Some uncertainties on the emerging Biofuel 2.0

Dutch life sciences group DSM is said to have made a breakthrough in biofuel production with a claim that they have a scalable technology that does not use food and uses enzymes as an input source but these claims and the efficiency of them should be under greater scrutiny given troubling evidence from the biofuel 1.0 era.

DSM is said to lead the biofuel 2.0 which seeks to, instead of food, use waste plant matter. What’s better, they claim, their technology does not use already produced energy to catalyze the production, but instead it uses enzymes to convert the waste first into sugar then into ethanol.

“We see refineries being built, particularly in the United States, in the next two years. So by 2014 or the end of 2013 we see a meaningful market with maybe about a dozen second-generation biorefineries,” DSM board member Stephan Tanda said.

The problem with biofuel 1.0 is not just that it uses food, like corn, as an energy source but according to studies it uses more energy than it actually produces.

Back in 2005, Cornell professor Dr. David Pimentel ran a study which found that converting “plants such as corn, soybeans and sunflowers into fuel uses much more energy than the resulting ethanol or biodiesel generates”.

- corn requires 29% more fossil energy than the fuel produced;

- switch grass requires 45% more fossil energy than the fuel produced;

- wood biomass requires 57% more fossil energy than the fuel produced.

How efficient is this new enzymes-technology?

Not clear, although DSM claims that it will make 1 billion euros in sales by 2020 and sees this market as being 50 billion in sales by 2022.

But these sort of rosy pictures of biofuel’s potential have been seen before. Under such claims that neglect efficiency, corn makers have gotten themselves all sorts of subsidies and tax breaks, so much so that it is fueling a bubble in farm prices. Some with no clue about farming are bidding up prices of farms under a presumption that corn – politically entrenched – will continue to be the input of choice in making biofuel. NPR recently asked Why 158 Acres Of Corn Costs $1.5 Million.

Then there are these “independent” research groups with equally lofty research conclusions about biofuel. One such came in earlier this month from Pike Research with a claim that the global fuel market will double within the next decade and 71% of it will be dominated by US producers.

Yet, according to the Congressional Budget Office, all these biofuel schemes actually cost more then they produce and therefore are a waste of taxpayers money.

From Congressional Budget Office 2010 study Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals, page 10:

The costs to taxpayers of reducing consumption of petroleum fuels differ by biofuel. Such costs depend on the size of the tax credit for each fuel, the changes in federal revenues that result from the difference in the excise taxes collected on sales of gasoline and biofuels, and the amount of biofuels that would have been produced if the credits had not been available. The costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for ethanol made from corn and $3.00 for cellulosic ethanol. The cost of reducing an equivalent amount of diesel fuel (that is, a quantity having the same amount of energy as a gallon of gasoline) using biodiesel is $2.55, based on the tax policy in place through last year.

So, the $3.50 gallon of gas we pay at the pump actually costs more because it uses up part of the $1.78 of our tax dollars so if the subsidized ethanol is a 10% mix then the ethanol subsidy jacks up our per gallon bill by 5% percent – and just in time when folks are struggling with their budget.

It is all these biofuel 1.0 “creative accounting” issues and its bad-tasting politics that casts a shadow over all the claims that biofuel 2.0 is now making.