Biofuels:Thinkoutsidethe

Barrel
VinodKhosla
Jan2006

1
Ver 3.2

AssertionsforAlternativeFuels

We dont need oil for cars & light trucks

We definitely dont need hydrogen!

We dont need new car/engine designs

We dont need new distribution systems

Rapid (3-5 yrs) changeover of automobiles is possible!

Shift has little cost to consumers, automakers, government

2

Not so Magic Answer: Ethanol

Cheaper Today in Brazil!

3

WhyEthanol

Todayscars&todaysfueldistribution

Todaysliquidfuelinfrastructure

Leveragescurrenttrends

Flexfuelvehiclesproveninmillions!
Hybriddrivetraincompatible
LeveragesLightweighting&improvedefficiencyofcars

Alreadypartoffuelmarketthroughblending

JustaddE85fuelcategory(thirdpump!)
Existingethanolmarketinthebillions&growing!
Incrementalintroductionpossible&UNDERWAY!
Ethanolischeaperthangasolineatcurrentprices
4

WhyEthanol

MultipleIssues,OneAnswer

Cheaperfuelforconsumers($20b+perNRDC)

Moreenergysecurity&diversifiedsources

Significant(80%95%)carbonemissionreduction(with
cellulosicethanol)

Higherfarmincomes&ruralemployment

FasterGDPgrowth,SmallerImportBill,Lowerworldwide
energyprices
5

WhyEthanol
SignificantUpsideToday&Tomorrow

NewCropuses;Useagriculturalwaste

ImprovedCropyield

ImprovedProcesstechnology

Bioengineeredcrops,enzymes,.

economic/environmental/landuseupsidethrutechnology/scale/

Multiplesourcesincludingcleancoal,naturalgas,animalwaste

Customethanolengines:Higherperformancethangasoline!

Biodiesel&heavytrucks
6

WhyNow

Brazilhasprovenmodelofethanol

LowriskautoconversionmodeltoFFV

Initialfuelmarketsthrublendingreducedproductionrisk

ExcesssupplyforkickstartavailablefromBrazil

Highoilpricesaccommodatestartupcostsofethanol

Breakevenatscalelikelytobe~$35/barrel

Carbonconsiderationswillfurtherimproveeconomics

20%/yr+increaseofUSethanolproductionalreadyinprocess

Significantincreaseinfarmprofitsfeasiblebetteruseforfarmsubsidies

4m+USFFVvehicles,4bgalsethanolsupply,blendinginplace,.

ManyUScarmodelsavailableatsameprice(FFVorgasoline)
7

FlexFuelVehicles(FFV)

Almostnoincrementalcosttoproduce&lowrisk
Confidenceonfuelavailabilitytoconsumers
Easyswitchoverforautomobilemanufacturers
4million+FFVcarsintheUStoday(toearnCAFEcredits)
Consumerchoice:useEITHERethanolorgasoline(norisk)
FullycompatiblewithHybridcars
BrazilProof:newcarsalesfrom4%FFVto~70%in3years!
Growthinethanolusedrivenbylowpricesofethanol
Brazil:$50bonoilimportssavings
8

InterestGroups

USAutomakers:lessinvestmentthanhydrogen;compatiblewithhybrids

AgriculturalInterests:moreincome,lesspressureonsubsidies;new
opportunityforCargill,ADM,farmerscooperatives,

EnvironmentalGroups:faster&lowerrisktorenewablefuture;
alignedwithinsteadofagainstotherinterests

OilMajors:equippedtobuild/ownethanolfactories&distribution;lower
geopoliticalrisk,financialwherewithaltoownethanolinfrastruct.;diversification

Distribution(old&New):nosignificantinfrastructurechange;
potentialnewdistributionsources(e.g.Walmart)

InterestGroups:ActionItems

USAutomakers:100%flexfuelnewcarrequirementinexchangeforsome
regulatoryrelief

AgriculturalInterests:100%flexfuelnewcarsbutnotaxonimported

ethanol;transfersubsidiesfromrowcropstoenergycrops(equivalent$/acre)

EnvironmentalGroups:taxcreditforcellulosicethanol&debt
guaranteesfornewcellulosicethanoltechnologies

OilMajors:newbusinessopportunity?

Distribution(old&New):assistethanolthirdpumpstrategy;promote
ethanoldistributionatdestinationsites(e.g.Walmart)&fleets

10

PrioritizedActionItems

RequireallcarstobeFlexFuelVehicles(FFVs)

RequireE85ethanoldistributionat30%ofgasstations

Assistdebtfinancibilityoffirst5plantswithanynewtechnology

Allowfleetstoimportethanolwithouttaxburden

RequireautomakerstopromoteethanolusagetogetCAFcredit

Switchsubsidies(same$/acre)fromexistingtoenergycrops

Allowcarboncreditsforcellulosicethanol

Fullyfundcurrentlegislation&reduceearmarks!

Fundfuturedemandwithimprovedefficiencyrequirements!

Establishearlydemandbycreatingstrategicethanolreserve
11

RISK:Oilvs.Hydrogenvs.Ethanol
Oil

Hydrogen

Biofuels

EnergySecurityRisk

High

Low

Low

CostperMile

Med

MedHigh

Low

InfrastructureCost

VeryLow

VeryHigh

Low

TechnologyRisk

VeryLow

VeryHigh

Low

EnvironmentalCost

VeryHigh

MedLow

Low

ImplementationRisk

VeryLow

VeryHigh

Low

InterestGroupOpposition

VeryHigh

High

Low

PoliticalDifficulty

High

Low

TimetoImpact

Veryhigh

Low
12

Objections

LandUse

Traditionalnumberscitedareforcornethanol
NRDC2050estimate:114macresrequiredforourneeds
CeresCorpEstimate:100m+acresofexportcrop&CRPlandsavailable
DOEStudyestimatesavailabilityof1.3billiontonsofbiomass
Conversionof73macrestosoybeansprovesabilitytoswitchlanduse
Woolsey/Shultzestimateof60macres(RockyMountainInstituteestimate)

EnergyBalance(EnergyOUTvs.IN)

Cornethanolnumbers~1.21.8X
.butrealityfromnoncornethanolis
Sugarcaneethanol(Brazil)~8X
Cellulosicethanol~48X
Petroleumenergybalanceat~0.75

Environmentalpollution

E85betterinmostrespects
E10gasolinehasacceptableemissionsperformanceinnewervehicles&FFVs
E10gasolinebetterthanMTBE+Gasolinetoday

13

Land Use

14

LandUse:Reality

NRDC:114macrescanmeetourtransportationfuelneedsin2050

Assumesonly2Xswitchgrassyieldimprovement(10tons/acre)
Assumesethanolproduction@100gals/drytonoffeedstock

JimWoolsey/GeorgeShultz(RockyMountainInstitute)estimate60macres

73macresofsoybeancanbeusedforcoproductionofethanol&animalprotein

20tons/acrex100gals/tonx39macres=78bgals/yrfromCRPlands!

LeeLynd:Reimagineagriculturetoaccommodateenergyproduction
Replaceexportlandswithimportreplacementlands

Miscanthus (www.bical.net or www.aces.uiuc.edu/DSI/MASGC.pdf)

New Energy crops (www.ceres.net )
39macresofCRPLands

Agriculturalwasteproducts&animalwaste

Leelynd:UsingCurrentlyManagedLandsforEnergyProduction
ThermochemicalEthanolfrommunicipalsewage/coal/animalwaste

15

LandUse:Reality

New Feedstocks Miscanthus, Switchgrass,

NRDC Estimates : Growing Energy Report

Prof Lee Lynd: Bioenergy from Currently Managed Lands

DOE Report: Potential for Billion Tons of Biomass

Futures: New Approaches, New Technologies

Prof. Lee Lynd: Re-imagining Agriculture

Ceres New technology Approaches

16

SwitchGrassasFeedstock

NaturalprairiegrassintheUS
Enrichessoilcarboncontent;lessfertilizer;lesspesticide
Lesswaterpollution(nitrogenrunoff)
DramaticreductioninCO2,otherreductions
Morebiodiversityinswitchgrassfields(vs.corn)
Dramaticallylesstopsoillosscomparedtocornfields
Significantpotentialforimprovementofswitchgrasscrops
Highpotentialforcoproductionofanimalfeed

Currently~50%ofallagriculturallanduse

Minimalextralandrequiredforfuelproduction

and other varied crop possibilities exist

the worlds best agricultural lands were once grasslands

17

Miscanthus as Feedstock?

20 tons/acre? (www.bical.net)
10-30 tons/acre (www.aces.uiuc.edu/DSI/MASGC.pdf)

18

Economics of Miscanthus Farming

19
Source: http://www.aces.uiuc.edu/DSI/MASGC.pdf

Characteristics of an Ideal Crop: Miscanthus

20
Source :http://www.aces.uiuc.edu/DSI/MASGC.pdf

Bioenergy From Currently Managed Lands

Expanded use of winter cover crops & breeding of new (winter & rotation) crops

Harvest of agricultural residues, particularly in conjunction with multi-year crop rotations.

Substitute crops that provide food/feed while also providing feedstocks for energy production.

Breeding crops to increase co-production of cellulosic feedstocks. (soybeans 2->5 tons/acre)

Changed cultivation practices for existing crops to increase recovery of cellulosic residues.
(reduced till or no till; rotation of corn with grasses; etc)

Increases in productivity of crops, making currently-managed lands avail for bioenergy.

Changes in demand for exports (+ or -).

Pretreatment of cellulose-rich biomass to make calories more available to feedlot animals

Increased hay productivity on underutilized pasture land.

Increased hay production/harvest from CRP land.

Recovered forest residues, potentially in relation to prevention of catostrophic fires.

Dietary change

21
Source: Lee R. Lynd, Producing Cellulosic Bioenergy Feedstocks from Currently Managed Lands; October 7, 2005

Three Important Sources

Production of corn stover and stalks from other grains (wheats, oats) totals well over 250 million dry tons. A
combination of different crop rotations and agricultural practices (e.g. reduced tillage) would appear to have
potential for a large fraction of these residues to be removed. For example, although complete removal of corn
stover would result in a loss of about 0.26 tons of soil carbon per year, cultivation of perennial crops (e.g.
switchgrass, Miscanthus) adds soil carbon at a substantially higher rate. Thus, a rotation of switchgrass and corn
might maintain or even increase soil fertility even with 100% stover removal. This, however, brings up questions
about the length of time land might be grown in each crop, since switchgrass would benefit from longer times to
distribute the cost of establishment while corn would benefit from short times to maintain productivity and decrease
losses due to pests. It is likely that some crop other than switchgrass as it exists today would be best for
incorporation into a relatively high frequency rotation with corn. Targets for crop development could be identified
and their feasibility evaluated.

Stovers: 250m tons

Winter Crops: 300m tons

Winter cover crops grown on 150 million acres (@2tons/acre) = 300 million tons of cellulosic biomass.
In recent years, U.S. soybean production has averaged about 1.2 tons of dry beans per acre annually. Given an
average bean protein mass fraction of about 0.4, the annual protein productivity of soybean production is about 0.5
tons protein per acre. Perennial grass (e.g. switchgrass) could likely achieve comparable protein productivity on
land used to grow soybeans while producing lignocellulosic biomass at about a rate of about 7 dry tons per acre
annually. The limited data available suggest that the quality of switchgrass protein is comparable to soy protein, and
technology for protein extraction from leafy plants is rather well-established. The 74 million acres currently planted
in soybeans in the U.S. could, in principle, produce the same amount of feed protein we obtain from this land now
while also producing over 520 million tons of lignocellulosic biomass. Alternatively, if new soy varieties were
developed with increased above-ground biomass (option 4, Table 1), this could provide on the order of 350 million
tons of lignocellulosic biomass although soil carbon implications would have to be addressed.

Soybeans: 350m tons

Source: Lee R. Lynd, Producing Cellulosic Bioenergy Feedstocks from Currnently Managed Lands,

22

Potential for Billion Tons of Biomass

In the context of the time required to scale up
to a large-scale biorefinery industry, an annual
biomass supply of more than 1.3 billion dry
tons can be accomplished with relatively
modest changes in land use and agricultural
and forestry practices
Technical Feasibility of a Billion-Ton Annual Supply
US Department of Energy Report , April 2005.
http://www.eere.energy.gov/biomass/pdfs/final_billionton_vision_report2.pdf

. Or a 100billion++ gallons per year!

23

24

Biomass Will Make a Difference

a member of OPEC?!

Turning South Dakota into

Today

Tomorrow

44 Million

44 Million

Tons/acre

15

Gallons/ton

60

80

Thousand
barrels/day

857

3,429

Farm acres

Thousand barrels/day
Saudi

9,101

South Dakota

3,429

Nigeria

2,509

UAE

2,478

Kuwait

2,376

Iraq

2,011

Libya

1,515

Qatar

818

or ~30% of U.S. transportation fuel supply!!

Source: Ceres Company Presentation

25

Land Is Not Scarce

US Acreage
Total = 2,300M acres

U.S. Cropland Unused or Used for Export Crops

In 2015, 78M export acres plus 39M CRP acres could produce 384M
gallons of ethanol per day or ~75% of current U.S. gasoline demand
26
Source: Ceres Company Presentation

Farmers Are Driven By Economics

Per acre economics of dedicated biomass crops vs. traditional row crops

Biomass

Corn

Wheat

Grain yield (bushel)

N/A

162

46

Grain price ($/bushel)

N/A

$2

$3

Biomass yield (tons)

15

Biomass price ($/ton)

$20

$20

$20

Total revenue
Variable costs

$300
$84

$364
$168

$178
$75

Amortized fixed costs

$36

$66

$36

Net return

$180

$120

$57
27

Source: Ceres Company Presentation

Biomass as Reserves: One Exxon every 10 yrs!!

1 acre

209 barrels of oil*

100M acres

20.9 billion barrels

Proven Reserves (billion barrels)

Exxon Mobil

22.20

BP

18.50

Royal Dutch Shell

12.98

Chevron

9.95

Conoco Phillips

7.60

* Assumes 10 yr contract
Source: Energy Intelligence (data as of end of 2004)

28
; Ceres Company Presentation

Energy Balance
&
Fossil Fuel Use Reductions

29

Fossil Fuel Use

Legend

EtoH
Allo.
Disp.

= Ethanol
= Allocation
= Displacement

30

Well-to-Tank
Well-to-Tank Energy
Energy Consumption
Consumption
BTU per Million BTU Fuel Delivered
Petroleum
Natural Gas

Renewable/
Electricity

31
Source: Well-To-Wheel
Energy Consumption and Greenhouse Gas Analysis, Norman Brinkman, GM Research & Development

Petroleum & Fossil Fuel Reduction Benefits

32

33

Environmental Issues

34

Environmentalissues

Carbonemissionreductionof80%++forlighttransportation

Zerosulphur,lowcarbonmonoxide,particulate&toxicemissions

Coproductionofanimalprotein&cellulosicbiomass

EnergyCrops(Switchgrass):Carbonenrichmentofsoil(immediate)

Allowsexistingcroplandtoproduceourenergyneeds
Reducescostofanimalfeed&energy

28Xlowernitrogenrunoff
75120Xlowertopsoilerosion(comparedtocorn)
25Xmorebirdspecies
Resistanttoinfestation&disease;lowerpesticideuse

Potentialforcoalethanolassupplementarysource(Cleancoal)
35

ol
in
D ec
ie
o
se nv
e
l
D
co nti
ie
o
s
G
as el nve na
nt l
ol hy
io
br
N in
n
ap e
id
ht fue el al
ha l
ec
c
Fi
tr
ic
sc fue ell
h
l
he
c y
r T ell bri
hy d
r
C op
b
N
G sch rid
LH c
d
M
2 onv ie
et
ha fue en se
no
l c tio l
el n
lf
l h al
u
C
e
l
H
ce ybr
2
id
fu ll
Eel hy
85
ce b r
co
i
ll
hy d
nv
br
en
id
tio
Et
n
ce han al
ll o
hy l f
br ue
id l
El
CH ect
hy 2 F roly
br C si
s
id

G
as

Well-to-Wheel
Well-to-Wheel Greenhouse
Greenhouse Gases
Gases

g CO2/mile
(fuel production
and vehicle) 800
600

Petroleum
Natural Gas
Renewable/
Electricity

Tank-to-Wheel
Well-to-Tank

Better
400

200

36

Source: Well-To-Wheel
Energy Consumption and Greenhouse Gas Analysis, Norman Brinkman, GM Research & Development

37

Emission Levels of Two 2005 FFVs

(grams per mile @ 50,000 miles)

Vehicle Model

Fuel

NOx
(CA std.=0.14)

NMOG
(CA std.=0.10)

CO
(CA std. =3.4)

2005 Ford
Taurus

E85

0.03

0.047

0.6

Gasoline

0.02

0.049

0.9

E85

0.01

0.043

0.2

Gasoline

0.04

0.028

0.3

2005
MercedesBenz C 240

source: California Air Resources Board, On-Road New Vehicle and Engine Certification Program,
Executive Orders; http://www.arb.ca.gov/msprog/onroad/cert/cert.php

38

EthanolBlends:Emissions
E6 (low ethanol blends)

Low Nox in modern vehicles with oxygen sensors (higher in older vehicles)
Increased RVP and increased VOCs (and hence ozone formation)
Increased permeation emissions in older vehicles
Reduced CO emissions (not enough to offset increased ozone via VOCs)
but
Reduced permeation emissions ( thicker hoses & plastics) in newer vehicles
California Low Emissions Vehicle II program reduces permeation and
evaporative emissions (part of 2007 Federal Law)

E85

Low Evaporative emissions (Lower RVP)

Expected Low Permeation emissions in FFVs
Low Nox in modern vehicles with oxygen sensors

reasons to not like ethanol are disappearing!

Source: Personal Communications

39

FuelIssues

E10
Usableintodaysengine
Meetsmostemissionsrequirements

E85
Easyswitch
6080%+reductionofcarbonemissions(vs.gasoline)
Exceedshydrogenfuelcellcarbonreductions

Continuousproductiontechnologyimprovementslikely
Cost
Sources
Environmental
40

More Technology to Come.

Changes that will have effects comparable to those of the
Industrial Revolution and the computer-based revolution are
now beginning. The next great era, a genomics revolution, is
in an early phase.
Thus far, the pharmacological potentials of genomics have
been emphasized, but the greatest ultimate global impact of
genomics will result from the manipulation of the DNA of
plants.
Ultimately, the world will obtain most of its food, fuel, fiber,
chemical feedstocks, and some of its pharmaceuticals from
genetically altered vegetation and trees."
Philip H. Abelson, Editor
Science, March 1998
41

Technology Improvements

Bioengineering

Enzymes
Plantengineering

Energycrops

Switchgrass
Poplar
Willow
Miscanthus

Coproductionofanimalprotein&cellulose/hemicellulose

Process&ProcessYields

ProcessCost
Pretreatment
Coproductionofindustrialchemicalstoreducenetfuelcosts
ProcessYieldgals/dryton
Consolidatedbioprocessing

Other:outoftheboxtechnologies
42

Ceres: What one company is doing

43

Ceress Traits Address all Parts of Equation

Parts of the Equation

Ceres Traits & Technologies

Acres

Tons per acre

Dollars per acre

Gallons per ton

Capital & Vari. cost

Co-products
Source: Company Presentations

Tolerance to chronic and acute drought

Drought recovery
High salt tolerance
Tolerance to heat shock
50% improvement in seedling growth under cold conditions

500% increase in biomass in arabidopsis in the greenhouse

300% increase in rice in the field
30% increase in CO2 uptake (a measure of photosynthetic effic.)

Significant reduction in required nitrogen

20% improvement in photosynthetic efficiency on low nitrogen
5% increase in root biomass
Decreased lignin
Increased cellulose

Proprietary gene expression system

Strong constitutive promoters
Tissue specific and inducible promoters

Up to 80-fold increase in desired plant metabolites

Ability to express entire metabolic pathways in plants

44

Expanding Usable Acreage

Drought tolerance

Heat tolerance

Cold germination

Drought recovery

Source: Company Presentations

Drought Inducible Promoters

Salt tolerance

45

CO2 uptake

Increasing Tons per Acre

Light density

Photosynthetic Efficiency
Increased biomass

Shade tolerance

Source: Company Presentations

Flowering time

Stature control

Herbicide tolerance

46

Reducing Dollars per Acre

Nitrate Content in Shoots
4

Control

N (ng/ mg DW)

3.5

Transgenic

3
2.5

1.5
1
0.5
0

Time Point

p < 0.001

Nitrogen partitioning
Nitrogen uptake

Photosynthetic efficiency
under low nitrogen

Source: Company Presentations

Increased root biomass

47

Increasing Gallons per Ton

Gallons of ethanol per dry ton of feedstock*

Composition
(How much carbohydrate is there?)

*Data represents theoretical yields as reported by Iogen

Source: Company Presentations

Plant structure
(How easy is it to access and digest?)

48

Reducing Cost Through Enzyme Production

Activation Line

Target Line
UASn

Trait

UASx

Sterility

UAS Marker

P1

Promoter
Protein
Sterility
Factor

Transcription
factor

Fluorescent
marker

Ceres proprietary gene expression system

Flower

Seed
Stem
Leaf
Root
Ceres
promoter

Industry
standard
promoter

Source: Company Presentations

Tissue-specific promoters

49

Ceres : Developing Commercial Energy Crops

Generating Plant Material for DNA Libraries
to be Used in Molecular Assisted Breeding

Transformation with Ceres Traits

Embryogenic
callus

1 day after trimming

Shoot
regenerated
from callus

Plant
regeneration
Re-growth after 15 days

Ceres expects to have proprietary commercial varieties ready for

market in 2-3 years and transgenic varieties in 5-7
Source: Company Presentations

50

Other Technology Companies

Genecore
Novazyme
Diversa
Iogen
BCI
Mascoma
Canavialis (www.canavialis.com.br):
.????
51

Hydrogen vs. Ethanol Economics

Raw Material Costs: cost per Giga Joule (gj)

Electricity @$0.04/kwh = $11.2/gj (Lower cost than natural gas)

Biomass @$40/ton = $2.3/gj (with 70% conversion efficiency)

Hydrogen from electricity costly vs. Ethanol from Biomass

Hydrogen from Natural Gas no better than Natural Gas

Cost multiplier on hydrogen: distribution, delivery, storage

Higher fuel cell efficiency compared to hybrids not enough!

Hydrogen cars have fewer moving parts but more sensitive, less
tested systems and capital cost disadvantage

Reference: The Future of the Hydrogen Economy ( http://www.oilcrash.com/articles/h2_eco.htm#8.2 )

52

Hydrogenvs.Ethanol

Ethanol:USautomakersbalancesheetsillequippedforhydrogenswitchover

Ethanol:Nochangeininfrastructureinliquidfuelsvs.gaseousfuels

Ethanol:Currentenginemanufacturing/maintenanceinfrastructure

Ethanol:switchoverrequireslittlecapital

Ethanol:AgriculturalSubsidiesareleveragedforsocialgood

Ethanol:Fasterswitchover35yearsvs1525yrs

Ethanol:Lowtechnologyrisk

Ethanol:Incrementalintroductionofnewfuel

Ethanol:Earlycarbonemissionreductions
53

Strategy&Tactics

Choice:Oilimportsorethanolimports?

GDPbeyondfoodtofood&energyruraleconomy

Add$550BtoruralGDP

Betteruseforsubsidiesthroughenergycrops

Relyonentrepreneurstoincreasecapacity

Relyonbiotechnology&processtechnologytoincreaseyields.

Increasedethanolusemandatesalreadyinplace

~20%/yrproductioncapacityincreaseplansalreadyinprocess!

Ethanolfuelcellspossiblyafterethanoldistributionisplace(ifneeded)
54

Brazil: A Role Model

55

Can Rapid Adoption of FFV Happen?

Brazil:FFVMarketShareofLightVehicleSales

50% in May05

.from 4% in early 2003 to 70% in Dec. 2005!!!

56

Ethanol: Learning Curve of Production Cost

100

( Oct. 2002) US$ / GJ

Market
Conditions
Ethanol
(producers BR)
1980
1986

1996

10
1990

2002
1993

1999

Gasoline
(Rotterdam)

1
0

50000

100000

150000

Accumulated Ethanol Production ( 1000 m3)

200000

250000

57

(J Goldemberg, 2003)

Brazil sugar-cane/ethanol learning curve

Liters of ethanol produced per hectare since between 1975 to 2004

??

Rendimento Agroindustrial Brasil

6500
6000

(em litros de lcool hidratado equivalente por hectare)

5931

5500
5000
4500
4000
3500
3000
2500
2000

+3,77% aa em 29 anos
2024

1500

08 Nov 2005

Fonte: Datagro

Nastari / Datagro @ Prolcool 30 anos

11

58

ConsumerPriceRatio

* So Paulo (SP)

Percentage: Hydrated x Gasoline

72,00%

67,00%

62,00%

57,00%

52,00%

47,00%

42,00%

37,00%

Source: Honorable Roberto Rodrigues, Minister of Agriculture, Brazil

59
SOURCE: MAPA
(Assessing Biofuels Conf., June 2005)

Brazil:EthanolFacts

Employment: Gasoline/Ethanol is 22:1 (BrazilANFAVEA)

Ethanol ~40% of total consumption of spark ignition

cars (non-diesel)

VW planning on a phase out of all gasoline cars in 2006?

Canavialis (www.canavialis.com.br): plant genetics

company developing an "energy cane" (more cellulose,
less sucrose)
60

Bioethanol Relative Production Cost

61
Source: The Economist, New Energy Finance, DOE, UK Petroleum Industry Association (via: Imprimatur Capital)

BioDiesel Production Cost

62
Source: The Economist, New Energy Finance, DOE, UK Petroleum Industry Association (via: Imprimatur Capital)

Status: United States

63

Ethanol Capacity Expansion is

Underway

64

Ethanol FFVs Are Here!

Californias Motor Vehicle Population
Vehicle
Type

Gasoline

Diesel

Ethanol Hybrid
FFV
gas/
elec

Light-Duty

24,785,578

391,950

257,698

Heavy-Duty

372,849

471,340

--

CNG

Electric

LPG/
other

H2

45,263

21,269

14,425

538

13

--

5,401

806

1,172

--

source: California Energy Commission joint-agency data project with California Department of Motor Vehicles. Ethanol FFV data as of April 2005; all other
data as of October 2004.

65

Costs
Wet Mills

Dry Mills

Overalll
Weighted Average

Electricity & Fuel

$0.112/gallon

$0.131/gallon

Operating Labor,

$0.124/gallon

$0.109/gallon

Yeast, Enzymes, Chemicals and Other

$0.114/gallon

$0.090/gallon

Administration, Insurance and Taxes

$0.038/gallon

$0.037/gallon

All Other Costs

$0.072/gallon

$0.051/gallon

Total Cash Costs

$0.46/gallon

$0.42/gallon

$1.118/gallon

Repairs and Maintenance

Combined with Net

$0.48/gallon

$0.53/gallon

$0.94/gallon

NET cost of corn

Depreciation (plant & Equip)

$0.10-$0.20

$0.10-$0.20

Note: Capital costs of ethanol production are estimated to be between

$1.07/gallon to $2.39/gallon, varying with facility type, size, and technology.

66
Source: Encyclopedia of Energy (Ethanol Fuels , Charlie Wyman)

Ethanol vs. Gasoline

6
Comparative Results Between Ethanol and
Gasoline Are More Relevant to Policy Debate

0.74MBTU Fossil Energy/1MBTU out

$80/ton of corn (100gal ethanol) = $0.20/gal raw material costs

1.23\MBTU Fossil Energy/1MBTU out

$60/barrel of oil (42 gals) = $1.43/gal raw material costs

67
Source: Prof. Dan Kammen (UC Berkley, Michael Chang (Argonne)

Cost of Ethanol vs. Price of Gasoline

($ per gallon of gasoline equivalent)

~$2

1 gallon gasoline equivalent fuel = 1.3 gallons of ethanol

Source: Worldwatch Institute

~$1.60

~$1.30

68

U.S. Ethanol Production Facilities

Source: Renewable Fuels Association

69

U.S. Fuel Ethanol Production Capacity

(Dec 2004)
U.S. FUEL ETHANOL PRODUCTION CAPACITY
DECEMBER 2004

Rank
Company/ Producer
1ADM
2Aventine Renewable Energy
3Cargill, Inc.
4Abengoa Bioenergy Corp.
5New Energy Corp.
6VeraSun Energy Corporation
7MGP Ingredients, Inc.
8Tate & Lyle
9Chief Ethanol
10AGP
11-70 Remaining 60
companies/ producers

Total Existing Capacity

1
Total Under Construction
Total Capacity 2005-2006

# of
Capacity
Locations Ownership (million GPY)
7
Corp.
1,070
2
Corp.
140
2
Corp.
118
3
Corp.
110
1
Corp.
100
1
Corp.
100
2
Corp.
78
1
Corp.
67
1
Corp.
62
1
Farmer
52
Only 1
36 of the 60 Total: 1,694
producer has are farmer- Range: 50 - 0.7
more than 1
owned
Mean: 28
Median: 30
82
3,582
16
754
98
4,336

% of
Existing
Capacity
29.9%
3.9%
3.3%
3.1%
2.8%
2.8%
2.2%
1.9%
1.7%
1.5%
47.0%

100.0%

Source: Renewable Fuels Association

70

U. S. Ethanol Production Capacity

Under Construction (Dec 2004)
U.S. ETHANOL PRODUCTION CAPACITY - UNDER CONSTRUCTION
DECEMBER 2004
Capacity
Rank
Company/ Producer
Location
Ownership (million GPY)
1
VeraSun Energy Corp.
Ft. Dodge, IA
Corp.
110
2
Central Iowa
Goldfield, IA
Farmer
50
3
Illinois River Energy
Rochelle, IL
Corp.
50
4
Lincolnway Energy
Nevada, IA
Farmer
50
5
Northstar Ethanol
Lake Crystal, MN
Corp.
50
6
Voyager Ethanol
Emmetsburg, IA
Farmer
50
7
Granite Falls Energy
Granite Falls, MN
Corp.
45
8
Amaizing Energy
Denison, IA
Corp.
40
9
Bushmills Ethanol
Atwater, MN
Farmer
40
10
Mid-Missouri Energy
Malta Bend, MO
Farmer
40
11
United WI Grain Producers
Friesland, WI
Farmer
40
12
Western Wisconsin
Boyceville, WI
Farmer
40
13
East Kansas Agri-Energy
Garnett, KS
Farmer
35
14
Panhandle Energies
Dumas, TX
Corp.
30
15
Pine Lake Corn Processors
Steamboat Rock,
Farmer
20
IA
16
Liquid Resources of Ohio
Medina, OH
Corp.
4
Total Under Construction
754
Total Existing Capacity
3,582
Total Capacity 2005- 2006
4,336

Source: Renewable Fuels Association

71

Energy Bill 2005

72

TheNumbers

Ethanolcosttoday:~$0.75/gal(Brazilianethanolwholesale)

E85gasolineequivalentblendedcost:~$1.30/gal(US)

Gasolinecost~$2.00/galwholesale

Longtermethanolpricepotentialof$0.60gasoline
equivalent

NRDC2050Forecast:165billiongalsofethanolfrom
existingcroplandwhilemeetingcurrentagriculturalneeds!

$40/tonofextraincomeforfarmersforwastebiomasslower
governmentsubsidiesforpricesupport(512tons/acreyield)
73

STATESCANHELP
Example:Pennsylvania

Ethanolofftakecontractsat$1.25/galfor10years
(vs.today'sgasoline@~$2/gal)

ProvidingDemandaggregation

Providingdebttoassistbiofuelplantfinancing

Providingfeedstockpriceguarantees/contracts

74

Unfair Expectations?

Level of cleanliness too high for biofuels : better than

petroleum or 100% Pure

Level of domestic supply expectations : why a 100% domestic

supply initially when petruleum is imported?

Agricultural standards too high: far more rigorous debate on new

crops than on traditional crops?

Debate on subsidy on ethanol but not on the tax on cheapest

worldwide ethanol supply (Brazilian)?
75

Non-Transportation Impacts of Ethanol

Coal & Clean Coal

Biofuels impact on oil prices

Fuel Cells & Stationary Power

76

References

NRDC Report: Growing Energy (Dec 2004)

http://soilcarboncenter.k-state.edu/conference/carbon2/Fiedler1_Baltimore_05.pdf

George Schultz & Jim Woolsey white paper Oil & Security

Rocky Mountain Institute: Winning the Oil Endgame

http://www.unfoundation.org/features/biofuels.asp

http://www.transportation.anl.gov/pdfs/TA/354.pdf

The Future of the Hydrogen Economy ( http://www.oilcrash.com/articles/h2_eco.htm#8.2 )

FuelEthanol:Background&PublicPolicyIssues(CRSReportforCongress,Dec.2004)

77

Comments?

VinodKhosla
vkhosla@kpcb.com
78

ETHANOL:
MARKET PERSPECTIVE
Luiz Carlos Corra Carvalho
Sugar and Alcohol Sectorial Chamber,
Ministry of Agriculture, Brazil

Assessing the Biofuels Option

Joint Seminar of the International Energy Agency,
the Brazilian Government and the
79
United Nations Foundation
Paris, 20 21 June 2005

Consumer Prices Ratio*

* So Paulo (SP)

Percentage: Hydrated x Gasoline

72,00%

67,00%

62,00%

57,00%

52,00%

47,00%

42,00%

37,00%

Source: Honorable Roberto Rodrigues, Minister of Agriculture, Brazil

80
SOURCE: MAPA
(Assessing Biofuels Conf., June 2005

Current Situation
Acoholgasolinemixturesetto25%sinceJuly,2003.
TheautomotiveindustryhaslaunchedflexiblefuelcarsinMarch,2003.
Advantage to alcohol consumption if oil prices are above US$ 35 / per

barrel.

Totalconsumption:~200,000barrels/dayofequivalentgasoline(30,000

gasstations).

~40%oftotalconsumptionofsparkignitioncars(OttoCycleEngines).
May, 2005: for the first time, flexifuel vehicles sales exceeded gasoline

fueledvehiclesales,49.5%against43.3%.

Source: Honorable Roberto Rodrigues, Minister of Agriculture, Brazil

(Assessing Biofuels Conf., June 2005

81

Comparative Energy Balance

Raw Material

Total Energy Ratio

Corn

1,21

Switchgrass

4,43

Sugarcane

8,32

82
Source: Leal, Regis, CO2 Life Cycle Analysis of Ethanol Production and Use, LAMNET, Rome, may 2004

LIFE CYCLE GHC EMISSIONS IN ETHANOL

PRODUCTION AND USE
Kg CO2 equiv./ t cane
Average

Best Values

Emissions

34,5

33,0

Avoided Emissions

255,0

282,3

Net Avoided Emissions

220,5

249,3

Anhydrous Ethanol

2,6 to 2,7 t CO2 equiv./m3 ethanol

83

Source: Leal, Regis, CO2 Life Cycle Analysis of Ethanol Production and Use, LAMNET, Rome, may 2004

Ethanol: LEARNING CURVE

(J Goldemberg, 2003)

100

( Oct. 2002) US$ / GJ

Market
Conditions
Ethanol
(producers BR)
1980
1986

1996

10
1990

2002
1993

1999

Gasoline
(Rotterdam)

1
0

50000

100000

150000

Accumulated Ethanol Production ( 1000 m3)

200000

250000

84

ETHANOL AND EMPLOYMENT

( IN THE PRODUCTION OF THE VEHICLE AND OF FUEL)

VEHICLES

RATIO OF
EMPLOYMENTS

ETHANOL
C GASOLINE

21,87
6,01

A GASOLINE

Considering that an ethanol driven vehicle consumes, on average,

2.600 litres of ethanol per year ( one million litres of ethanol, per
year, generates 38 direct jobs );for gasoline, spends 20% less fuel
( one million litres of gasoline, per year, generates 0,6 direct jobs);
C gasoline contains 25% ethanol.
Source: Copersucar/Unica/ANFAVEA/PETROBRAS

85

86

The Ethanol application as

vehicular fuel in Brazil.

Brazilian Automotive Industry Association - ANFAVEA

Energy & Environment Commission
Henry Joseph Jr.
87

Brazil:FFVMarketShareofLight
VehicleSales

.from 4% in early 2003 to 67% in Sept. 2005

88

89

3. Brazilian Domestic Production

of Vehicles
Passenger Cars, Light Commercials, Trucks and Buses

2003

Brazil:
10th World Production
1.828.000
vehicles / year

Source: AAMA, OICA, AN

FIA, IMT, INA, ANFAVEA

Vehicle Modifications
Carburetor

Engine

Intake Manifold

Fuel Tank

The material of the carburetor body or carburetor cover

cannot be aluminum or exposed Zamak; if it is, must
be substituted, protect with surface treatment or
anodize;

The engine compression

ratio should be higher;

With new profile and less

internal rugosity, to increase
the air flow;

If the vehicle fuel tank is metallic, the internal surface

of tank must be protected (coated);

Any component in polyamide 6.6 (Nylon) that has

contact with the fuel must be substituted by other
material or protected;
The material of buoy, nozzle, metering jet, floating
axle, seals, gaskets and o-rings must be appropriated.

Camshaft with new cam

profile and new phase;
New surface material of
valves
(intake
and
exhaust) and valve seats.

Must provide higher intake air

temperature.

Any component in polyamide 6.6 (Nylon) that has

contact with the fuel must be substituted by other
material or protected.
Higher fuel tank capacity, due to the higher fuel
consumption.

Catalytic Converter
Electronic Fuel Injection

It is possible to change the kind and amount of noble

metal present in the loading and wash-coating of
catalyst converter;

Substitution of fuel injector material by stainless steel;

New fuel injector design to improve the fuel spray;

The catalyst converter must be placed closer to the

exhaust manifold, in order to speed up the working
temperature achievement (light-off).

New calibration of air-fuel ratio control and new

Lambda Sensor working range;
Any component in polyamide 6.6 (Nylon) that has
contact with the fuel must be substituted by other
material or protected.

Exhaust Pipe
The internal surface of pipe must be protected
(coated);

Fuel Pump
The internal surface of pump body and winding must
be protected and the connectors sealed;
Any component in polyamide 6.6 (Nylon) that has
contact with the fuel must be substituted by other
material or protected.
The pump working pressure must be increased.

The exhaust design must be compatible with higher

amount vapor.

Fuel Pressure Device

Motor Oil

The internal surface of the fuel pressure device must

be protected;
Any component in polyamide 6.6 (Nylon) that has
contact with the fuel must be substituted by other
material or protected.
The fuel pressure must be increased.

New additive package.

Cold Start System

Fuel Filter

Ignition System

The internal surface of the filter must be protected;

The adhesive of the filter element must be
appropriated;
The filter element porosity must be adjusted.

New calibration of advance

control;
Colder
plugs.

heat

rating

spark

Evaporative Emission
System
Due to the lower fuel vapor
pressure, it is not necessary
evaporative emission control.

Auxiliary gasoline assisted start system, with

temperature sensor, gasoline reservoir, extra fuel
injector and fuel pump;
The vehicle battery must have higher capacity.

(Otto Engines)
91

8. Relative Performance of Ethanol

Engines

92

10. Comparative Raw Exhaust

Emission

93

15. Comparative Aldehyde Emission

94

16. Comparative Evaporative

Emission

95

11. The Fossil Fuels

Aquatic Life Breathing

Photosynthesis of Algas

Plants
Photosynthesis

Plants Breathing

Soil and Organisms Breathing

Animal Breathing

Carbon Dioxide at Atmosphere

Vegetable
Garbage

Rooths
Breathing

Fossil Fuels:
Coal, Natural Gas,
Oil

Oceans,
lakes

96

12. The Renewable Fuels

CO2

97

Comparative Vehicle Prices (Brazil)

Ford EcoSport XL
1.6L 8V gasoline
1.6L 8V Flex Fuel
Volkswagen Gol 2d
1.0L 8V Special gasoline
1.0L 8V Special alcohol
1.0L 8V City Total Flex
Renault Scnic Privilge 4d
2.0L 16V gasoline
1.6L 16V Hi-Flex

- 14.859,00
- 15.231,00
-
-
-

7.496,00
7.649,00
8.035,00

- 22.597,00
- 21.540,00
( 1,00 = R$ 2,933)

98

http://www.transportation.anl.gov

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

Wholesale Prices

Source: http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/petroleum_marketing_monthly/current/pdf/pmmall.pdf

116

Projected World Oil Prices (EIA)

117

US Domestic Oil Consumption & Supply

118

Prices of Selected Petroleum Products

119
Source: http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/petroleum_marketing_monthly/current/pdf/pmmall.pdf

Tutorial

http://www.eere.energy.gov/biomass/understanding_biomass.html

120