Biofuels: the best of times, the worst of times?

Outlook for biofuels in energy transition

Our outlook for biofuels in energy transition will investigates how food and energy shortages will re-shape liquid biofuels? This 11-page note explores four questions. Could the US re-consider its ethanol blending to help world food security? Could rising cash costs of bio-diesel inflate global diesel prices to $6-8/gal? Will renewable diesel expansion ambitions be dialed back? What outlook for each liquid biofuel in the energy transition?

In principle, price spikes for conventional energy should be ‘the best of times’ for diversified energy sources, such as liquid biofuels. But in practice, there is also a possibility of food shortages in 2022. Biofuels are made from agricultural products that are usually in some way fungible with food supplies. And thus could this turn into ‘the worst of times’ for corn ethanol, bio-diesel and renewable diesel? The outcome depends on the numbers, which are explored in this report.

Our outlook for US corn ethanol is laid out on pages 4-5, including typical costs, CO2 intensity, feedstock inflation and possible impacts on the gasoline market. We wonder whether world events, especially 2022-3 food shortages, might motivate the US to re-visit diverting 40% of its corn crop into producing a biofuel, in the name of humanitarian aid?

Out outlook for bio-diesel is laid out on pages 6-7, including typical costs, CO2 intensity, feedstock inflation, and possible impacts on the diesel market. We wonder whether 0.8Mbpd of bio-diesel is now effectively the ‘marginal supply source’ for diesel markets, and if in turn, vegetable oil shortages could push world diesel prices up to $6-8/gallon?

Our outlook for renewable diesel is laid out on pages 8-9, including typical costs, CO2 intensity and the importance of used cooking oil as a feedstock. We wonder whether it is realistic for the US to scale its renewable diesel capacity by 7x, without relying on vast imports of agricultural oils, even palm oil, and whether the expansion will be softened?

Conclusions and some speculations are given on pages 10-11. We think biofuels may have a role in the energy transition, but the best pathway is bio-diesel from used cooking oil, while abatement costs of other options are on the higher side.

To read more about our outlook for biofuels in energy transition, please see our reports here, here and here. We are most excited about opportunity in landfill gas.

Ethanol: hangover cures?

Could new technologies reinvigorate corn-based ethanol? This 12-page  note assesses three options. We are constructive on combining CCS or CO2-EOR with an ethanol plant, which yields a carbon-negative fuel. But costs and CO2 credentials look more challenging for bio-plastics or alcohol-to-jet fuels. 

Challenges for the bio-ethanol industry are re-capped on pages 2-3, building off of our recent research. Hence how could new technologies fix the economics and carbon credentials of corn-based ethanol?

Our constructive outlook on ethanol + CCS is presented on pages 4-6. Ethanol plants have the unique advantage of a nearly pure CO2 stream from fermentation, allowing them to by-pass the costly and energy intensive amine process. The resultant fuel can be considered carbon negative. White Energy and Oxy are pursuing a project.

Our outlook for bio-plastics is presented on pages 7-10. Costs of bio-ethylene will likely be 2x higher than conventional ethylene, mainly due to running ethanol as a feedstock. Although encouragingly, ethanol dehydration could be 70% less energy intensive than ethane cracking.

Our outlook for alcohol-to-jet fuel is presented on pages 11-12. If our numbers are correct, some projects could result in 3-4x higher costs compared to conventional jet, despite minimal CO2 savings. Thus companies in this space are pursuing more novel pathways.

Biofuels: better to bury than burn?

The global bioethanol industry could be disrupted by a carbon price. Between $15-50/ton, it becomes more economical to bury the biofuel crop, rather than convert it into biofuels. This would remove 8x more CO2 per acre, at a lower total cost. More conventional oil could be decarbonized with offsets. Ethanol mills and blenders would be displaced. The numbers and implications are outlined in this 12-page report.

Nature-based solutions to climate change need to double annual CO2 uptake from plants in our models of decarbonization, using forests and fast-growing grasses (pages 2-3).

We profile the bioethanol industry, which is already using fast-growing grasses to offset 2Mbpd of liquid fuels. But our models suggest the economics, efficiency and CO2 intensities are weak (pages 4-6).

A first alternative is to reforest the land used to grow biofuels, which would carbon-offset 1.5x more oil-equivalents than producing biofuels (pages 7-8).

A more novel alternative is to bury the biomass, such as sugarcane or other fast-growing grasses, which could sequester 8x more CO2, with superior economics at $15-50/ton CO2 prices (pages 9-11).

Company implications are summarized, suggesting how the ethanol industry might be displaced, and quantifying the CO2 intensity of incumbents (page 12).

Copyright: Thunder Said Energy, 2022.