Two studies – one just published, the other due out early next year – tell us that a biomass-based ethanol industry could potentially dwarf current grain ethanol production.

Within the next two decades more than a third of our transportation energy could come from processing agricultural and forest waste products, along with an array of energy crops – breaking cellulose and lignocellulose down to unleash carbon-five sugars and fermenting them into a high octane alcohol fuel.

Research conducted by a partnership of the U.S. Department of Energy’s Sandia National Laboratories and General Motors resulted in the study “Feasibility, economics, and environmental impact of producing 90 billion gallons of ethanol per year by 2030,” by Todd West, et al.

“We are confident that it can be done,” said West, the Sandia National Laboratories lead for the study, adding, “This is not a prediction of what is going to happen. The result of the study is that we didn’t find any theoretical constraints to 90 billion gallons per year – but there are a number of practical challenges that will need to be overcome.”

That would include 15 billion gallons of corn-based ethanol. The grain ethanol industry is almost there, with a current production rate of 11.5 billion gallons and just over 13 billion gallons when current construction projects are completed, according to the Renewable Fuels Association.

The study considers a feasible volume for cellulose ethanol and arrives at the figure of 75 billion gallons per year by 2030. Current U.S. energy law provides for 21 billion gallons per year of advanced biofuels by 2022, a volume that the Sandia-GM study finds eminently possible. Considering the likely maturation of cellulose ethanol technology, the study posited a yield range between 74 and 115 gallons of ethanol per dry ton of biomass.

In order to achieve this volume of production, the industry will require the full range of feedstocks, from ag and forest residues to energy crops, according to Dawn Manley, the manager of the systems research and analysis group at Sandia National Laboratories. Likely, the rollout would begin with technologies that could collocate at corn ethanol plants, to take advantage of economies of scale as well as already existing infrastructure, financing, and revenue streams. Reaching the full 75 billion gallon volume would probably require standalone, green field cellulose ethanol developments as well, she said.

The other study, to be published by DOE’s Oak Ridge National Laboratory sometime early next year, is an update of the work ORNL published in 2006, which quickly became known as “The Billion Ton” study. The 2006 study found that U.S. bioenergy producers could marshal 1.3 billion tons of biomass for use in advanced fuels sometime between 2040 and 2050.

According to lead author Bob Perlack, Oak Ridge is still assembling its numbers for this follow-up study which shifts focus and looks at how close America could come to a billion tons biomass supply in the nearer term.

“We are really just focused on the feedstock, looking at the present up to 2030,” Perlack said. “If we were to need 45 to 60 billion gallons of ethanol, that would translate to 500 to 700 million tons of biomass using current technologies and their conversion rates.”

As to meeting the requirement set in the Energy Independence and Security Act of 2007 (21 billion gallons) or even the Department of Energy’s more recent goal of displacing 30 percent of fossil fuel transportation energy with biofuels by 2030, Perlack said, “It looks like it could be done; we are still working out the numbers. Another thing about our new study is that we are looking at costs and supply curves for feedstock. It will also be fairly spatially explicit – we will include a sort of database with county-level supply curves for various feedstocks.”

Key factors for a biomass ethanol rollout

Experts agree that perhaps the single-most important factor to a biomass ethanol rollout of this magnitude (30-75 billion gallons per year) is cost competitiveness with existing fossil fuels. The high capital-intensity of building commercial scale plants – considerably more expensive than a corn ethanol plant, according to West – means that cellulose ethanol will need either high oil prices, or government incentives, or a combination, in order to be commercially viable.

The break-even point appears to be oil prices at $90 per barrel, according to the Sandia-GM report.

As a government researcher, West could not express a preference for any given approach, but he laid out likely scenarios for reaching cost competitiveness with gasoline and diesel.

“There are a number of different options, such as a carbon tax, or subsidies required for ethanol, or taxes on conventional gasoline. It all depends on the price of oil,” West said. “Our models show that if oil is over $90 per barrel we may no longer need those types of incentives. If oil prices remain below $90 for an extended period the industry would need incentives to make up the difference. For example, at $70 a barrel like we are seeing today, you would need about 50 cents per gallon to make up that difference.”

The other key factors that would allow the U.S. to reach 75 billion gallons per year (bgy) of cellulose ethanol are conversion yield and the availability of the whole range of feedstocks, from ag wastes to woody energy crops.

“The sensitivity analysis for the ethanol production volume showed conversion yield as the key parameter influencing this metric,” according to the Sandia/GM report. “Availability of short rotation woody crops also had a significant impact on the production volume. The interaction of these two parameters also emerged as significant from the interaction screening… When all feedstocks are available, the 90 billion gallons/year target is met for all values of overall conversion yield over the range of 74 gallons/dry ton to 115 gallons/dry ton.”

The study posits a reference case in which cellulose conversion technology matures in 2020. The study sketched the importance of conversion yield on cellulose ethanol prices. Putting the research in now, in order to achieve that mature rate of conversion, will have concrete impact on the industry, according to the report. If maturity comes in 2025, that means 9 percent loss of cost savings, and it would mean 24 percent loss of cost savings if conversion technology reaches full maturity in 2030, rather than 2020.

“As expected, increases in the conversion yield improve cost metrics,” the Sandia/GM study states. “As a point of reference, corn grain ethanol yields average approximately 90 gallons/ton. The theoretical biochemical yield from cellulose and hemicellulose is 172.5 gallons/dry ton, while the maximum yield from the thermochemical process is 206 gallons/dry ton. However, the practical maximum yields for conversion processes using cellulose are estimated to be 120 gallons/dry ton, due to losses from non-converted feedstock material and external energy inputs. There are no data on production-scale cellulosic processes, as there are no such processes in existence, but the current estimates based on laboratory yields are in the range of 63-72 gallons/dry ton (Hsu, 2008). Our reference case has an overall average yield (2006-2030) of 95 gallons/dry ton and thus assumes significant technical advances over time. Sensitivity analysis showed that the cost difference between achieving a moderate improvement of yield (75 gallons/dry ton) and achieving the maximum practical yield corresponds to approximately a $0.20/gallon impact on cost of ethanol.”

The Sandia/GM modeling is based on cost and builds return-on-investment calculations for each link in the supply chain – from the farmer to those who collect and transport the biomass to the ethanol plant, the plants themselves and the jobbers who bring the fuel to the terminal. At $90-plus per barrel oil prices, everyone in the biomass supply chain and cellulose ethanol production business is making money, according to the findings of the Sandia/GM research.

The study estimates it would take $400 billion to build a 75 bgy cellulose ethanol industry. Initial commercial-grade plants would see a capital cost of approximately $7 per gallon of capacity, and that would drop as the technology matures, eventually reaching an average of $5 per gallon of capacity by 2030. The report notes that all new domestic energy production, whether it is renewable or fossil, is costly.

“Capital required for 25 years of sustained new production of petroleum in the Gulf of Mexico is estimated to be roughly $6 per gallon of ethanol equivalent of production capacity ,” the report states.

Public-private partnerships

In terms of experience with conversion of biomass to transportation energy, few can match the DOE’s National Renewable Energy Laboratory in Golden, Colorado, which has run biomass ethanol projects for nearly three decades. The current facility, with 8,000 square-feet devoted to “bench scale” projects, began making cellulose ethanol in 1994, according to Dan Schell, a senior research supervisor at NREL. The facility is now adding 10,000 square feet, a reflection of the intensifying interest in public-private research partnerships into cellulose ethanol.

“Ultimately the companies we partner with are looking for breakthrough processes that dramatically lower cost and make cellulose ethanol competitive with petroleum derived fuels,” said Schell, who is project lead for the biochemical integration project.

“Whether it is a series of incremental steps or one dramatic breakthrough that lowers the cost of cellulose ethanol, I don’t know the answer to that. It may end up being a combination,” Schell said. “ Biofuels will have to be cost competitive with whatever the competition is. It depends on what happens to petroleum. If the cost of petroleum stays where it is, or even gets cheaper, it will take some changes to make cellulose ethanol cost competitive.”

The DuPont Danisco Cellulose Ethanol LLC (DDCE), due to launch its Vonore, Tennessee demonstration plant by December 31, owes much of its progress to a partnership with NREL between 2005 and 2008. DDCE will be the first demonstration scale cellulose plant within the United States.

“We do work on many short-term projects with industry partners,” Schell said. “Typically, we work with a client to tackle some minor, specific aspect of the technology. We probably process ten to 15 of those a year.”

Where biomass ethanol stands today

At the present moment we don’t have a single commercial-scale (50 mgy or larger) cellulose-to-ethanol production facility.

There is a 125,000-gallon per year demonstration facility in Canada (Iogen, Ottawa, which uses wheat straw), the first major U.S. demonstration plant is due to produce fuel by the end of December (DuPont-Danisco, Tennessee), and a host of bolt-on facilities have reached various stages of planning that would take advantage of biomass available from existing corn ethanol production operations.

DuPont-Danisco’s focus will be providing equipment and support to the emerging cellulose ethanol industry. They have developed their approach in hopes of licensing it to other companies that want to do the actual energy production and marketing. In addition to NREL, the partnership has drawn major support from the state of Tennessee. The University of Tennessee created its own company, called Genera, to help develop a switchgrass production industry in the state.

“Our business model calls for us to build one corn cob plant, at a nameplate of around 25 mgy, and then building, owning, and operating one switchgrass-to-ethanol plant,” said Vonnie Estes, vice president of commercial development and marketing for DDCE. “Thereafter, our plan would be to license and sell technology to other people. Our parents, DuPont and Danisco, may look at investing in these plants – they might have equity in these plants. Neither DDCE nor DuPont nor Danisco want to go into the energy business per se. Their investments, however, could make obtaining financing easier.”

At this stage of the cellulose ethanol rollout, government subsidies for feedstocks are essential, according to Estes. Without the USDA-administered Biomass Crop Assistance Program, Estes said it would have been much more difficult to start up a brand new switchgrass production industry. In 2008, the partnership had 16 Tennessee farmers plant switchgrass crops.

Iogen’s planning continues for a cellulose ethanol project at a former pulp and paper mill in Saskatchewan. As yet, no date has been set for construction and commencing production, which the company hopes to scale at 70 million liters per year (18.5 million U.S. gallons).

Another Canadian firm, Lignol, believes it offers a different paradigm that will allow it to be the first cost-competitive cellulose ethanol producer. Its process can pretreat a variety of hardwoods and softwoods and ferment ethanol, while also producing lignin – a binding material common to most plants, yet of such a high purity that it will be useable as a substitute for oil when it is used as a feedstock for the production of industrial chemicals and materials such as lignin, furfural, and acetic acid.

“We may be the bridge to cellulosic ethanol,” said company CEO Ross MacLachlan. “Our ethanol yield per ton of biomass will be within a point of the yield everyone else is getting, but we will also be producing the lignin… We make chemicals from it instead of burning it. Our revenues more than double because less than fifty percent of revenue comes from ethanol, the rest comes from biochemicals.”

Lignol has just completed a fully integrated pilot plant that will produce about 26,500 gallons per year. More importantly, it will provide the information necessary to proceed with construction of a commercially competitive plant within six to nine months, according to Lignol officials. The plant would produce 7.5 to 10 million gallons of ethanol per year, as well as biochemicals.

MacLachlan noted that the first major corn ethanol plants were built on a similar scale. Even as they begin construction of the 10 mgy plant, they will be searching for a location, either in the U.S. or Canada, to develop at 50 mgy cellulose ethanol plant.

“Is it reasonable to think you can go from zero to 50 or 100 mgy,” MacLachlan asked rhetorically. “We think our approach, our scale, is a much more feasible way to start out.”

This fall, POET Energy is demonstrating a system for collection of corncobs to process into ethanol. A bolt-on cellulose ethanol fermentation system will go onto the front end of its 55 mgy corn ethanol plant in Emmetsburg, Iowa. POET currently projects construction of the cellulose ethanol processing facility in 2011, and the company hopes it will double the output of the Emmetsburg plant.

With current technologies, a 90 billion gallon per year ethanol industry, with 75 billion gallons of cellulose-based ethanol, could displace more than a third of the fossil fuels we use for transportation by 2030.

Well-developed research models show no insurmountable obstacles to major growth in the production and use of cellulose ethanol. Still, predicting whether this will happen is a bit like trying to look around a corner. What we do know is that it is possible, and it is possible to continue to grow the ethanol industry in ways that will benefit farmers, rural communities, and the whole nation from the standpoint of economic activity, environmental benefit, and national security. Maintaining a high level of investment in research will make all the difference in attaining this goal in 2030.