GLOBAL PRODUCTION OF SECOND GENERATION BIOFUELS: TRENDS AND INFLUENCES January 2017 Que Nguyen and Jim Bowyer, Ph. D Jeff Howe, Ph. D Steve Bratkovich, Ph. D Harry Groot Ed Pepke, Ph. D. Kathryn Fernholz DOVETAIL PARTNERS, INC. Global Production of Second Generation Biofuels: Trends and Influences Executive Summary For more than a century, fossil fuels have been the primary source of a wide array of products including fuels, lubricants, chemicals, waxes, pharmaceuticals and asphalt. In recent decades, questions about the impacts of fossil fuel reliance have led to research into alternative feedstocks for the sustainable production of those products, and liquid fuels in particular. A key objective has been to use feedstocks from renewable sources to produce biofuels that can be blended with petroleum-based fuels, combusted in existing internal combustion or flexible fuel engines, and distributed through existing infrastructure. Given that electricity can power short-distance vehicle travel, particular attention has been directed toward bio-derived jet fuel and fuels used in long distance transport. This report summarizes the growth of second-generation biofuel facilities since Dovetail’s 2009 report1 and some of the policies that drive that growth. It also briefly discusses biofuel mandates and second-generation biorefinery development in various world regions. Second generation biorefineries are operating in all regions of the world (Figure 1), bringing far more favorable energy balances to biofuels production than have been previously realized. Substantial displacement of a significant portion of fossil-based liquid fuels has been demonstrated to be a realistic possibility. However, in the face of low petroleum prices, continuing policy support and investment in research and development will be needed to allow biofuels to reach their full potential. Introduction Serious modern-day efforts to displace use of gasoline with biofuels in the United States began following the oil embargo of 1973. The Energy Tax Act of 1978 created tax credits for producers of ethanol, initiating a series of federal actions to incentivize ethanol production that have continued to the present. Goals were twofold: to make the U.S. less vulnerable to fossil fuel supply disruptions, and to help American farmers combat low corn prices. The Renewable Fuel Standard (RFS), which established benchmarks for volumes of renewable fuel production, was established under the Energy Policy Act of 2005. The Energy Independence and Security Act of 2007 further increased RFS program targets, establishing a 36 billion gallon (136 billion liter) target for total biofuels by 2022, a quantity sufficient to displace 16-17% of U.S. crude oil in that year.2 In 2015, the U.S. produced an estimated 14.7 billion gallons (56 billion liters) of ethanol, and 1.3 billion gallons (4.8 billion liters) of biodiesel. Ethanol production alone was equivalent to 527 million barrels of crude oil, or 31% of U.S. crude oil imports. Ethanol production was estimated to impact 40 percent of U.S. corn production and to account for 26% of U.S. harvested cropland. Even as the biofuels program was being established, it was recognized that the energy balance in corn-based ethanol production was quite modest, yielding only a 28% gain in delivered energy relative to fossil energy input. Consequently, a key aspect of biofuels development has involved support for research aimed at development of high energy balance second generation fuels. 1 Biofuels/Biorefinery Development Report Card, available at: 2 USDA Economic Research Service (2010) Dovetail Partners January 2017 2 First generation biofuels helped to demonstrate the potential for large-scale production, distribution, and use of plant-based fuels. However, in view of the fact that such fuels were and continue to be made from corn and soybeans, first generation processes have also raised a number of concerns regarding land use choices, food vs. fuel issues, and environmental impacts of vast-scale corn and soybean production. Raw materials for second generation lignocellulosic biofuel production are quite different, and in the case of ethanol include corn stalks rather than corn itself, wood, and a range of non-food biomass. Production processes can also yield a wider range of useful end products. Second-generation biofuels began to be produced at full commercial scale in 2015. Currently, 67 second-generation biofuel facilities operate around the world (Figure 1), with over one-third of these operating at commercial scale. As of 2015, 35% of the commercial installed capacity for production of second generation ethanol worldwide was located in the U.S. Figure 1 Global Biorefineries Legend: Blue markers display operational biorefineries. Yellow markers display biorefineries in development. Red markers display biorefinery developments that have been suspended. Map produced by Dovetail Partners. For the full scale, interactive map, visit: http://www.dovetailinc.org/programs/responsible_materials/maps/global_biorefineries In 2015, 144 million tons of biomass (primarily corn) were used within the U.S. to produce biofuels, which supplied 5% of domestic transportation fuel needs3. However, the volume of biomass potentially available for production is far greater. For example, based on a 2011 estimate of potential sustainable biomass production in the U.S. of 1.1-1.6 billion dry tons annually4, it was determined that biomass could supply a quantity of biofuels equivalent to total domestic transportation fuel needs in 2012. While use of all or even most available biomass for 3 Energy Information Administration (2016) 4 U.S. Department of Energy (2011) Dovetail Partners January 2017 3 this purpose is not a realistic possibility, it is nonetheless clear that bioenergy potential is far greater than present production levels. 5 Overview of Biofuel Production First generation starch and sugar-based biofuels are dominantly refined from vegetable oil and corn sugar. In the U.S., corn is the dominant feedstock. Increasingly, corn planted for biofuels is being genetically modified to enhance production of biofuels. Even though a number of states require a minimum ethanol mix in fuels (thus “fueling” the market), the low price of fossil fuels makes it difficult to operate biorefineries profitably using first generation methods. Moreover, the industry continues to face questions regarding environmental performance, including life cycle energy consumption, water use, and the environmental impacts of large-scale corn production and use. Second generation cellulosic biofuels can be derived from almost any ligno-cellulosic material including corn stover and bagasse, non-food crops such as woody biomass, switchgrass and Jatropha seeds, or from municipal solid waste. The end products can be ethanol, biodiesel, aviation fuel, or any one of a wide array of industrial biochemicals. Dovetail Partners’ Bioenergy Update: A Biofuels/ Biorefinery Development Report Card1 revealed that as of 2009, there were several pilot and demonstration second generation biofuel facilities in North America, Europe, Brazil, and Asia. However, commercial production of second generation biofuels was not available anywhere in the world at that time. Now, commercial production of second-generation biofuels is a reality. Several facilities began operation in 2014 and 2015. In October 2015, DuPont opened the world’s largest cellulosic ethanol plant in Nevada, Iowa. The biorefinery runs on corn stover and can produce 30 million gallons of ethanol per year. While a step forward, this recent development occurred at about the same time that several large biofuel producers, including Abengoa, BP, and DuPont, either closed plants or suspended projects. Overview of Cellulosic Biofuel Production There are three primary ways to make cellulosic biofuels: chemical, biochemical and thermochemical. The biochemical conversion of cellulose to ethanol happens in three steps, pretreatment, hydrolysis, and fermentation. Pretreatment weakens the plant wall, then acid or enzymatic hydrolysis separates the cellulose into sugars, and lastly fermentation converts the sugars into ethanol. In order to produce biodiesel, cellulose needs to undergo thermochemical processes, such as pyrolysis or gasification (Figure 2, following page). Production and use of second generation biofuels results in far greater displacement of fossil fuels than do first generation fuels, and emissions of carbon dioxide equivalents are significantly lower as well. Whereas the fossil energy input per unit of first generation ethanol is 0.78 million British thermal units (Btu) of fossil energy for each 1 million Btu of ethanol delivered6, production of second generation ethanol yields 4.4-6.6 energy units for every energy unit in7, meaning that the fossil energy input per each 1 million Btu of second generation cellulosic ethanol is only about 0.15-0.23 million Btu. 5 Globally, it is estimated that total annual biomass production on earth is over 200 billion metric tons of organic dry matter, of which about 46% is aquatic vegetation. Field et al. (1998) 6 Wang (2007) 7 Sims et al. (2008) Dovetail Partners January 2017 4 Because of fossil energy displacement, the use of ethanol also reduces greenhouse gas (GHG) emissions per unit of energy produced. On a per-gallon basis, Department of Energy (DOE) modeling shows that corn ethanol reduces GHG emissions by 18% to 28% in comparison to gasoline, while cellulosic ethanol offers an 87% reduction.8 Figure