We go through the renewable fuels math — and find that the nattering nabobs of negativism might have crowed too soon.
Sometimes you wonder what former US Vice-President Spiro Agnew would make of the current political landscape, and the hoo-haw over the US Renewable Fuel Standard.
Back in 1970, he decried the “nattering nabobs of negativism” and “men who smack their lips at any American setback in the world,” and said “if we were to believe men like these, we would buy the notion that the United States is headed for recession, repression and regression.” He assailed the “pusillanimous pussyfooters” and “vicars of vacillation”. The year before, he attacked what he saw as “a spirit of national masochism.”
(Sigh. They just don’t write political speeches anymore like William Safire did.)
Lately, the nattering nabobs appear to have landed at the American Petroleum Institute — which has called for a repeal of what it considers to be a “irretrievably broken” Renewable Fuel Standard. API issued a laughable study, predicting that RFS compliance would cost the US economy up to $700 billion in 2015.
Any drunken fool can see that — in the face of ethanol blend wall problems — if you simply gave away 2 billion gallons of E85 ethanol, the damage would be less than $6 billion. That’s giving the fuel away, for Pete’s sake – what could be worse?
Tell you what. Let’s look today at the kong-term options for compliance. Are there reasons to regard the RFS as broken and unrepairable?
Reasons raised as concerns
Upstream: concerns over feedstocks (too many of one, not enough of the other).
Midstream: skepticism over the rollout of cellulosic biofuels technology in sufficient volume to meet RFS timelines.
Downstream: a concern about ethanol blending limits, pump infrastructure, and management of RIN obligations (those barcode Renewable Identification Numbers lately subject to price volatility, RIN fraud, and so on).
A scenario for meeting RFS targets
OK, let’s look at a scenario — and see if there is a feasible path to meeting the 2022 RFS targets (36 billion gallons of ethanol-equivalent fuels blended into the fuel supply).
1. Starting point – 14.72 million gallons of ethanol capacity and roughly 1.5 billion gallons in currently available biodiesel production capacity (currently in use – estimates on total US biodiesel capacity run as high as 2.7 billion gallons).
Since biodiesel has a higher energy value than ethanol, each biodiesel gallon counts for 1.5 gallons towards that RFS 36 billion gallon target. Where are we so far? 16.97 billion gallons.
2. Cellulosic bolt-ons. It’s widely agreed that current ethanol capacity can be boosted 25% by adding cellulosic production capacity – and that this represents a safe amount of “lift” of residue from the field (e.g. retaining enough for soil health). Adding 3.68 billion gallons of capacity.
3. Algae bolt-ons. It is widely agreed that there is enough CO2 and process heat available from ethanol fermentation to boost fuels production by 15%, through adding algae production. There are paths such as BioProcess Algae in active testing (at Green Plains Renewable Energy) — and we also point to Algenol’s technology for producing ethanol from CO2, water and sunlight.
In fact, there’s enough CO2 available to boost production by as much as 30%, but we may not find optimal light conditions throughout the year, constraining production. Adding 2.76 billion gallons of capacity.
4. Greenfield cellulosic biofuels. There’s certainly time, and available technology, to build 600 million gallons of capacity from each of wood, MSW and energy crops & residues. INEOS Bio, Fulcrum, Enerkem, ZeaChem, Abengoa, Fiberight, Dupont, and Beta Renewables all have the technology and have built or are building plants. More will come — and there is no question that there is available, affordable feedstock at these kinds of volumes. Adding 1.8 billion gallons of capacity.
5. Biobutanol bolt-on. Well may you ask, how are 22.96 billion gallons of ethanol from Steps 1-4 going to be distributed into the US market, without tripping over ethanol blending restrictions?
Biobutanol gives us a pathway. Biobutanol blends at 16 percent into gasoline under the same structural rules by which ethanol blends at 10 percent.
And, generally speaking, an ethanol to butanol production will bring down the production capacity by 20%. So, capacity would be reduced to 18.37 billion gallons. You can blend that safely into just 115 billion gallons of gasoline demand. In fact, from a vehicle and fuel infrastructure point of view, even higher blends are quite possible — it really comes down to tailpipe emissions associated with butanol, more than infrastructure problems.
6. Biodiesel ramp up. We mentioned that there is rumored to be 2.7 billion gallons of biodiesel capacity built at some point in the US – much of it idled. Much of that may not be still in place, or able to be feasibly restarted. But an NBB sponsored report from IHS Global Insight projected that the biodiesel industry could boost production to 3.3. billion gallons by 2022. Ron Kotrba at Biodiesel Magazine went through some of the bullish data, here.
7. Renewable diesel and renewable jet. There’s certainly time and technology to build 5 billion gallons of renewable diesel capacity. There’s already 1 billion gallons in capacity in place or under construction around the world – roughly 250 million gallons in the US.
How does 5 billion gallons relate back to feedstock?
One billion gallons each from tallow, algae, wood, MSW & cellulose, and CO2. Examples of companies with the technology: tallow: Diamond Green Diesel, Dynamic Fuels, Neste Oil; algae: Sapphire Energy is projecting 1 billion gallons by 2022 in its plan; wood: KiOR and Sundrop Fuels (the latter with a natural gas booster); MSW & cellulose: Envergent; CO2: Joule Unlimited. Renewable diesel, based on energy density, count for 1.7 ethanol-equivalent gallons each. So, 5 billion gallons gets you 8.5 billion gallons towards an RFS2 target.
Bringing it all together.
5.00 Renewable diesel
8.50 Renewable diesel
Fuel Infrastructure build out
None required. Everything pretty much blends in using the current infrastructure.
New Plant construction
1.80 Cellulosic greenfields
4.75 Renewable diesel
Renewable diesel tends to be be built in the 100-240 Mgy range, cellulosic biofuels and biodiesel generally fall in the 20-60 range. Assuming 100 million gallons in average capacity — this represents around 83 projects, in 9 years starting in 2014, or roughly 9 per year. For sure, individual construction companies had more projects that that going at the height of the ethanol boom.
2 wishes from the biofuels genie
1. All fuels including renewable jet would need to qualify under RFS – otherwise, you get distorted markets.
2. Biobutanol technology companies develop out their capability to handle cellulosic feedstocks.
The bottom line
Scenarios are not proofs — this is a scenario based on assumptions. Certain technologies may not pan out, capital constraints may apply, feedstocks may not be available at the needed volumes or prices, yada yada yada.
But here’s the thing. The math works without any exotic infrastructure changes. No blend wall hassles, no extra production from corn. Just based on rolling out technologies that have already been demonstrated at scale (excepting algae, which is currently at pilot scale) – backed by large-scale companies such as Neste Oil and DuPont that are known for doing their homework and for whom this sector is not their only path to making money.
Moreover – so many companies are working in the sector, that there is a tremendous built-up of redundancy — a failure to bring forward a given technology simply opens the door for another. If, for example, you hold the belief that algae technologies cannot yet deliver affordable fuels? OK, there’s plenty of capacity from other feedstocks. In fact, Oak Ridge National Laboratory found, in a detailed survey, that up to 1 billion tons of US feedstock is sustainable, available, reliable and affordable.
Just look at the number of companies bringing these technologies — and consider how many consecutive failures of good old American know-how it would take for the industry to completely fall short of its 2022 goals. The conversation in Washington over RFS repeal shows that a “spirit of national masochism” is alive and well, though it has moved off the streets and into the corridors of power.
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