Transcript: Biofuels - Potential National Implications

STEVE WEHRENBERG:  If you could find some seats – still a few up front here.  Well, welcome to our fifth session on energy.  My name is Steve Wehrenberg.  I’m with the U.S. Coast Guard.  This conversation series is sponsored by the undersecretary of Defense for Acquisition, Technology and Logistics and the Office of Force Transformation.  We’re very pleased to have the acting director of Force Transformation with us this evening, MR. Terry Pudas, who acts as our host.  (Applause.)

Is everybody comfortable?  I think we got the temperature right given outside, you know what I mean?  We thought about having this outside but maybe not today. 

One of the objectives of this entire series is to build a network.  We should all listen, learn, connect, share, collaborate – with the emphasis on that last word, collaborate.  So if you haven’t already, please be sure to chat with at last one person you didn’t know before you got here.  That’s how networks start.  There’s plenty of talent and an amazingly diverse set of participants in the room.  You will be stunned at some of the things you can learn from some people who are very unlike you. 

Just a quick reminder:  If you would do me a favor and put your cell phones on vibrate or stun or whatever your cell phone does I would appreciate that.  And as a matter of fact, by the end of the evening I’m sure we will all thank you for that. 

There will be time for questions after our speakers speak.  I have a couple of volunteers with microphones who will wander around among you.  And we are recording this and will make the audio available on our website – that one – so please wait for the microphone when you have your questions.  And be sure to state your name and affiliation clearly so the people who are doing the transcription for us can understand that, unless you want to be anonymous of course and then just say I would prefer to be anonymous; otherwise you’ll leave my guessing about whether you would rather be anonymous. 

Before we get started I would like to thank the tremendous support staff from CAN.  Kathy Lewis, Karin Duggan, Mike Marquez (sp), Brenda Mitchell, Allison Bassey (sp) and Lee Woodard have all worked hard to make sure that you have what you need to be here. 

We’re currently working through sort of a new iteration of an automated registration process that we think is going to be a lot easier than the one we’ve put together so far.  We will get you word of that as soon as we can.  If you did not register through the website and registered out front by filling in a piece of paper, please make sure we have your email address so that we can send you notices about future events. 

Our topic tonight is “Biofuels’ Potential Risks and Implications—National and Global Perspectives.”  We’re very pleased to have two experts on the topic with us this evening.  Their bios are posted on the website – that one.  If you haven’t been there, please do so.  And that website, by the way, is listed in your program flier.  If you haven’t been there, go.  We’ve just posted a weekly newsletter with sort of energy facts and who’s doing what to whom within – largely within the DOD community but not exclusively within the DOD community.  So please take advantage and give us feedback about how we make it more useful to you because that’s really what it is we’re trying to do. 

Since we’ve posted those bios I’m only going to give you a very brief introduction to our two speakers. 

Doctor Michael Pacheco is director of National Bio Energy Center at NREL – the National Renewable Energy Laboratory.  He coordinates DOE’s bioenergy research activities, which are currently underway at the National Renewable Energy Lab and at Oak Ridge, Pacific Northwest, Idaho and Argonne National Laboratories.  He has a long and distinguished career in RND, understands a lot about biofuels. 

Our second speaker will be Ms. Suzanne Hunt.  She’s the biofuels project manager with the Wordwatch Institute and has considerable experience on the other end of the sphere.  She’s been working with local, national and international venues both directly with farmers and as an educator.  We think it’s important to have that end of the spectrum in the room as well.  She’s spent some time in the policy and planning arena so she is no stranger to the problems that are associated with deploying good ideas. 

Without further adieu, Dr. Mike Pacheco.

(Applause.)

DR. MIKE PACHECO:  Can you hear me okay with this lapel mike on in the back? 

MS.    :  Yes.

DR. PACHECO:  Good, thank you very much. 

Well, it’s an honor to be here, and thank you very much for the invitation to come and talk to you today.   It’s a very different presentation than what I normally give.  Normally my focus is exclusively on cellulosic ethanol these days, and as you’re going to see in my talk, that is really the focus of the effort within the Department of Energy.  But there are a number of other fuel options, and some of the other options might actually make more sense for some of the military needs, and so I’ve tried to account for that in my presentation and hopefully that will be more meaningful for the folks here from the Department of Defense. 

The real strengths of biomass are in its abundance.  If you look at the intergovernmental study on global climate change and you compare the massive flux of carbon that terrestrial and ocean-based system churn, it’s like a flywheel that’s transmitting on the order of a 150 billion tons of carbon per year, about 60 of it through terrestrial land resources and about another 90 through ocean plant systeMs. The amount of carbon that we’re pumping into the atmosphere with our fossil usage is only the order of about 6 (billion) or 7 billion tons.  So when you look at it in that perspective, biomass is truly abundant.  If you think of it just in terms of one specific resource, say be it wood resources or corn resources or particularly in food stocks, then it can look very daunting. 

But as you’re going to see in my presentation, the real challenge and the focus that we’re working on at NREL and in the other national labs that participate, and the National Center, is to get beyond just food resources and move on to cellulosic biomass, which really the key to getting to that abundant resource. 

It’s renewable.  This cycle has been going on long before we were here and it will continue to go on.  The renewability is interesting because those of you who have studied fossil energy, you may be aware that the leading theory of where petroleum came from is actually from algal-based biomass.  And so it’s been the source of our major fossil energy resources.  Coal is thought to come mainly from plant resources, terrestrial plants, and the oil primarily from ocean-based plants. 

Carbon neutrality is probably the most challenging argument to make about any resource, including biomass, and it won’t be until renewables are available throughout our society to provide electricity, transportation fuels, and the heat that we need in our various processes within manufacturing settings, and only then could any resource start to approach truly carbon neutrality.  Biomass has a good running start, though.  The point I like to make when I talk with people about biofuels is that if the fuel truly was made from biomass, then you can be sure that every carbon atom in that fuel resource – whether it’s ethanol, whether it is biodiesel – every single one of those carbon atoms came from the CO2 in the atmosphere.  Experiments were done four, five hundred years ago to demonstrate that plant matter takes all of its carbon from the atmosphere, and it’s through the photosynthetic cycle using sunlight for the energy source and the CO2 as the source of carbon and water as the source of hydrogen. 

It is in fact – biomass is the starting point for our only sustainable source of carbon-based fuels and chemicals.  So if our society needs carbon-based chemistry and carbon-based fuels in the future, eventually it is going to have to boil down to biomass.  And I said in my opening statement, even our fossil resources, if you trace them back far enough to the hundreds of millions of years, you can trace them back to biomass. 

It’s very important because, as we know, today we’re facing a gap between world oil production being able to keep up with rising demand throughout the world for petroleum resources, and that gap is going to have to be filled by something.  And at NREL be believe that the one resource that’s capable of filling that petroleum gap is in fact biofuels.  There’s a lot of options for renewable electricity – solar, wind, geothermal, and in nuclear as well – but when you look at the transportation fuel system and our chemicals industry, there really are not other sustainable choices.  And in the long run, if we do successfully move and transition to a hydrogen society, biomass can also represent a long-term source for renewable hydrogen.  So it plays a very important role. 

Already in the United States bioenergy represents the largest of all of our renewable energy resources.  It accounts for about 6 percent of the total energy.  This includes the thermal energy as well as the power and transportation fuels used in the United States.  About 100 quads of energy and about 6 percent of that is renewable, and about half of that renewable is represented by biomass.  The largest component of that is actually combined heat and power that’s used in industry, and predominantly in the forest products industry. 

One of the fastest growing segments, though, is in fact ethanol.  And shown here in this chart is the recent progress in the last eight years in terms of industries’ production capacity for ethanol.  It very quickly passed 5 (billion) and 6 billion gallons.  Capacity is already under construction now to surpass both of those milestones.  The Energy Policy Act of 2005 basically sets a backstop to that growth to prevent it from slowing down.  You can see from this chart that the policy act doesn’t really drive the growth, because if you extrapolate that growth curve you’ll see that it’s actually above where the policy act’s requirements are, but it really in my mind is a backstop. 

Probably one of the most – from my perspective, one of the most important components of that Energy Policy is the requirement that within the next five to six years we begin to transition away from relying totally on sugars and starches as the source of ethanol and move into cellulosic ethanol, which is really the focus of our research at NREL.  And that’s a very challenging goal.  Today to produce ethanol from cellulosic resources it costs roughly twice what it costs to make it from starch materials like cornstarch.  So we have a tall order in front of us. 

To put it in perspective for those of you who don’t see these numbers every day, the requirement to get to 7.5 billion gallons by 2012 is a small percentage of the 140 billion gallons of gasoline that we use today.  And keep in mind that you have to discount that 7.5 billion by a factor of about 0 .7 in order to put in on an equivalent energy basis. 

Q:  That’s just gasoline, not including diesel fuel?

DR. PACHECO:  That’s correct.  This is just light-duty gasoline.  Diesel fuel is about 60 billion gallons. 

So today, the resources that we use for biofuels are the same resources that we rely on for food and fiber.  So in Brazil, where they’re using sugarcane, and the United States where we’re using cornstarch, those are resources that are very important.  They can readily be fermented.  Man has known for thousands of years how to ferment those materials.  It’s very, very easy.  I hate to admit it, but I’ve even done it myself a few times in my garage when I was an undergraduate student.  (Laughter.)

The other resource that a lot of you are hearing about now is the growth in biodiesel.  The Energy Policy Act includes provisions for biodiesel and renewable diesel.  That is another one I’ll talk about.  Those are coming from triglycerides.  Triglycerides are even less plentiful than the sugars and the starches, so where we might be able to displace maybe 5 or 10 percent of our total gasoline pool with food resources, the ability to displace diesel fuel with food oils is even more restrictive.  And so to get to, say, 30 or 40 or 50 percent displacement of these very important transportation fuels we need to move beyond these food resources and go to resources that are more plentiful.

 The three that we focus on in our research in the National Bioenergy Center are the lignin, the hemicellulose, and the cellulose.  I spent the better part of my career – well, most of my career; I won’t say the better part.  I spent the most of my career in the oil industry, and in that industry we did what was called a PIANO analysis and we talked about paraffins and isoparaffins and aromatics and naphtenes and olefins.  That’s the alphabet soup of petroleum chemistry.  But this is really the alphabet soup of tomorrow’s petroleum.  It’s the building blocks that we have to work with and we have plenty of them. 

Recently the Department of Energy and the USDA got together – and this was a study that we began designing and conceiving in the spring of 2003 and it wasn’t completed until last April – and it studied – the citation here is at the very bottom, and I know you can’t read it in the back, but if you go to the Oak Ridge website, ornl.gov, and just do a search on the world “billion,” this will probably be the first thing on the list. 

But this study was very important because what we had to show for ourselves and for the nation was that we could develop a scenario that would be able to be vetted with industry – and this study has been and has been widely accepted by both the ag and the forestry industries and right now is being used by the oil industry to help develop strategies on how to integrate biofuels into their business.  It had to be able to show that we could produce at least a billion tons of biomass – and not food resources but biomass that could be dedicated for energy, and this study did that. 

Now, this study has three different levels of optimism on the agricultural residues, and those different levels range from as low as about 400 to a high of about 900.  This is the most aggressive of the three scenarios in agriculture.  The forestry just had one scenario, but when you add the two together, the aggressive ag the one forestry scenario, you come up with about 1.3 billion tons. 

Now, why was that so important?  And you can see from this slide why we’ve able to start to bring and engage the oil industry into the discussion about biofuels.  It’s because of that study that we were able to put biomass on a playing field where it could be very significant in terms of a resource that compares in size with what we can do with petroleum. 

I’ll take my time on this slide; it’s probably one of the most valuable or most important and significant slides in the presentation. 

This barrel chart here on the far end represents the amount of petroleum that we use totally in the United States for all purposes: for gasoline, for distillate fuels like diesel on farm fuels, and heating fuels, jet fuel, and all of the other products, the chemical products, the asphalt, the lubricants and so forth.  It’s on the units of billions of barrel of oil equivalents.  These are energy units.  They basically represent 5.7-million BTUs.  It’s just an energy unit; it’s the amount of energy in a typical barrel of oil, mid-grade oil. 

Of that six and a half we import about two-thirds of it.  Today we produce about 2 billion.  We peaked in 1970 and ’71 at about 3.5 billion.  And now you can start to see the significance of that billion-ton study.  If you take that 1.3 billon tons of biomass and just do an apples-and-apples comparison of that heating value of that biomass versus the heating value of the most crude oil we’ve ever produced in this country in a given year, you’ll find out that those are equal – very close to equal. 

So what that billion-ton showed us was that, look, we understand Hubbard’s peak and we know that the United States went through a period of growth in the ’30s, ’40s, and ’50s, peaked in the early ’70s, and we’ve been on the decline ever since.  What this shows is that we can develop a sustainable scenario for maintaining that level of production of energy that could be dedicated to transportation fuel year after year after year, not using food resources.  So that’s why that study was so significant. 

Another question?

Q:  I’m sorry – (off mike).

DR. PACHECO:  So now I want to show you, where are we today with near-term technology?  If we were forced to deploy this today, if we took that biomass that represents about 3.5 billion barrels of oil equivalents on an energy-unit basis, we only know how to produce, with today’s best technology, about 1.9 billion barrels of oil equivalents in the form of products. 

Some of that material would come from food resources.  This is this little yellow piece that the people in the back room can probably not even see.  That basically amounts to 20 billion gallons of ethanol a year coming from food resources.  And we believe that’s probably about close to the ceiling of what we can do with food resources before we severely impact food prices. 

The rest of this, the green, are the carbohydrates that are in plants: the trees, the grasses.  That’s the hemicellulose and the cellulose that we can hydrolyze and convert to ethanol, and you can see that’s the biggest piece, and that’s where our focus is right now.  That’s the focal point of the DOE research program. 

This next piece here are resources that are not high enough in carbohydrates to be fermented, and it’s also the lignin – remember, the three major pieces: the two carbohydrate pieces and the lignin.  It’s the lignin component, which we don’t have technology today to be able to ferment the ethanol, and so instead we use thermochemical processes like gasification, which can be done with coal and natural gas as well, works perfectly well with biomass, or pyrolysis, a process that really is unique to biomass and doesn’t have an analog for natural gas or coal. 

But I’m going to talk more about both of those thermal processes as well as – but this chart, now, you can see maybe some of my enthusiasm comes from the fact that we now have a vision and a scenario that has been widely vetted and is being accepted, not only by the ag and forest industries but by the energy industry that this is a quantity of energy that can really contribute to our final solution.  It’s not the silver bullet, but it is part of that silver buckshot that – where we have several solutions all contributing to replacing our energy sources. 

So where is our research focused?  Our research is really focused right now on the front end of this process.  We’ve got to be able to cost effectively and quickly take these complex polymers, those three polymers that I showed you earlier, and we have to be able to break them down into simple sugars so that we can then ferment them.  Now, there is still work that needs to be done on the fermentation side but for the moment DOE is heavily focused on this part of the research right now in getting those sugars down to a cost effective level.  This is where, when we do our detailed analysis of the cost structure, that’s where the majority of the costs are, and so that we know we know we have to attack that part of the process. 

And that’s why, for example, DOE recently completed a major campaign with two of the largest enzyme producers in the world.  It was a four-year campaign that started – the initial work and the solicitation went out in ’99 and the project really concluded in 2004, and took the cost of enzymes down the point where now they can be considered the lowest-cost way to hydrolyze cellulose.  And that was very important because while we could use chemicals to break down cellulose, we cannot ever even approach the yield and the efficiency at which enzymes can do it at.  So it was critical for us to be able to work with industry and get those costs down so that was the leading technology. 

Now, I’ve shown up here in the corner, this is the existing corn ethanol industry where they take corn grain, go through a hydrolysis step, a fermentation, and they produce ethanol plus animal feed – distiller’s grain for those of you who are familiar with it.  What you can see is that cellulosic ethanol doesn’t replace corn ethanol or sugar ethanol – the same analogy holds for Brazil and for the United States – it adds on to it. 

So, for example, in those cornfields throughout the corn belt of the United States, in addition to the corn grain, half of the plant is the stalk, the cobs, the leaves, the part of the plant that we can’t eat, and some large fraction of that, somewhere between 30 to 70-percent of that material, can be taken off the farm and still maintain soil quality with proper tillage practices to keep the farm viable and sustainable but we able to produce much larger quantities of ethanol. 

The scenario that we’re working on right now and the goal that we’re working towards in a scenario that would get us to 60 billion gallons of ethanol from a combination of starches, together with cellulosic biomass, by the year 2030.  And that’s the goal that we’re shooting for now. 

To get to that goal, we understand that we have to get our costs down to the point where they’re comparable, starting with either feedstock.  This feedstock will be a little cheaper but it will involve higher conversion costs.  This feedstock will cost more but it will have a lower conversion costs, and we need to get the total costs to where they cross over, and that’s when we believe the real growth will start in this industry. 

Q:  And you have to factor that 60 billion by 70 percent?

DR. PACHECO:  That’s correct.

Q:  Okay.

DR. PACHECO:  That’s correct.  But if you go through that math, that’s 60 billion represents about 30 percent of today’s gasoline usage – 30 percent of that 140 billion gallons. 

So where are we on that march to try to get to success?  This is the recent history in terms of the cost structure.  The red section, which is highlighted, is the progress that I talked about and the enzyme costs.  And that was not just DOE progress; it was in partnership with two major corporations working together on that.  And NREL was involved in that research but really it was being led by Genencore and Novozymes, the two companies that participated in that. 

We have been making progress at NREL on the conversion costs.  This was the cost to get from that feedstock all the way through, and those are conversion costs separate from the variable expense of buying the enzymes.  And then the feedstock costs have been relatively flat. 

If you look ahead to what we’re trying to get to by the year 2012 – and this is to try to get to that take-off point that’s in the Energy Policy Act of taking off with cellulosic ethanol around that timeframe of 2011, 2012 – we believe we need to be down in the neighborhood of about $1.10 per gallon for ethanol.  We have a very careful chemical engineering process model that some of you may have experience with that helps us understand exactly what parameters, what xylose conversation we have to get to, what fermentation efficiency we have to achieve, what fermentation time we have to achieve, the cost of the metals that’s being used in the various parts of the process, and the cement and all of that.  That’s all factored into that, so it’s not a pie-in-the-sky number.  We actually have a defined scenario – we call it our “dollar seven” case, which is very carefully defined. 

Question, Russ (sp)?

Q:  The gathering and processing costs, is that so minimal that it’s not part of it?

DR. PACHECO:  It’s factored into the feedstock costs.  So $53 per dry ton is the cost of getting this material to the refinery gate, which includes the gathering and the collection.  The fifth –

Q:  So the cost of fossil fuel increases in the last five years hasn’t affected the (profit?) at all?

DR. PACHECO:  The beautiful thing about a cellulosic biorefinery – as I’ll show you in a future slide – is it completely decouples itself.  There’s only a very small percentage, less than 5 percent of the total energy required, is coming from fossil energy in the biorefinery. 

We get our energy for the process from the lignin portion of the biomass.  Let me just back up one slide and I’ll show you that.  This lignin residue is not being used to make ethanol.  It represents, in some cases, as much as 40 percent of the total energy in this biomass on a heating value basis.  We use that much the same way that a paper mill does or a plywood mill or any other wood products facility.  We use that to produce the heat and power that the biorefinery needs.  And it turns out that it’s in excess so we actually can either excess and export some electricity or we don’t have to use all of that material. 

Q:  (Off mike.)

DR. PACHECO:  That’s in there.  That’s that big of a percentage when you really look at the numbers.  I’ll show it to you in a little bit; I have the energy balance in another slide. 

Amory?

Q:  We’ve lately been discovering in reforming and distillation settings – (off mike) – distributed miniaturized models, they actually work better and cost less.  They can even have higher thermal efficiency in some cases, and you get economies of mass production.  It makes me wonder how well all the processes you’re looking with might scale down, even to putting a rig on the back of a truck so you can take it to where the feedstock is and have lower transport costs and pick up a lot of little feedstocks. 

DR. PACHECO:  I would like to talk with you about that after the meeting, because that’s very contrary to what the chemical engineering cost models – ICARIS or any of the cost models always show the opposite trend that for conversion process technologies, as you go bigger you always get some advantage of the cost of increasing the size.  The only time that doesn’t occur is when you start repeating an exact piece of equipment multiple times.  Then you lose the benefit of the economy of scale.  But as long as you can start making pumps bigger and pipes bigger and vessels bigger, you always tend to get – and it’s what chemical engineers refer to as the six-tenths power law because it tends to go up.

Q:  That is the conventional wisdom. 

DR. PACHECO:  Yeah, exactly.

Q:  I’m just saying we’re now finding counter examples. 

DR. PACHECO:  I would like to talk with you later.  That’s very interesting. 

Go ahead.

Q:  On your next line you shared cost per gallon.  Does that include the amortization of the facility?

DR. PACHECO:  Yes it does.  It includes a return on capital plus a depreciation. 

Q:  What’s your best guess as to the magnitude of the investment cost of a viable industry?

DR. PACHECO:  That’s an extremely good question.  I will give you the number for a plant or a certain amount of capacity and then I’ll leave it to you to do the industry.  But our numbers which are published – and in fact, of most of the technology development in this area, this is one of the most important parameters.  There is the cost of the capital per unit capacity.  Right now the state of our technology, we’re in the neighborhood of about $3 per gallon per year of capacity. 

That’s quite high.  If you look at the corn ethanol industry it’s probably less than a third of that.  And so that is one of the key reasons why we’re so focused on the front end of the process because most of that capital is tied up in the front end of the process. 

Q:  Capital of that magnitude tends to kill a lot of projects.

DR. PACHECO:  Absolutely.  No, we don’t think this is commercial at that level.  To get to our dollar-seven case our capital number gets down in the neighborhood of $1.50 per gallon per year capacity, about half of what it’s at today. 

Q:  Have you considered – in the breakdown of cellulosic materials – fermentable sugars – did you look at supercritical water?

DR. PACHECO:  We’re not doing any of that work ourselves but there are folks in academia who are doing that work, and some of the folks that work for me follow that work.  I’m not prepared to talk about it. 

Q:  So I would have thought that you would have compared the enzymatic conversion versus the supercritical.

DR. PACHECO:  I know that –

Q:  If the supercritical works, it could be, you know, a pretty good bet. 

DR. PACHECO:  Yeah, I know that we’ve looked at it and I don’t have numbers on my fingertips, but if you like it we could talk about it after.

Q:  I would like that.

DR. PACHECO:  This is the energy balance rod (?) that I was talking about.  When you look at the three major technologies for fuels, you look at gasoline, transportation fuel for light-duty vehicles; you look at corn ethanol; you could also put sugar ethanol in there as well – sugarcane ethanol – and you look at cellulosic ethanol. 

There’s a very important story here that unfortunately gets twisted and turned, and I’ve tried to put all of the information on this slide.  Some of it is good news, some of it’s not so good news, but it’s all the information so that it doesn’t get twisted, and hopefully you’ll appreciate that.

If you look at production of gasoline and you allow yourself, which we do in this, to take credit for the diesel fuel, the jet fuel, the asphalt, all the other co-products, you actually find out that there’s very little energy wasted in producing gasoline.  If you couldn’t account for those other co-products, this would be up at around three because you don’t make that much gasoline from a barrel of crude oil. 

Now, a small amount, about 10 percent of that energy, is actually coal and natural gas.  That’s for the heat and power mostly inside the battery limits of the petroleum refinery.  With corn ethanol, the usage of coal and natural gas jumps up dramatically.  All of the energy that’s required to distill off that ethanol and separate the ethanol from the water is coming from natural gas.  All of the power in the plant is coming from coal, and so you have a very large demand here. 

There are people out there who will argue – Professors Pimental and Patsik (sp) from Cornell and Berkeley respectively will argue that this is actually above the red line.  What this red line represents is that for every BTU of fuel that we’re going to put in your gas tank, whether it’s gasoline, corn ethanol or cellulosic ethanol, how many BTUs of energy and where did that energy come from in order to make that fuel?  So, for example, with corn ethanol, most of the energy is coming from the corn and we don’t use any biomass when we produce petroleum materials.  So in a lot of cases people are ignoring this. 

We put the fossil energy there, we put the biomass energy there, and you can see that, yes, it’s a less efficient process.  In terms of overall efficiency it’s only 57 compared to 81.  But what you can also see is that for every BTU of fuel ethanol that I put in your tank I only used one-tenth of a BTU of petroleum.  And that is the most important parameter on this curve because our real challenge, as the president said, is we need to end our addiction to oil. 

Now, we can – in the process of transitioning from oil to other fuels it may be perfectly acceptable for decades, if not centuries, to be using coal, but it can facilitate the process.  The real solution is over here.  The real solution is getting to that cellulosic biomass where we know that it’s got the quantity that we need to work with.  But then the energy balance reveals – as I was explaining to Rod in the last slide – is that we actually use the lignin portion from the biomass to replace the coal in natural gas. 

We still use about the same amount of petroleum, but we’re using all of the biomass.  We’re using the carbohydrates to make the ethanol and we’re using the lignin to provide the heat and power to run the business, and so that we can cut the umbilical cord with this big block of fossil energy.  And we have time to make that transition because coal is not about to peak anytime soon.  So this is what I believe is the true – the accurate story.

Question?

Q:  (Off mike) – you said with proper farming practices, the soil can be – (off mike).

DR. PACHECO:  It’s very important.

Q:  – but you are taking away the food from the soil, are you not?

DR. PACHECO:  In the case of – you’re thinking, like corn stover, for example –

Q:  Yeah.
   
DR. PACHECO:  – in your question.  Oh, absolutely.  And that has to be very carefully modeled and managed, and people have the models to do that, and that has been the basis.  Right now, for example, in the corn industry there’s on the order of about 230 or 240 billion tons – million tons of stover that’s being plowed into the fields.  The estimates are that we could remove maybe 60 to 80, maybe even 100 of that.  So we’re not talking about taking all of it; we’re talking about managing it and removing it off. 

Most corn farmers will tell you that they can have too much stover and they can’t plow it all into the field and it’s actually a problem.  So it is a question of managing it.  It also depends on your tilling practices.  One of the things that’s integrated in this billion-ton study is that, particularly for a crop like corn, the soil can be maintained better with a low-till or a no-till practice and a lot of farmers are already doing that. 

Another – Peter, you had a question?

Q:  (Off mike) – in Nebraska that’s using the manure from a feedlot across the street – (off mike) – methane to power the plant.  I guess two questions.  (Off mike) – replicate in other places, and what does that do to the efficiency and the energy balance?

DR. PACHECO:  We haven’t done the full-energy balance on what you’re calling – what you’re referring to, Peter, is what is known in the literature as a closed-loop process.  For those of you who maybe haven’t seen – this is really just within the last four or five years – and that is to take the DDGS from a corn dry mill, feeding it to the cattle in a feedlot.  The cattle – you know what they produce – you take their manure and then you use that to produce biogas and the biogas can replace the natural gas that’s being used at the corn ethanol mill.  They call it closed-loop because you’re basically – each part of the loop is using a product from one of the others. 

I believe – I haven’t done the study myself; maybe someone in the room has, but I believe it’s going to be a significant improvement because it’s going to take out a big piece of the fossil resources there for the ethanol plant. 

Q:  How easy is it to replicate?

DR. PACHECO:  You have to be – I was at a meeting just a few weeks ago in New York – you have to have the three pieces.  The anaerobic digester you can build if you’ve got the manure.  So it’s a matter of, say, in New York what they’re looking at is the dairy farms – the cheese and the mill farms – instead of the cattle lots like they have in Nebraska.  But if you have the three pieces you may be able to do the same thing with the poultry industry.  If you have the pieces I think that could be replicated in quite a few places. 

MR. WEHRENBERG:  Ladies and gentlemen, please, I’ve got to ask you – our second speaker is getting way nervous.  (Laughter.)  And I love this interaction; don’t get me wrong; it’s a tough balance.  If you have a question of clarification – please, if you don’t, try to hold it until we get through the second speaker.  Thank you.

DR. PACHECO:  The takeaway on this slide is in the red text here.  The takeaway is – and recently testifying on the Hill, this is the important message – is that it really doesn’t matter if you’re trying to replace petroleum and reduce our dependence on petroleum, either corn ethanol or cellulosic ethanol both provide about a ten-to-one lever on them.  That is, over here, where we’re virtually using one BTU of petroleum to make one BTU of gasoline, over here we’re using about a tenth to make one, and over here we’re using about a tenth to make one.  So the fossil and coal kind of get mixed in there. 

And that’s what I believe has been misrepresented heavily in the literature is that if you’re really focused – if we’re focused as a nation on reducing our addiction to petroleum, either one of these forms of ethanol are a good solution.  This one albeit is a short-term solution because we do eventually have to come up with a sustainable solution that doesn’t involve fossil energy. 

Now, there’s a wide range of possibilities, and what I talked about here is what our focus is at the laboratories – the DOE laboratories – is on cellulosic ethanol.  But as I promised, what I would like to do now is talk a little bit about some of the other technologies that we’re not working that aggressively on that could possibly have a better fit with some of the DOD applications.  And I’m going to end on one that we’re actually kind of excited about because we think it’s a really good fit sort of supplying the high amounts of jet fuel that both the Navy and the Air Force need, and so I would like to end of that.  

I’m going to talk very, very briefly about gasification because I now that within DOD gasification is being looked at, and as it should.  It’s the largest fossil resource that we have in this country and the technology exists to go through the gasification, produce syngas, and from the syngas can go through a synthesis step and produce very good diesel fuel – not so good gasoline, but very good diesel fuel.  And this is very well known technology.  It was practiced by the Germans during the war.  And this technology is really sound technology and is a great way to produce good, high-quality fuels. 

One of the beauties – and I borrowed this slide from Steve Koonin at BP – one of the beauties of this technology is that you can use natural gas.  So, for example, for remote natural gas – a very, very important issue for the oil industry – you can use coal, biomass, or the heavy oils.  As we run out of oil and as we are on the backside of the Hubbard’s peak, the quality of the oil is going to gradually decline. 

One of the nice features about biomass gasification is it lends itself to small projects, to small applications.  This is a really exciting project that was a partnership between DOE and USDA in the late ’90s, early 2000.  It resulted in the formation of a small company that is actually producing these units.  These are small.  They’re in the range of five to 50 kilowatts – not megawatts, kilowatts.  These are small units. 

This one here is at a high school in Colorado.  This is the gasifier in the back, this is the students that run the thing, and this is the diesel genset.  All they did was take a diesel genset and convert it to be able to burn synthesis gas.  So they gasify the biomass and burn it in a genset to produce the electricity. 

One of the exciting things about this project is that it’s at a high school, and with four children – they’re all going through school – I would love to see one of these at every high school in the United States because you can just imagine how the science classes use this as a resource to basically teach the students about the whole field of chemistry and about the whole field of biomass and power and efficiency.  And it’s just so exciting to see something like this going on at the high school level.  Those are the kids that are going to have to solve these problems.

Another technology I mentioned briefly at the beginning – this is such a unique technology because it doesn’t have an analog with coal or with natural gas.  The closest analog is with petroleum cracking, and it’s very similar to what was done prior to catalytic cracking of petroleum.  It’s just a thermal cracking process. 

The remarkable thing about this chemistry is you can take wood – you can take woody resources, chopped it up, and if you heat it up in a fraction of a second to 5 (hundred) or 600 degrees centigrade – I mean, a third-of-a-second, a half-a-second, no longer – if you got much longer you’ll make synthesis gas.  If you stop and you quench it immediately – and this is – for those of you who are familiar with petroleum like the gentleman from API, this like a cat cracker except instead of circulating six pounds of catalyst for every pound of oil, I’m going to circulate 20 pounds of just a thermal sand and just shred the biomass thermally into small fragments.  And those small fragments are a black liquid that looks an awful lot like crude oil, and you can get yields in the neighborhood of 70 to 80 percent liquid. 

This is a fascinating process.  The bad news is the quality of that liquid; it needs a lot more work.  But this is an option longer term, and it’s a different option.  It doesn’t make a nice clean product like ethanol but it but it can make a liquid that can be refined. 

Now, what about military applications, and in particular what about the needs for jet fuel?  The president said that we’re addicted to oil.  I’ve already explained to you our focus is on cellulosic ethanol, and I think that’s fair because that is the civilian need for a replacement for gasoline.  But the military need is different, and I recognize that neither ethanol nor biodiesel really meet the needs, particularly the need for jet fuel. 

But what I’m going to do for you now in the last few slides is describe for you another option, which combines some work we’ve done at NREL some years ago and some work that we’ve just been partnering with with the oil industry over the last several years.  And when we connect the dots between those two we come up with a marvelous technology option that’s not widely know.  In fact, I doubt that there are too many people in the room that have heard of it.  I believe this may actually be the best option if we need to be able to produce jet fuel like a JP-8 or a JP-5 from biomass.  And so, for those of you who are interested in that challenge, this is the part you want to wake up and pay attention to I guess. 

The military has a very different pie chart in terms of its fuel needs than the rest of society.  In the United States, jet fuel really represents a small portion of the total petroleum that we use.  If you put this on the total of transportation fuels it would be about twice tat size, but this is on the total petroleum used.  On the other hand, the military requires about 71 percent. 

So, in the 1980s and on through 1996, NREL had a project that we referred to as the aquatic species project, and our focus at that time – I say our focus; I wasn’t at NREL at the time – the focus at that time was to go through the world and review thousands of strains of algae, looking for strains that could produce very high yields of lipids.  Lipids are just like the oils – the triglycerides that are in soybean oil or in rapeseed oil, and it is the oils that could be used to make biodiesel, and that’s why we were looking at it at that time. 

We were looking at extracting those lipids for the production of biodiesel, and we developed a process, we had patents in this area.  We even built a very large – this is a 14-meter by 70-meter, 80-meter long oval track that was being used to grow algae in Roswell, New Mexico, and it ran for a year.  And we’ve got data at that scale showing productivities, and we know from that data that we could produce biodiesel today if we had to from a system like that for about $4 or $5 a gallon. 

We also understand the cost limitations.  And the cost limitations were the way in which the system has to be run, is you literally have to starve the algae in order for them to produce large yields of oil.  So we started it – towards the later few years of the project we started working on trying to understand, could we get the high yields of lipids even when the algae was under good healthy growth conditions?  And it was right at about that time – diesel fuel was at about 60 cents a gallon.  There was a big question about do we have enough emphasis and focus on ethanol?  And we did our analysis and we said, well, you know, we could probably get this biodiesel down to maybe a dollar or a dollar-and-a-half but probably not 60 cents.  The project was cut at that point in time and it has been on the backburner. 

For anyone that wants to learn about this project there is just an absolutely outstanding document that’s called “The Close-our Report.”  It was written in 1998 by John Sheehan, the fellow who lead this project.  And I think of it as a bibliography to the hundreds of studies and hundreds of reports that were written during those 17 years, and each report has a short summary in there. 

Well, why were we interested in algae and why should be consider going back to it at this point?  The reasons really are is that algae – we demonstrated in this project – can have a much greater productivity for oil than any of the terrestrial plants by an order – by about a 50-fold effect. 

We’re not using a food resource.  We can do this on land that’s not suitable for growing crops.  You could do this on a pad of concrete.  You could do this in the desert.  You can do this in New Mexico.  Think of growing corn there.  And so, in addition, this doesn’t have to have fresh water like most arable soil crops need fresh water.  This can be done with ocean water, it could be done with saline aquifer water, this could be done with wastewater from a wastewater treatment plant.  These are algae, come on. 

And so this is basically pond scum – is what most people refer to it as.  It kind of looks like that.  And it takes CO2 out of the atmosphere, uses sunlight, and it produces these lipids – the tremendous synergism with the greenhouse.  What we got really excited about at NREL is when we started working with some of our oil company partners and some of them started asking questions like, well, why can’t we just take those lipids and feed them to a petroleum refinery?  What would happen if we put then in a hydrotreater or in a cat cracker?

Well, they did those experiments, and in fact three of the companies talked about them in our conference last August here in D.C.  It was BP Totale (sp) from France and UOP, which is one of the companies we’re partnering with on this research.  They got phenomenal results.  They got yields of diesel fuel at 80- to 90-percent yield.  And anybody who is familiar with diesel fluid, they were getting cetane numbers of 80 to 90, almost not sulfur in it, no aromatics, no nitrogen.  This is very exciting stuff.  They’re excited about it. 

What they really like is that it allows them to use existing assets so we don’t have to go out there and build a conversion facility.  You have to build a facility to grow and harvest the algae but once you harvest that triglyceride oil, you would go ahead and ship that to the refinery.  So a whole new model started to gel in our mind and this is the model that I believe is possibly one of the best solutions if you need to make high-quality jet fuel from biomass. 

And that is to use sunlight, use carbon dioxide.  The CO2 could come from a coal-fired powered plant, it could come from a natural gas fire pump, it could come from an ethanol fermenter, it could come from a remote natural gas facility, because for those of you who are familiar with oil and gas, when you produce gas you normally are producing CO2.  In some cases as much as 20 percent of the reserve is CO2 and 80 percent methane. 

And so there’s exciting opportunities to grow this stuff.  The goal would be to get the triglyceride into a petroleum refinery and then work with the refiners to select the right triglycerides to be producing. 

By the way, this is actually a photograph of an algae farm in Japan where the Japanese are growing algae for a variety of resources.  One is for food because the protein content that you don’t need for the fuels could be used to make food.  The carbohydrate, basically the skeleton of the algae if you will, the carbohydrates can be used to make ethanol.

This is a fantastic opportunity, and it’s one of the reasons why at NREL we would really kind of like to reopen that program now and see whether or not working with the oil industry, not by ourselves but working with the oil industry, if we could bring this to closure in a few years and demonstrate a really novel route to produce high quality jet fuels that also could be very good diesel fuel.

What’s really needed is to go back to that lipid trigger that I talked about and find out why that algae – (audio break) – starve algae for a certain nutrient that they all of a sudden go into this survival mode and they shunt all of that carbon dioxide into lipids instead of putting some of it into carbohydrates and some of it into lipids.  And if we could understand that and then modify this organism so that we can do that on demand, even while it’s healthily growing under good growth conditions, then we could basically have an oil-producing machine. 

And you asked the question, well, how much area does that machine have to take? The answer will really surprise you; it’s not the whole Pacific Ocean.  This picture here shows you a red square that basically is the amount of area in Arizona that we would have to use if we don’t even do anymore research in this area, if we just use today’s technology and had to produce 5 billion gallons of jet fuel, say, for the military tomorrow.  Now, obviously it would take some time to build those algae farms, but that’s today’s technology. 

With the research that could get to that production rate, which we’ve already observed in the big production facility in Roswell, this is how small it would be to make that 5 billion gallons.  Now, remember, 5 billion gallons is about how much ethanol we’re making today, and you know the footprint that it has in the Midwest. 

This is very exciting technology.  This goes back to that high productivity per acre, which is one of the reasons why at NREL we’re so excited about this approach.  So this is just a little glimpse at what we think is one option there. 

The factors that govern that – you’ve got to think about where the CO2 is going to come from, got to think about the geometry of this facility.  The biggest question and one that we recognize is whether it’s an open or closed facility because it has a huge impact on the water requirements.  An open facility in Arizona, that footprint is going to have huge water requirements.  Rough estimate for that diagram I showed you on the far left is about a trillion gallons per year.  So we think it’s going to have to be a closed system.  It’s going to have to be inexpensive and that – work needs to be done.  We think that’s a role for private industry.  We don’t think that’s a role for a federal laboratory, but we do think that the strained development needs that industry has is a good role for the federal laboratories. 

The research that’s required to get that particular solution is to develop the strains that are required – and I say strains because it may be that we need to have more than one – but the strains that are needed, the algal strains, got to work with industry partners to have the cultivation system, the harvesting system, the collection – someone is going to have to go out and build these things and it’s not going to be a federal laboratory – and then integration with the petroleum industry. 

The best, I think – having worked in that industry for a long time, I think the best solution there is to just partner with them, be working with them to provide them with the extracts from the algal solutions and let them tell us which ones are the best lipid strains to be able to use to make either a high-quality diesel jet fuel or maybe even a universal fuel that could be used in both applications very well. 

With this research, what we would want to try to get to is get away from the $4 or $4.5 per gallon target and get down below $2, really ultimately down in the neighborhood of a $1 to a $1.5, which we believe we could get to based on the modeling that we’ve done. 

So to end my talk really in summary, I want to remind you what I started with, and that is that biomass is the only renewable option for transportation fuels, liquid-based transportation fuels.  The resource base is sufficient to make a very big dent.  It may not be the silver bullet, especially if we limit ourselves to arable land.  If we’re willing to think about both land species as well as marine-based species, the options grow dramatically, as I just showed you in the last few slides. 

I do think that ongoing research at the federal labs, the academic labs out in industry, is going to create a lot more options.  Just about a month ago British Petroleum announced that they were going to form a biosciences institute at a major university either in Europe or the United States.  They’re going to have a request for proposals from various universities, and they’ve committed a half-a-billion dollars over a 10-year time period to support that institute.  It’s a tremendous move on their part. 

I think that we need other options, because I showed you a threshold of where I thought we could get to with cellulosic ethanol, and while it was a big dent it wasn’t 100 percent, it wasn’t 200 percent.  We need additional options in addition to the cellulosic ethanol and that’s why we’re so excited about something like this a algae to jet fuel because, in addition to the jet fuel for the military, eventually it could grow and produce other fuels from that same starting concept. 

So with that, there’s a lot of other additional information.  I don’t know if we have anymore time for questions or not. 

MR. WEHRENBERG:  We’ll have some time at the end.

DR. PACHECO:  At the end of both of them, so if you could hold your questions – give Suzanne time.

MR. WEHRENBERG:  Thank you very much.

(Applause.)

MR. WEHRENBERG:  Let’s make sure we turned off so your mutterings don’t –

(Cross talk, laughter.)

    SUZANNE HUNT:  Hello.  It’s always fun to be the last or the second person after everyone has eaten and they’ve already been sitting still and listening politely for an hour, so I’ll try and keep you awake.  And I was actually going to thank you for asking so many questions because it makes my job easier; I only have to talk for a few minutes and then we go straight to the drinks or whatever comes next.

MR. WEHRENBERG:  There are no drinks so you might as well talk. 

MS. HUNT:  (Laughs.)  Okay.  Well, the reason that I think Mitzi invited me – and thank you to the organizers for inviting me – is that at the Worldwatch Institute, which is a small think tank research group, if you’re not familiar with us, we’ve spent about a year now looking at biofuels globally, and we actually got our funding from the German government. 

And we’re asked to basically put together a resource for decision makers that would look at the physical potential of biofuels but also a lot of the different trade aspects, the climate impacts, the impacts in developing countries’ economies, et cetera, et cetera.  So what we did was we pulled together a team of different experts from different countries, mainly the principal production regions, so Brazil, the United States and Europe in terms of our core team, and then we got input from at least 100 or more people in the private sector, public sector, academia and civil society. 

So I’ll be sharing – these are some of our main contributors.  I’ll be sharing some of our results in speaking – now that Mike has given kind of a specific U.S. technical presentation, I’ll speak more generally about kind of some of the social aspects, the environmental aspects, the constraints and some of the opportunities. 

So the research was not done with the military in mind, but when I was thinking about what to say today I was assuming that part of your interest is for direct applications in the military but some of your interest is probably for these other reasons.  So what I’m going to say is probably more applicable to all these other reasons.  So I’ll give just a quick overview of where the industry is globally and then talk about some of the global production potential assessments, some of the constraints and then the social and environmental impact. 

This is a graph of the growth in the ethanol industry over the last 30 years, and you can see in the last five years it’s just shot up.  We’ve had exponential growth for about five years; production has doubled.  You probably know that Brazil and the United States are the two major ethanol producers with China being a distant third and then Europe and then India. 

China has used up its grain surpluses and is now looking at the cellulosic pathways.  India and China both have very ambitious goals.  India was set back by some droughts several years ago and now is trying to get back on its feet with its production of ethanol mainly.  They’re also interested in biodiesel and they’re using some interesting non-edible plants, jatropha and some others. 

Biodiesel, the story is just about the same: extremely rapid growth except that biodiesel is – the production is just much, much less.  And it has been ramping up.  Only really in about the last 15 years we’ve seen production quadruple between 2000-2005.  The major producers here, Europe produces about 90 percent of the world’s biodiesel and Germany represents about half of that.  The U.S. is starting to catch up; I think we’ve hit about 8 percent of global production but still not a major producer. 

I thought I would throw this graph up because I think it’s a good visual representation of the fact that not all current feedstocks are created equal.  One the right side of the green bars are feedstocks for biodiesel, and you can see on the far, far right is palm oil and on the far left the small green bar is soybean.  So you get four or five times more soy oil per hectare or per acre than you do soy, so that’s kind of an interesting thing to keep in mind when we’re looking at who is producing what. 

    In terms of ethanol feedstocks, the far right purple bar is sugarcane and the center bar is corn.  So you actually get twice as much right now with average – these are, I think, average production numbers for the United States corn and Brazil sugarcane, so you get about twice as much ethanol per land area in Brazil. 

    One of the – Mike has already talked about how we need to move rapidly to the next generation of fuels and how limited we are with the food inputs, and I think it’s interesting to note that right now about 520 percent of Brazil’s sugar crop is going to produce about 40 percent of their light vehicle fuel.  They are exporting some but it’s not a whole lot, maybe 10 percent.  I don’t think it’s even that. 

In the U.S. right now – I never dare put exact numbers because they’re changing so fast and there’s always someone in the room that knows a more up-to-date number than me – but about 15 or 20 percent of our corn crop right now is being used to produce only about 2 or 3 percent of our fuel.  And it’s already starting to impact corn prices.  So the limits are already starting; we’re starting to glimpse those limits there.  In the EU, more than 20 percent of the rapeseed crop is producing about 1 percent of their fuel.  So we’re going to have to both look to the next generation of technologies and look outside of our borders. 

And then in total – in total, biofuels right now, even with all the excitement, all of the investment and all of the growth, are only producing about 1 percent of global transport fuel, so we’re still about 96, 97 percent dependent globally on oil.  So nothing and nobody moves without oil basically. 

One of the exciting things about the next generation of technologies, in addition to the dramatically increased production potential, is the potential to dramatically reduce the environmental impacts, and I’ll talk most about that in a second. 

Sugarcane is a special kind of crossover case.  Sugarcane – and I’ll talk more about this also – is going to be a first-generation and second-generation feedstock. 

And Mike talked about some of the exciting developments with BP, and Goldman Sachs is investing and Vinod Khosla is investing, and everybody and their brother is investing right now. 

Probably what we’ll see in terms of feedstocks with algae and some of the kind of new outside of the – if there is a box – box technologies, we’ll probably see, first, the agricultural wastes being kind of the lowest hanging fruit in terms of low cost feedstock that’s already partially processed, already collected in one place.  And the bagasse in Brazil, the leftover cane waste is a good example of this.  Forestry wastes are already pretty well utilized by the forest industry; they’re pretty efficient with their waste but there is some potential there.  And eventually municipal solid wastes could be better managed and collected. 

And then the next most cost-effective thing will be co-harvesting residues.  This will be, you know, designing new machines.  I think they’ve already, I think – is it John Deere or somebody has already designed a new machine to co-harvest some of the stover along with the corn.  And then we’ll eventually get to dedicated energy crops. 

This is kind of an obnoxious graph – I apologize to those of you in the back – but I just thought it’s an interesting graphic to show that there is a huge amount of variation in the projections that different teams of researches are making in terms of the potential for biomass production globally.  And what this shows is this line across the top is 430 exojewels (ph), and that’s the total energy demand of the planet right now.  And in the center of the screen is 2050.  And this is – some researchers looked at about 13 different biomass potential studies and all those different colored dots just show you the variations. 

So some folks found that biomass is going to be able to supply more than all of our current energy needs in 2050, and some folks found that it would only represent about a fraction.  And they all make very different assumptions based on some factors I’ll talk about here in a second. 

So in terms of regions with the most biomass potential, the former Soviet Union, East Asia and South America seem to have the most theoretical potential. 

In terms of the studies that have been done, two of the most instructive studies that we found were the billion-ton study and then also a study very similar that was done in Germany.  And I think they’re more useful because they’re on a more detailed level but they also – they assume that there are other uses for biomass so they take the competing uses into account.  They do not take trade into account so they’re conservative in that respect if we assume that there are going to be efficiency gains with trade being brought into the picture.  And they also assume some pretty hefty sustainability requirements so that they’re assuming that none of the natural areas that are now preserved are touched, et cetera.  And both of them found pretty big numbers. 

And another key thing that Mike didn’t mention is that this is all assuming that we’re going to – we’re not going to make major breakthroughs with our efficiency.  And having spent a lot of time now in Europe with our funders and our partners over there – I think their vehicle fleet is twice as efficient as ours right now, so without hybrids, without modern technology, just with more efficient and smaller vehicles and better public transportation, we could dramatically change this picture. 

So some of the – there’s obviously a lot of factors that are going to affect the ultimate potential, but a few of the interesting ones that I thought I would throw up on the screen – developments in agronomy.  We’ve been tinkering with food crops for millennia and we’ve just barely started to play around with energy crops, whether you’re genetically engineering or just with standard breeding programs.  So there’s a huge potential for yield increases there that we’re anticipating. 

In developing countries right now it’s not uncommon to see yields for current – for wheat or some other current crops that are eight or ten times less than the average yield in developing countries, so there’s a huge potential just with current crops, with current technologies, to dramatically increase yields theoretically in developing countries.  Obviously there are a lot of organizations and development agencies that have been trying to do this for years so it’s not necessarily easy but it is theoretically possible. 

The size of the human population is obviously going to impact how much land is available for energy crop production, and the U.N.’s kind of mid-range projection is that the population will level off at around 9 billion people mid-century.  Not as critical but also important is how high in the food chain all of those people are eating, because now as countries are developing people tend to eat more meat and meat takes more land to produce. 

Something that has been really interesting for me and kind of exciting to look at has been the utilization of waste streams. So rather than taking valuable crop land, taking valuable food crops, taking a problem from society, and instead of spending lots of fuel and money to ship garbage somewhere to put in a hole in the ground, take that garbage and turn it into a useful fuel supply.  That’s been pretty interesting. 

We did some kind rough back-of-the-envelope calculations and looked at a typical U.S. city of about a million people and how much fuel you could make from their municipal solid waste – so nothing exact but just kind of rough sketches – and I think we figured that you could make enough fuel to meet the needs of about 58,000 Americans at today’s average per-capita fuel use. 

And so just to stress the importance of reducing the demand side of this equation, we looked at how many people that would supply in France at today’s current per-capita fuel use and it is 360,000 people.  So here’s a country that’s smaller but they have similar or higher standard of living and that was kind of interesting.  And in China it’s 2.6 million people. 

This picture – if you can see it in the bottom here – is a mountain of cane waste, bagasse, at an ethanol plant that we visited in Brazil.  And so it’s already collected.  Right now they burn it for heat and power.  You guys probably are familiar with this. 

And it’s really funny – I was actually in Canada on Friday giving a talk and one of the guys on the panel with me was a – I think he was a CEO of an ethanol plant, and he was telling everybody about how when they started – when they built a lot of these mills, they made these boilers and the combustion facilities for the begasse as inefficient as possible because they had these mountains of begasse waste that they just – it was a mess and they just wanted to get rid of it, so they’ve been burning it extremely inefficiently for years and now have finally started to change the policy so that they can sell some of the excess electricity back to the government.  So they’re starting to invest in better technology.  

But kind of an exciting thing is that right now they burn – the common practice is to burn the cane fields before they harvest so the guys can get in there with machetes and cut the cane.  And because of the air pollution that it creates, the government is phasing in mechanical harvesting so you don’t burn off all of the excessive leaves so you actually have a lot more biomass that you harvest. 

So as cellulosic technology has become more viable with the added biomass that mechanical harvesting brings and with the ability to use more of that hemicellulose and cellulose and still leave the lignin for burning for heat and power, they think they can double or triple their per-hectare yield.  So that’s pretty interesting. 

And then just completely new technologies, so algae – everyone has been talking for years about ethanol, biodiesel, syndiesel, cellulosic ethanol, and now all of a sudden we’re hearing about butanol, so who knows what else is going to come up on the horizon. 

Some of the constraints:  Certainly there are competing uses for biomass, for heat, electricity, biomaterials.

 Climate change:  We don’t know how climate change is going to affect agricultural productivity, the productivity of our forests. 

There are lots of trade barriers in place right now.  If this is going to become a global industry with global biofuels markets, the trade barriers are going to become much more of an issue than they are now.  Basically oil, from what I understand, flows around the world with almost no barriers whatsoever, whereas there are huge, huge impediments to biofuels trade. 

The infrastructure issue – I mean, one of the appeals of biofuels is that is that it is a liquid fuel that is somewhat compatible with the existing infrastructure, but there are issues there that have to be addressed. 

And technical hurdles; we’re not there yet with cellulosic.  We’re getting there but we’re not there yet. 

It’s not such an issue for the military but in general public acceptance is an issue.  There are plenty of cases – I was in Costa Rica two weeks ago.  Their government is looking at whether or not they can go petroleum free – or we’re trying to get them to look at that – and they tried to use – they did some kind of program in the ’80s with ethanol and it bombed.  I think they used a percentage that was too high in old, old vehicles and it was a mess and so now no one wants to hear about biofuels.  And so the public perception is a really important part of all of this. 

And then there’s just little things that are certainly not deal breakers but have to be dealt with right now.  There are no internationally accepted fuel quality standards, so the U.S. has their standards, Europe has their specs, but we have to get those aligned. 

    The trade issues:  I can skip through a lot these, but as trade ramps up these are going to become more of an issue.  Right now some biofuels are treated as industrial products under international trade law and some are treated as agricultural products.  Just as one example, right now in the Doha round there’s a discussion about liberalizing trade in environmental good and services but they haven’t defined what environmental good or service is yet so we don’t know.  Right now ethanol is on a number of the draft lists that I’ve seen bouncing around but I haven’t seen mention of other things.  And we’ll also have to define what is a sustainable biofuel, so lots of issues there. 

This graph just shows the variety in import tariff barriers.  On the far left, Australia actually has the biggest barrier – import tariff on ethanol.  And these numbers are from 2004 but they haven’t changed much.  The U.S., we all know, has a fairly hefty import tariff, as does Europe, Brazil and Canada.

So going from the downsides to the upsides, energy security is certainly the obvious one.

 Diversifying energy supplies, I mean, this is just a no-brainer.  It should make everyone nervous that we’re almost completely dependent on one source of energy for all transport. 

Reducing oil import spending:  I was looking at some of the numbers that – I think the sub-Saharan African country is impacted about 10 times more by a $10 increase in the price of a barrel of oil than, say, the U.S. or Germany or Japan.  So the impacts of these price increases are not felt equally among different countries.  And some of these countries – I think Indonesia spent a third of its entire government budget on oil imports in 2004 or ’05 before the price made it above $50 a barrel, so really significant impacts on developing countries. 

The rural development potential here is really exciting for a lot of people when they think about what could happen when just some of the billions of dollars that are being sent to oil producers are instead invested in rural communities and agricultural production and the forest industry, et cetera, et cetera.  So really a lot of support for this industry because of the rural development potential and a lot of excitement from rural communities. 

The job creation aspects, you know, that’s the issue that all politicians want to talk about.  And the World Bank actually put our a report recently that said that for every one unit of energy produced in the biofuels industry versus the petroleum industry, 100 more jobs are created.  So it’s very job-intense capital, not very capital intensive compared to petroleum. 

And then the developing world actually, with the current biofuels industry, the developing countries are really well suited for biomass production.  They often have 12-month growing sessions, they have plants that are just inherently more productive in terms of oil production, plants, sugar plants, and so developing countries are actually very well suited to be suppliers for a global market. 

In terms of the social risks, in Brazil when they started ramping their industry up about 30 years ago there were violent conflicts over land.  So this is not an unprecedented, kind of wacky idea.  There is the potential for land conflicts in some of the more lawless parts of the world. 

Water is something that Mike mentioned but I’ll mention again.  It’s something that probably doesn’t get enough attention and is going to be a major factor in all of this. 

The concentration of the biofuels industry is something to keep your eye on.  In Brazil we’ve seen that their industry has become very concentrated and will probably continue to be more concentrated, especially as they start phasing in cellulosic technologies, which are more capital intensive.  In the United States people like our friend Bill, who I see here, help to make sure that farmer co-ops structures could be put in place for a lot of the corn ethanol plants so that those rural development benefits are spread and the money is circulated more effectively through communities. 

The increases food prices for the poor, this kind of food-versus-fuel debate, there are billions of starving people in the world and now we’re going to put food into rich people’s cars.  I mean, this is something that – this is probably the hottest issue along with the energy balance issue – and Mike is shaking his head.  And this is a really, really complicated, really tricky issue and warrants a lot more than a two-minute explanation from me.  But we did – we spent a lot of time looking at this.  We wrote a whole chapter about it in our report. 

And I just threw a couple of things up here to highlight, and one of them is that it’s the rural poor that I worry most about.  According to the U.N., next year we will go from a planet with majority of people living in rural areas to a majority of people living in urban areas because of this – because people can’t make a living in rural communities and there has been this constant urban migration for a long time now.  So that’s one factor. 

In terms of opportunities, though, the developing world is still largely agronomically based.  So you have the dynamic where in the poorest areas, 60, 70, 80 percent of the people are somehow involved in agriculture.  So if we see biofuels as an opportunity for agricultural societies, I think there’s a strong potential for net benefits there.  Who wins and who loses is going to depend on policies and the quality of governance and if and how those policies are enforced.  And then, as Mike mentioned, as we move to the next generation over the next 10 years, that’s going to reduce the pressure and the direct competition with food crops. 

I’ll just spend a few more minutes going over kind of the environmental impacts, the environmental risks, and there are a number of environmental opportunities, and then I’ll wrap up so we have lots of time for questions. 

Again, the water supplies.  Soil – maintaining the soil quality we’ve already talked about.  And then the other key issue is the expansion into sensitive ecosystems. And this is not important just if you are a wildlife advocate or if you’re a hunter or you happen to be a nature lover; this is also really important for the climate stability aspect and for other ecosystem services our forests and grasslands and wetlands provide. 

The studies that we looked at showed that a one-time conversion of, say, a native forest or virgin forest to say a cornfield, you can lose – because of all the carbon that is held in that soil and also in the vegetation, you actually negate all of the benefits that you gain from those biofuels in terms of carbon benefits.  So this is a really, really critical factor. 

In terms of whether you have a net environmental benefit or not depends completely on how this is done, how the fuels are grown.  Probably the most important factor is the feedstock choice:  Are you using a waste, are you using an annual crop, a perennial?  The feedstock is absolutely vital.  How is that crop being managed?  Was there a land-use change involved, and what kind of energy are you using to process it? Are you using a closed-loop system? Are you using begasse or are you using coal?  It’s really important. 

These are just more of the different parts of the life cycle that have to be considered when you’re looking at the overall picture and the total footprint.  I won’t go through all of them but we did look at all the aspects from the planting to the processing to the transport to the storage and the fueling.  And what we did was we looked at all of the different aspects of the life cycles of biofuels production, but we also looked at all of the aspects and the impacts – the life cycle of petroleum production, and looked at them side by side.  So we weren’t looking at biofuels and comparing it to some kind of ideal that doesn’t exist; we were comparing it to the current option, which is petroleum, obviously.

I’m not an oil expert.  I’m sure there’s someone in the room that is.  But I thought I’d throw a couple of slides up just with a few points about oil.  Right now we’re using about 85 million barrels a day around the globe.  There are dramatic environmental impacts, obviously, from this.  We have demand starting to outpace production, or at least outpace the amount we can increase our production.  We have our real oil prices at the highest levels we’ve seen in 20 years.  We have this disproportionate impact that I was talking about on the poorer countries.  And it was interesting that – in our report we cited that – we cited Exxon, actually, in saying that more than half of the world’s hydrocarbon needs that they project for the next 15 years have yet to be found.  So this is a sobering piece of information.

Mike already addressed the energy balance, so I won’t dwell on this.  But we did look at every single energy balance study that we could get our hands on in the English language and found that virtually all biofuels have a positive energy balance, and we focused on the fossil energy balance – so looking at the kind of energy in and the kind of energy out.

Just to say a few words on the climate aspect, transportation right now uses about a quarter of the world’s energy, and it produces about a quarter of the world’s greenhouse gases.  And this proportion is increasing.  We’re making gains in our industry – in our electricity sector.  Areas like Europe that have taken their greenhouse gas impact seriously are making dramatic – they’re having, you know, good success with a lot of their industry sectors.  I was just looking at a report the other day, and it showed kind of a leveling off of emissions from electricity generation in Europe and a leveling off of emissions from a number of other sectors.  And then you see the transport sector and it’s just this sore thumb going towards the sky. 

So the transport sector has really been the hard sector to deal with, and so the proportion of greenhouse gases that are coming from transport are just climbing and climbing.  So, while right now it’s more efficient and it’s cheaper to use biomass to displace, say, coal in the electricity sector, as Mike said, we don’t really have renewable options in the transport sector.  So that’s why we’re seeing a lot of – even though it’s expensive right now – a lot of focus on biofuels as a greenhouse gas mitigation strategy in the transport sector.

I’ll skip over the cap and trade stuff. 

This graph just shows kind of the range of greenhouse gas benefits you can get from different feedstocks.  On the far right is the benefit you get from vegetable oils.  It’s a 45 to 75 percent gain.  Next to that is the gain from starches.  It’s the smallest, but it is positive.  And then you see sugars, and then you go up to the cellulosic.  And the cellulosic – I think it’s interesting – you can actually have a net negative greenhouse gas impact from your cellulosic biofuels.  And this is just a snapshot.  So if the corn ethanol plants start using coal to generate their power instead of natural gas or instead of one of these closed-loop systems, you’re going to see that benefit decrease.  As we become more efficient with cellulose and with other feedstocks you’re going to see that benefit increase.

So, just to wrap up quickly – and no one asked questions, so I don’t know if that’s a  good sign or bad sign.

(Laughter.) 

MR.    :  (Off mike.)

MS. HUNT:  Okay.  So just to wrap up, we were pretty surprised, actually, at the amount of potential that we discovered.  You probably know that a lot of the environmental groups and a lot of different folks are really skeptical; there’s a lot of bad information out there.  And we were really surprised that we found such a large potential.  There are serious risks that have to be managed, but I think that with – and I will stress the demand side of this issue – with improvements in public transportation, with increases in efficiency – which are easy to do – biofuels can play a pretty – looks like they can play a pretty major role in our energy future. 

(Applause.)

MR. WEHRENBERG:  Thank you. 

We do have some time for questions.  Just some quick ground rules.  Please state your name and affiliation unless you’d rather not, then tell us that as well.  If you want to direct your question to one of the speakers, do that, and I’ll try to manage throwing the microphone back and forth between them.  Mike, it might help if you wandered up this way.  Thank you very much.  Amory, I know you’re dying to say something, and as a matter of fact, to the point where you’re going to come up here and take the mike away from me.  (Laughter.) 

Q:  Better than throwing it.  A question and two comments.  Two terrific briefs; thank you both.  Question:  Phil Verleger, the energy economist, says that as the result of recent events in the Doha round and WTO, it might be a lot smarter for the U.S. not to grow cotton anymore but to grow this sort of thing instead, which could free up a lot of really good land.  I wondered what you think of that.  And by the way, that land needs some healing with some more biodiversity. 

Then two comments:  When we talk about producing biofuels of whatever kind, say for military use, we tend to think of a straight substitution – gallons for gallons – corrected for energy content.  But Doctor Cone (sp) in John Haywood Sloan Automotive Lab at MIT points out that we should really use things like ethanol for their unique combustion properties to get much more leverage.  And his example is if you put a little ethanol, a canister a month, in your car, into a high-compression, direct-injection, spark-ignited engine, you can get a 250 percent increase in torque, which means – because it’s such a great NOX suppressant, so that you can use a much smaller, more efficient, lighter, cheaper engine to get the same vehicle performance.  And in diesel applications it gives you a cetane number of about 150 to 200, which is really impressive. 

Second question has to do with the Air Force and Navy – or comment.  Air Force and Navy are interested in each buying 100 million gallons of coal Synfuels, but it seems to me this work, as well as end-use efficiency work raises the obvious question:  Isn’t it a lot cheaper to save or substitute for some of the 98-point-something percent of U.S. oil that’s used in the civilian sector?  That frees up the same metal distillates, for example, to substitute for military logistics fuel.  And DOD, if it wishes, has legal purchasing priority.  So Wal-Mart, for example, has already said it’s requiring a doubling – and I think it will ultimately require a tripling – of heavy truck efficiency.  That would save 6 percent of U.S. oil in the form of diesel.  That’s four times DOD’s total fuel use. 

Thanks.

MR. WEHRENBERG:  And I’ll thank Amory Lovins, our third speaker of the evening.  (Laughter, applause.)  Was there a question embedded in that somewhere?

(Cross talk.)

MS. HUNT:  Thank you, Amory.  I think it would be fantastic – and I should’ve spoken more about some of the potential environmental gains on the feedstock side.  I think it would fantastic if we replaced our inefficient, highly subsidized, highly petrochemical-intensive cotton with perennial grass species for biofuels production.  I think that would be fantastic, especially because Brazil has been very successfully and very aggressively challenging our subsidies in the WTO.  So I think that’s fantastic.

And that’s the kind of the thing where – a lot of these projections don’t take into account.  So they kind of assume – there are so many moving parts and so many variables that you can’t possibly take them all into account.  So something like that or something like algae in the desert isn’t – none of that is considered in these projections.  So they are, actually, probably fairly conservative. 

And in terms of the diesel and Wal-Mart and freeing up, that was one of the things I put on put of one of the first slides in terms one of the opportunities here.  And Coca-Cola is also interested in this and kind of working with Wal-Mart, and they use a trillion liters of diesel a year in their 200,000 diesel trucks. 

MR.    :  (Off-mike.)

MS. HUNT:  Yeah, that’s right.  You are. 

MR. WEHRENBERG:  Questions?  Can we get a mike somewhere near there?  Thank you.  Sir?

Q:  (Off mike.)

MR. WEHRENBERG:  Do that one more time.

Q:  Peter Rhode (sp) with Energy Washington.  You were talking about a million-person city providing energy for 58,000 people I think you said.  What kind of yield, what kind of process – how did you come up with back-of-the-envelope –  

MS. HUNT:  That was our contributor Jim Easterly of Easterly Consulting came up with those numbers.  And I think he assumed – he used the gasification route.  And I would have to – as I said, very rough – very rough estimates just to give us a ballpark kind of idea of scale.  And I can get his calculations for you if you want.

Q:  Hi, I’m Ken Andrasko, Environmental Protection Agency.  It seems like the energy balance question is really central to this, and I’ve very interested that you’ve dismissed Pimentel’s and others’ critiques.  So I’m curious, what is it that those critics have missed in their assessment of the efficiency?  And why did you assume that most – or find that most of the studies you looked at showed a net positive benefit?  So just walk us through quickly:  What is it that those guys are missing that you guys – everyone else is not missing?

MR. WEHRENBERG:  I just want to note that I don’t plan to answer that question, so one of you has got to own up to it.

DR. PACHECO:  There’s a lot of pieces that go into calculating an overall energy balance, and every one of those pieces requires assumptions.  In the analysis that’s been published, particularly by Professor Pimental – Ted Patzek’s analysis makes some of the same assumptions – it starts, really, on the farm, and then it goes through the corn ethanol mill.  And assumptions that they’re making are consistently out of date.  And so, it was about a year ago when we invited both of them to come and join us here in Washington, and we had a healthy debate about this.  It was, I think about, 300 press people that attended that debate.  And so I’ll just reiterate some of the major – the real big pieces of discrepancy between most of the analyses that are done in academia together with USDA and DOE.

One of the big differences is, for example, is in their analysis they make assumptions that require the use of water to irrigate the farms that are being used to produce the corn that’s going to go into ethanol, and they make those assumptions as an industry standard.  But yet if you look at USDA information, you find out that there are very few corn farms that are actually irrigating.  It’s on the order of about 10 percent, and those that are irrigating are usually not producing corn that’s going into an ethanol plant.  They’re producing a specific hybrid and they’re getting extremely high yields.  They’re getting yields in the neighborhood of 300 bushels per acre which is about double what the industry average is. 

And so then you take that and you combine that with fertilizer usage.  And they make assumptions about fertilizer usage that are well above what published industry averages are.  And if those fertilizer applications were applied at that level, the yields would not be consistent with the yields per acre that they’re using in their study.  So there’s discrepancies between the application of water and high fertilization rates with very low, you know, industry average corn yields because corn growers that are applying that level of irrigation are getting much, much higher yields.  I’ve been at meetings in Ohio and Iowa and in Nebraska where some of these fellows that are using that practice, they say, boy, if you’re not getting at least 300 bushels an acre you’re just losing money because you can’t afford to irrigate unless you get your yield that high.  So that’s the first inconsistency is on the farm.

And then when you go in to the refinery, you go in to the conversion facility itself, you can go to an engineering construction firm, and you can actually get a certified design – a guaranteed process design on what your energy costs will be – for example, the amount of energy that you will need to use to do the water and ethanol separation.  The levels of energy that those firms will quote you and guarantee you are half what are in the Pimentel and Patzek calculations.  They’re numbers that were used back in the 1990s.  In fact, when you look at publications comparing all these studies – and it would have been one of the 13 studies that Suzanne looked at – was a lab-mate of mine – the office right next door in 1991 was She Ping Ho (sp).  He was my next-door neighbor office-wise, not home-wise.  We were both working at Amoco at the research center in Naperville.  And when he was doing that study, boy, we came out just very close to 100 percent closure.  And that was in 1991, 16 years ago.  And I can tell you that corn yields, that efficiencies of the refineries themselves, the ethanol plants, have changed dramatically in 16 years.  It is still a fairly young industry and the process technology is getting better.

So you got on-field assumptions that lead to, you know, the big difference.  So the chart that I showed you where we were showing about a 30-percent net gain above fossil, if you look at the Pimentel and Patzek studies, they actually come in maybe 10 to 20 percent above the red dash line.  So we’re not talking about a huge difference between our calculations, but the fundamental assumptions that they’re making are not up to date.  And if our scientists at NREL put those same assumptions in our calculations we’d get the same answer, but we don’t think those are the correct numbers to be using.  So that’s really the difference.  Hopefully I answered your question.

MS. HUNT:  I’ll just add to that.  Four months ago – I can’t remember which month, but maybe four months ago at the National Press Club there was a debate that was recorded live between Pimentel and Patzek and several – Bruce Dale and –

DR. PACHECO:  It was Bruce Dale from Michigan State University and John Sheehan from NREL, and they were debating Ted and David Pimentel.  And it was – it was more than that; it was about a year ago.  But it was here at the National Press Club and it was televised and very, very well received.

MR. WEHRENBERG:  Yes.  We’ll get you next. 

Q:  Suzanne, this is a question for you.  My name is Mike Imany (sp).  I work with the Department of the Air Force.  You mentioned, and skipped over it very briefly, the infrastructure issues, and then on a later slide you spoke to the logistics issues.  I’d be intrigued to understand what are those infrastructure and logistics issues, primarily with fermented-based biofuels?  I’m speaking to issues associated with biodegradable nature. 

And then, Mike, if you could follow up on that, I’d be interested in what’s your best estimate of converting the report and the details on algae into a functioning system.  What would be the length of time in R&D?  And then, finally, when would you expect to see the first plant?  So it’s really two questions.

MS. HUNT:  Sure.  And I’m happy to share the full study.  We have a chapter just on the infrastructure issues in terms of transport, blending, trucks, ships, pipelines.  And then we also have an entire chapter on vehicle technologies and the vehicle aspects.  And ethanol is a water-loving chemical, so you have to treat it differently in pipelines.  And, it’s interesting, when we started this project everyone in the U.S. said, you can’t put ethanol in a pipeline, you can’t do it, and all the oil companies say you can’t do it, it’s terrible, and then we went to Brazil, and they’re doing it.  And the difference is that they’re putting it through in a pure form; they’re not putting it through as a blend.  And I was talking to a guy that used to work for the petroleum – he used to work for API on pipelines, and he said we could do it here in blends, we’d just have to change some of the seals and do a couple things differently.

So there’s issues with piping it.  There’s issues with the fact that it’s a little bit more corrosive than gasoline, so since about 1990 they’ve change the materials they’ve been using in engines in a number of the car companies.  What else?  Obviously ethanol, the car companies are pretty comfortable with it being blended at 5 percent.  I think that just about every warranty is okay at 5 percent.  Ten percent is okay.  Anything much above 10 percent and you start to get into some iffy area in terms of the combustion – the temperature and the timing and all of that, and in terms of the corrosiveness of the ethanol. 

I guess the last time I was in Brazil I went out and I got the full tour around the tankers that they were shipping it in.  They put it right in – you know, the oil tankers, they just clean it out, put the ethanol in, send it off, bring it back with something else.  I don’t know what else.

Blending is an issue.  Right now they basically are just splash blending ethanol with gasoline and biodiesel with diesel.  And it would be, you know, a much better, more uniformly mixed blend if you had official, you know, mixing stations rather than just letting it slosh around in the trucks. 

DR. PACHECO:  Very good question, Mike.  Before I answer it, though, my colleagues back at NREL would tan my hide if I get back to Golden, Colorado and I didn’t – there was one additional, big difference between our analysis and Pimentel and Patzek, and I alluded to it during the slide.  Remember when I showed the energy balance slide I pointed out that the overall energy balance for petroleum is really quite good; they only waste about 10 to 20 percent of the total energy.  But remember, gasoline is only about maybe 45 percent of the total yield of what we produce from petroleum.  If we didn’t account for that other 55 percent of products properly, the energy balance for petroleum would look awful.

What professors Patzek and Pimentel don’t do is they don’t take any co-product credits for the distiller’s grain, for the carbon dioxide, which nowadays in quite a few of the dry mills is being used in the bottling industry and it’s replacing CO2 that’s made by another process, and if you don’t account for those credits, that also has an impact on the analysis.  So I talked about the on-farm fertilizer, irrigation.  I talked about the energy usage within the refinery.  But you also have to properly credit and account for the energy that would have had to be – that you would have used to produce cattle feed if you didn’t have that DDG to feed the cattle or to produce CO2 if you didn’t have that CO2 for the bottling plant. 

So, Mike, coming back to your question, that’s a very good question.  We, over about the last six months, have been in deep discussion with a particular oil company because, like NREL, they’re interested in attacking that problem.  Currently the estimates that we have for the project, it would be about a five-year project life – and I’ll talk with you about a couple of key milestones around years three and four – and order of magnitude of about $10 million in research.  And what that would include, Mike, would be the research that we need to go back and reopen the strain development for the algae, get the strains to a point that within the first three years we’re able to produce large quantities of the oils so that we can have materials to send to our partner and they can do the refining.  And it’s very important that the collaboration, the team, would have a close partnership with one of the equipment developers.  As you are aware probably, Mike, there are equipment developers who are already working on harvesting concepts.  I’ll mention one.  It’s Greenfuels in Boston that’s working on a very particular design of a growth and harvesting system. 

So if we could work effectively with one or more companies that are developing the collection, growth, and harvesting equipment, then we would have access, hopefully, to a large pilot plant at around that year three or four where we could go in, make a major production campaign with several of the key leading strains, and have our refining partner do the hydrotreating in one of their pilot plants, possibly at – maybe at one of their refineries.  And that way by the end of that, say, four- or five-year campaign, we would have enough oil – enough fuel to be able to provide – to begin doing some of the product testing that has to get done and the certification that you’re very familiar with.  So that first chapter would get you to about that point, to about the five-year point.

So does that answer your question?

Q:  Yes, thank you.

Q:  How much did you say?

DR. PACHECO:  Ten million dollars.

Q:  Ten million.

DR. PACHECO:  Yep.

MR. WEHRENBERG:  Are you writing a check?

(Laughter.) 

Q:  Don’t I wish?

MR. PACHECO:  Make that out to National Renewable Laboratories, 1617 Cole Boulevard.  (Chuckles.)

MR. WEHRENBERG:  Over here, I believe.

Q:  Jerry Warner with the Defense of Life Sciences.  Have any of these studies factored in the growth of bioplastics?  I mean, you sort of displaced petroleum plastics, and in a lot of cases they’re being developed for a secondary use as an energy feedstock.  European markets fairly well – and I think even Wal-Mart has pursued that with all of their food delivery systems.  So how do those play?

DR. PACHECO:  They’re very important.  And one of the reasons that they’re very important is, in generating value for an investment, it’s not always the largest product that’s going out the door that’s generating you the most profit.  In my years in the oil industry, there were many years where we were probably just about breaking even on gasoline – not today – but probably just about breaking even on gasoline.  And we were making all of our money off of the petrochemicals business.  We had a record year – I can’t remember exactly what year.  It was around 1988 when Amaco made probably 80 percent of their profit off of their terephthalic acid business, supplying polymer for polyester.  So it’s very important.

The good news is, on a material balance, the plastics don’t use a lot of carbon.  It’s on the order of about 5 percent of the total carbon that’s in the petroleum that is actually going into petrochemicals.  So it’s not a lot.  That’s the good news.  It’s also good that you can generate additional value from that.  Dale and I, both from NREL, we interact a lot with industry.  The largest industrial partnership that I have in the National Bioenergy Center right now is a partnership with Dupont, and we’re in the third year of that four-year partnershp.  And it’s a very large project.  DOE and NREL are both very happy to be partnering with Dupont.  And a very important part of the Dupont model for a biorefinery is to generate a lot of revenue from chemicals in addition to producing biofuels.  So it’s very much like a large petrochemical complex that produces the chemicals as well as the fuels. 

So it’s very much an integration.  It doesn’t affect the material balance too much on carbon, but it can affect the revenue of the plant a great deal.  Does that answer your question?

MS. HUNT:  And the other beautiful thing about it is that – I just happen to have a bioplastic bottle with me – and the beautiful thing is that at the end of its life it becomes feedstock for the process all over again.

MR. WEHRENBERG:  We have a question over here.

Q:  One question.  Dennis Murry; I’m director of energy for Marriot.  I have a question on going from cellulose to liquid fuels.  Have you done any comparisons of going from the gasification through Fischer-Tropes to liquid versus going with an enzymatic conversion and then fermentation, in terms of efficiency and cost?

DR. PACHECO:  I’ve studied it ad nauseum.  In terms of overall efficiency, from carbohydrates we can get a higher yield of liquid fuel if we go through the fermentation of the carbohydrates to ethanol.  If were to look at lignin, as I showed you in the slide, that’s really no comparison; we’d need to use something like gasification or pyrolysis if want to make a liquid fuel from the lignin portion.  So when you look at a total lignocellulosic, it does depend on the composition of the feedstock.  If it’s very rich in carbohydrates, you tend to prefer to go through a biochemical scheme.  If it’s very rich in lignin, like for example the bark on a tree – it’s very rich in lignin, can be sometimes 35 or 40 percent lignin, and the carbohydrates are tied up in that lignin and it’s difficult to ferment them.  So in a feedstock like that it may be preferred to use a gasification route and to go through. 

The economics are actually very close.  And right now it’s a dead heat as far as which process technology is most cost effective.  We are working on both of them.  About two-thirds of our effort, I would say – at NREL anyway – is going into the biochemical and maybe a third on the thermochemical, and predominantly right now, gassification to make mixed alcohols. 

Suzanne talked about the recent announcement that BP hopes to have butanol in their gasoline in Europe by the end of next year.  That’s a really exciting announcement.  Butanol has been used before; it was used in the ‘40s and ‘50s here in this country.  It was used in the ‘60s and ‘70s – tertiary butanol was used in the ‘60s and ‘70s in Europe.  So it’s been in gasoline before; it’s actually a very good gasoline additive.  We can make Fischer-Tropes liquids like you’re talking about, or we can make mixed alcohols.  They use different catalysts, different operating conditions.  Right now that’s one of the things we’re studying is what would be the most attractive product and why to make from gassification of lignin in a biorefinery? 

Q:  I’m Mike Canes with LMI.  Mike, I’d like to kind of press on just a little bit on the question of location for the production of fuels from algae.  You spoke about the desert, and I presume it has to do with having a large land area available plus the sunlight, but you also pointed out the water problem and the cost of that and maybe having to have a cover which would perhaps add some costs.  What alternative locations might there be?  You suggested sea water, which suggests offshore, freshwater perhaps.  Where could you – where else could you go and get the kind of magnitude that we would want to have from production of this kind of fuel?

DR. PACHECO:  I’m probably going to get somebody to throw something at me at this point, but we’re actually talking with a company in – a country in the Middle East that’s very interested in it.  (Laughter.)  They have plenty of seawater – (laughter) – they have plenty of flat desert, and they’re not suitable for growing crops on.  And they are thinking ahead, and they have a lot of cash to invest in their future – (laughter) – for when they run out of oil.  So that when they run out of oil they can supply us with oils from algae instead. 

All along, if you take the globe and just cut it, you know, 20 degrees above and below the Equator, you’ve got this ideal band for growing algae.  We are talking with some companies about offshore projects.  There’s two reasons why algae produce oils.  One is, unlike you and I, they don’t get fat this way; they store oils as a way of storing energy.  When they don’t have all of the nutrients in their diet that they need they store the carbon in the form of that lipid.  The other important reason that they do it is to stay near the top of water.  If microalgae sink too low, they won’t get enough sunlight and they won’t be able to compete in a bioenvironment.  They regulate the amount of oil to stay near the surface of the water. 

So you can think about it – being from the API, you can appreciate that, you know, one of things about oil spills, it’s a mess when they happen, but it’s actually a fairly straightforward problem as to how to go about containing the oil.  You can imagine a large oil-producing algal plume the same way.  You could have some of the same containment concepts that we use for recovering oil spills, and you could use that to manage a farm offshore.  Would it be able to weather a storm?  Probably not.  That would be a big, tragic upset.  So what would you have to do to re-cultivate it and get it started again? 

Those are the issues that have to be studied offshore.  Offshore has a lot of advantages.  They have the same advantages for cheap transportation that oil has and just wide open space.  When you saw that small box in Arizona – the first time we drew that map we actually put it out in the South Pacific, and there was nothing nearby to kind of give it perspective on size.  But it is a very small dot in the middle of the South Pacific. 

MR. WEHRENBERG:  In the back.

Q:  Dr. Pacheco, Peter Garretson from the Headquarters, Air Force.  You had spoken about a mass production of the algae.  I’m wondering, how adaptable is this process to small scale?  Could you ever, say, put a bunch of bags of algae on top of your house and have a small refinery to make your own fuel?

DR. PACHECO:  It’s a very intriguing idea, and I think the answer is absolutely yes.  You know, I think that – the organizations that I work with, they tend to look for large projects, large production.  But from a distributed concept, your question is very intriguing to me.  We haven’t looked at it. 

Q:  Yes, I’m Bill Hart (sp) from Brookhaven Lab.  And I just wanted to expand out what the other speaker had said.  Both you and Ms. Hunt have alluded to the water needs that are going to be required for biofuels, but you haven’t really given us any specifics.  Are there any processes that are more water efficient or have reduced water demand versus the others?  And if you factor in the water needs, who are the winners and losers in the processes?

DR. PACHECO:  Well, I’ll make a few comments, and then I’ll give the mike to Suzanne. 

All major fuel processes require a lot of water.  Any process that has a large heat separation, for example a distillation column that has overhead condensers and therefore has cooling water towers, has a tremendous water load.  A corn ethanol plant uses roughly about five gallons of water for every gallon of ethanol it produces, and most of that water is being evaporated in the cooling tower.  A cellulosic ethanol plant is going to be even higher.  Our early estimates are it might be as high as 10.  We think we can get it down, but it will be a very significant number. 

The algae project, our estimates depend heavily on whether it’s an open pond or a closed pond system.  The system I showed you there, if that were an open pond, the worst-case scenario – today’s technology; we actually did rough calculations – it’s a scary number.  It’s a trillion gallons of water per year to produce 5 billion gallons of fuel.  So it’s an enormous evaporative load. 

So that’s why we’ve come to the conclusion, and so have the leading equipment developers in this area, come to the conclusion that it needs to be an inexpensive closed system.  Doesn’t have to be high pressure – and that’s one of the real benefits.  It could be plastic.  Containment could be just the soil.  The two ponds that we built in New Mexico, one of them was plastic-lined – was vinyl-lined; the other one was just a soil.  There was nothing under it.  They just put cinderblocks to form the pond on the outside.  So there’s a lot of different concepts. 

As far as the retaining cover, when we were talking with the folks from the Middle East, the one concept that came up in the discussions with them is, would you want to have – any Boy Scouts in the room?  Eagle Scouts?  Show of hands?  How do you make fresh water when you’re on the ocean?  You put a tarp, and in the evening it condenses on the tarp and you collect the water.  So the concept that it could develop – and what’s being talked about, it’s a very, very early stage – would be is to have an inexpensive plastic system, might be just sheet polyethylene systems that are very, very inexpensive, replaceable and basically a system that would keep the water from escaping.  It would be condensed. 

That’s important for a second reason.  One of the things we learned on our large pilot experiment in New Mexico was we thought it was going to be warm enough there – the climate was warm enough – but what we learned is in the day-to-evening cycles the temperatures got so low at night that the evaporation condensation cycle was driving a tremendous temperature swing in the pond.  Algae need to have some minimum temperature to stay healthy and grow.  If you have a pond in your backyard you know that because on hot, sunny days like today the algae plume takes off and you’ve got to feed the pond a lot more bacteria to keep the algae in check.

So a lot, a lot of issues that need to go into it.  The water management is a big one.  The design of the pond – to keep it inexpensive but not have a big water bill – is very, very important.

MS. HUNT:  The water issue is also really important on the feedstock production side.  So you’ve got crops like corn that require quite a lot of water, but some of the cellulosic crops – the tree species, the perennial grasses – tend to just generally require a lot less water.  And they also help absorb water and hold it in the soil.  And you’re also not tilling every year, so you don’t lose that moisture and that carbon when you’re tilling every year.

There’s also – a lot of the breeding efforts that are going to be taking place as they move forward – a lot of the effort is going to be focused on yield increases, but some of the effort will also be focused on pest resistance and water needs and that kind of thing.  So drought resistant, lower water – plants that need less water, that kind of thing is certainly going to be in the docket in the future for feedstocks.  There are also feedstocks and plants right now – getropha is a good example – that grow – they’re basically weeds that grow in wastelands that don’t require much water.  So you have getropha plantations around railroad tracks and in wastelands and in some of the Middle Eastern countries being planted.

Oh, and for the question about the scale of the algae plants, there’s a company that’s kind of interesting that has a couple of demo – or at least one demo facility, and they’re working on a commercial plant that uses algae, and they bubble coal plant emissions through these columns of algae.  And they’re hoping to replicate that at a number of coal plants.  So there’s a range of sizes.

DR. PACHECO:  That company is Greenfuels. 

In addition, on the water issue, there’s a big issue around the selection of the crop when we look at forest resources versus ag resources, versus algae.  And one of the points that I want to make out because Suzanne alluded to it is that when you cut down forestlands like in South America in the rainforest, you change dramatically the carbon management in the soil, but you also change dramatically the water management.  The amount of water that’s retained when rain falls on a forest is almost double what’s retained when rain falls on, say, ag lands and other lands.  And it has to do a lot with the soil chemistry, so that has a very big impact.

The other things about forests – we’ve talked a lot about algae, we’ve talked a lot about ag resources, but I really want to put in a little plug for forestry because one of the issues that’s a big issue is that if we become totally dependent on biofuels as our source of transportation fuel energy, we need to have a capacitor somewhere in the system; we need to have a buffer.  We need to have some working inventory somewhere in the system.  Ag crops don’t serve well as working inventory.  Algae probably would not serve well as working inventory.  Trees are wonderful.  If the demand is down this year – one of the advantages of working for four years in the forest products industry, when demand was low, that was when we did the maintenance on our shops and on our equipment.  When demand was high and prices were high we turned it up and got the trees out of the woods and made product. 

And so a standing tree has good growth characteristics and you continue to build inventory in your warehouse – i.e. the forest – and you really can’t do that with, say, algae or ag crops.  So it may be that when we talked earlier about the silver buckshot and having a lot of solutions, even within one solution space, say biofuels, it may be that we want to have a portfolio of resources, not just one or the other.

MR. WEHRENBERG:  I’m afraid I’m might have to give you just a couple more questions here.

Q:  Ted Hilgerman (sp), Northrop Grumman Corporation.  I have a question – maybe you can elaborate a little bit about fertilizers.  If we’re going to have a sustainable process here, we need to be able to put back the essential soil nutrients that we’re stripping out.  And do your processes produce fertilizer and minerals, iron, things like that the soils will need to be able to truly make it sustainable?

MS. HUNT:  It’s a good question, and it’s important.  And actually, if you look into the details of these energy balance studies, the petrochemical fertilizer inputs, it’s one of the major factors in the equation, which is probably why you’re asking the question. 

It’s interesting, in Brazil they’ve – Brazil is an interesting case because they made a lot of mistakes and learned a lot of lessons.  And one of the things that they learned was that they couldn’t take the wastewater and dump it in the rivers because it killed the fish and ruined the rivers.  And so they’ve figured out ways to recycle that water, use it as fertilizer because it is quite nutrient-rich.  So there are things in place – there are methods in place already to reuse some of the nutrients in the system. 

One of the interesting things about some of the grass species that are being researched right now is that they tend to hold a lot of nitrogen in their roots and don’t need nearly as much nitrogen to be applied, so that’s another interesting thing.

DR. PACHECO:  It’s a very good question.  When you look at the different crops it plays a big role.  If you’re looking at a food crop or a grain crop or a protein-producing crop like soybean, the nitrogen requirements are very significant.  However, as you probably know, some crops – legumes – have the ability to fix nitrogen in their root system and so that they don’t need as much fertilizer, and in some cases they don’t require any fertilizer even though they’re high protein producers. 

I think the selection of crops is very significant.  One of the questions that the scientists, the biologists in this area – plant agronomists – look at – question is can we take the genetic characteristics of some of these legumes that are able to fix nitrogen in their root system and could we carry that across to an energy crop plant, whether it would be a forest crop or whether it would be a switchgrass or something.  If you look at one of those crops, their nitrogen load is much, much lower, say, than corn or some other food crop.  So the choice of the crop will have a big impact on whether or not you even need to apply a fertilizer, say a nitrogen fertilizer or a potassium or phosphorous. 

You talked about trace metals.  In all of our schemes we envision that the ash that comes along with the cellulosic biomass is going to – (audio break) – back to the field.  It could get back – if it’s pyrolysis it would be with the char from the process.  And that char, which is carbon rich, would be a fertilizer supplement.  We’ve actually had meetings with Scott’s fertilizer company about that very topic, of that being a soil amendment product that they may have in their product line in the future. 

But this is a very important question.  The nutrients don’t go away.  The trace metals that you referred to, they’re all there in the ash.  It’s a question of getting them back to the farm or the forest, whichever the case may be.  In the case of nitrogen, it’s a question of carefully selecting the energy crop so it’s not a high nitrogen-demand crop.  And none of the energy crops that are being considered are really high nitrogen-demand crops.

MR. WEHRENBERG:  Okay, people are starting to bid for the microphones.  I’m getting a little concerned here. 

Q:  Ted Henry.  I’m a toxicologist, and I noticed in the flyer – it spoke about how there’s no silver bullet, but obviously in all of this we don’t want to end up with like another lead bullet or a depleted uranium bullet or so forth.  So I’m curious if, either in your report or in the calculation modeling you’ve done, sir, if people are looking at both the human health and the ecological impacts from how we’re changing, whether it be pesticide use, whether it be the industrial cycles being used and so forth and if that’s being considered in your cradle-to-grave costs and longer term costs for communities and societies, whether they be rich or poor.

DR. PACHECO:  Absolutely.  One of the reasons why we really put low gear on the pyrolysis project, for example, is the pyrolysis oil has a very low LD50 in aquatic systems.  It can be quite toxic to marine life.  These are very important issues.  So there’s always those considerations.  We have no plans to introduce lead back into gasoline.  We took it out in the early ‘70s, and we’re keeping it out.

MS. HUNT:  Biofuels have been really useful, actually, in a lot of the poorer countries as a way to phase out lead.  Venezuela is one of the more recent adopters of ethanol as a means to reducing their lead.  Generally – I should have put up some of the emissions charts.  The emissions tests actually are – there needs to be a lot – there need to be a lot more of them done because the results – tests are done differently and the results are kind of all over the place.  But, just in general, biofuels don’t have a lot of the carcinogens; they don’t have a lot of the sulfur and a lot of the other components.  They have, generally, lower particulate matter, which contributes a lot to asthma and other illnesses.  So in general, the combustion part of the life cycle is much healthier.  And we’ve seen in a number of countries and cities that have adopted biofuels in a big way we’ve seen dramatic decreases in air pollution.

There are instances, for example, low-level blends of ethanol with gasoline in the summertime in old vehicles where certain emissions go up.  So it’s not a clear black and white.  But in terms of, you know, an ethanol spill versus a petroleum spill, a biodiesel spill, you know, these are organic compounds that biodegrade.  And so, you know, you can handle them; you can ingest them in many cases in their pure form.  And they’re non-toxic.

MR. WEHRENBERG:  Peter, I have to give you points back there, by the way, for holding your hand up this long.  You’ve clearly been working on.  (Laughter.)  We’ll take your question – we’ll take your question in the middle, sir, and then Peter can have the last word.

Q:  Michael, I want to thank you for bringing up pyrolysis and charcoal.  I think we have to recognize that the earliest fertilizer in humankind was charcoal.  And it’s still an incredibly valuable fertilizer in the sense that it builds an enormous amount of CO2 in the soil; it has that capability.  And we talk about gasification and taking a syngas on into a range of biofuels; we can talk about pyrolysis, charcoal, syngas.  I think the pyrolysis process needs a lot more attention. 

DR. PACHECO:  I agree.

MR. WEHRENBERG:  That was a good one; that was a good comment.  Thank you. 

Peter.

Q:  I just wanted to ask a couple questions about – when you actually start to power a large facility with algae, a couple things come to mind I was wondering about.  One is how do you prevent competing species or maybe even predatory species from fouling your crops?  And the second one is, there are pond scum – (off mike) – a water treatment facility nearby after – (off mike) – or does it have to be – (off mike)? 

DR. PACHECO:  Again, all good questions.  Where do I start? 

In terms of invasion of foreign species, that’s absolutely an issue, particularly in an open system.  I mean, when we did the pond in Roswell, we did in fact have invasions from algae species from neighboring ponds, and that’s a very important issue.  The way that – the way that biologists tend to manage that is they design into the species that you would like to have survive in that environment some competitive advantage, and then you put some stress on the environment that makes it difficult for any other species to populate that environment.  It’s a common biological technique in microbial field.  And so – but that has to be developed, and there’s no guarantee that it’s going to last forever.  There could be a native species that picks up a resistance to that stress that you’ve put on your environment, and then you have to develop improvements. 

So those are huge issues.  They’re not small issues.  But I do believe that they’re surmountable. 

As far as the odor issue, when you develop a strain, that may be one of the attributes that you have to develop into that strain in the long run.  If it’s a closed system the problem may not be as significant.  But I think it’s something that has to be looked at.  And, by the way, big, thick growths of algae can have quite a smell to them.  Absolutely. 

MR. WEHRENBERG:  Let me thank both of our speakers, and, please, all of you thank both of our speakers.  (Applause.)   I have a suspicion that you would stay all night and they would stay all night, but some of us have to go home, and the hotel people are signaling me as well.

MR.    :  If they buy the beer, we’ll stay.  (Laughter.) 

MR. WEHRENBERG:  There’s a bar in the lobby, so we’ll take that up with them. 

Our next meeting will be Monday, September 18th.  Retired Admiral Frank Bowman, the president of the Nuclear Energy Institute, will discuss the prospects for nuclear energy. 

For all of you transcripts, audio, MP3 files, and PowerPoints will be posted to the Sabrowsky website as soon as we have them in hand.  Thank you all for coming tonight.  I appreciate it.

Oh, yeah, and Suzanne was gracious enough to bring about 7 million – you can tell the difference between a nonprofit and a government agency; Mike brought nothing, but Suzanne brought a bunch of these.  They’re back on the back table.  It’s a summary of the report.

(END)

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