Can Large-Scale Biofuels ProvideCan Large Scale Biofuels ProvideA Real and Sustainable Solution to Reducing Petroleum Dependence?

A Comprehensive Systems Approach to Understanding Large-Scale Biofuels Deployment in the USa ge Sca e o ue s ep oy e t t e US

Presented byRobert W. Carling

Director, Transportation Energy CenterSandia National Laboratories

Livermore, California

10 February 2009

11

Joint project conducted by GM and Sandia National Laboratories is the first true value-chain approach to future large-scale biofuels

DistributionConversionStorage and TransportFeedstock g p

22

A number of organizations provided direct input and reference materials for our study*

DistributionConversionStorage and TransportFeedstock p

33

*Views expressed in this presentation are those of the study authors and do not necessarily reflect the views of organizations listed here

What questions did we seek to answer?

1. What must happen to grow ethanol production to meet RFS2 (36B gal by 2022) and then ramp to 60B gal by 2030?

2. What is required for cellulosic ethanol to be cost competitive with gasoline?

3. What are the greenhouse gas, energy, and water footprints associated with this level of ethanol production?

4. What risks could impact cellulosic ethanol’s production and competitiveness goals and how can we mitigate these?co pet t e ess goa s a d o ca e t gate t ese

44

We built a ‘Seed to Station’ system dynamics model to explore the feasibility of 60 billion gallons of ethanol

Production DistributionConversionLogistics

Biofuels Deployment Model

GREET

Production DistributionConversionLogistics

Biofuels Deployment Model

GREET

Production DistributionConversionConversionLogistics

Biofuels Deployment Model

GREET

VolumesProduction

SRWCHerbaceous ECForest Residues

Ag ResiduesCorn

Biofuels PipelineRail

TruckDistribution

BioThermalThermochemical

BiochemicalConversion

On-farm StorageLogistics

Bi f l

Production

SRWCHerbaceous ECForest Residues

Ag ResiduesCorn

Biofuels PipelineRail

TruckDistribution

BioThermalThermochemical

BiochemicalConversion

On-farm StorageLogistics

Bi f l

Production

SRWCHerbaceous ECForest Residues

Ag ResiduesCorn

Biofuels PipelineRail

TruckDistribution

BioThermalThermochemical

BiochemicalConversion

BioThermalThermochemical

BiochemicalConversion

On-farm StorageLogistics

Bi f l

VolumesCosts (2006 Dollars)Greenhouse Gas EmissionsEnergy UseWater Use

Solid BiomassIntermediates

Cellulosic EtOHGrain EtOHBiofuels

Solid BiomassIntermediates

Cellulosic EtOHGrain EtOHBiofuels

Solid BiomassIntermediates

Cellulosic EtOHGrain EtOHBiofuels

Key constraints:Ti f id d 2006 t 2030Timeframe considered: 2006 to 2030State-level granularity

Model purpose:Understand how key variables affect the cost and volume of ethanol production from biomass sources and how these variables may interactAllows a study of variable sensitivity, which should provide a better understanding of th f t k i th d l t f ti l bi th l d ti bilit

55

the forces at work in the development of a national bioethanol production capability

What must happen to grow ethanol production to meet RFS2 (36B gal by 2022) and then ramp to 60B gal by 2030?

RFS2 (nearl 1/5th of US gasoline from biof els) co ld be achie ed b s ccessf lRFS2 (nearly 1/5th of US gasoline from biofuels) – could be achieved by successful deployment of cellulosic biofuels (in addition to corn ethanol), without displacing current crops grown

Transportation and distribution challenges while substantial are notTransportation and distribution challenges, while substantial, are not insurmountable

$B

Domestic investment for biofuels production is close to the investment required to develop

Req

uire

d, $ is close to the investment required to develop

new long-term domestic petroleum production

CAPEX for 60 BGY ethanol: $250B

estm

ents

R CAPEX for 40 BGY petroleum: $250B to $370B

apita

l Inv

e

66

C

What is required for cellulosic ethanol to be cost competitive with gasoline?p g

Cellulosic biofuels can compete with oil at $90/bbl assuming:

Average conversion yield of 91 gallons per dry ton of biomass

Average conversion plant capital expenditure of $3.60 per installed gallon of nameplate capacity

Average farmgate feedstock cost of $40 per dry ton

$120.00

dry-

ton

Sensitivity analyses i th ti

$70.00 oc

k co

st $

/dvarying these assumptions individually gave potential cost-competiveness with

il i d t $70/bbl t

$20.00

$20.00 $100.00 $180.00

Feed

stooil priced at $70/bbl to

$120/bbl

77

Not cost-competitive within 15 years

Cost-competitive between 5 - 15 years

Cost-competitive within 5 years

Crude oil price $/bbl

What are the greenhouse gas, energy, and water footprints associated with this level of ethanol production?

Feedstocks for 45B gallons of cellulosic ethanol can beFeedstocks for 45B gallons of cellulosic ethanol can be grown in states requiring little or no irrigation

60B gal of biofuels would require only 5% of total 2030 water consumption; food and feed production requires 75%water consumption; food and feed production requires 75%

Large-scale cellulosic biofuel production can be achieved at/below current water consumption levels of petroleum f f ffuels from on-shore oil production and refining

Using cellulosic ethanol in transportation consumes only one-fourth of the fossil fuels as gasoline, on a well-to-wheels basis (numbers based, in part, on assumptions in GREET)

60B gallons of ethanol provides annual GHG savings of 260 million tons of CO2e per year – (Excluding GHG emissions from land use change)

Equivalent to 45 coal-fired power plants

88

What risks could impact cellulosic ethanol’s production and competitiveness goals and how can we mitigate these?

We did not find fundamental barriers to large-scale production of biofuels (e.g., supply chain or water constraints), assuming the technology matures as projected here

However, multiple actions could be taken to enhance the successful build-out of the cellulosic biofuels industry:

Supportive policies, including well-planned market incentives and carbon pricing, that could minimize investment risks in light of oil price volatility and periodic economic dislocations

cellulosic biofuels industry:

economic dislocationsOptions include greenhouse gas taxes and market incentives (e.g., $50/ton CO2 tax significantly reduces required incentives)

Enhanced R&D and commercialization associated funding despite currentEnhanced R&D and commercialization-associated funding, despite current declining/low oil prices

Conversion investments to increase conversion efficiency and decrease capital costImproved energy crop technology to reduce cost, land use, and water usep gy p gyDecreased timeframe for technologies to reach maturity (lowers investment risk)

Infrastructure investment to ensure the rail and road network in the US can safely support future expanded economic activity, including biofuels

99

pp p y, g

How much would accelerating biofuels technology and commercialization reduce capital requirements?

Baseline assumptions assume technology matures in 2020What would be the savings if the technology were at/near maturity in 2013?

Up to $2.8B/year less capital needed in cellulosic conversion build-out phaseU t $13 4B t t l it l i b 2022Up to $13.4B total capital savings by 2022

S iSavings

1010

Technology improvements (if made) would drive down the total cost of cellulosic ethanol

2.5Ethanol Costs at Retail Without Taxes or Incentives

$1 73/gal ethanol

Higher initial cellulosic ethanol cost due to: •Higher capital costs

2.0

$/ga

llon

$1.73/gal ethanol$2.60/gal gasoline $1.54/gal ethanol

$2.31/gal gasoline

•Lower conversion yield•Higher energy costs of early technology

1 0

1.5

anol

Cos

t,

$

Energy and other costs of conversionFeedstock cost:•Low initially: low-cost forest residue•More expensive

0.5

1.0

Cellu

losi

c Eth

a

Debt payment for conversion

o e e pe s efeedstocks are used as production expandsProduction costs, with technology assumed in

0.0

C

Feedstock

technology assumed in this study, can be well below $1.50/gal

1111

2010 2014 2018 2022 2026 2030

Technologies that reduce capital and feedstock costs can make cellulosic ethanol competitive with gasoline at lower oil prices

$6.00

$7.00

ty)

Not cost competitive within

$5.00

$6.00

($/g

al c

apac

it p15 years

$32 $52 $75 Average feedstock cost ($/ton)

$3.00

$4.00

Capi

tal C

ost

(

Cost competitive within 5 years

$2.00

50 70 90 110 130 150 170 190 210

C

Energy Price ($/bbl WTI) Based on 90 Bgal/year by 2030 scenario

Competiveness of cellulosic ethanol with gasoline is sensitive to oil, capital, and feedstock costs. For example, at $4/gal capacity capital and $50/ton average feedstock costs, cellulosic ethanol can be competitive by 2023 at $90/bbl oil.

Based on 90 Bgal/year by 2030 scenario

1212

Reduced capital and feedstock costs make ethanol competitive at lower oil prices

At $50/bbl oil price, a $50/ton GHG tax keeps subsidy cost below $8B per year; $100/ton keeps it under $2B per yearbelow $8B per year; $100/ton keeps it under $2B per year

$1.00

hano

l

$0/ton $25/ton0.5x Energy Costs ($50/bbl)

$0.75

e, $

/gal

et

$50/ton $100/ton

$0/ton

$0.50

Ince

ntiv

e

$0 00

$0.25

d M

arke

t

$100/ton

$0.00

2010 2014 2018 2022 2026 2030

Requ

ire

1313

21 Bgal/year cellulosic ethanol in 202243 Bgal/year cellulosic ethanol in 2030

What is “Large-Scale?” Selecting Target Production Levels

Study targeted 90B gallons = 60B gallons gasoline equivalent2006 EIA projections of 2030 demand: 180B gal of gasoline – displacement 1/3rd

90B gallons could be reached with enduring government commitment and necessary technological progressnecessary technological progress

Today’s Focus: RFS2Part 1: RFS (EISA 2007) to 2022 50Part 1: RFS (EISA 2007) to 2022

Produce 36B gal total by 202215B gal from corn ethanol21B gal from advanced biofuels 35

404550

capa

city

ns)

Corn EthanolCellulosic Ethanol

g(assumed here: cellulosic ethanol)

Part 2: beyond 2022 to 2030 15202530

pro

duct

ion

Bill

ion

gallo

nContinue ramp up to 60B gal45B gal advanced biofuels(assumed here: cellulosic ethanol) 0

510

2005 2010 2015 2020 2025 2030

Etha

nol ( B

1414

2005 2010 2015 2020 2025 2030

Capital required for the biofuels supply chain is significant, but developing new oil supplies is about equally capital intensive

Capital Investments Required $BCAPEX for 60 BGY ethanol: $250BCAPEX for 40 BGY petroleum:

$250B to $370B $160B t $270B f l ti d

Capital Investments Required, $B

- $160B to $270B for exploration and production; existing refineries can be used but will require upgrading and maintenance

Ethanol CAPEX is dominated by the cost of 120 additional corn plants (after 2006) and 400 cellulosic biorefineries. Efforts to reduce the installed per gallonEfforts to reduce the installed per gallon cost could have significant payoff.

New production of 40B gal oil per year in Gulf of Mexico assumes 6% or 12% decline in field over a 50-year period.(Requires ongoing investment in oil field production).

1515

Conversion technologies are linked with specific feedstocks

F h l t t t d th Bi f l D l t M d l (BDM)For each new plant constructed, the Biofuels Deployment Model (BDM) selects a feedstock/conversion pair resulting in lowest cost of ethanol

Biomass Biomass

Biochem

(e.g. Mascoma)

Thermochem

(e.g. Range Fuels)

Syngas

Ethanol

Gasification

CatalystsSugars

Ethanol

Enzymes

Microorganisms

BioThermal (e.g. Coskata)Forest ResidueShort Rotation

Ag ResidueHerbaceous

Ethanol Ethanol

Woody Crops

Inputs:Inputs:

BiomassGasification

Inputs:Resource supplyCost of harvest

Inputs:Acres availableYield vs. timeYears to maturityCosts

Acres plantedYield vs. time% harvestableFertilizer makeupCost of harvest

Inputs:Acres availableYield vs. time% harvestableCosts

Syngas

Ethanol

Gasification

Microorganisms

1616

Above linkages are only representative – other combinations possible

What other key assumptions did we make?

Energy pricesOil prices were assumed to be $100 per barrelOther energy prices were assumed to be US average prices in 2008 (EIA data)These were varied from half to double these values to test sensitivitiesThese were varied from half to double these values to test sensitivities

Biofuels conversion technologies

C it l t ll it Yi ld f th l bi t i tCapital cost per gallon capacity Yield of ethanol per biomass ton input

Biochemical2010: $6.16/gal 60 gal/dry ton2020: $3 30/gal 88 gal/dry ton

Continued R&Dneeded to improve conversion yields2020: $3.30/gal 88 gal/dry ton

Thermochemical2010: $6.00/gal 75 gal/dry ton2020 $4 00/ l 105 l/d t

conversion yieldsCommercialization support could shrink timeframest t it2020: $4.00/gal 105 gal/dry ton

Biothermal2010: $5.00/gal 90 gal/dry ton

to maturityBoth could lower capital costssignificantly

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2020: $3.00/gal 105 gal/dry ton

Biomass production for 60B gal can rely largely on idle land and residues using diverse feedstocks

Feedstocks should be viewed as representative – we did not include annual crops such as sorghum, sugarcane or municipal solid waste (MSW)Regionally diverse feedstocks are spread across the US to nearly all states; as a whole this reduces risk due to regional weather events

0.5

whole this reduces risk due to regional weather eventsCosts and land area used per gallon of ethanol decline as new cellulosic feedstocks are developed with improved per-acre yield

0.4

ry to

ns/y

r

44M acres is 100% of idle land plus 7% of cropland used as pasture

2030 Data:44M acres6 tons/acre$49/ton delivered

2022:21M acres herbaceous5M acres SRWC

0.2

0.3

e ra

te, B

illio

n dr

Herbaceous 5M acres5 tons/acre$67/ton delivered50M acres

5M acres is 7% of forest land

49M acres

0.1

Cel

lulo

se u

se

F t R id

SRWC Ag Residue

20M acres6 tons/acre

50M acres1.5 tons/acre$49/ton delivered

No land use change for residues

1818

02010 2014 2018 2022 2026 2030

Forest Residue 6 tons/acre$40/ton delivered