Opportunities, Challenges Abound in 2008

Gazing deeply into a crystal ball or dealing out tarot cards are ways to predict what will happen tomorrow. While it can be amusing, the results are generally less than satisfying. So instead of phoning the Psychic Friends Network, Biomass Magazine talked with people who know the industry to find out what the hot topics will be this year.
By Jerry W. Kram
2007 was a roller coaster ride with the U.S. DOE announcing $385 million in funding opportunities for multiple cellulosic ethanol pilot plants, balanced by the challenging economics of higher feedstock costs and lower biofuels prices. 2008 promises to be another exciting year, when many of the most basic questions about the nascent biomass industry may be answered.

Mandates and Incentives
Two bills currently moving through Congress will greatly impact the biomass industry. The Energy Bill and the Farm Bill will set much of the agenda for developing biomass industries for years to come. "In the Farm Bill, there will be substantial incentives for biofuels, not only for biodiesel but for ethanol [produced] from cellulose and noncorn starch feedstocks," says John Urbanchuk, director of the consulting firm LECG LLC. "With the Energy Bill, the question will be what kind of a mandate we have. Is it going to be 36 billion [gallons of ethanol] or is it going to be 20.5 billion, and how is that going to help structure the marketplace?"

Biomass technology companies are following the Congressional debate with great interest. "In our area there is the biomass or biogas credit," says Albert Cocci, vice president of marketing and sales, and a wastewater treatment and energy specialist for ADI Systems Inc. "If that goes through, it would clearly drive a lot more interest in biogas production and anaerobic digestion." Among other things, ADI Systems manufactures anaerobic digestion systems for water treatment and biogas production. No matter what the outcome of the congressional debate, the DOE will continue to be a major booster of fuel production from biomass. At BBI International's Biofuels Workshop & Trade Show Eastern Region held recently in Philadelphia, Melissa Klembara of the DOE's Office of Biomass Program described the current and future solicitations to encourage development of the biomass industry. She describes the agency's plan for assisting the development of a biomass industry as a five-step process with declining federal involvement and increasing private investment. The first two stages, basic research and development, and technology development, are largely underway or complete. In 2008, the biomass industry will be entering the third stage of the program; building proof-of-conception pilot production plants. The final two stages are construction of commercially viable demonstration plants, and permitting, construction and operation of fully commercial plants.

Klembara says of the six projects selected by the DOE to build cellulosic biorefineries, Abengoa Bioenergy Biomass of Kansas, Bluefire Ethanol Inc. and Poet LLC have received their first phase cooperative agreement awards for planning, design and permitting. Range Fuels has received its second phase award, which allowed the company to break ground for construction. Alico Inc. and Iogen Biorefinery Partners LLC were still negotiating their phase one agreements at press time.

The DOE also funded five groups in 2007-Cargill Inc., Celunol Corp., DuPont, Mascoma Corp. and Purdue University-to the tune of $37 million to develop new ethanol fermenting organisms that can utilize both C5 and C6 sugars and have a tolerance for higher levels of alcohol than existing organisms.

In 2008, the DOE will award grants for demonstration-scale plants, which will be about 10 percent of the size of commercial scale plants. These grants will be for up to $200 million over five years. "In a couple of weeks we hope to make an announcement of about eight to 10 facilities," Klembara says. Announcements are also pending for a joint $18 million DOE/USDA grant for biobased product development, a $7.75 million grant for thermochemical conversion of biomass and a cost-sharing program for a new generation of cellulase enzymes.

The DOE has requested $179 million for biomass programs in 2008, less than what was provided in a continuing funding resolution in 2007, but still more than double any of the funding amounts in the preceding years since 2000. If funding permits, the DOE plans to solicit proposals in 2008 for research and development into feedstocks, pretreatment reactor designs and pyrolysis oil refining.

Finding Fuel
Many of the people Biomass Magazine spoke with mentioned feedstocks as an issue that needs to be addressed, especially in the biodiesel industry. Soy and other oils have become so expensive that they are pricing many biodiesel producers out of the market. "I think there is going to be more and more demand for alternative feedstocks for biodiesel just because there is so much demand for soy right now," says William Marmer, a research leader with USDA's Agricultural Research Service. "There are plenty of other alternatives that should be taken advantage of. Biodiesel is feedstock neutral. If you meet ASTM standards, you have good biodiesel." Marmer thinks the biomass industry will be more flexible in 2008 regarding feedstocks. A great deal of research is going into developing biofuels from regionally appropriate feedstocks. "I think in the longer term there will be attention to newer crops-higher yielding crops," he says. "Peanuts could be one. There is a lot of attention given to algae as a source of biodiesel. In warmer climates jatropha is getting a lot of attention. Philosophically, I think we are looking at regional crops. I don't think there is one favored crop for the whole United States." Regional feedstocks for producing ethanol are also being considered. "A number of my colleagues are looking at barley for ethanol," Marmer says. "Barley is a good alternative for the East and Northeast, which are not major corn producers. Getting a regional crop that can be converted to ethanol is a good catch." Michael Haas, a research biochemist with the ARS, thinks a lot this research will come to fruition in 2008, especially for one highly promising feedstock. "It seems to me that in 2008, we will find out a whole lot more about the feasibility of algae as a fuel feedstock," he says. "Not much has been published to date, but I have reason to believe that there will be some major developments in the next year and a half."

Feedstocks may not be as important however, if technology can be developed that is flexible enough to handle a wide range of biomass and convert it into the appropriate fuel. Then it becomes a question of who can get the job done for the best price, says Michael Cooper, president of Biofuels Brokers LLC. "Regarding the future of biomass, it's all about economics," he says. "The one thing that we have all decided is that we don't necessarily know what the future holds. The term that has been coined is XTL, which is X-to-liquid. Instead of biomass to liquid or waste to liquid, I prefer X because X is my new variable." The X could be anything, from jatropha to sewage sludge to compost. "I do know that if it has an energy value and we can gasify it, and turn that gas into a liquid we can put in a fuel tank, that is the future of biomass today," Cooper says. "We don't know what X will be, but the technology better be able to handle all the Xs we have coming down the road."

Looking Ahead
There will be other challenges ahead for the biomass industry including environmental and permitting concerns, and finance and investment in the industry. "2008 will see a continuation of the two issues we have now," says Mick Durham, a project principal with Stanley Consultants Inc. "One is the environmental concerns with water, especially with corn-based ethanol. The second is that the cost of feedstocks is probably going to be high, and that new plants are going to be up against a greater economic challenge than the plants that are now in place. For ethanol, I see a slowdown for at least another year, but it will pick up after that."

The price of energy is another area of concern for biomass although this is both a challenge and an opportunity. With the specter of $100 a barrel oil and similar increases in other fossil fuels, biomass becomes a competitive choice for new and retrofitted heat and power systems. "I think in 2008, the ethanol producer will have to strive to become the low-cost producer," says Brian Hare, director of business development for AE&E Von Roll Inc. "This can only be done by kicking the natural gas habit and moving on to biomass fuels and waste fuels, some which [biomass companies] already produce such as syrup from the evaporators. If they wait too long, they may be out of business because the cost of natural gas will go up again."

Incorporating biomass as an alternative fuel source could make some projects more attractive to investors in 2008, says David Quinby a partner with Stoel Rives LLP. "I think in 2008 we are likely to see more biomass applications applied in the biofuels and ethanol areas, as well as in other commercial or industrial projects. Biomass used as an energy source, be it an open-or-closed loop project, will likely be more ‘financable' with the current market, as there is more interest being shown by debt and equity sources in such projects. While maybe not as robust as we saw in biofuels projects a year or two ago, projects involving biomass are likely to receive a better reception from investors and lenders."

One of the most often mentioned challenges for the biomass industry in 2008 is infrastructure and transportation. By their nature, biomass resources are concentrated in rural areas, and low-density feedstocks are expensive to transport. Without pipelines, cellulosic ethanol producers must depend on a road and rail system that is already being challenged by the corn ethanol industry. Moving the feedstocks to the factories and the finished products to customers may possibly be the biggest hurdle for the biomass industry to conquer in 2008, says Tom Richard, director of the Biomass Energy Center at Penn State University. "The challenge is going to be infrastructure, moving both fuels and feedstocks," he says. "In grain ethanol we are already running into some challenges and I don't know what this year will look like with new plants coming on line. These first generation cellulosic plants are going to start facing the questions about how we are going to get the feedstocks and how we are going to move the fuel. I think the technology is really ready for prime time. It's the feedstocks and logistics and the fuel distribution system that are going to be the biggest technical and societal challenges."

Rudy Pruszko, from Iowa State University's Center for Industrial Research and Service thinks one answer is to convert the biomass into a denser form at the farm gate. "I think the hottest topic is going to be how to convert biomass into a transportable substance that doesn't take up a lot of space in the truck," he says. "Either you will have to have very local facilities or convert it into a denser product that can then be transported at a lower cost." BIO

Jerry W. Kram is a Biomass Magazine staff writer. Reach him at jkram@bbibiofuels.com or (701) 738-4962.