The escalating price and declining availability of oil
, combined with increasing concerns about energy security
and climate change, have prompted the United States to
seriously assess alternative sources of transportation
fuels. Corn has ushered the United States into alternative
fuels, and cellulosic biomass promises to boost domestic
production in the future. Meanwhile, Latin America has
tremendous potential to become a global biofuels leader
and thus contribute to U.S. energy security and climate
stabilization. The availability of land, a favorable climate,
agricultural experience and ethanol know-how are key attributes
of that potential. Closer cooperation between the United
States and Latin America will enhance U.S. energy security
by capitalizing on the continent’s biofuels capabilities.
The high demand for oil has contributed to an unprecedented
increase in oil prices and, by extension, in food prices,
which threaten national security, the economy, family budgets
and even social order. At the same time, the use of fossil
fuels generates greenhouse gases, which trigger climate
change.
Fuel diversification based on biofuels produced from agriculture
constitutes a key component of greater energy security
and environmental stewardship. Ethanol blended with gasoline
is already available in several countries. However, only
in Brazil does ethanol represent a significant portion
of total fuel consumption (more than 40 percent) and is
projected to become the dominant transportation fuel by
2010. In the United States and other countries ethanol
accounts for less than 5 percent of fuel use.
Biofuels possess numerous advantages over fossil fuels
in consumer, environmental, agriculture, economic and national
security aspects. They are renewable, non-toxic, biodegradable,
cheaper than gasoline and diesel, and beneficial to the
automobile engine, the environment and the domestic economy.
Yet, these benefits still remain largely unknown because
the government and the industry have failed to educate
the public. Now that concerns about food versus fuel and
biofuel sustainability are in the news on a daily basis,
biofuels are facing an uphill battle.
Sustainability Concerns
The issue of sustainable biofuels production is quickly
becoming global as the world faces dramatic increases in
food prices. Although the campaign against biofuels is
based on misinformation, the biofuels industry can not
afford to ignore this issue. Push-back from social groups
is already forcing governments around the world to scale
back their plans for mandatory ethanol blending.
In the United States the corn ethanol industry needs to
seriously invest in technology improvements to reduce land
demand and minimize its carbon footprint. On a life cycle
basis compared to gasoline, corn ethanol results in 18
percent greenhouse gas emissions reduction, compared to
the 80 percent realized with sugarcane ethanol and projected
with cellulosic ethanol. Similarly, the life cycle net
energy balance (the ratio of renewable energy output over
fossil energy input) of corn ethanol is 1.3 compared to
9 or higher for sugarcane and cellulosic ethanol. The main
reasons are:
› Sugarcane ethanol and projected cellulosic ethanol
yield per acre of land is twice that of corn ethanol
› Sugarcane and cellulosic biomass require less
irrigation and fertilization
› Ethanol production from cane and cellulosic biomass
is powered by renewable energy derived from bagasse or
other biomass, whereas corn ethanol production relies mostly
on natural gas.
Moreover, from an economic standpoint, the significant
agronomic and process improvements that Brazil has accomplished
during the past 30 years have made Brazilian ethanol cost-competitive
with gasoline at just $45 per barrel of oil without government
subsidies.
Yet, this does not mean we abandon corn as a feedstock.
Corn ethanol has ushered the United States into fuel diversification
and will continue to play a role in the U.S. economy, but
there are lessons to be learned from Brazil: a 33 percent
increase in crop yield per hectare, an 8 percent increase
in sugar yield from sugarcane, a 14 percent increase in
sugar conversion to ethanol, and a 130 percent increase
in fermentation productivity. Today, sugar mills are biorefineries
that co-produce food (sugar), fuel (ethanol) and electricity
in a renewable fashion. This way Brazilian agricultural
productivity has increased significantly, while the food,
fuel and energy needs of Brazil are satisfied.
The Future is Cellulosic Biofuels
Cellulosic biomass holds significant promise for the world’s
future fuel needs as it constitutes an agricultural residue
that in many cases is already collected and inexpensive.
It has no food or feed value and therefore no effect on
food availability and prices. It is abundant, particularly
in the form of sugarcane bagasse and wood waste throughout
the Americas, enabling many countries to produce biofuels
domestically. By nature it contains significant amounts
of water (more than 50 percent) and has significant caloric
value as a solid fuel, which could eventually render ethanol
production water and energy self-sufficient.
A number of technologies are being pursued for production
of cellulosic ethanol and other fuels, such as butanol
and diesel. The technologies can be classified as biochemical
(enzymatic or chemical hydrolysis and fermentation), thermochemical
(gasification and catalytic conversion or carbohydrate
reforming), and hybrid (gasification and fermentation).
Undoubtedly, great technical progress has been achieved
in cellulosic technologies during the past 15 years. Still,
they all face technical challenges before becoming cost-competitive.
Most likely there will be no single technology winner,
but rather technologies will be adapted to the particular
characteristics of local feedstocks. Closer collaboration
within the Americas will allow the countries of the Western
Hemisphere to capitalize on their collective technical
expertise and biomass resources to produce significant
amounts of ethanol further enhancing their energy security,
economic growth and environmental record.
Manage Expectations Properly
The new federal renewable fuels standard calls for the
United States to raise its annual biofuel production from
6.5 billion gallons per year in 2007 to 36 billion gallons
per year by 2022. This is a tremendous undertaking in terms
of investment required, construction activity and infrastructure
development. Corn ethanol alone will not suffice to reach
that goal, since U.S. corn ethanol production will max
out at approximately 15 billion gallons per year. Hence,
there will be a significant gap between U.S. ethanol supply
and demand, as shown in Figure 1. In this model the supply
projections are based on a realistic capacity growth of
U.S. corn and cellulosic ethanol, whereas demand is based
on a combination of historical trends in the number of
total and flexible fuel vehicles on the road, per capita
miles driven per year, and estimated E10 and E85 market
penetration rates.
The projected ethanol shortage will have to be filled by
ethanol derived from sources other than corn. Cellulosic
ethanol is viewed as the only feasible domestic solution
for the United States, but expectations of commercial cellulosic
plants within the next two to three years are not realistic.
Resolution of scale-up issues in newly built demonstration
plants will require several years, and lengthy construction
(due to a shortage in stainless steel) will add more time.
If expectations for cellulosic ethanol are not properly
managed, the whole biofuels industry will suffer from a
potentially fatal public and investor reaction. There have
already been “false starts” in the past. This
time around, when policy, technology and investment have
finally converged, we can not afford to miss the golden
opportunity for a long-term prospective.
Latin America Part of Solution
The United States must look at its hemispheric neighbors
to make up the demand-supply gap. Sugarcane ethanol from
Brazil, Colombia and Central America needs to be an integral
part of the U.S. energy strategy, especially when an increase
in cane ethanol capacity in Latin America provides an expedient,
cost-effective and low-risk strategy. This can be accomplished
by adding (or expanding) ethanol production capability
at existing sugar mills to enable them to produce a diverse
portfolio of products: sugar, ethanol, renewable electricity
and steam, animal feed (molasses) and fertilizers (vinasse).
Undoubtedly, the United States needs Latin America for
energy security through diversification. Conversely, Latin
America needs the United States for capital and technology
infusion to build or expand their cane ethanol (and, in
the future, cellulosic ethanol) capabilities to satisfy
their own energy needs and enter the U.S. market, the largest
fuel market in the world (145 billion gallons per year
of gasoline).
This interdependence calls for closer collaboration within
the Americas in the energy sector and by extension in agriculture,
project financing, trade, immigration and poverty reduction.
Biofuels Challenges in Latin America
While conditions are favorable for biofuels production,
Latin America faces a number of challenges that make foreign
investors hesitant. Those issues need to be addressed on
a hemispheric basis under the joint leadership of the two
biofuels giants, the United States and Brazil. The challenges
include political, economic, trade and social issues. Political
instability and poor regulatory and legal frameworks need
to be addressed. Latin American countries need to commit
to protecting foreign investment, intellectual property
and the sanctity of contractual agreements.
For Latin America to realize its full biofuel production
potential, significant investment will be needed. Joint
ventures between U.S. and Latin American investors, helped
with debt financing from regional development banks, is
the best means to fund local biofuel projects.
Although one has to recognize the complexity of agricultural
subsidies world-wide, there is no excuse for setting up
barriers to the open trade of biofuels. For biofuels to
truly become world commodities and hence cost-competitive,
import quotas and tariffs need to be eliminated.
Through economic growth and employment opportunities the
biofuels industry can become a means to alleviate rural
poverty in Latin America and reduce migration to the United
States. For local people to take advantage of employment
opportunities, the public and private sectors need to team
up to provide workforce training and development with the
active participation of local educational institutions.
Recommendations
Ethanol and other biofuels are a key part of the solution
to our country’s need for energy diversification.
The corn industry has introduced Americans to a new era
of fuels, but we need additional abundant ethanol resources
to break our addiction to oil. Domestic cellulosic biomass
and biofuels from Latin America are two key sustainable
resources. The U.S. needs to pursue a four-prong biofuels
strategy. First, the corn industry needs to improve the
sustainability of its ethanol by eliminating fossil energy
use and concentrating on agronomic and process improvements
rather than conversion of more U.S. land to ethanol production.
Second, through public-private partnerships the United
States should treat the commercialization of cellulosic
technologies as a matter of national security (a new Manhattan
project) and invest all the necessary resources to accelerate
deployment.
Third, the United States should pursue closer energy integration
with Latin America though regulatory convergence and open
biofuels trade, thus encouraging private investment in
sugarcane ethanol production to supplement domestic capacity.
This is the fastest and lowest risk means to boost E85
availability within three to four years and displace gasoline
use to an extent significant enough to cause oil demand
and prices to drop.
Figure 1. Projected U.S. ethanol demand and supply
2007-2030
Source: george philippidis
Fourth, consumers should be educated about the benefits
of biofuels and incentivized to switch to flexible-fuel
vehicles, creating proper market conditions for automotive
manufacturers to switch their production lines to such
vehicles, which will dramatically cut U.S. dependence on
foreign oil.
On the road toward fuel diversification there is no silver
bullet. It is not an issue of corn versus sugarcane, food
crops versus cellulosic biomass or even ethanol versus
butanol. The sooner we realize that U.S. energy security
needs all of the above, the sooner our country will be
able to develop and commit to a coherent long-term energy
policy.
George Philippidis is associate director of the Applied
Research Center and co-director of the Energy Business
Forum at Florida International University. Reach him at george.philippidis@arc.fiu.edu or
(305) 606-9998.
