Today in Biofuels: Ethanol provides carbon-sink protection, not destruction; Branson launches algae biofuel business; China faces food, fuel shortages

Top Story:

An critic of two articles appearing in Science magazine, which have led to resounding reversals in global biofuels policy, reports that actual land use conversion in the US, primarily from soy to corn, has little discernible effect on global emissions. David Morris of the Institute for Local Self-Reliance found that  the carbon return of no-till cultivation and the overlooked impact of distillers grains, offset the impact of conversion of land from soy cultivation.

Morris found that the major impact of land use conversion comes not from biofuels, but from 2.2 million acres converted for urban and suburban development, which does not have any offsets and results in other land-use conversions to replace both food and fuel production.

The study raises the possibility that, by raising farm prices and the opportunity cost of land conversion for suburban development, corn ethanol is a highly significant barrier to further erosion of the national carbon sink.

Producer News:

In Colorado, LiquidMaize will commence groundbreaking this month for its $24 million, 15 Mgy corn ethanol plant in Lamar. The plant recently received its air permit, a final step prior to commencing construction.

In Illinois, the bankrupt Central Illinois Energy will hold an auction on March 20 to attract offers to top an $80 million debt-for-assets swap proposed by Credit Suisse Group, which holds $95 million in secured liens against the uncompleted 37 Mgy corn ethanol plant in Canton. Assets of the plant are listed at $0 million and debts at $141 million.

In Arkansas, Arkansas SoyEnergy Group opened a 4 million bushel soy crusher in DeWitt, which will produce 4.5 million gallons of soy oil for the company’s phase one biodiesel operation. The plant has a planned capacity of 7 Mgy of soy biodiesel in its second phase.

International News:

In China, the cancellation of all new grain ethanol production will not save China from becoming a corn importer in 2008. The country, which has 20 percent of the world’s population but only 7 percent of its arable farmland is facing a corn shortage at the same time as it has ramped up biofuel production to reduce oil imports.

By 2010, China plans to consume 10 percent of its fuel needs via renewables, including 6.7 million tonnes of ethanol and 11 million tonnes of biodiesel, and analysts say that China’s policy switch from grain  to crops such as cassava, sweet potato and sweet sorghum will be “too little, too late” in order for the country to meet its fuel targets and remain food secure.

In Finland, the 12 Mgy Hamina ethanol plant will open later this month, replacing up to 2 percent of Finland’s conventional gasoline usage, with waste products from candy factories and bakeries among its feedstocks. The plant will distribute fuel to 20 etanolix stations that are scheduled to open around the country.

In Malaysia, Carbon Capital will launch $60 million in biogas and biomass projects in Sarawak, including a 10 megawatt biomass power plant using palm fruit waste, and four biogas projects. The company specializes in projects built under the Clean Development Mechanism, which offsets traditional fossil fuel usage in other parts of the world with investments in emissions-reducing projects, many in developing countris. The company will also joint venture with Japan Carbon Mercantile on up to $600 million in jatropha and oil palm cultivation in Sarawak.

In Pakistan, the Pakistan Sugar Mills Association (PSMA) said that the introduction of ethanol production will reduce the country’s fuel bill by $500 million and improve the country’s balance of trade. The association’s chairman said that the focus on molasses production and export would result in less export earnings than the offset effect of reducing oil importation costs through production of sugar cane ethanol.

Research News:

In Iowa, researchers at Iowa State University have forecast that cellulosic ethanol production in the US will peak at 4.5 billion gallons by 2022, and only if US government incentives are increased to $1.55 per gallon. The researchers concluded that, had the 2007 Energy Act not been passed, cellulosic ethanol and biodiesel production would have been wiped out in  the United States due to the opportunity cost for feedstocks and land.  The researchers projected a peak production of corn ethanol of 18 billion gallons by 2022.

In Texas, the state’s Emerging Technology Fund will provide $4 million to Texas AgriLife Research and General Atomics to conduct microalgae research and development. The two groups have previously identified high-oil content algae strains, and the project will fund research into commercial-scale cultivation of the varietals as well as design and testing of advanced oil separation procedures. The first phase will be a quarter-acre demonstration system, followed by a second-phase commercial-scale production system covering up to 100 acres.

Policy and Policymakers:

In Iowa, the Department of Natural Resources has announced training in ethanol spill fighting techniques for eight cities around the state, in response to criticism that ethanol spills and fires pose added danger due to lack of training and materials to fight outbreaks. The Department acknowledged that techniques such as containment booms and absorbent pads do not work with ethanol spills as with conventional gasoline, and that because ethanol mixes with rather than floats on water, there are special risks in handling ethanol accidents near water.

Consumer and Fleet News:

In England, Sir Richard Branson announced a new business unit of Virgin Atlantic Airways that would produce algae-based biofuels for the airline’s use. Branson told reporters that algae is the best fuel feedstock because it does not affect food supply. He said that his company is “talking to a lot of sewage plants about setting up algae plants above and using a lot of the CO2 coming off those sewage plants” and said that using CO2 to produce algae for low-emission fuels was a “a double-whammy effect.”

Financial News:

The Biofuels Digest Index™ (BDI), a basket of public biofuels stocks, commenced March trading with a 1.22 percent gain to 127.28 as diversified agribusiness gains offset ethanol weakness.  For the day, Archer Daniels Midland (ADM) rose 1.42 percent to close at $45.74, while US BioEnergy (USBE) fell 2.46 percent to $7.15 to lead a broad but slight ethanol sector decline. Among small caps, Xethanol (XNL) gained 8 percent to close at $0.54.  For the day, advances led declines 3 to 2.

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