatment, then a more mild pretreatment can be used without sacrificing effectiveness Fermentation NREL NREL, in partnership with NCGA and CRA, developed a yeast that can break down the 5-carbon sugar arabinose, which constitutes up to 20% of fermentable sugars in corn fiber NREL NREL also modified a bacterium to enable it to ferment both arabinose and xylose, the most important 5- carbon sugar Mascoma Lee Lynd, a professor at Dartmouth college, led the development of a bacteria that can produce ethanol at much higher temperatures, thus reducing the number of enzymes needed to break down cellulose and greatly reducing cost Process Integration Qteros has developed a bacterium that can combine two steps into one. Instead of breaking down cellulose l with enzymes and then fermenting the sugars, Qteros bacterium can eat cellulose and produce ethanol. Additionally, it can digest 5-carbon and 6-carbon sugars Michigan State University Mariam Sticklen has led the development of genetically engineered corn that produce enzymes to break down the cellulose in its leaves and stems. Since the plant breaks down its own cellulose into sugars, this eliminates the need for costly external enzymes Thermochemical Range Fuels Broke ground on a commercial-scale cellulosic ethanol facility in November 2007. The facility will use thermochemical conversion and is expected to be operational by late 2009. Range Fuels is one of several companies in the race to achieve the first commercial scale cellulosic ethanol plant Sources: NREL MIT Technology Review 13
Costs, Funding, and Investment
Production Costs The below figures show the current costs of cellulosic ethanol production and their anticipated downward trajectory over the next five years, as projected by NREL For comparison, the average cost of corn ethanol was $1.69 in 2007 and rose slightly above $2.00 in the beginning of 2008 The DOE has set forth a number of cost targets for cellulosic ethanol, in order for the fuel to be cost competitive The cost target for 2012 is $1.33/gal determined to be the price at which cellulosic ethanol can be cost competitive. The cost target for 2017 is $1.20/gal Sources: US Ethanol Industry: The Next Inflection Point, BCurtis Energies & Resource Group NREL 15 The figure to the left shows the DOE cost structure targets for 2017, excluding feedstock These targets are based on advanced technologies that are not yet deployed at full scale
Government Support and Venture Capital Investment While government support plays a central role in biofuel development, cellulosic ethanol has also sparked interest from venture capital firms Venture capital has been a major driver in the development of biofuels, with over $650 million invested in the US from the beginning of 2007 through the Q1 of 2008; this funding is almost evenly split between early and late stage deals Funding from the DOE flows through two major offices, The Office of the Biomass Program and The Office of Science Since the beginning of 2007, over $650 million has been allocated from the annual Biomass Program budget to support commercialization of biofuel technology and private efforts, and the Office of Science has committed $375 million to support new Bioenergy Research Centers, listed on the following slide Major VC firms investing in biofuels include Khosla Ventures, Nth Power, Mohr Davidow, @ Ventures, Capricorn, Pinnacle and others Investment is skewed toward the West Coast and Northeast, regions with a history of venture capital and technological innovation, rather than areas where feedstock is plentiful and production facilities are being built Source: US Ethanol Industry: The Next Inflection Point, BCurtis Energies & Resource Group 16
Government Support Grants Without loan guarantees and government incentives, it will be difficult for the budding cellulosic ethanol industry to move from its current demonstration phase to commercial operations. The DOE has awarded several grants to spur this transition Integrated Cellulosic Biorefineries Announced Feb 2007 Selected six biorefinery yprojects to develop commercialscale integrated biorefineries using a wide variety of cellulosic feedstocks Selected Amount ($ million) Abengoa 76 ALICO 33 BlueFire Ethanol 40 POET 80 Iogen 80 Range Fuels 76 Ethanologen Projects Announced Mar 2007 Selected five projects focused on developing high efficient fermentative organisms to convert biomass into ethanol Selected Amount ($ million) Cargill 4.4 Verenium 5.3 DuPont 3.7 Mascoma 4.9 Purdue University 5.0 BioEnergy Research Centers Announced Jun 2007 Established three new Bioenergy Research Centers to accelerate basic research to develop cellulosic ethanol and other biofuels Created Amount ($ million) Oak Ridge National Lab 125 University of Wisconsin 125 Lawrence Berkeley National Lab 125 Thermochemical Solicitation Announced Dec 2007 Selected five biofuel projects to receive funding for demonstrating the thermochemical process of turning cellulose into biofuel Selected Amount ($ million) Emergy Energy 17 1.7 Iowa State University 2.0 Research Triangle Institute 2.0 Southern Research Institute 2.0 Gas Technology Institute 2.0 Small Scale Cellulosic Biorefineries Announced Jan/Apr 2008 Announced investment of up to $114 million to support development of small-scale cellulosic biorefineries (10% of commercial scale). Another $86 million was announced for this effort in April Selected Amount ($ million) ICM 30.0 Lignol Innovations 30.0 Pacific Ethanol 24.3 NewPage Stora Enso 30.0 Mascoma 26.0 RSE Pulp & Chemical 30.0 Ecotin 30.0 Enzyme Systems Solicitation Announced Feb 2008 Announced investment of up to $33.8 million in four projects that will focus on developing improved enzyme systems to convert cellulosic material into sugars suitable for fermentation into biofuel Selected DSM Genecor Novozymes Verenium Amount ($ million) TBD TBD TBD TBD Source: US Ethanol Industry: The Next Inflection Point, BCurtis Energies & Resource Group 17 Copyright 2008 by ScottMadden. All rights reserved.
Major Policies and Industry Players
Cellulosic Ethanol Policy Timeline Energy Policy Act of 2005 (EPAct) Established a Renewable Fuels Standard (RFS) that set a goal of producing 7.5 billion gallons of renewable fuels by 2012. Also modified the Small Ethanol Producer Tax Credit, increasing the definition of a small ethanol producer from 30 million gallons/year to 60 million gallons/year. Small producers qualify for 10 cents per gallon up to 15 million gallons (limit $1.5 million) Food, Conservation and Energy Act of 2008 (FCEA) Put in place a tax credit of $1.01 per gallon for cellulosic ethanol. Also provided grants for demonstration-scale biorefineries and allowed for loan guarantees of up to $250 million for building commercial-scale biorefineries to produce advanced biofuels EISA 2010 mandate to be met (100 million gallons cellulosic ethanol) VEETC currently authorized through Dec 2010 Small Ethanol Producer Tax Credit currently authorized through Dec 2010 Target set by DOE to displace 30% of US gasoline demand (2004 levels) with biofuels in 2030 2004 2005 2007 2008 2010 2012 2017 2022 2030 Volumetric Ethanol Excise Tax Credit (VEETC) Established by The American Jobs Creation Act of 2004, this credit originally offered $0.51 for every pure gallon of pure ethanol blended into gasoline, but was reduced in 2009 to $0.45 per gallon Target set by DOE for cellulosic ethanol to be cost competitive in 2012 at $1.33/gal Energy Independence and Security Act of 2007 (EISA) Amended the RFS to require 9 billion gallons of renewable fuel in 2008, growing to 36 billion gallons by 2022. Included in the total requirement, it mandates that cellulosic ethanol will provide 100 million gallons in 2010 and 16 billion gallons in 2022 Cost target from DOE decreases to $1.20/gal in 2017 EISA 2022 mandate to be met (36 billion gallons renewable fuel, including 16 gallons cellulosic ethanol) Sources: Verenium International Federation of Agricultural Producers American Coalition for Ethanol 19 Copyright 2008 by ScottMadden. All rights reserved.
Renewable Fuels Standard in More Detail The Energy Policy Act of 2005 established a Renewable Fuels Standard (RFS) for automotive fuels; the RFS was expanded by the Energy Independence and Security Act of 2007 The Energy Independence d and Security Act seizes on the potential ti that t renewable fuels offer to reduce foreign oil dependence and greenhouse gas emissions and provide meaningful economic opportunity across this country, putting America firmly on a path toward greater energy stability and sustainability The RFS requires the blending of renewable fuels (including ethanol and biodiesel) in transportation fuel In 2008, fuel suppliers (refiners, blenders, and importers) must blend 9.0 billion gallons of renewable fuel into gasoline; this requirement increases annually to 36 billion gallons in 2022 The expanded RFS also specifically mandates the use of advanced biofuels fuels produced from non-corn feedstocks and with 50% lower lifecycle greenhouse gas emissions than petroleum fuel starting in 2009 Of the 36 billion gallons required in 2022, at least 21 billion gallons must be advanced biofuel, of that 21 billion gallons, 16 billion gallons are to come from cellulosic ethanol specifically Compliance is required for any facility generating more than 10,000 gallons or more of renewable fuel per year The RFS directs EPA to promulgate regulations ensuring that applicable volumes of renewable fuel are sold or introduced into commerce in the United States annually On May 1, 2007, EPA issued a final rule on the RFS program detailing compliance standards for fuel suppliers, as well as a system to trade renewable fuel credits between suppliers While this program is not a direct incentive for the construction of biofuels plants, the guaranteed market created by the renewable fuel standard is expected to stimulate growth of the biofuels industry According to a January 2008 study, the economic impacts of a 36 billion gallon RFS include: Adding more than $1.7 trillion to the Gross Domestic Product between 2008 and 2022 Generating an additional $436 billion of household income for all Americans during the same time period Supporting the creation of as many as 1.1 million new jobs in all sectors of the economy Generating $209 billion in new Federal tax receipts Sources: Economic Impact of the Energy Independence and Security Act of 2007, LECG LLC www.ethanolrfa.org/resource/standard/ CRS Report for Congress Biofuels Incentives: A Summary of Federal Programs (1/30/2008) http://epa.gov/otaq/regs/fuels/rfsforms.htm 20
Major Players At least 11 companies are in the race to develop the first commercial cellulosic ethanol plant Company Verenium (NasdaqGM: VRNM) Headquarters Cambridge, MA Funding Has received DOE funding to advance cost-effectiveness of enzymes Coskata Warrenville, IL Has raised over $30 million from Globespan Capital Partners, GM, Khosla Ventures, GreatPoint Ventures and Advanced Technology Ventures Activity Has a demo plant running in Jennings, LA that produces 1.4 million gallons/year; construction began February 2007 Plans to begin building a 30 million/year plant in mid-2009 Plans to scale up a pilot project in Madison, PA to 40,000 gallons/year that will start delivering ethanol in early-mid 2009 Working on a 100 million gallon/year; hopes to have it online in 2011 Range Fuels Broomfield, CO Has raised over $130 million from Plans to finish a 20 million gallon/year (scalable to 100 million Passport Capital, BlueMountain, Khosla Ventures, Leaf Clean gallons/year) commercial facility in 2009; construction began November 2007 Energy Company and Pacific Capital Group Uses thermochemical process which it has been testing in pilot projects for seven years POET (formerly Broin) Sioux Falls, SD Was selected for a DOE grant of $80 million for its cellulosic In process of expanding its corn-based ethanol plant in Emmetsburg, IA to include a cellulosic plant DuPont Danisco Cellulosic Ethanol LLC Itasca, IL ethanol plant Joint venture (50/50) between DuPont and Genecor, with both companies investing $70 million over three years Mascoma Itasca, IL Has raised almost $90 million from several investors, including GM, Khosla Ventures, Flagship Ventures, General Catalyst Partners, Kleiner Perkins Caufield & Byers, Vantage Point Venture Partners, etc Sources: Earth2tech website; Company websites Construction is scheduled to start in 2009 and finish in 2011; the plant will produce 25 million gallons/year from cellulosic sources Plans to have its Vonore, TN pilot plant operating by 2009 and a commercial demonstration plant online by 2011 Process uses DuPont s pretreatment and ethanologen technology and Genecor s enzymatic hydrolysis methods Began construction on a pilot plant in Rome, NY in 2006 Working with Michigan State University and Michigan Technological University to build a commercial-scale biorefinery fed by wood in Michigan 21
Major Players (Cont d) Company Headquarters Funding Zeachem Menlo Park, CA Has received funding from Mohr Davidow Ventures ($4 million) and Firelake Capital Qteros (formerly SunEthanol) BlueFire Ethanol (OTC: BFRE) Abengoa Bioenergy Hadley, MA Irvine, CA Chesterfield, MO (owned by Spanish company Abengoa) Has received funding from VeraSun, Battery Ventures, Camros Capital LLC and LongRiver Ventures Was awarded $100,000 research grant from DOE Was awarded $40 million in funding from DOE Was awarded $76 million in funding from DOE Iogen Ottawa, Ontario Has received over $130 million over the past 25 years from investors including Royal Dutch / Shell Group, Petro-Canada and Goldman Sachs Activity Has an operational test facility in Menlo Park, CA; Zeachem uses a combination of biochemical and thermochemical processing steps Working with GreenWood Resources to build a 1.5 million gallon/year test plant in Portland, OR Developed bacteria which performs hydrolysis and fermentation in one step; long-term plan is to license its technology to companies wanting to build cellulosic ethanol facilities rather than build the facilities itself Plans to have a pilot plant operational in 2009 and is working with ICM to build a demo plant that would produce 2.5 million gallons/year Working with contractors MECS and Brinderson on a plant located at a Lancaster, CA landfill that will produce 3.1 million gallons/year Working with DOE to develop a 17 million gallon/year plant that will also use landfill waste to produce ethanol Opened a $35 million pilot plant in York, NE in October 2007 Plans to spend $300 million on a cellulosic ethanol plant in Hugoton, KS; plant will produce 49 million gallons/year Received $76 million from DOE for a 11.4 million gallon/year plant to be built in Colwich, KS Planning to build a cellulosic ethanol plant in Saskatchewan; Iogen uses biochemical conversion Was slated to receive $80 million in funding from DOE to build a US plant, but has more recently suspended these plans Sources: Earth2tech website; Company websites 22
Biorefineries
Biorefineries Biorefineries could be the key element in achieving the economical and efficient production of cellulosic ethanol A biorefinery integrates biomass conversion processes and equipment to produce fuels, power, and chemicals from biomass Takes advantage of differences of biomass components and intermediates to maximize value derived from biomass feedstock Allows parallel production of chemicals and fuels Produces energy (for internal usage or for sale as electricity) Biorefineries can be specialized according to biomass type Can be based on similar processes or feedstocks, for example, forest biorefineries The biorefinery concept is much like to today's petroleum refineries, which produce multiple fuels and products from petroleum. Industrial biorefineries have been identified as the most promising route to the creation of a new domestic biobased industry By producing multiple products, a biorefinery can take advantage of the differences in biomass components and intermediates and maximize the value derived from the biomass feedstock A biorefinery may produce one or several low-volume, but high-value, chemical products and a lowvalue, but high-volume liquid transportation fuel, while generating electricity and process heat for its own use and perhaps enough for sale of electricity. The high-value products enhance profitability, the high-volume fuel helps meet national energy needs, and the power production reduces costs and avoids greenhouse gas emissions Source: NREL 24 Copyright 2008 by ScottMadden. All rights reserved.
Potential Biorefinery Technologies Several technologies The Sugar-Lignin Technology One out of eight gallons of gasoline sold in the United States already includes ethanol as an additive. Ethanol is made by fermenting sugar, most of which is derived from starch in corn kernels. In contrast, instead of starting with sugar, NREL s advanced bioethanol technology starts with cellulose and hemicellulose, two of the three main components of most plant material vastly expanding potential feedstocks breaking them down to sugars for fermentation. In addition to ethanol, the sugars, or intermediate breakdown products, can be fermented, polymerized, or otherwise processed into any number of products. Lignin, the third main component of biomass, can fuel the process or be used to produce a slate of different chemicals, expanding the number of products for the sugar-lignin platform biorefinery The Syngas Technology If biomass is heated with limited oxygen (about one-third that needed for ideal combustion), it gasifies to a syngas composed mostly of hydrogen and carbon monoxide. That syngas inherently burns cleaner and more efficiently than the raw biomass. NREL scientists are using gasification technology to improve a large innovative biomass power plant in Vermont (see sidebar Vermont Gasifier ) and to provide electricity for the first time to isolated Philippine villages with small electric generators. The syngas also can be used to produce hydrogen (see Hydrogen Economy on pages 10-13) which, in turn, can be used as a fuel or to make plastics, fertilizers, and a wide variety of other products. Syngas can also be converted to sulfurfree liquid transportation fuels using a catalytic process (known as the Fischer-Tropsch Process), or provide base chemicals for producing biobased products The Bio-Oil Technology If biomass is heated to high temperatures in the total absence of oxygen, it pyrolyzes to a liquid that is oxygenated, but otherwise has similar characteristics to petroleum. This pyrolysis- or bio- oil can be burned to generate electricity or it can be used to provide base chemicals for biobased products. As an example, NREL researchers have extracted phenolics from biooil to make adhesives and plastic resins. NREL uses several thermochemical reactor systems available for use by outside researchers to efficiently pyrolyze and control the bio-oil components. NREL scientists have also used pyrolysis for true recycling of plastics such as nylon carpeting, selectively regenerating the base chemicals from which the plastics were made Source: NREL 25 Copyright 2008 by ScottMadden. All rights reserved.
Potential Biorefinery Technologies (Cont d) The Biogas Technology Another way to convert waste biomass into useful fuels and products is to have natural consortiums of anaerobic microorganisms decompose the material in closed systems. Anaerobic microorganisms break down or digest organic material in the absence of oxygen and produce biogas as a waste product. Biogas produced enclosed tanks, or anaerobic digesters, consists of 50% to 80% methane, 20% to 50% carbon dioxide, and trace levels of other gases such as hydrogen, carbon monoxide, oxygen, and nitrogen. NREL has developed an anaerobic digestion system that handles much higher solids loading than typical digesters. This system effectively converts cellulosic waste (such as municipal solid waste) and fatty waste (such as tuna cannery sludge) to a methane-rich h biogas suitable for power generation (or as a starting ti material for biobased products) and usable compost material. Anaerobic digesters are currently getting considerable attention as a way to turn swine and cattle manure into useful fuel and chemicals The Carbon- Rich Chains Technology Plant and animal fats and oils are long hydrocarbon chains, as are their fossil-fuel f counterparts. Some are directly usable as fuels, but they can also be modified to better meet current needs. Fatty acid methyl ester fat or oil transesterified by combination with methanol substitutes directly for petroleum diesel. Known as biodiesel, it differs primarily in containing oxygen, so it burns cleaner, either by itself or as an additive. Biodiesel use is small but growing rapidly. In the United States, it is made mostly from soybean oil and used cooking oil. Soybean meal, the co product of oil extraction is now used primarily as animal feed, but also could be a base for making biobased products. Glycerin, the coproduce of making biodiesel, is already used to make a variety of products, but has potential ti for many more. And the fatty acids are used for detergents t and other products. So carbon-rich chains are already well on their way as a platform for the biorefinery The Plant Product Technology Modern biotechnology not only can transform materials extracted from plants, but can transform the plants to produce more valuable materials. Selective breeding and genetic engineering i can be used to improve production of chemical, as well as food, fiber, and structural products. Plants can be developed to produce high-value chemicals in greater quantity than they do naturally, or even to produce compounds they do not naturally produce. With its genetic engineering, material and economic analysis, and general biotechnology expertise, NREL could make major contributions in this exciting arena. For example, NREL researchers exploring variation in composition of stover for various strains of corn are analyzing the impact this makes on producing ethanol from stover Source: NREL 26 Copyright 2008 by ScottMadden. All rights reserved.
Typical Biorefineries Despite multiple technology options, the two most promising biorefinery technologies are biochemical technology (or sugar platform ) and thermochemical technology (or syngas platform ). As discussed earlier, sugar platform biorefineries break biomass down into different types of component sugars for fermentation or other biological processing into various fuels and chemicals. Thermochemical biorefineries would convert biomass to synthesis gas (hydrogen and carbon monoxide) or pyrolysis oil, the various components of which could be directly used as fuel Sources: DOE; EERE 27 Copyright 2008 by ScottMadden. All rights reserved.
Biorefinery Development Because a biorefinery uses more than one technology, successful deployment of biorefineries depends on overcoming not just biochemical technology challenges, but biochemical and thermochemical challenges. These barriers need to be addressed in order for lenders to be comfortable loaning the large sums required for biorefinery projects As highlighted earlier, thermochemical and biochemical conversion methods offer different challenges Thermochemical Improving syngas clean-up is necessary to more effectively reduce the tars and other contaminants that negatively impact conversion to ethanol Catalyst selection needs to be improved in order to increase yield of desired products Biochemical The need for increased enzyme effectiveness and greater efficiency of fermentation remains Government support is working to make commercial-scale biorefineries viable Six grants were awarded to develop commercial-scale biorefineries using multiple feedstocks, each company receiving i $33-$80 $80 million An additional $114 million was awarded in four grants for 10 Percent demos smaller scale projects than the original six that are expected to demonstrate commercial viability by building biorefineries that will produce 10% of an intended commercial volume Displaying 10% of commercial volume was determined to be required in order for conventional financiers to consider investment Several projects are underway as a result of government funding, but currently no commercialscale biorefinery has been completed Sources: NREL; Ethanol Producer Magazine 28 Copyright 2008 by ScottMadden. All rights reserved.
Summary SWOT Analysis
Summary SWOT Analysis For Cellulosic Ethanol Strengths New employment estimate possible 10,000-20,000 jobs per billion gallons of ethanol Rural economic benefits provides farmers with revenues for their residues Additional farming distribution channel Reduced agricultural premiums and subsidies Maximized use of set aside land Weaknesses Contributes t to secure energy supply Current production technologies are not cost competitive More likely to reduce GHG emissions than corn-based ethanol Capital costs are high federal support needed to encourage investment Reduced land degradation and greener wastelands Higher yield per acre than corn-based ethanol Co-products provide additional income Nontoxic Opportunities Replace a large percentage of fossil fuels Decrease dependency and imports of crude oil Reduce air pollution and GHG emissions Orderly transition from fossil fuels era Future research initiatives Energy efficient crops and cheaper feedstocks Improved conversion technologies Advancement of biotechnology Diversification of transport fuels requires diversification of technology (e.g. motors) Fuel prices largely l depend d on the sale of co-products Feedstock production largely depends on many vagaries of nature, including extreme weather conditions and pest attacks Lower energy content per volume than fossil fuels Threats Relatively new market and small market share Weak political lobby vs. fossil fuels Limited feedstock production need technology to develop in order to incentivize larger feedstock investment Further biological and technological breakthroughs are necessary for commercial-scale viability Source: WIP Renewable Energies Biofuel SWOT Analysis (2007) 30
Appendices
Appendix 1: Summary of Technology Development Goals The DOE s Office of the Biomass Program has established the following technology development goals and timeline Sources: DOE Office of The Biomass Program 32 Copyright 2008 by ScottMadden. All rights reserved.
Appendix 2: Per Acre Economics Several studies claim the benefits for US farmers will be substantial once the cellulosic ethanol industry takes off. The below table shows how the higher per acre yield of dedicated biomass crops can benefit feedstock producers Per Acre Economics of Dedicated Biomass Crops vs. Traditional Row Crops Biomass Corn Wheat Grain yield (bushel) N/A 162 46 Grain price ($/bushel) N/A $2 $3 Biomass yield (tons) 15 2 2 Biomass price ($/ton) $20 $20 $20 Total revenue $300 $364 $178 Variable costs $84 $168 $75 Amortized fixed costs $36 $66 $36 Net return $180 $120 $57 Source: Ceres 33
Contact Us For more information on advances in cellulosic ethanol technologies, please contact us. Jere Jake Jacobi Partner and Sustainability Practice Leader ScottMadden, Inc. Ten Piedmont Center Suite 805 Atlanta, GA 30305 Phone: 404-814-0020 Mobile: 262-337-1352 jjacobi@scottmadden.com Prepared by : Katy Cagle & Jere Jacobi 34