Rising oil prices spark interest in biofuels

Though biomass provided all of the energy for the U.S. economy two hundred years ago, today it is just an asterisk in the accounting of a global energy economy dominated by fossil fuels. Even when lumped in with geothermal, wind, and solar, renewable energy sources account for about 2 percent of energy consumption worldwide, according to the U.S. Energy information Agency.

‘We’re a ripple on an ocean of oil.’ — Marty Baruso Energy Alternatives

“We’re a ripple on an ocean of oil,” Baruso said of biofuel makers.

But in a few countries, aggressive promotion of biofuels have begun to pay dividends. In Brazil, the world's leading producer of ethanol, about a third of the fuel used by cars and trucks is ethanol made form sugar cane. The government continues to promote expansion of production, and now exports 500 million gallons a year to a dozen countries, including the U.S.

The advantages of biofuels are fairly straightforward: As a renewable resource, fuel produced from crops like soybeans could help ease the nation’s dependence on foreign oil. With the largest output of oil-producing crops in the world, the U.S. is well suited to make fuels from biomass.

Biofuel is also the only renewable out there that’s ready to go as a substitute for the liquid fuels that power the vast majority of internal combustion engines on the road today. One of the reasons gasoline and diesel have proven so difficult to replace is that they are hard to beat as transportation fuels. They're extremely energy-dense liquids, stable at normal temperature and pressure, and relatively safe to transport and dispense at filling stations.

That’s why, proponents argue, biofuel could potentially have the biggest and most immediate impact on U.S. reliance on foreign oil. Other energy alternatives — like wind, solar, nuclear, or even cleaner-burning coal — are primarily used to make electricity. Until electric drive train vehicles become commonplace, these power sources will replace little of the oil consumed in the U.S.

Like making moonshine
The biggest source of biofuel by far is ethanol — a liquid distilled from corn or other starchy crops. While various feedstocks and methods are used, the basic process relies on fermentation to produce ethanol and carbon dioxide — not unlike the making of moonshine. (Biodiesel uses a somewhat different process: Vegetable oil or animal fat is combined in large vats with a catalyst such as methanol; the mixture is then heated and a glycerin byproduct is removed, leaving behind the fuel.)

Demand for ethanol got a big boost over the past five years as an additive for so-called reformulated gasoline blends used to cut air pollution in the summer months. Much of that demand comes as refiners have phased out MTBE, a widely-used additive that has been banned in many states after it was found to have contaminated water supplies.

Though most ethanol and biodiesel is blended with gasoline and diesel, some newer-model vehicles can burn pure biofuel with only minor modifications. But pure biodiesel does have some performance drawbacks, according to a Department of Energy Report published last year, including lower fuel economy than conventional diesel, operating problems in cold weather, and increased emissions of nitrous oxide. Pure biodiesel can also break down some engine parts, like rubber tubes and gaskets. (That's one reason it's mixed with conventional diesel.)

The most contentious issue surrounding biofuels is whether they, in fact, save oil. One of the leading critics of government subsidies for biofuels, Cornell University professor David Pimentel, recently published research showing that it takes 29 percent more fossil fuel energy to produce ethanol from corn than the energy it replaces. Biodiesel made from soybeans didn't do much better -- requiring 27 percent more fossil energy than the resulting fuel produced.

Critics of Pimentel's work point to other studies showing biofuel's energy benefits. Pimentel counters that those studies don't take into account all the fossil fuel energy needed to make biofuels.

Nonetheless, biofuels have enjoyed widespread support in Congress, owing to the wide-ranging political clout of the farm states that benefit from increased demand for corn and soybeans. Though most of the tax breaks and subsidies in the $14.5 billion Energy Policy Act of 2005 went to oil and gas producers, farmers and biofuel makers won support for generous biofuel subsidies, tax breaks, grants and loans.

The law also calls for more than doubling ethanol production by 2012 from last year's level of 3.4 billion gallons, which was more than double 2000 levels. To help boost production, the government expanded tax breaks for smaller ethanol producers, set aside grants to research new production techniques and provided grants and loan guarantees to expand production of ethanol from sugar cane in Hawaii, Florida, Louisiana and Texas.

All of which will generate an estimated $70 billion in spending on goods and services required to produce ethanol over the next decade, along with $6 billion in new investment for expanded production capacity. Sales of corn, soybeans, and other crops for biofuels will total $43 billion over the next decade, according to the Renewable Fuels Association, an ethanol industry trade group.

That's been good news for big U.S. agricultural companies, who lobbied heavily for the extension of biofuel subsides and tax breaks in this year's Energy Policy Act.

"Across the world and across the country, (with) a variety of different vegetable oils, these high energy costs of petroleum prices are driving a lot of interest in biodiesel as well as in ethanol," Archer Daniels Midland CEO Wayne Andreas told Wall Street analysts last month on a conference call to announce that profits had more than doubled to $1 billion in the latest fiscal year.

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