The Future Role of Biofuels in Achieving American Energy Independence

1. The Future Role of Biofuels in Achieving American Energy Independence Christine Zeivel Energy Law Spring 2007 Professor Bosselman

2. What are Biofuels? • a combustible fuel produced from any sort of vegetation (“biomass”) • 3 MAIN TYPES: • Bioethanol • Biodiesel • Purified biogas

3. Source: Energy Information Administration

4. History • Production triggered by 1970s oil shocks • Ethanol from sugarcane in Brazil • Ethanol from corn in U.S. • Grew rapidly until stagnation in 1990s • Oil price increases after 2000 re-stimulated production

5. Current Usage • 2005: 2% of global gasoline usage • Ethanol Production • 2000: 4.6 billion gallons • 2005: 12.2 billion gallons • Biodiesel Production • 2000: 251 million gallons • 2005: 790 million gallons

7. Ethanol • Mainly produced by fermenting sugar or starch portions of raw agricultural material • Sugar (sugar beets, sugar cane) • Starch (corn) – converted into sugar • Cellulose (trees & grasses) – more difficult to convert to sugar • Sugar & starch come from fuel or energy crops varying by region

8. Ethanol Production Process • Grind up feedstock so more easily & quickly processed • Sugar is dissolved out of the material • Sugar fed to microbes that use it for food, producing ethanol & carbon dioxide in the process • Purify ethanol to desired concentration

9. Current U.S. Usage • Blended with gasoline (reduces mileage by 2% - 30 mpg = 29.4 mpg) • E10 most common blend • E85 requires Flexible Fuel Vehicle (FFV) • E85 is a leading US alternative fuel • 3.5 million autos that can run on E85 fuel • apprx. 1000 public refueling sites • 2004: 3.4 billion gallons from 32 million tons of corn, 11% of harvest • 2007: 116 distilleries, 90 slated for construction • 2% of transportation needs

11. U.S. Ethanol Policy • 51¢/gallon subsidy • CAA 1990 amendments required sale of oxygenated fuels in areas with unhealthy CO levels = increase • E85 & blends with higher concentrations of ethanol qualify as alternative fuels under the EPA of 1992

12. Illinois Ethanol Policy • Sales & use taxes don’t apply to ethanol-blended fuels (containing between 70% and 90% ethanol) sold between July 1, 2003, and December 31, 2013. • Will apply to 100% of proceeds from sales made after. 35 ILCS 120/2-10; 35 ILCS 105/3-10

13. Chicagoland Area E85 Pumps

14. Advantages of Ethanol • Less toxic, less risk from spills • “Carbon Neutral” – same amount of CO2 emitted is absorbed during growth process • Easily integrated into current transportation system • can blend up to 10% w/ gasoline (E10) • Modified engines (FFVs) can take up to 85% ethanol (E85)

15. Advantages of Ethanol • Energy efficient – yields 25% more energy than used in corn production • growing corn, harvesting, distilling into ethanol • Decreased fossil energy input • Gasoline: 1.23 million BTU/ I million BTU delivered • Ethanol: .78 million BTU/ 1 million BTU delivered

16. Future of Ethanol • Industry set for 160% increase in next 2 years • 116 existing U.S. ethanol-fuel distilleries • use 53 million tons of corn • capacity to produce more than 5.6 billion gallons annually. • 80 refineries are under construction & 7 are expanding • Boost demand to 139 million metric tons of corn • add more than 6 billion gallons of capacity when complete • USDA predicts corn acreage will increase more than 15% in 2008 than in 2007

17. Is Ethanol the answer? • CATO Institute "Ethanol will not lead to energy independence. If all the corn produced in America in 2005 were dedicated to ethanol production (and only 14.3% of it was), U.S. gasoline consumption would have dropped by only 12%. For corn ethanol to completely displace gasoline in this country, we would need to appropriate all U.S. cropland, turn it over to ethanol production, and then find 20% more land on top of that."

18. And on top of it…. • Average fill up of a 25 gallon SUV gas tank with ethanol requires same amount of grain as it takes to feed 1 person for 1 year. • Every person in the US uses 500 gallons of gasoline per year. • That means that every American would use enough gas to feed 20 people over the course of the year. • There are 300 million people in the US, and 300 million people, each using enough food to feed 20 people to run their cars, would require enough grain to feed 6 billion people. • “So realistically, we are not discussing replacing 75% or 50% of our imported oil with biodiesel or ethanol – period. It isn’t possible. And if we are talking about a more realistic number, like 10-15%, that can only happen with policy programs designed to create, encourage, and perhaps require conservation.”

19. But impact on other industries? • USDA has said that meat supply will fall this year because of high cost of feed • Beef, pork & chicken is expected to decline by 1 billion pounds • Typically, meat production in the United States rises by about 2% a year, but pressure from American ethanol producers has sent the price soaring to $4 a bushel

20. Biodiesel 2 methods utilized • Fuel – “Neat” biodiesel is 100% • Fuel additive – “Biodiesel blend” is neat biodiesel blended with petrodiesel (Bxx)

21. Biodiesel Production • Made from: • straight vegetable oil • waste cooking oil • animal oil & fat • Transesterification – process used to produce biodiesel by separating the glycerin from the fat or vegetable oil • methyl esters (chemical name for biodiesel) • glycerin (valuable byproduct usually sold to be used in soaps and other products)

23. Biodiesel Basics • Largest possible source of oils = oil crops • such as rapeseed, palm or soybean • Soy driving force b/c capacity, surpluses, & declining prices • BUT expensive • Currently, waste oils (grease) & fats largest source because they are FREE • Not just raw vegetable oil! • Has to meet strict industry standards • Have to register with EPA

24. Algae – “Green Gold?” • Currently being developed • 30 times more oil per acre than current crops used • no sulfur • non-toxic • highly biodegradable • not subject to a commodity risk as is crude oil, corn & soybeans.

25. Biodiesel is approved for use in U.S. • Registered as a fuel & fuel additive with the Environmental Protection Agency (EPA) • Meets clean diesel standards established by the California Air Resources Board (CARB). • Neat biodiesel designated as an alternative fuel by DOE & DOT. • Only alternative fuel to fully complete health effects testing requirements of 1990 Clean Air Act Amendments.

26. U.S. Biodiesel Policy – EPA of 2005 • Small Agri-Biodiesel Producer Tax Credit • volumetric based income tax credit for the production of agri-biodiesel – $.10/gallon (biodiesel made from first-use vegetable oils and first-use animal fats) • Alternative Fuel Refueling Infrastructure Tax Credit • tax credit for installation of certain qualifying fueling infrastructure that dispense alternative fuel, including biodiesel blends B20 and higher.

27. U.S. Biodiesel Policy • Biodiesel Excise Tax • Extends the tax credit for biodiesel producers established in 2004 through 2008. • $.50/gallon of waste-grease biodiesel • $1.00 for agribiodiesel. • If used in a mixture, • $.01/ percentage point of agribiodiesel used or • $.005/percentage point of waste-grease biodiesel. • Consumer Credits • Income Tax credit • Credit for fed tax paid

28. Illinois Biodiesel Policy • Sales & use taxes apply to 80% of proceeds from the sale of biodiesel-blended fuels made between July 1, 2003, and December 31, 2013. • Sales & use taxes don’t apply to the proceeds from sale of biodiesel blends containing more than 10% biodiesel made. • Taxes apply to 100% of the proceeds from sales made thereafter. • 35 ILCS 120/2-10

29. National Biodiesel v. Diesel Prices

30. Current U.S. Usage • 2005: EPA Act • 75 million gallons (vs. 62 billion diesel fuel) • Tripled in 1 year (25 million gallons in 2004) • End of 2006 • 105 producing plants • 77 more slated for construction in next 1 ½ years • available at over 1,000 pumps

31. Current U.S. Usage • National Biodiesel Board predicts 150 million gallons in 2007 • More than 300 major fleets • U.S. Postal Service • U.S. Depts of Defense, Energy & Agriculture • Transit authorities, schools, parks

35. Chicagoland Biodiesel Pumps

36. Advantages of Biodiesel • Safe to handle, store & transport • Less toxic, less risk from spills • Higher flash rate = safer in a crash • “Carbon Neutral” - same amount of CO2 emitted is absorbed during growth process • But other emissions during process = 78% reduction in CO2 through life cycle (neat) = 15% reduction in CO2 through life cycle (B20) = 35% reduction in CO through life cycle

37. Advantages of Biodiesel • Reduces other pollutants • 35% reduction in unburned hydrocarbons through life cycle – smog & ozone precursor • 8% reduction in sulfur oxides – acid rain • 3% reduction in methane • 32% reduction in particulate matter (PM10 68%) • 83.6% reduction in PM soot • 79% reduction in wastewater • 96% reduction in hazardous waste, but double non-hazardous waste

38. Future of Biodiesel • Most major car manufacturers offer FFVs running on E85 where it is popular • Japan • South Korea • DaimenChrysler & Volkswagon working on “SunDiesel” made from crops grown specifically for energy use (willow), waste wood & other plant material • GHG & other pollutants reduced up to 90% • Manufacture cars as soon as tech developed to produce enough fuel

39. Is Biodiesel the Answer?Case Study: North Carolina Zoo • Fuel for trams, buses, trucks, tractors & equipment • Restaurants provide about 1500 gallons of used oil • Current capacity can produce 1500 gallons of pure B100 or 7,500 gallons of B20 blend annually  • Enough B20 to meet 40% of Zoo fuel demand.  • Plans to increase the batch size & add 2nd reactor tank will increase output to 17,000 gallons of B20 to meet 100% of Zoo diesel fuel needs • As production capacity increases, the Zoo will need to obtain additional waste oil from local restaurants

41. Is Biodiesel the Answer? • It would be very ambitious to produce the amount of diesel used on the farm • That would require all of the vegetable oil currently produced in the U. S. & about 15% of our total production land area. • It would in fact be very ambitious to have even a 0.5 billion gallon per year biodiesel industry • This would be only 1.5% of our on-highway diesel fuel or less than 1% of our total fuel oil and kerosene use • would require • all of the surplus vegetable oil (0.13 bil. gal.), • 1/2 of the used oil (0.17 bil. gal.), and • all of the oil which could be produced on the 37 million acres of idle crop land (approx. 0.3 billion gal.) or the equivalent by displacing current crops

42. Biogas • Composed of 60% methane • Purified or refined biogas has 85-96% methane • Sources – “wet biomass” • Landfills – methane collection • Water sewage treatment plants • Gas from biomass (fermentation of organic wastes) • Animal manure • Industrial organic wastes Biogas Pump in Sweden

43. Biogas Production • Bacteria in bio-degradation of organic material under anaerobic (without air) conditions. • Digester: heats & agitates to produce anaerobic conditions • Small Scale v. Large Scale • Methanogens (methane producing bacteria) help degrade organic material & generates biogas • Purified: Biogas is passed through a gas purification system which removes excess moisture & hydrogen sulphide

44. Small Energy Uses • fuel to run power generators, boilers, burners, dryers or any equipment using propane, gas or diesel. • requires minor adjustments to run on biogas • electricity can be used to power small appliances & lights • dual-fuel generator that permits the use of conventional diesel fuel with or without biogas (good if biogas shortage)

45. Animal Manure & Plant Residue

46. Industrial Organic Waste

47. Integrated biogas plant for treatment of 500 people’s dung waste built in China 2005. The biogas is provided as fuel for a restaurant.

48. Natural Gas Substitute • Substitute or combined with natural gas • Can be used in natural gas vehicles if upgraded to 85% methane • When used alone, faster breakdown of parts & engine overheating • Injected into natural gas grid • if injected close to the production site (low pressure network) it can only be used locally • for high pressure injection the installation need special infrastructures

49. U.S. Biogas Policy • AgSTAR Program • voluntary effort jointly sponsored by the U.S. EPA, U.S. Dept of Agriculture, & U.S. Dept of Energy. • encourages the use of methane recovery (biogas) technologies at the confined animal feeding operations that manage manure • Biogas Production Incentives Act of 2007 • Proposed by Senator Ben Nelson of Nebraska & of Larry Craig of Idaho • Providing biogas producers with a tax credit of $4.27 for every million British thermal units (Btu) of biogas produced

50. U.S. Biogas Usage • Most of the methane from wastes is allowed to escape into the atmosphere • about 100 dairy farms • few pig farms • some landfills • few municipal sewage treatment plants • 125 operational digester systems • methane emission reductions of approximately 80,000 metric tons • energy generation of about 275 million kWh.