Cellulosic Ethanol - Economics

Economics

Start-up costs for pilot scale lignocellulosic ethanol plants are high. On 28 February 2007, the U.S. Dept. of Energy announced $385 million in grant funding to six cellulosic ethanol plants. This grant funding accounts for 40% of the investment costs. The remaining 60% comes from the promoters of those facilities. Hence, a total of $1 billion will be invested for approximately 140-million-US-gallon (530,000 m3) capacity. This translates into $7/annual gallon production capacity in capital investment costs for pilot plants; future capital costs are expected to be lower. Corn-to-ethanol plants cost roughly $1–3/annual gallon capacity, though the cost of the corn itself is considerably greater than for switchgrass or waste biomass.

As of 2007, ethanol is produced mostly from sugars or starches, obtained from fruits and grains. In contrast, cellulosic ethanol is obtained from cellulose, the main component of wood, straw, and much of the structure of plants. Since cellulose cannot be digested by humans, the production of cellulose does not compete with the production of food, other than conversion of land from food production to cellulose production (which has recently started to become an issue, due to rising wheat prices.) The price per ton of the raw material is thus much cheaper than that of grains or fruits. Moreover, since cellulose is the main component of plants, the whole plant can be harvested. This results in much better yields—up to 10 short tons per acre (22 t/ha), instead of 4-5 short tons/acre (9–11 t/ha) for the best crops of grain.

The raw material is plentiful. An estimated 323 million tons of cellulose-containing raw materials which could be used to create ethanol are thrown away each year in US alone. This includes 36.8 million dry tons of urban wood wastes, 90.5 million dry tons of primary mill residues, 45 million dry tons of forest residues, and 150.7 million dry tons of corn stover and wheat straw. Transforming them into ethanol using efficient and cost-effective hemi(cellulase) enzymes or other processes might provide as much as 30% of the current fuel consumption in the United States. Moreover, even land marginal for agriculture could be planted with cellulose-producing crops such as switchgrass, resulting in enough production to substitute for all the current oil imports into the United States.

Paper, cardboard, and packaging comprise a substantial part of the solid waste sent to landfills in the United States each day, 41.26% of all organic municipal solid waste (MSW) according to California Integrated Waste Management Board's city profiles. These city profiles account for accumulation of 612.3 short tons (555.5 t) daily per landfill where an average population density of 2,413 per square mile persists. Organic waste consists of 0.4% manure, 1.6% gypsum board, 4.2% glossy paper, 4.2% paper ledger, 9.2% wood, 10.5% envelopes, 11.9% newsprint, 12.3% grass and leaves, 30.0% food scrap, 34.0% office paper, 35.2% corrugated cardboard, and 46.4% agricultural composites, makes up 71.51% of landfill. All these, except gypsum board, contain cellulose, which is transformable into cellulosic ethanol. This may have additional environmental benefits because decomposition of these products produces methane, a potent greenhouse gas.

Reduction of the disposal of solid waste through cellulosic ethanol conversion would reduce solid waste disposal costs by local and state governments. It is estimated that each person in the US throws away 4.4 lb (2.0 kg) of trash each day, of which 37% contains waste paper, which is largely cellulose. That computes to 244 thousand tons per day of discarded waste paper that contains cellulose. The raw material to produce cellulosic ethanol is not only free, it has a negative cost—i.e., ethanol producers can get paid to take it away.

In June 2006, a U.S. Senate hearing was told the current cost of producing cellulosic ethanol is US $2.25 per US gallon (US $0.59/litre), primarily due to the current poor conversion efficiency. At that price, it would cost about $120 to substitute a barrel of oil (42 US gallons (160 L)), taking into account the lower energy content of ethanol. However, the Department of Energy is optimistic and has requested a doubling of research funding. The same Senate hearing was told the research target was to reduce the cost of production to US $1.07 per US gallon (US $0.28/litre) by 2012. "The production of cellulosic ethanol represents not only a step toward true energy diversity for the country, but a very cost-effective alternative to fossil fuels. It is advanced weaponry in the war on oil," said Vinod Khosla, managing partner of Khosla Ventures, who recently told a Reuters Global Biofuels Summit that he could see cellulosic fuel prices sinking to $1 per gallon within ten years.

In September 2010, a report by Bloomberg analyzed the European biomass infrastructure and future refinery development. Estimated prices for a litre of ethanol in August 2010 are EUR 0.51 for 1g and 0.71 for 2g. The report suggested Europe should copy the current US subsidies of up to $50 per dry tonne.