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Next-generation biofuels begin to emerge

The production of biofuels has tripled from 4.8 billion gallons in 2000 to 16 billion gallons in 2007, but still only accounts for less than 3% of total global transportation fuel supply, according to a report from the Economic Research Services division of the US Department of Agriculture (USDA).

However, in large industrial nations such as the US, the demand for biofuels is set to grow at a rapid rate over the next two decades: the comprehensive energy bill (H.R. 6) passed by the US congress in December 2007 calls for 36 billion gallons of biofuels to be blended into the US fuel supply annually by 2022.

In the US this situation is helping to give impetus to the development a 'next generation' of advanced biofuels such as cellulosic ethanol, micro-algae, and biogasoline/

Though biofuels where once considered a major breakthrough in the fight against climate change they have recently been placed under intense scrutiny on several fronts.

"Traditional" biofuels such as ethanol have faced accusations of poor CO2 performance, accelerating deforestation and, most alarmingly, being a causal factor in spiraling global food and agricultural costs due to their production taking land away from traditional crops.

Many lawmakers in the US have also expressed concern that the US will not be able to meet the benchmark biofuel goals set out in the 2007 energy bill as a result of the growing global competition for, and rising prices of existing biofuel products.

In the US this situation is helping to give impetus to the development of a 'next generation' of advanced biofuels such as cellulosic ethanol, microalgae, and biogasoline, with both the US government and a rapidly expanding number of energy companies beginning to invest billions of dollars into next-gen biofuel projects.

US government earmarks cellulosic ethanol as key new biofuel

Cellulosic ethanol is believed to be the key to meeting the expansive targets set out in the Bush government's 2007 energy bill.

Unlike current ethanol production, which is usually processed from corn, cellulosic ethanol production uses all parts of many types of plants.

Cellulosic ethanol and other potential biofuels derived from plant cellulose are seen as a largely replenishable source of raw biofuel materials that will not compete with food needs, as corn does.

On February 28 2008, the US Department of Energy announced $385 million in funding for six new cellulosic ethanol plants. The money for these plants will be paid out over four years to help commercialize the fuel.

The Bush administration in 2007 said it would also provide $160 million for up to three of the so-called biorefineries, but decided to double funding to speed development of the alternative fuel.

The projects are intended to improve production of biomass and demonstrate the feasibility of cellulosic ethanol, which the administration hopes to make cost-competitive with gasoline by 2012, with an aim to displace 30% of gasoline use by 2030.

The grants, which will be made if companies reach certain performance benchmarks, are expected to support production of more than 130 million gallons of cellulosic ethanol/year, DOE said. With the sponsors' contributions, total investment in the plants will exceed $1.2 billion, DOE said.

"The release of these grants is a major step forward for the cellulosic ethanol industry as many ethanol producers were awaiting this announcement to move forward with their plans," said the Renewable Fuels Association in a statement on Feb 28.

Agricultural policy

The debate over the merits of both traditional corn produced ethanol and cellulosic ethanol is also impacting agricultural policy in the US.

The US Senate's most recent farm bill funding proposal would ratchet down an existing conventional ethanol tax credit to pay for a new incentive for ethanol from biomass, documents show.

The proposal, sent to the House on April 14, would reduce the existing 51 cent/gallon credit for corn-based ethanol to 46 cent/gallon starting in 2009.

"There is a limit to how much corn ethanol we could use," said a spokeswoman for Senate Finance Committee Ranking Member Charles Grassley.

"That why we need to make that transition to cellulosic ethanol," she said. The cut would save over $1 billion in funds, according to a Finance Committee estimate.

The committee's proposal would also spend $537 million on credits for biodiesel and renewable diesel, and create two new credits for small wind and residential wind energy production.

The bill's future is still uncertain. House and Senate negotiators continue to disagree on how much money should be spent on the measure, and what programs should be funded. House negotiators panned the Senate's latest offering as still too expensive, with too few revenue raisers.

The House and Senate have less than a week to either extend the current farm bill or produce and pass a new one. The latest farm bill extension expires on April 18.

Created: April 16, 2008

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