[Editor's Note -- we published Mr. Khosla's introductory piece, What Matters in Biofuels? here. He detailed his perspective on biofuels production technologies and his firm's investment thesis here. And he concludes his biofuels primer with today's piece on biofuel feedstocks.]
Part II: Feedstock.
Feedstock cost, environmental impact and even its politics are critical variables. With each investment one has to pay attention to which feedstocks to get started on, what the process can accommodate over time, the economics, the alternative uses and scalability potential (hence the economics to the feedstock producers among their alternatives) for each feedstock.
Technologies that use food-based feedstocks are likely viable in the near term but will have increasing costs, poor politics, and feedstock competition unless the production technique is compatible with cellulosic to sugar hydrolysis technology (such as HCl and others in development).
For fuels, processes that can directly use all components of biomass (cellulose, hemi-cellulose, sugars, starches and lignin) may have an advantage of higher yields per ton and lower costs per ton. Oil based processes for biodiesel are not likely competitive except in niche applications and in certain geographies.
Though multiple cellulose and hemi-cellulose to sugars conversion technologies are in development, personally I am most bullish about some of the recent surprise developments in acid hydrolysis. At scale, HCL-like technologies should be able to produce food and non-food grade sugars at between $0.08 to 0.12 per pound at $50 per ton biomass costs. To speed up and increase cellulosic sugar cost reduction, HCL CleanTech has developed a number of front end extraction processes that, while contributing to the purity of the sugars, increase the potential of co-product value: their de-acidified lignin is unadulterated (27 percent of the wood dry basis) and tall oils and resins (5 to 7 percent of the wood) are pre-extracted from the wood.
This or similar surprise technology developments could make biomass the new feedstock for sugars based processes. Though traditionalists may argue with me about other technologies that can also convert biomass to sugars cost effectively, such as enzymes and steam or ammonia explosion I have not seen them progress rapidly enough.
In my view “paper mill compatible woodchips”, sometimes needed for sugar based processes, will cost in the U.S. at scale $65 to $70 per dry ton and $50 to $60 per dry ton for whole logs for processes that can tolerate bark and wood slash. These prices will start declining quickly in the U.S. as the ecosystem and cultivation of alternative “fuels grade biomass” (which does not need to meet paper mill feedstock quality metrics) develops within five years. The non “paper or lumber” quality biomass ecosystem, which will include co-feed of wood slash, bagasse or corn stover, will develop quickly in the next 5 years as the first commercial cellulosic biofuels units become operational. Mixed biomass feedstock (for technology that can accept agriculture and forest waste mixed with whole logs) will decline towards $40 to $45 per dry ton by 2020 or sooner in the US.
There is a surprising amount of forest waste available; a good example would be hardwood waste, which can reach up to 30 percent or more of the harvest: southeast timber has roughly 18 to 22 percent waste by mass, whereas the Northeast and Alaska have as much as 30 percent. Ultimately, scaling fuels will depend upon exploiting these near-term available non-food feedstocks. In the mid-term (5 to 10 years) winter cover crops (where appropriate) and energy crops planted in crop rotations or on marginal land (over one billion acres of marginal land worldwide has been put out of production due to degradation).
The appropriate perennial, polyculture biomass production approaches, (which can restore degraded lands) will come into play in addition to continued wood, agricultural waste and bagasse use. Long term (10 to 15 years), dramatically improved energy crops, new cropping practices and new chemical fertilizer reduction strategies (such as polycultures) could yield well over a billion tons of biomass in the United States alone, if not substantially more, without significant land impact.
As a result, the most promising technologies must be able to exploit these ligno-cellulosic sources and ideally, mixed feedstocks to have the lowest costs. Use of bark, waste and mixed feedstocks will lower costs and be a significant competitive advantage for any process. Accepting mixed feedstocks will be a major advantage for any conversion process. Such technologies, in my estimation, should yield more than 2000 gallons of fuel per acre (ethanol equivalent) in the long term (versus 400 to 500 gallons per acre today with corn ethanol) to provide material biomass fuels scalability without significant land use impact.
At a high level, at 2000 gallons per acre, to reach 36 billion gallons, we need 18 million acres of land (which need not be farmland), compared to 309 million acres of cropland currently in production (of 406 million acres of total cropland). If one displaces corn ethanol and recovers that land, the numbers for land usage could be substantially lower to meet our 36 billion gallon goal (though corn does co-produce animal feed). In the last 10 years alone, more than 30 million acres went out of production due to degradation, crop yield improvements and conservation. The issue is further complicated by the recovery of land that takes place (covered in more detail in my previous papers) as diets shift from red meat (beef) to white meats (chicken), which take less than 5% of the land beef requires for corn cultivation for animal feed.
In contrast, technologies that focus on specialty oils like jatropha, rape seed (used extensively in Europe for biodiesel), palm oil and the similar are less attractive because their gallon per acre yields are far lower (40 to 50 gallons per acre for jatropha, up to 600 gallons per acre with palm oil), and we don’t expect these oil yields to increase substantially over the next decade. Not only that, jatropha in particular is toxic to animals. Additionally, used restaurant grease, oil from old tires and animal waste, are largely irrelevant as feedstocks at the global scale, though they can be used to produce cost effective fuels where available. As a result, we are not considering them here in detail because in my view, they are not likely to achieve relevant scale, regardless of profitability.
Photosynthetic algae are touted as something exciting due to very high batch yields (suggesting greater than 4000 gallons per acre). However, as discussed earlier, they currently appear to be cost prohibitive for biofuels applications due to high culturing and processing costs, except perhaps for use in specialty products (e.g., Omega 3 supplements, proteins). There are several cost breakthroughs that we believe are necessary for photosynthetic algae to become competitive: continuous high strain yields (strain survival and resistance to contamination). That said, there is always the possibility of an unexpected technology disruption of the traditional efforts. The Synthetic Genomics effort, is one such possibility, though unpredictable, long term and with substantial GMO risk, and potentially high reactor costs. Other photosynthetic efforts like Joule are also potential shots on goal. In my view none of the traditional efforts seems currently viable to reach economic costs for fuels and some of the newer approaches are too early to assess predictably. This statement is based on our firm having evaluated dozens of business plans based on photosynthetic algae, though there are ones we have not evaluated.
Meanwhile, there will be numerous opportunities for local, opportunistically low-cost local feedstock, but such specific instances can’t be relied upon globally and are not generally scalable. Cellulosic sources could be cheaper in other parts of the world. Eucalyptus for example in Brazil can be $30 to $40 per dry ton (used today for steam generation) and bagasse in certain circumstances can cost substantially less. Eucalyptus yields of 6+ tons per acre in drier regions like Matta Grasso and over 9 dry tons per acre (300+ wet tons per hectare in a 7 year growing cycle) in better rain regions like Sao Paulo are common today.
In the mid-term, use of energy canes, new crops and new regions, like the Brazillian Cerrado, could substantially reduce costs as well. Cellulosic and lingo-cellulosic plants are by the far the most scalable feedstock for biofuels on the planet (and most abundant), and will likely be the least expensive as well. Energy crops are likely to play a significant role in the long term and may actually improve row crop agronomy and environmental impact.
Next page: scaling production