Increasing Grain Prices Making Operating Costs of First- and Second-Generation Biofuels Similar; Capital Costs Remain an Impediment
09 August 2007
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| Operating costs for 150 mmgpy gasoline equivalent. Click to enlarge. |
Second-generation biofuels produced from lignocellulosic feedstocks like straw, grasses and wood have long been positioned as the successor to today’s first-generation grain ethanol plants, however the technology has been considered too expensive to compete.
Recent increases in grain prices are now resulting in similar operating costs for first-and second-generation biofuels, according to a paper published in the first edition of Biofuels, Bioproducts & Biorefining (BioFPR), a new journal from John Wiley & Sons and SCI (Society of Chemical Industry). However, the capital costs for advanced biochemical and thermochemical biorefineries—which are comparable—will be four to five times as expensive as comparably sized grain ethanol plants.
Mark Wright and Robert Brown, at the Center for Sustainable Environmental Technologies, Iowa State University, compared the capital costs and operating costs of the current generation of starch-based ethanol plants with those of first-generation lignocellulose-to-biofuels plants.
These lignocellulosic biofuels platforms include enzymatic hydrolysis of cellulose to ethanol (the biochemical platform) and three manifestations of the thermochemical platform in which biomass is gasified and upgraded to hydrogen, methanol, or Fischer–Tropsch (F-T) liquids.
The two researchers showed that the capital costs for 150 million gallon gasoline equivalent capacity range from around $111 million for a conventional grain ethanol plant to $854 million for an advanced (Fischer Tropsch) plant. The difference in the final cost of the fuel, however, was less severe, being $1.74 for grain ethanol when corn costs $3.00 per bushel and $1.80 for cellulosic biofuel when biomass costs $50 per ton.
Among the second-generation variants, thermochemical hydrogen had the lowest operating cost ($1.05 per gallon gasoline equivalent), followed by methanol ($1.28), lignocellulosic ethanol ($1.76), and F-T diesel ($1.80). In comparison, grain ethanol for this size of plant could be produced for $1.22 per gallon of gasoline equivalent. This is cheaper than all the cellulosic biofuels except hydrogen.
| Capital cost and operating cost for 150 million gallon gasoline-equivalent per year plants (2005 dollars) | |||
|---|---|---|---|
| Fuel | Total capital cost ($ millions) | Capital cost per unit production (pbpd)* | Operating cost ($ per gallon)** |
| * Per barrel per day gasoline equivalent. **Gallon gasoline equivalent | |||
| Grain ethanol | 111 | 13,000 | 1.22 |
| Cellulosic ethanol | 756 | 76,000 | 1.76 |
| Methanol | 606 | 66,000 | 1.28 |
| Hydrogen | 543 | 59,000 | 1.05 |
| Fischer-Tropsch | 854 | 86,000 | 1.80 |
Comparing the costs of biofuels is complicated by the fact that most studies rarely employ the same bases for economic evaluations. Differences in assumed plant size, biomass costs, method of project financing, and even the year in which the analyses are performed can skew comparisons.
Although the costs of production are comparable for grain ethanol and cellulosic biofuels, the much higher capital costs of the cellulosic plants will be an impediment to their commercialization.
—Mark Wright
BioFPR. The new journal is offering complimentary online access to institutions throughout 2007 and 2008. The first issue is free access to all on Wiley interscience. In addition, the publishers are developing a free access web portal www.biofpr.com to supplement the journal.
Resources:
Mark M. Wright and Robert C. Brown; “Comparative economics of biorefineries based on the biochemical and thermochemical platforms”; Biofuels, Bioprod. Bioref. 1:49–56 (2007) DOI: 10.1002/bbb.8
So, there's the hard economics. The upfront capital costs for a BTL facility are far greater than for conventional biofuels. However, if that Rhodium-based syngas reactor is cheap and flexible enough, a significant fraction of those costs may evaporate.
Posted by: Cervus | 09 August 2007 at 12:54 PM
The capital investments required for cellulosic ethanol and BTL (a diesel substitute) are still peanuts compared to the cost of securing the flow of crude oil from the Persian Gulf.
Granted, even those biofuels will not fulfill more than perhaps 10% of demand before there are once again significant consequences for wholesale food prices. Still, that would be more in absolute terms than Iraq ever produced under Sadddam.
The hydrogen costs are surprisingly low, but the stuff is much harder to distribute and store on-board a vehicle. It could be used to substantially increase xTL yields, I'm not sure if the study considered this combination/application.
In addition, hydrogen from biomass can be used to (expensively) generate electicity using fuel cells, offsetting CO2 emissions from legacy coal-fired plants to some extent.
Posted by: Rafael Seidl | 09 August 2007 at 01:11 PM
Or you could just gasify and burn the biomass in a combined cycle power plant and get more energy out of the bargain.
I'm curious about the energy balance of these alternatives rather than simply the economic costs. The costs depend a lot on current fuel prices rather than on the net yield of energy.
Posted by: Michael | 09 August 2007 at 01:50 PM
Not at all surprised that the price of grains (corn, wheat and rice + sugar beets + sugar) would quickly go up when large amounts are used to produce ethanol. We simply do NOT have enough good farm land to satisfy all our food needs and produce enough ethanol to satisfy our 200+ million gas/ethanol guzzlers.
A combination of PHEVs + BEVS + cellulosic ethanol-biofuels-butanol
would be a better possibily to reduce fossil fuel consumption and eliminate oil imports.
Posted by: | 09 August 2007 at 02:52 PM
Another consideration is government's dependence on fuel taxes as major source of revenue. If the untaxed wholesale price of fuel was already barely affordable, adding another 20-50% could bring the economy to a halt. This suggests that apart perhaps from aviation that liquid fuels should fill a secondary role as in plug in hybrids.
Posted by: Aussie | 09 August 2007 at 03:53 PM
The grain ethanol dipping below zero to -$0.50 is pretty telling and funny at the same time. ;-)
Posted by: Mark | 09 August 2007 at 11:48 PM
@Aussie -
"If the untaxed wholesale price of fuel was already barely affordable, adding another 20-50% could bring the economy to a halt."
US gasoline consumption has not gone down substantially in the past few years and the US economy has not ground to a halt. Obviously, people can and do afford gas at higher prices, so I'm not sure what your point is. What will drag the US economy into recession - hardly a halt - is all those reckless subprime loans given to people who obviously weren't paying nearly enough for gas at the time!
@Mark -
you're misinterpreting the graph, which admittedly is a little confusing. The total cost to the fuel manufacturer is the one indicated by the top of the orange portion of the bar. The light blue portion representing subsidies etc. basically moves the base of each column into negative territory.
Posted by: Rafael Seidl | 10 August 2007 at 03:46 AM
The graph makes an interesting case about the distortions of subsidies. Since grain gets 50 cents and elephant grass nothing, cellulosic loses out in the market and farmers will grow corn, over a nickel-a-gallon difference, even though the country may get only one-third as much product from the finite land. I thought subsidies were supposed to encourage more productivity.
Another thing the numbers suggest is it's tempting to conclude that if you're going to make fuel from biomass it should be hydrogen. Three problems with that. One is that such hydrogen facilities will soon be obsolete as the costs of solar PV and electrolysis are brought down. These can produce hydrogen at several times better yield per acre and so should be used for that. Two is that storage and shipment of hydrogen is much more difficult for the foreseeable future, so it's a waste of the plants' carbon collection function not to use it to displace convenient liquid fuels. Three is that biomass fuel facilities are going to be distributed all over the country where the feedstock and ash shipment costs are low in small facilities, and that discourages sequestration. Better to use your fossil fuel that is already consolidated and transported at high volume to make hydrogen and sequester it along the way and use your distributed biomass operations to displace fossil fuel in vehicles to make them carbon neutral. Because one carbon neutral gallon plus one carbon negative gallon is better than one carbon positive and one carbon neutral. Assuming all these feedstocks and fuels will share the market.
Posted by: P Schager | 13 August 2007 at 11:04 AM
It looks to me like the price of dry distillers' grains is the key. Without it the running costs of corn ethanol is about the same as cellulosic ethanol.
So, corn is more expensive to buy, and if the price of dried distillers grains drops significantly, then ethanol's advantage would evaporate. In plants producing 150million gallons gasoline/year the dried distillers grains account for a 50cent/gal credit. It will be interesting to see where the equilibrium price of distillers grains settles when we have a combination of grain and cellulosic ethanol plants.
The other interesting point is that the basis of financing. The authors are assuming an interest rate of 8%/year for 20 years, is assuming an interest rate that the Fed has not charged other banks since July 13 1989.
Posted by: biofuelsimon | 14 August 2007 at 04:03 AM
Gasify the biomass, make methane, pump it through the natural gas pipelines and run our cars on it. Nice and clean and easy.
Posted by: sjc | 17 August 2007 at 08:53 AM
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Posted by: Marian | 20 August 2007 at 09:49 PM