1. Ethanol Fuel Programs: Sustainable Development or just another Farm Subsidy Program?

2. Topics

Review of US & Brazilian Ethanol Programs

Ezymatic Hydrolysis: The Way Forward

Summary

3. The Story-line

Current Biomass-to-Energy Conversion technologies in use

• Enzymatic conversion of feed grains, sugar and other starches into ethanol

• Convert fats and specialty crops into bio-diesel

• Convert ligno-cellulosic (LC) wastes into electricity & heat

Current methods of producing ethanol are costly and as scale of programs increase raise serious social issues such as Food vs. Fuel trade-offs

Advances in enzymatic hydrolysis technology may soon allow the economic conversion of LC wastes into ethanol and over come some of these barriers to traditional ethanol programs.

Remaining commercial barriers

• High costs of cellulase enzymes

• High costs of collecting and transporting agricultural wastes

• Seasonal nature of agricultural waste production.

4. Top Ten Ethanol Producers, 2004 Source: F.O. Lichts, Annual World Ethanol Production by Country, (Millions of Gallons, All Grades), http://www.ethanolrfa.org/industry/statistics/#E 219 3972 3,535 964 462 198 110 106 79 79 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Brazil U.S.A. China India France Russia South Africa U.K. Saudi Arabia Spain Million of gallons 5. A Tale of Two Ethanol IndustriesUS vs. Brazil

US Ethanol Industry

US is now the largest producer of fuel ethanol (EtOH)

Output has almost quadrupled from 4,180 million liters in 1996 to 16,195 million liters (ML) in 2005

2005 EtOH output equals around 3% of US motor gasoline usage by volume; 2% by energy content

By 2008, USDA and RFA forecast that US EtOH output will increase to 30,000 ML

9O% of US EtOH is produced from corn using 13% of total 2005 US corn output

EtOH plants are located largely in mid-west corn belt

Preferred technology: Dry milling, which produces distillers dry feed grains as a by-product

Brazil Ethanol Industry

Brazil was once the worlds largest EtOH producer; now is running a close second to US at 16,000 MLin 2005

Brazil produces all of its EtOH from sugar cane using straight sugar cane juice plus some from molasses

Plants located in southern & central parts of Brazil

Considered lowest cost producer of EtOH in the world.

6. Figure 1 Brazil has the lowest cost of ethanol production.Brazils unsubsidized price for EtOH is currently lower than the cost of petrol Sugar Cane Source: Michael Wang. ANL, March 2006, Bangkok Conference on Alternative Fuel for the Transport Sector Sugar Production Cost Estimated Cost (US$/Ton in Dec/00) Production (Mt) 2002 22,7 5,4 2,6 19,0 2,3 6,6 5,1 7,3 10,3 1,5 1,5 0,9 7. A Tale of Two Ethanol Industries (cont.)

US Issues

Cost of producing EtOH in US is very high

US EtOH Industry can only survive with substantial help from Government:

• Renewable fuels standard requires U.S. refineries and filling stations to use 28,500 ML/yr of bio-fuels by 2015 with1,000 ML coming from cellulose.

• Duty on imported EtOH: $0.14/liter

• EtOH exempted from Gasoline Tax in many States

• EtOH Excise Tax Exemption - $0.13/liter

• Other state and Federal subsidies.

Inefficient way to produce transport fuels

• Pimentel and others argue that it takes more energy to produce a liter of ethanol from corn than the energy content of that liter of EtOH.

• USDA disagrees strongly with that view, but the energy pathway efficiency is still very low.

Brazil Issues

Very small domestic market; growth of Brazis EtOH industry is highly dependent on exports

High import duties in the US and elsewhere are limiting EtOH exports from Brazil.

Fuel vs. Food issue resurfaces whenever sugar prices jump or if a drought or natural disaster affects sugar cane crops.

Domestic regulations related to blending ratios continue to create government-caused supply fluctuations.

Water and land required to expand sugar cane output = significant local environmental impacts.

8. The US ethanol industry is concentrated in the mid-west where feedgrains are grown

1995 data

9. Br 10. Enzymatic Hydrolysis: The Way Forward?

New crops and conversion technologies needed for EtOH to have a significant impact on fossil fuel usage

US corn-to-EtOH program has limited potential and is too expensive. Without huge subsidies, it would collapse.

Growth in Brazils EtOH industry is limited by high import duties in US and elsewhere and environmental impacts of expanding sugar cane plantations

Technology of the Future: Enzymatic Hydrolysis

11. Enzymatic Hydrolysis: Has its time finally come?

Short answer is we are very close but.

• Cellulose-to-biomass technologies still need further improvement

• Resource selection must be sensibly done.

• Reliability and seasonality of biomass fuel supplies remains a continuing question.

12. Enzymatic Hydrolysis

But, to achieve substantial increases in EtOH production, all countries, including Brazil, will need to turn to ligno-cellulosic biomass as an additional feedstock.

In the US, EtOH production is expected to plateau at 40,000 ML by 2010, unless biotech firms develop new varieties of corn with higher yields/acre or higher levels of fermentable starch levels.

US EtOH production can increase to 225,000 ML if cellulosic biomass is relied on as a future feedstock.

Before this feedstock can play a significant role, improvements in process economics are needed

13. Progress in Commercializing Enzymatic Hydrolysis

Two of the Worlds largest enzyme producers Genecor International and Novozyme- have worked under a US DOE contract to achieve a 50-fold reduction in the cost of cellulase.

US DOE has claimed that:

• 10-fold cost reduction was achieved in 2002

• 30-fold improvement was achieved by 2004.

Examples:

• Genecor has developed enzymes that allow a simplified process for producing EtOH from cellulose.

• Novozyme is building a demonstration plant in Nebraska that will use its brand of improved enzymes.

Other technological breakthroughs expected to reduce the cost of producing EtOH from cellulose such that enzymatic hydrolysis will become the cost effective option for producing EtOH in most countries

Thailand, Malaysia, the Philippines and most other ASEAN countries can then expand their EtOH programs to include agricultural wastes

Given the abundance of agricultural wastes in most ASEAN countries, the shift in feedstocks should result in EtOH finally achieving a significant displacement of oil imports.

14. Map 1 Growth of cellulose-to-ethanol industry will be helped in US by the favorable location of ethanol plants to crop residues 15. Map 2 Potential location of Ethanol Plants in 2025 with application of enzymatic hydrolysis technologies Source: Michael Wang, Argonne National Lab, USA 16. Even Brazil land of low cost sugar cane- has tremendous potential to produce EtOH from cellulosic wastes.

436 million tonnes of sugarcane were harvested in 2005 from

~ 5 million hectares

• 55% used for sugar and 45% for EtOH

• 16 billion liters of fuel ethanol produced

122 million tonnes of bagasse was produced in 2005

• Currently being burned in inefficient CHP plants, capable of producing 7.6 GW of electric capacity

• With improved enzymatic hydrolysis systems, Brazil can theoretically produce 25 billion liters of EtOH from its bagasse

• Even if only 30% of bagasse and cane waste is converted to EtOH, Brazil could still produce 6.6 billion additional liters of EtOH

• Plus the lignin, which is left over after cellulose is converted to EtOH can provide all the electricity & steam requirements of sugarcane-to-EtOH plants

17. For each tonne of sugar cane, only 6%-9% is in the form of sucrose. Rest: high moisture fermentable waste 18. Summary

Using increased amounts of food crops and arable land to produce more ethanol will raise Food vs. Fuel debate to level that will render current ethanol production methods as unsustainable.

Subsidies in US are neither sustainable nor desirable.

Way forward is to use enzymatic hydrolysis to convert cellulosic wastes into ethanol at a reasonable cost.

Process produces lignin as a by-product, which can be used to produce power and steam, effectively allowing ag industry to have his cake and eat it too.

Farmers can earn extra income (some, not much) from selling their residues and wastes to enzymatic hydrolysis plants