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BioFuels Activities in Mississippi Sumesh Arora Mississippi Alternative Energy Enterprise - Mississippi Technology Alliance Southern Bio-Products Conference March 5, 2004 Slide 2 What are BioFuels? Slide 3 Significance of Biofuels National Security National Security Increased Energy Independence Increased Energy Independence Creates Jobs improved farm economy Creates Jobs improved farm economy Environmental Benefits Environmental Benefits Slide 4 Biodiesel Emissions EPA: A comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions: Draft Technical Report EPA420-P-02-001, Oct. 2002 Slide 5 Why Use Ethanol? 10% ethanol-gasoline blend reduces carbon monoxide emissions by up to 30%. 10% ethanol-gasoline blend reduces carbon monoxide emissions by up to 30%. Over 10% all gasoline in the US contained ethanol in 2002. Over 10% all gasoline in the US contained ethanol in 2002. All new vehicles are ethanol-ready. All new vehicles are ethanol-ready. Ethanol reduces our demand for imported gasoline by 100,000 barrels each day. Ethanol reduces our demand for imported gasoline by 100,000 barrels each day. Slide 6 BioFuels Activity in Mississippi Very Progressive Slide 7 Projects in Mississippi BioFuels Ethanol Commercial Pilot Scale Research Biodiesel Commercial Pilot Scale Research Feasibility Studies Legislative Demonstrations Slide 8 ETHANOL C2H6OC2H6O Slide 9 Ethanol Process and Feedstocks US Capacity: 2.85 billion gallons/year US Capacity: 2.85 billion gallons/year 72 Plants, 10 under construction > 90% derived from cornstarch (fermentation) Gasification of biomass Gasification of biomass Syngas fermentation Syngas fermentation Other potential ethanol feedstocks: Other potential ethanol feedstocks: Wheat, sorghum, potatoes, wood waste, corn cobs, straws, corn hulls, corn stover, grasses (switch grass), kenaf, bagasse, MSW Slide 10 Ethanol Plant Activity Aberdeen Amory Greenville Southern Ethanol 30 MM gal/year EOH Energy LLC 50 MM gal/year Southern Ethanol 45 MM gal/year Pearson BioEnergy 3 MM gal/year Vicksburg Winona Mississippi Ethanol 1 MM gal/year Slide 11 Commercial Ethanol Activity Southern Ethanol Company, LLC First company to announce sites in Amory and Vicksburg First company to announce sites in Amory and Vicksburg Amory construction expected to begin in early 2004 and complete by mid 2005 Amory construction expected to begin in early 2004 and complete by mid 2005 A 30 mm gal/year plant may consume about 12 million bushels of corn per year A 30 mm gal/year plant may consume about 12 million bushels of corn per year which translates to about 30,000 bushels of corn per day which translates to about 30,000 bushels of corn per day A sizeable portion of the corn used could be locally grown A sizeable portion of the corn used could be locally grown TDF (Tire Derived Fuel) will be a unique feature of the Amory plant TDF (Tire Derived Fuel) will be a unique feature of the Amory plant Greenville may be a third site Greenville may be a third site EOH Energy, LLC Announced in April 2003 to construct a corn-based ethanol plant in Greenville Announced in April 2003 to construct a corn-based ethanol plant in Greenville Plant capacity of more than 50 million gallons of ethanol per year Plant capacity of more than 50 million gallons of ethanol per year Expected investment in the plant is about $58 million Expected investment in the plant is about $58 million Plant expected to open in the fall of 2004 Plant expected to open in the fall of 2004 Working with one of the major ethanol plant design and construction companies in the US to build this plant Working with one of the major ethanol plant design and construction companies in the US to build this plant Slide 12 Ethanol Pilot Scale Activities Pearson Bioenergy Inc., Aberdeen, MS Involved in pioneering work in non-fermentation based waste biomass to ethanol technology. Involved in pioneering work in non-fermentation based waste biomass to ethanol technology. A 400 pound per hour pilot plant completed in early 2004 is in limited operation A 400 pound per hour pilot plant completed in early 2004 is in limited operation A 3 million gallon per year prototype plant is expected to open mid - 2004 A 3 million gallon per year prototype plant is expected to open mid - 2004 The pilot plant capable of evaluating of various biomass feedstocks The pilot plant capable of evaluating of various biomass feedstocks Mississippi Ethanol, LLC, Winona, MS Innovative gasification process to convert biomass into ethanol Innovative gasification process to convert biomass into ethanol The design for a 1 million gallon per year ethanol pilot plant is complete The design for a 1 million gallon per year ethanol pilot plant is complete Expected start date of the pilot plant is in the summer of 2004. Expected start date of the pilot plant is in the summer of 2004. This plant will utilize 30 dry tons per day of wood waste as the feedstock This plant will utilize 30 dry tons per day of wood waste as the feedstock A 1/10th scale version of this plant is being assembled at Mississippi State University (MSU) for research purposes A 1/10th scale version of this plant is being assembled at Mississippi State University (MSU) for research purposes This project is getting technical assistance from MSU engineering faculty and staff of the universitys Diagnostic Instrumentation and Analysis Laboratory (DIAL). This project is getting technical assistance from MSU engineering faculty and staff of the universitys Diagnostic Instrumentation and Analysis Laboratory (DIAL). Slide 13 Ethanol Research Activities Biomax Gasifier Mississippi State University is home to one of only six of such gasification units in the world Mississippi State University is home to one of only six of such gasification units in the world The object is to efficiently convert various biomass materials into gases, and subsequently into energy-related and value- added chemicals such as ethanol and acetate. The object is to efficiently convert various biomass materials into gases, and subsequently into energy-related and value- added chemicals such as ethanol and acetate. The machine, which arrived on campus in August 2003, is built by Community Power Corporation (CPC) of Littleton, Colorado. The machine, which arrived on campus in August 2003, is built by Community Power Corporation (CPC) of Littleton, Colorado. Joint research project between MSU and Oklahoma State University Joint research project between MSU and Oklahoma State University Two-year-old U.S. Department of Agriculture grant that evenly divides about $1 million a year between the two schools. Two-year-old U.S. Department of Agriculture grant that evenly divides about $1 million a year between the two schools. Experimenting with grasses and residues from various crop processes such as cotton gin waste, rice husks and chicken litter. Experimenting with grasses and residues from various crop processes such as cotton gin waste, rice husks and chicken litter. Slide 14 More Research Activities The Mississippi University Research Consortium for the Utilization of Biomass formed in 2000 The Mississippi University Research Consortium for the Utilization of Biomass formed in 2000 Funding from the US Department of Energy and the State of Mississippi Funding from the US Department of Energy and the State of Mississippi Total funding is $8.1 Million over a six year period Total funding is $8.1 Million over a six year period Members include Mississippi State University (lead university), Jackson State University, University of Mississippi, and University of Southern Mississippi Members include Mississippi State University (lead university), Jackson State University, University of Mississippi, and University of Southern Mississippi The mission of the Consortium is to develop technologies that are capable of producing valuable products from Mississippi-grown biomass resources, development of additional research capabilities within Mississippi, and the education of future engineers and scientists within Mississippi with expertise in the production of chemicals from biomass feeds. Slide 15 Ethanol Research Syngas Fermentation The MSU Team has isolated cultures capable of producing ethanol at a rate several times that of the best rates reported in literature Syngas Fermentation The MSU Team has isolated cultures capable of producing ethanol at a rate several times that of the best rates reported in literature Acid Hydrolysis USM has greatly improved conversion performance via better reactor design and operation and is developing new membrane separation systems Acid Hydrolysis USM has greatly improved conversion performance via better reactor design and operation and is developing new membrane separation systems JSU has developed a pre-treatment technique that improves fermentation of the hydrolyzate by removing inhibitors prior to fermentation. JSU has developed a pre-treatment technique that improves fermentation of the hydrolyzate by removing inhibitors prior to fermentation. Enzymatic Conversion UM is working on the isolation of novel enzymes Enzymatic Conversion UM is working on the isolation of novel enzymes Slide 16 Mississippi-Land Use Slide 17 BIODIESEL Excellent choice as a low sulfur, high lubricity, fuel additive Slide 18 Biodiesel Process Methanol Catalyst Catalyst- Mixing Transesterification Vegetable Oils, Used Cooking Oil, Animal Fats Neutralization Phase Separation Re-neutralization Methanol- Recovery Purification Methanol- Recovery Quality Control Glycerin Purification Neutralizing Acid Crude Biodiesel MethylEster CrudeGlycerin PharmaceuticalGlycerin Recycled Methanol If desired Slide 19 Biodiesel Plant Activity Meridian Nettleton Tunica Biodiesel of Mississippi 40 MM gal/year Renewable Fuels, Inc 2 MM gal/year Biodiesel of Mississippi 15 MM gal/year EECo 400 gal/day Marks Slide 20 Commercial Biodiesel Activity Environmental Energy Corporation (EECo), Meridian EECo is the first producer of biodiesel in the state EECo is the first producer of biodiesel in the state Current production capacity is about 400 gallons per day with potential of 2,000 gallons per day Current production capacity is about 400 gallons per day with potential of 2,000 gallons per day Operation uses yellow grease from regional independent restaurants Operation uses yellow grease from regional independent restaurants Renewable Fuels, Inc. (RFI), Tunica Evaluating biodiesel production technologies and feedstock sources for year Evaluating biodiesel production technologies and feedstock sources for year Considering a 1.5 million to 3 million gallon per year plant Considering a 1.5 million to 3 million gallon per year plant This plant is expected to be able to use yellow grease and soybean oil This plant is expected to be able to use yellow grease and soybean oil Biodiesel of Mississippi, Nettleton Approximately 15 million gallons per year plant under construction in Nettleton Approximately 15 million gallons per year plant under construction in Nettleton Currently awaiting necessary environmental permits from Mississippi Department of Environmental Quality (MDEQ) Currently awaiting necessary environmental permits from Mississippi Department of Environmental Quality (MDEQ) Based solely on soybean oil as the feedstock Based solely on soybean oil as the feedstock Since 1 gallon of soybean oil yields one gallon of biodiesel, this plant is expected to use: Since 1 gallon of soybean oil yields one gallon of biodiesel, this plant is expected to use: 15 million gallons of soybean oil annually Requirement of roughly 10.7 million bushels of soybeans or 240,000 acres (assuming a soybean yield of 45 bushels per acre) Considering co-locating a biodiesel plant with the Bungee soybean oil processing facility in Marks, Mississippi. Considering co-locating a biodiesel plant with the Bungee soybean oil processing facility in Marks, Mississippi. Slide 21 Biodiesel Research Activity Develop numerous potential candidate lipid feedstocks included blended feedstocks Develop numerous potential candidate lipid feedstocks included blended feedstocks Potential feedstock candidates in the Southeast US include: Potential feedstock candidates in the Southeast US include: poultry and swine fats oils extracted from genetically manipulated plants novel plant species typically not considered lipid feedstocks and other lipid sources selected based on a thorough technical and economic assessment. Evaluate innovative extraction techniques such as: Evaluate innovative extraction techniques such as: co-solvent amended supercritical extraction propane extraction Extraction and separation of novel secondary products, such as selected lipids (lecithin) and fatty acids (DHA and EPA), prior to transesterification will be researched Extraction and separation of novel secondary products, such as selected lipids (lecithin) and fatty acids (DHA and EPA), prior to transesterification will be researched Improve environmental performance including reducing oxide emissions and utilization of more environmentally friendly process chemical reagents. Improve environmental performance including reducing oxide emissions and utilization of more environmentally friendly process chemical reagents. Potential ability to customize product performance to customer needs. Potential ability to customize product performance to customer needs. Research team consists of process engineers, mechanical engineers, plant scientists, biochemists, economists, chemists, biologists, and microbiologists. Research team consists of process engineers, mechanical engineers, plant scientists, biochemists, economists, chemists, biologists, and microbiologists. DOE MSU Feedstocks = 70% production cost Apply a true biorefinery approach Slide 22 Biodiesel Demonstration Mississippi Development Authority Energy Division grant to the Lauderdale County School District for the 2003-2004 school-year Mississippi Development Authority Energy Division grant to the Lauderdale County School District for the 2003-2004 school-year 9 buses at West Lauderdale Elementary School are currently operating on a B10 blend 9 buses at West Lauderdale Elementary School are currently operating on a B10 blend Biodiesel is being purchased from the local biodiesel producer in Meridian Biodiesel is being purchased from the local biodiesel producer in Meridian No operational problems reported to date No operational problems reported to date Slide 23 Feasibility Studies Slide 24 Ethanol Feasibility Study Sparks Companies, Inc. & MSU Cooperative Extension Service was asked by the Mississippi, Alternative Energy Enterprise to conduct a statewide feasibility study regarding the prospects of ethanol production There were two areas of primary concentration - the overall state potential for ethanol production and the assessment of five specific production sites Study completed in January 2003 Slide 25 Corn Yield Index: MS vs. US Slide 26 MS Corn Production Slide 27 Major Commercial Grain Elevators Slide 28 MS Grain Commercial Elevators, Capacity Slide 29 Report Summary General Theme: the State should proceed with caution, this is predicated on the following conclusions 1Supply-Side Issues - there needs to be continued expansion in MS corn production - critical for ethanol success (MS net importer of corn for animal feed) 2There are significant regional differences in corn production 3The animal livestock industry plays a vital role in the balance of corn in MS 4Some proposed production areas/sites are significantly better relative to the other sites 5There are important financial variables/issues to consider Slide 30 Major Drivers to the Model Revenue MS Producer Payment DDG Prices Ethanol Prices Costs Feedstock Energy Prices - Natural Gas Cost of Capital Slide 31 Biodiesel Feasibility Study MISSISSIPPI DEVELOPMENT AUTHORITY ENERGY DIVISION Mississippi Land, Water and Timber Resources Board US DOE/SSEB Completed in February 2004 Slide 32 Biodiesel Study Participants MBC MSU ChemE ASU SFDC MSU GRI FBAMDAC Chemical Engineering Small Farms Development Center GeoResources Institute Frazier Barnes & Associates Department of Agriculture and Commerce Slide 33 Feedstock Availability Soybean Oil: 38.6 million gallons Cottonseed Oil: 16.0 million gallons Yellow Grease: 6 million gallons Average Cost: $0.23/lb Average Cost: $0.25/lb Average Cost: $0.11/lb Slide 34 Soy Based Biodiesel Potential Slide 35 Yellow Grease Based Biodiesel Potential Slide 36 Weighted County Scores Slide 37 Cumulative Weighted County Scores Slide 38 Biodiesel Technology Oilseed Processing Technology Review Oilseed Processing Technology Review Mechanical Extraction vs. Solvent Extraction Biodiesel Technology Review & Providers Biodiesel Technology Review & Providers Biodiesel produced must meet or exceed the ASTM specifications as per the standard D6751 Catalyst Conversion Operating Costs Product Yield and Quality Feedstock Flexibility Economy of Scale Capital Costs Vendors Slide 39 Who Can Use Biodiesel? Anyone who uses Petroleum DieselAnnual US Consumption 57 billion gallons/year B2 = 1.4 billion gallons/year B10 = 5.7 billion gallons/year B20 = 11.4 billion gallons/year Slide 40 Mississippi Market Potential Total petroleum diesel consumption Total petroleum diesel consumption 760 million gallons/year @ B2 = 15 million gallons/year @ B2 = 15 million gallons/year @ B20 = 300 million gallons/year @ B20 = 300 million gallons/year Farm Use @ B2 = 1.6 million gallons/year Farm Use @ B2 = 1.6 million gallons/year Farm Use @ B20 = 32 million gallons/year Farm Use @ B20 = 32 million gallons/year Slide 41 Commercialization Options Stand-alone production facility Stand-alone production facility Biodiesel from virgin oils and recycled fats purchased on the open market Simple Payback > 10 years (no subsidy) Integrated Facility Integrated Facility Process Mississippi grown soybeans into oil, biodiesel, and other co-products Simple Payback ~ 7-8 years (no subsidy) Current federal subsidies reduce payback periods by about 3 years Current federal subsidies reduce payback periods by about 3 years Paybacks based on 13 million gallons/year plant Slide 42 Study Recommendations Production Side Incentives Consider producer payments Consider producer payments Consider blender credits to offset excise tax on sales of biodiesel Consider blender credits to offset excise tax on sales of biodiesel Direct investment in integrated soybean storage/processing and biodiesel production and distribution facilities Direct investment in integrated soybean storage/processing and biodiesel production and distribution facilities Consider tax credits on equipment used for biodiesel production, distribution or blending Consider tax credits on equipment used for biodiesel production, distribution or blending Slide 43 Recommendations Market Adoption Incentives Adopt the use of biodiesel blends in state fleets and other municipal fleets such as school buses Adopt the use of biodiesel blends in state fleets and other municipal fleets such as school buses Special monetary incentives for on-farm biodiesel consumption. Special monetary incentives for on-farm biodiesel consumption. Encourage the use of biodiesel blends in private fleets by offering monetary incentives Encourage the use of biodiesel blends in private fleets by offering monetary incentives Adopt use of biodiesel for stationary applications such as generators Adopt use of biodiesel for stationary applications such as generators Encourage use of biodiesel in the marine transportation sector. Encourage use of biodiesel in the marine transportation sector. Invest in renewable energy education Invest in renewable energy education Invest in research and development focused on lowering the production cost of biodiesel and finding additional uses for biodiesel and the byproduct glycerin Invest in research and development focused on lowering the production cost of biodiesel and finding additional uses for biodiesel and the byproduct glycerin Slide 44 State Legislative Actions State Legislative Actions House Bill 1130 (2002) Considered to be one of the strongest pieces of legislation in the nation in support of ethanol. Considered to be one of the strongest pieces of legislation in the nation in support of ethanol. The bill authorized a producers payment of 20 cents per gallon of ethanol produced up to a maximum of 6 million dollars per fiscal year, per plant. The bill authorized a producers payment of 20 cents per gallon of ethanol produced up to a maximum of 6 million dollars per fiscal year, per plant. These payments my last up to 10 years from the start of production and are set to expire in 2015. [Money not appropriated in 2002] These payments my last up to 10 years from the start of production and are set to expire in 2015. [Money not appropriated in 2002] House Bill 1596 (2003) 2003 regular session authorized the Mississippi Land, Water and Timber Resources Board to set aside $1,000,000 for the purpose of providing funds to the Mississippi Department of Agriculture and Commerce for use in making payments to ethanol producers under Section 69-51-5 during the State Fiscal Year 2003 2004. 2003 regular session authorized the Mississippi Land, Water and Timber Resources Board to set aside $1,000,000 for the purpose of providing funds to the Mississippi Department of Agriculture and Commerce for use in making payments to ethanol producers under Section 69-51-5 during the State Fiscal Year 2003 2004. House Bill 928 (2003) As sent to the Governor in the 2003 Regular Session, amended House Bill 1130 to include an unspecified producer payment for Biodiesel as well. Issues pertaining to definition of biodiesel and method of calculation for the producer payments require additional clarification. As sent to the Governor in the 2003 Regular Session, amended House Bill 1130 to include an unspecified producer payment for Biodiesel as well. Issues pertaining to definition of biodiesel and method of calculation for the producer payments require additional clarification. Slide 45 Barriers for BioFuels Cost Integration into the current Fuel Distribution System Need Legislative Support Slide 46 Questions? Contact Information: Mississippi Alternative Energy Enterprise 601-960-3610www.msenergy.ms Biofuels are