Biofuels: Bust or Bonanza?

Vast sums of venture capital have flowed into making biofuels—renewable substitutes for gasoline and diesel. But aside from heavily subsidized corn ethanol, which consumes a third of America’s crop to replace just 5 percent of America’s gasoline, there’s not yet a lot to show for it.

A recent analysis by ClimateWire notes that “U.S. EPA figures indicate that in the second half of 2010, not a drop of cellulosic ethanol — a much-touted fuel that taps the sugars from farm wastes and other non-food sources of biomass — was commercially blended with gasoline.”

Cellulosic ethanol is one of the holy grails of biofuel, because it can in principle be made from cheap and fast-growing weeds like switchgrass, or waste products like corn stalks and wood chips, without driving up the cost of grains and other food.

The trick is to find some combination of heat, enzymes, acid and microorganisms to break down cellulose—a tough organic compound composed of long chains of sugars—into simple sugars that can in turn be fermented into alcohol or other fuels.

Although optimists promised faster success—the original federal Renewable Fuel Standard called for 5 million gallons of cellulosic fuel production in 2010—no one should be surprised at how long it takes to found a new industry. In his 2006 State of the Union Address calling for additional research funding for cellulosic ethanol, President Bush said, “Our goal is to make this new kind of ethanol practical and competitive within six years.” So we still have another year to go.

In its most recent report, EPA claims that five plants in the United States should begin producing cellulosic biofuel for transportation uses this year. They will produce a mix of ethanol, methanol and biodiesel from wood, paper or corn waste and switchgrass. EPA holds out hope that they will make as much as 6 million ethanol-equivalent gallons, about 50 percent more than the base estimate offered by the U.S. Energy Information Administration but within the realm of feasibility.

EPA sees the possibiity of an explosion of production in 2012 as some 20 or more plants begin producing more than 300 million gallons of cellulosic fuels. If some of all prove viable, the industry hopes that new financing will in turn fuel the sector’s rapid growth.

One biofuel maker, Mascoma Corp., just announced last week that Valero Energy, the world’s largest independent oil refiner, will invest up to $50 million in “one of the world’s first commercial scale wood-based cellulosic ethanol biorefineries,” which is slated to break ground in 2011 in Michigan. It will convert wood into 40 million gallons of ethanol a year.

Even if they prove commercially viable, biofuels are no panacea. They require vast amounts of land and lots of energy to grow, harvest, transport and process the feedstock. Still, a recent analysis by researchers at the University of Illinois suggests that anywhere from a quarter to half of the world’s current fuel consumption could be met by biofuel crops grown on surplus land, without affecting food crops.

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