Grupo de Economia da Energia

The future of biofuels II: Why will the biofuels industry of the future be different from the current one?

In biofuels on 10/05/2010 at 01:30

By José Vitor Bomtempo

In our first article on the future of biofuels, we start from a clear premise: the biofuels industry of the future will be very different from the current one. It will be neither limited to current products – ethanol and biodiesel – nor the current processes and feedstocks. Its technological base and its industrial structure can be unrecognizable today.

This assumption is very important to ponder on the questions made previously. Let’s discuss it a little more and try to defend it.

Why can we say that a new biomass-based industry to biofuels and bioproducts is being built? Some issues related to the limitations of the so-called first-generation biofuels and conditions to be met by biofuels for occupying a space in the market in the coming decades guide the environment for searching innovations in biofuels and bioproducts. The neo-Schumpeterian vision regarding innovation suggests that to address a social problem and/or to explore a business opportunity, the innovative actors work within a selection environment. The selection environment corresponds to the set of economic, social and institutional factors that act as selection mechanisms for the technologies.

The factors that have motivated them to explore biomass to offer their answers, and if the innovations are successful, reap the rewards, in recent years have become increasingly complex. Therefore, the industry is in the highest point for searching better answers to selection environmental for entering the future low-carbon world. Or as Phil New, BP Biofuels chief executive, said recently in a more direct and clear manner: “It still feels like the final bets have not been made”.

Let’s go to the points that mark the selection environment:

  • First-generation biofuels compete directly with food upon using noble and food raw materials;
  • First-generation biofuels compete with food, even if it does not use food for energy use upon occupying fertile land and change food production;
  • First-generation biofuels, except ethanol from sugar cane, are not sustainable from an environmental standpoint;
  • First-generation biofuels can not be produced in volumes expected to meet the programs for the use of renewable energy, according to current productivity level;
  • First-generation biofuels using raw materials with poor quality, availability and prices which undermine the economic feasibility of the industry;
  • First-generation biofuels (ethanol) are not perfect substitutes for oil byproducts in terms of energy and they still require a transportation and distribution infrastructure and adaptation of engines.

Many of the above problems are directly or indirectly linked to the environmental sustainability and competition with food issues. In some ways, the debate has become clearer over the past two years. Towards sustainable production and use of resources: Assessing Biofuels, a study made by the UN may be cited as the reference. In the American context, the RFS (renewable fuel standard) set a maximum of 16 billion gallons for corn ethanol, which should be achieved in 2016. The important thing is that the incorporation of these limitations to the selection environment stimulated or has stimulated the search for innovations in raw materials.

The search for the ideal raw material, or some ideal raw materials, is open and developing rapidly. The requirements of raw materials include multiple factors and not easily reconcilable: availability, price, quality in relation to the conversion process, not to mention environmental sustainability.

At this stage it seems clear that the sugarcane grown in Brazil would be among the raw materials available the closest to the ideal condition. This raw material has been used so far only as a source of ethanol from broth fermentation, besides producing electricity from bagasse. However, other alternative fuels and bioproducts from sugarcane as the drop in diesel from Amyris, Veranium/BP project for cellulosic ethanol or polyethylene from Braskem have emerged, reinforcing the value and potential of the sugarcane in biomass-based industry. Other energy crops have been developed such as switchgrass and miscanthus in the USA and Canada, and jatropha in India and elsewhere. The process of developing these crops has been difficult as it is the nature of innovations with hopes and disappointments that alternate in response to the efforts of researchers and investors. The cultivation and use of new plants requires a long maturation that can not be ignored whose results are uncertain.

In this process of finding solution to the problem of raw materials, two alternatives deserve attention: firstly, algae, and urban waste.

The analysis of process innovations shows firstly a range of techniques under development, using various knowledge bases (fermentation, enzymatic processes, catalysis, genetic engineering, gasification, pyrolysis and also catalysis and chemical reactions) that reflect the challenge of advanced biofuels wider than the simple production of ethanol from cellulose Far from being irrelevant, the production of ethanol from cellulosic materials is an important technological challenge that has been pursued by several companies, but it can not be seen as a synonym for advanced biofuels, sometimes considered by the most.

It should be noted that increasing the degree of variety and multiplicity of alternatives, conversion technologies of the same nature by using the same knowledge base are being developed according to different lines. The investigation of the various conversion technologies under development would cause certainly a perception that the competition for the solutions to be adopted takes place not only among the general technologies but also within each one of them.

What about the product innovations? Initially it should be few or almost nonexistent. Product innovations are rare in liquid fuels. The natural logic of the industry is to establish well-defined specifications for some products and seek cost reduction and improvement of characteristics in process innovations. According to this, much of the efforts are focused on developing new processes to produce fuels already known and used, such as ethanol. But the current state of the industry sees opportunities to introduce new products from renewable sources, which are close to the ideal condition of fuel and other bioproducts that may compete with fossil-based chemicals. An increasing number of innovative projects have been interested in product innovations.

The problem of adaptation of engines and construction of transport infrastructure and distribution of ethanol and other first-generation fuels has allowed a growing space for product innovations and production of drop in biofuels. Comparing with ethanol and other biofuels, the question about the nature of the biofuels of the future has been made by the American EPA to discuss developments in the RFS (renewable fuel standard). The current discussions about the limitations of American infrastructure for ethanol and the difficulties for its implementation reinforce this trend. A relevant work published in the McKinsey newsletter, November 2009, illustrates the complexity of the problem related to the infrastructure for ethanol in the USA.

Also related to product innovations, we have to mention the growing importance of the biorefinery concept. This concept suggests that the exploitation of biomass need to integrate a multiproduct view, by exploring several chains and processes, like the oil refineries that generate oil byproducts. In the case of biorefinery, energy products and chemicals are side by side.

In summary, the biofuels industry of the future and the current industry will be very different because there is an ongoing innovation process with many variables still open. This movement is often described as dedicated to the development of so-called second-generation biofuels and advanced biofuels. Given the diversity of technological alternatives and concepts proposed, the term “second-generation” is becoming inadequate because it highlights essentially some initial options, such as ethanol from cellulosic materials instead of a very rich and complex spectrum that is being developed for full advantage of biomass (biofuels, chemicals and bioelectricity). In a recent interview, USA Secretary of Energy, Stephen Chu, used the term “fourth or fifth-generation biofuels to emphasize how different and innovative will be biofuels of the future.

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  1. […] the previous article, we presented a debate about points that can justify our central premise:  in the future, the […]

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