Energy Security Achievable with Biofuels Made in the Americas

By George Philippidis | July 08, 2008
The escalating price and declining availability of oil , combined with increasing concerns about energy security and climate change, have prompted the United States to seriously assess alternative sources of transportation fuels. Corn has ushered the United States into alternative fuels, and cellulosic biomass promises to boost domestic production in the future. Meanwhile, Latin America has tremendous potential to become a global biofuels leader and thus contribute to U.S. energy security and climate stabilization. The availability of land, a favorable climate, agricultural experience and ethanol know-how are key attributes of that potential. Closer cooperation between the United States and Latin America will enhance U.S. energy security by capitalizing on the continent's biofuels capabilities.

The high demand for oil has contributed to an unprecedented increase in oil prices and, by extension, in food prices, which threaten national security, the economy, family budgets and even social order. At the same time, the use of fossil fuels generates greenhouse gases, which trigger climate change.

Fuel diversification based on biofuels produced from agriculture constitutes a key component of greater energy security and environmental stewardship. Ethanol blended with gasoline is already available in several countries. However, only in Brazil does ethanol represent a significant portion of total fuel consumption (more than 40 percent) and is projected to become the dominant transportation fuel by 2010. In the United States and other countries ethanol accounts for less than 5 percent of fuel use.

Biofuels possess numerous advantages over fossil fuels in consumer, environmental, agriculture, economic and national security aspects. They are renewable, non-toxic, biodegradable, cheaper than gasoline and diesel, and beneficial to the automobile engine, the environment and the domestic economy. Yet, these benefits still remain largely unknown because the government and the industry have failed to educate the public. Now that concerns about food versus fuel and biofuel sustainability are in the news on a daily basis, biofuels are facing an uphill battle.

Sustainability Concerns
The issue of sustainable biofuels production is quickly becoming global as the world faces dramatic increases in food prices. Although the campaign against biofuels is based on misinformation, the biofuels industry can not afford to ignore this issue. Push-back from social groups is already forcing governments around the world to scale back their plans for mandatory ethanol blending.

In the United States the corn ethanol industry needs to seriously invest in technology improvements to reduce land demand and minimize its carbon footprint. On a life cycle basis compared to gasoline, corn ethanol results in 18 percent greenhouse gas emissions reduction, compared to the 80 percent realized with sugarcane ethanol and projected with cellulosic ethanol. Similarly, the life cycle net energy balance (the ratio of renewable energy output over fossil energy input) of corn ethanol is 1.3 compared to 9 or higher for sugarcane and cellulosic ethanol. The main reasons are:
Sugarcane ethanol and projected cellulosic ethanol yield per acre of land is twice that of corn ethanol

Sugarcane and cellulosic biomass require less irrigation and fertilization
Ethanol production from cane and cellulosic biomass is powered by renewable energy derived from bagasse or other biomass, whereas corn ethanol production relies mostly on natural gas.

Moreover, from an economic standpoint, the significant agronomic and process improvements that Brazil has accomplished during the past 30 years have made Brazilian ethanol cost-competitive with gasoline at just $45 per barrel of oil without government subsidies.

Yet, this does not mean we abandon corn as a feedstock. Corn ethanol has ushered the United States into fuel diversification and will continue to play a role in the U.S. economy, but there are lessons to be learned from Brazil: a 33 percent increase in crop yield per hectare, an 8 percent increase in sugar yield from sugarcane, a 14 percent increase in sugar conversion to ethanol, and a 130 percent increase in fermentation productivity. Today, sugar mills are biorefineries that co-produce food (sugar), fuel (ethanol) and electricity in a renewable fashion. This way Brazilian agricultural productivity has increased significantly, while the food, fuel and energy needs of Brazil are satisfied.

The Future is Cellulosic Biofuels
Cellulosic biomass holds significant promise for the world's future fuel needs as it constitutes an agricultural residue that in many cases is already collected and inexpensive. It has no food or feed value and therefore no effect on food availability and prices. It is abundant, particularly in the form of sugarcane bagasse and wood waste throughout the Americas, enabling many countries to produce biofuels domestically. By nature it contains significant amounts of water (more than 50 percent) and has significant caloric value as a solid fuel, which could eventually render ethanol production water and energy self-sufficient.

A number of technologies are being pursued for production of cellulosic ethanol and other fuels, such as butanol and diesel. The technologies can be classified as biochemical (enzymatic or chemical hydrolysis and fermentation), thermochemical (gasification and catalytic conversion or carbohydrate reforming), and hybrid (gasification and fermentation).

Undoubtedly, great technical progress has been achieved in cellulosic technologies during the past 15 years. Still, they all face technical challenges before becoming cost-competitive. Most likely there will be no single technology winner, but rather technologies will be adapted to the particular characteristics of local feedstocks. Closer collaboration within the Americas will allow the countries of the Western Hemisphere to capitalize on their collective technical expertise and biomass resources to produce significant amounts of ethanol further enhancing their energy security, economic growth and environmental record.

Manage Expectations Properly
The new federal renewable fuels standard calls for the United States to raise its annual biofuel production from 6.5 billion gallons per year in 2007 to 36 billion gallons per year by 2022. This is a tremendous undertaking in terms of investment required, construction activity and infrastructure development. Corn ethanol alone will not suffice to reach that goal, since U.S. corn ethanol production will max out at approximately 15 billion gallons per year. Hence, there will be a significant gap between U.S. ethanol supply and demand, as shown in Figure 1. In this model the supply projections are based on a realistic capacity growth of U.S. corn and cellulosic ethanol, whereas demand is based on a combination of historical trends in the number of total and flexible fuel vehicles on the road, per capita miles driven per year, and estimated E10 and E85 market penetration rates.

The projected ethanol shortage will have to be filled by ethanol derived from sources other than corn. Cellulosic ethanol is viewed as the only feasible domestic solution for the United States, but expectations of commercial cellulosic plants within the next two to three years are not realistic. Resolution of scale-up issues in newly built demonstration plants will require several years, and lengthy construction (due to a shortage in stainless steel) will add more time.

If expectations for cellulosic ethanol are not properly managed, the whole biofuels industry will suffer from a potentially fatal public and investor reaction. There have already been "false starts" in the past. This time around, when policy, technology and investment have finally converged, we can not afford to miss the golden opportunity for a long-term prospective.

Latin America Part of Solution
The United States must look at its hemispheric neighbors to make up the demand-supply gap. Sugarcane ethanol from Brazil, Colombia and Central America needs to be an integral part of the U.S. energy strategy, especially when an increase in cane ethanol capacity in Latin America provides an expedient, cost-effective and low-risk strategy. This can be accomplished by adding (or expanding) ethanol production capability at existing sugar mills to enable them to produce a diverse portfolio of products: sugar, ethanol, renewable electricity and steam, animal feed (molasses) and fertilizers (vinasse).

Undoubtedly, the United States needs Latin America for energy security through diversification. Conversely, Latin America needs the United States for capital and technology infusion to build or expand their cane ethanol (and, in the future, cellulosic ethanol) capabilities to satisfy their own energy needs and enter the U.S. market, the largest fuel market in the world (145 billion gallons per year of gasoline).

This interdependence calls for closer collaboration within the Americas in the energy sector and by extension in agriculture, project financing, trade, immigration and poverty reduction.

Biofuels Challenges in Latin America
While conditions are favorable for biofuels production, Latin America faces a number of challenges that make foreign investors hesitant. Those issues need to be addressed on a hemispheric basis under the joint leadership of the two biofuels giants, the United States and Brazil. The challenges include political, economic, trade and social issues. Political instability and poor regulatory and legal frameworks need to be addressed. Latin American countries need to commit to protecting foreign investment, intellectual property and the sanctity of contractual agreements.

For Latin America to realize its full biofuel production potential, significant investment will be needed. Joint ventures between U.S. and Latin American investors, helped with debt financing from regional development banks, is the best means to fund local biofuel projects.

Although one has to recognize the complexity of agricultural subsidies world-wide, there is no excuse for setting up barriers to the open trade of biofuels. For biofuels to truly become world commodities and hence cost-competitive, import quotas and tariffs need to be eliminated.

Through economic growth and employment opportunities the biofuels industry can become a means to alleviate rural poverty in Latin America and reduce migration to the United States. For local people to take advantage of employment opportunities, the public and private sectors need to team up to provide workforce training and development with the active participation of local educational institutions.

Recommendations
Ethanol and other biofuels are a key part of the solution to our country's need for energy diversification. The corn industry has introduced Americans to a new era of fuels, but we need additional abundant ethanol resources to break our addiction to oil. Domestic cellulosic biomass and biofuels from Latin America are two key sustainable resources. The U.S. needs to pursue a four-prong biofuels strategy. First, the corn industry needs to improve the sustainability of its ethanol by eliminating fossil energy use and concentrating on agronomic and process improvements rather than conversion of more U.S. land to ethanol production.

Second, through public-private partnerships the United States should treat the commercialization of cellulosic technologies as a matter of national security (a new Manhattan project) and invest all the necessary resources to accelerate deployment.

Third, the United States should pursue closer energy integration with Latin America though regulatory convergence and open biofuels trade, thus encouraging private investment in sugarcane ethanol production to supplement domestic capacity. This is the fastest and lowest risk means to boost E85 availability within three to four years and displace gasoline use to an extent significant enough to cause oil demand and prices to drop.

Figure 1. Projected U.S. ethanol demand and supply 2007-2030

Source: george philippidis

Fourth, consumers should be educated about the benefits of biofuels and incentivized to switch to flexible-fuel vehicles, creating proper market conditions for automotive manufacturers to switch their production lines to such vehicles, which will dramatically cut U.S. dependence on foreign oil.

On the road toward fuel diversification there is no silver bullet. It is not an issue of corn versus sugarcane, food crops versus cellulosic biomass or even ethanol versus butanol. The sooner we realize that U.S. energy security needs all of the above, the sooner our country will be able to develop and commit to a coherent long-term energy policy.

George Philippidis is associate director of the Applied Research Center and co-director of the Energy Business Forum at Florida International University. Reach him at george.philippidis@arc.fiu.edu or (305) 606-9998.