Every six months, the fine folks over at Biofuels Digest compile and publish a database listing all of the advanced biofuels projects that are either operating, under construction, or being planned around the world. The most recent version of this "Advanced Biofuels & Biobased Materials Project Database" was released at the end of July. This article examines several of the more notable developments identified in the most recent version of database.
The Biofuels Digest database is by necessity very fluid, as planned projects are shelved and new projects announced every few months in response to changing market conditions. I have also found past iterations to contain errors with regard to pathway categorization and duplicated project listings; it is nowhere as authoritative as the industry review articles that appear in peer-review publications from time to time. That said, the database is a very useful resource for obtaining general details on project pathways, feedstocks, and capacities due to the relatively high frequency of updates (whereas journal review articles are almost never updated and frequently outdated by the time they are published). Furthermore, I have corrected its more obvious mistakes for the purposes of this article, which will focus strictly on advanced biofuels projects (the database also contains biobased chemicals projects).
A word on nomenclature: the term "advanced biofuels" refers here to biofuels produced via any pathway other than grain ethanol, cane ethanol, and lipids transesterification (biodiesel). This definition does include biobutanol produced from grain feedstock.
Hydrocarbon-based biofuels take the lead
Advanced biofuels can be broadly split into two categories: alcohol-based and hydrocarbon-based. Alcohol-based biofuels include biobased fuel ethanol, fuel butanol, and fuel methanol. Hydrocarbon-based fuels include biobased gasoline, diesel fuel, and jet fuel. Alcohol-based fuels have the longest history of the two categories (humans have been producing ethanol via fermentation for thousands of years, if not longer) but contain a number of disadvantages, perhaps the greatest of which are a low energy content relative to petroleum-based fuels and, in the case of fuel ethanol, an incompatibility with the existing transportation fuel infrastructure. The technology for hydrocarbon-based biofuels has only been recently developed but yields products that have the same energy content as petroleum-based fuels and can utilize the existing transportation fuel infrastructure.
Historically it was assumed that alcohol-based fuels would be the future of advanced biofuels in the U.S. Cellulosic ethanol was the only advanced biofuel pathway mentioned in the 2006 State of the Union Address as part of President George W. Bush's declared goal to reduce U.S. imports of Middle Eastern petroleum. This reflected a common assumption in both industry and academia that cellulosic ethanol would be the most viable pathway for commercialization. The closest the U.S. had come to pursuing hydrocarbon-based fuels on a national scale prior to this was its brief dalliance with the hydrogen economy in 2002 and 2003, which ultimately became a footnote once politicians realized that fuel hydrogen was completely incompatible with the existing transportation fuel infrastructure. (Astute readers will note that hydrogen isn't actually a hydrocarbon, although it frequently serves as an input for the production of hydrocarbon fuels).
Viewed in this context, then, one of the most interesting details contained in the Biofuels Digest database is that virtually all global advanced biofuels production in 2011 yielded hydrocarbon-based biofuels (see chart). Furthermore, based on existing and planned commercial-scale projects (i.e., those with an output capacity in excess of 10 million gallons per year), most of advanced biofuels production is expected to consist of hydrocarbon-based biofuels through at least 2017 (on a volumetric basis; this proportion is even higher on an energy content basis):
Alcohol- and hydrocarbon-based biofuels production as a percentage of total advanced biofuels production (Source: Biofuels Digest).
The primary reason for the initial dominance of hydrocarbon-based biofuels is the recent commercialization of a single pathway: renewable diesel (not the same as biodiesel) and jet fuels via lipids hydroprocessing. Hydroprocessing, which is the reacting of hydrogen with a fuel intermediate, has been employed by the petroleum refining industry for several decades. While the refining industry employs hydroprocessing to desulfurize and depolymerize petroleum, the hydrogen can also react with oxygen to form water, thereby causing deoxygenation as well. While petroleum generally doesn't contain any oxygen, biomass contains a very high proportion of it, t must be removed if biobased hydrocarbons are to be produced. Furthermore, many lipid feedstocks consist of linear carbon chains of a similar length as those found in diesel and jet fuels, allowing their production from lipids with minimal processing (relative to a pathway such as gasification, which depolymerizes biomass into its basic components before repolymerization to fuel-range hydrocarbon molecules). The lipids hydroprocessing pathway is therefore been well-suited to utilize this existing refinery technology in the production of hydrocarbon-based biofuels and the first advanced biofuel pathway to achieve widespread global production as a result.
Advanced biofuels production by pathway, 2011-2017 (Source: Biofuels Digest).
While the lipids hydroprocessing pathway has started strong, its future expansion will be constrained by a limited supply of cheap feedstock. Examples of commercial-scale employment of the pathway in the U.S. are limited to two companies: Syntroleum (NASDAQ:SYNM) and Tyson Foods (NYSE:TSN) joint venture Dynamic Fuels; and Valero Energy (NYSE:VLO) and Darling International (NYSE:DAR) JV Diamond Green Diesel. Both ventures utilize animal processing residue as feedstock and while this is an inexpensive source of lipids, global supply is limited. Employing a more abundant lipid feedstock such as soya or palm comes with a much higher feedstock cost, as well as exposure to the "food versus fuel" controversy. Finnish refiner Neste Oil (OTCPK:NTOIF) currently operates three lipids hydroprocessing facilities with a combined fuel output of 572 MGY, although one of these is located in Singapore to ensure close proximity (and lower feedstock transportation costs) to palm.
Grain butanol supplants cellulosic ethanol
Another development of note is the planned rapid increase in biobutanol production, primarily by Butamax and Gevo (NASDAQ:GEVO). While biobutanol is another newcomer relative to cellulosic ethanol, it has a number of advantages over the other alcohol-based fuel. First, it has a much higher energy content than ethanol (although still lower than that of hydrocarbon-based fuels). This allows it to be categorized as an advanced biofuel despite being produced from grain feedstock; two of the biggest disadvantages encountered by cellulosic ethanol producers are the difficulty of converting lignocellulose to fermentable sugars and the lack of a biomass feedstock infrastructure on a scale comparable to that enjoyed by grain feedstocks. Biobutanol producers therefore enjoy many of the advantages enjoyed by grain ethanol producers with few of their disadvantages.
Butamax and Gevo have begun converting a number of existing grain ethanol projects to biobutanol production, allowing them to minimize their capital costs while still achieving commercial-scale production. Barring resistance to their further expansion resulting from high corn prices and their utilization of a food crop as feedstock, biobutanol producers are expected to bring a number of converted facilities online by 2017, making the pathway the single largest in advanced biofuel capacity by 2017.
Cellulosic ethanol: Better late than never
An old joke common among advanced biofuels observers is that cellulosic ethanol has been five years away from commercialization for the last 30 years. If all goes as planned, the world's first commercial-scale cellulosic ethanol project will come online in Italy in 2012, with several more following around the globe in 2013. Interestingly, the company behind the Italian project, Beta Renewables, is also researching the production of cellulosic butanol as part of an agreement with Gevo. Total cellulosic ethanol production is expected to exceed 1000 MGY by 2017 according to the Biofuels Digest database, although much of this is expected to be produced via newer pathways such as syngas fermentation (e.g., Coskata, Lanzatech) and engineered microalgae (Algenol).
After decades of being "just five years away" from commercialization, the advanced biofuels industry has finally achieved that status with 648 MGY of total capacity in 2011. Based on the existing and announced projects listed in the Biofuels Digest Advanced Biofuels & Biobased Materials Project Database, global advanced biofuels capacity is expected to increase by nearly 600% from 2011-2017. While existing capacity is almost entirely within the lipids hydroprocessing pathway, biobutanol production is expected to increase until it achieves a plurality of total capacity by 2017. Alcohol-based fuels are expected to be responsible for an increasing share of total capacity in the near future, although hydrocarbon-based biofuels are expected to retain majority status through at least 2017.
The viability of the projects listed in the Biofuels Digest will be very sensitive to a number of different politico-economic factors and the numbers presented above can be expected to fluctuate some in the future. The political future of the revised Renewable Fuel Standard (RFS2) will have outsized influence on whether the announced projects ever become operational. A decision by the EPA to enforce the cellulosic biofuels aspect of the RFS2 mandate over the next several years will encourage further investments in overall capacity. On the other hand, companies will likely look elsewhere for investments in clean energy should the RFS2 become a political football, particularly in light of the current drought affecting much of the Midwest U.S. that has driven corn prices to historic highs (corn being the feedstock for biobutanol production). Any tightening of credit on a scale seen during the 2008-2009 Financial Crisis (caused by a collapse of the eurozone, for example) would likely cause many of the announced projects to quickly be shelved.
Finally, it should be noted that while global advanced biofuels production is expected to increase significantly over the next several years, it still pales in comparison to the fossil fuel-based synthetic fuels projects that are already in operation around the globe. Just two natural gas-to-liquids facilities on the scale of the Pearl GTL project operated by Royal Dutch Shell (NYSE:RDS.A) would produce as much gasoline and diesel fuel annually as the 99 commercial-scale advanced biofuels projects listed in the Biofuels Digest database. Advanced biofuels projects will require favorable operating conditions to compete with these economies of scale.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.