January 24, 2008 | General

Biomass Energy Outlook: Jam-Packed Year Of Bioenergy Industry Growth

BioCycle January 2008, Vol. 49, No. 1, p. 44
Mark Jenner

This last year was a mighty big year of economic growth in generating energy from biomass. First-generation commercial-scale projects began generating bio-BTUs like: E3 Biofuels’ ethanol/feedlot, Fibrominn’s 55 MW manure-fueled power plant and Microgy’s manure to natural gas facility. Then, in December, E3 Biofuels filed for bankruptcy.
Last year began with seemingly every Midwest rural community announcing a corn-based ethanol plant. By fall, the bottom fell out of the ethanol and biodiesel expansion. It went from one extreme to the other.
Communities both loved and feared these projects, creating tax incentives, filing lawsuits against projects, or both. Public opposition transitioned from thermodynamic inefficiency to insufficient water supplies and then settled on the food vs. fuel debate. Grain farmers cheered the $4/bushel price of corn. The livestock industry became antibiofuels.
The year ended with apprehension about the future of biofuels, but this is not the end of the story. Economic growth is measured in decades – not in weeks or months. We are just getting started.
Project activity in 2007 was impressive. Even after adjusting for cancelled ethanol projects, there was still over 10 billion gallons of ethanol project activity – 500 million gallons of that was focused on cellulosic ethanol. Biodiesel had 2.5 billion gallons of capacity on the drawing board, or under construction. Over 2 million tons of fuel pellet milling capacity are planned or on the way. I also recorded 700 MW of electrical production from solid biomass or from methane gas in landfills or manure digesters.
These projections span everything from the proposal stage to facility operation. The announced future ethanol, biodiesel and fuel pellet project activity is roughly about 125 percent of current operating capacity. While project activity in all stages of development dropped in October, project proposals jumped back almost immediately.
Economic success depends on building enough capacity so that the per-unit cost of producing energy decreases and becomes affordable. This is exactly what happened in 2007. E3 Biofuels’ financial challenges are due to scores of unexpected expenses from combining three commercial enterprises into one system: ethanol plant, feedlot and anaerobic digester (see “Closed Loop System Takes Manure And Methane To Ethanol And Compost,” October 2007). Thomas Edison reportedly took 2,000 attempts to make the light bulb. E3 Biofuels is on its first attempt.
It takes decades to build an industry. For example, U.S. soybean production grew from about 5 million bushels per year in 1924 to over 3 billion bushels per year in 2005. It wasn’t simply a management decision to grow a thousand-fold more beans. It took 80 years to develop new production and processing technologies. It also took 80 years to build the global market infrastructure to move beans around the globe.
As a biomass economist, the real bioenergy “mountains” that were moved happened on the market/regulation policy frontier. The following is my brief list of the most significant market/policy events of 2007.
The U.S. Department of Energy (DOE) funds over $1 billion in cellulosic ethanol technology commercialization. This has been allocated to everything from development of new enzymes to funding commercial-scale cellulosic ethanol plants.
Private industry contributed more. All DOE money was cost-shared with developers. In addition, major oil and life science companies announced technology development partnerships.
Passage of the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007. This new legislation sets new mandates for biofuels production (36 million gallons by 2022).
States vs. EPA greenhouse gas regulation. In lawsuits and agency rulings, the debate continues about who can regulate climate change issues. States are moving forward because EPA is not. In December, EPA ruled that states (California) can not act independently from federal policy. This is not over.
There is growing investment in greenhouse gas study and remediation. The voluntary, private carbon credit documentation and marketing system developed by the Chicago Climate Exchange (CCX) is expanding.
Implementation of the federal, BioPreferredSM procurement standards for all things bio. The feds are developing biobased marketing standards that the industry can rise to meet.
The evolution and growth of electrical green markets. This defies economic theory, which makes it fun to talk about, but consumers are voluntarily paying more for green power. Utilities are rising to the demand for certified “green” power.
In April, the IRS recognized existing oil refining technologies as renewable diesel fuel for a production tax credit. This puts biodiesel producers at a disadvantage, but will move waste organics into the liquid fuel market very rapidly.
In the fall, Kansas denied a power plant an air permit because the CO2 emissions would be hazardous to human health. Curiously, the power plant was planning to use algae to remediate its CO2 emissions (on a pilot-scale).
States are beginning to address bioenergy regulation. Wisconsin put out a Guide to Building Biofuels Facilities in 2007. New York put out a Biomass Guidebook (NYSERDA 2006) that identifies risk by feedstock and technology.
These 2007, long-run market infrastructure activities ensure the continued economic growth of the bioenergy industries. Economic shocks are not the end of growth. They are a necessary step in the process.
Mark Jenner, PhD, is the owner of Biomass Rules, LLC and has over 25 years of biomass utilization expertise. Burning Bio News is Jenner’s monthly scorecard of bioenergy project adoption, available at www.biomassrules.com.

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