economics of expanding biofuel production in the upper midwest · 2014-08-13 · economics of...
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D.G. Tiffany June 23, 2009 1
Economics of Expanding Biofuel Production in the Upper Midwest
Douglas G. TiffanyExtension EducatorUniversity of Minnesota
National Academies Madison, WisconsinJune 23, 2009
D.G. Tiffany June 23, 2009 2
Today’s Topics
• Review history of firm failures• Consider Challenges of Advanced Biofuels• Current densification & logistics of Stover• On-going research using IGCC to produce
even more electricity for sale to grid
Historical Data (Hettinga, 2007)
1980 1985 1990 1995 2000 2005 2010
Cap
acity
[10
9 gal
/yr]
0
2
4
6
8
10
Num
ber
of p
lant
s
0
20
40
60
80
100
120
140
160
180
Dry grind capacity (right)Wet milling capacity (right)Number of wet milling plants (left)Number of dry grind plants (left)Average dry grind size [million gal/yr] (left)
In Remembrance of Numerous Small Dry-Grind Ethanol Plants in the mid 1980’s
3D.G. Tiffany June 23, 2009
D.G. Tiffany June 23, 2009 4
Historical View: Crude Oil Prices and Use
U.S. Crude Oil Consumption and Refiners Acquisition Price Levels
($2005) Source: Energy Information Agency
5 ,000, 000
5 ,500, 000
6 ,000, 000
6 ,500, 000
7 ,000, 000
7 ,500, 000
8 ,000, 000
1 970 197 5 198 0 1 985 19 90 1995 20 00 20 05 201 0
Th
ou
sa
nd
s o
f B
arr
els
An
nu
all
y C
on
sum
ed
$0
$20
$40
$60
$80
$10 0
$12 0
Pri
ce p
er
Ba
rre
l ($
20
05
)
ConsumptionPrice
Other Troubling Attributes• Too small for acceptable process controls• Poor operator safely• Poor utilization of by-products• Insufficient capital to improve and control
process• Bankers were uninterested in financing
“stills on the hills.”
D.G. Tiffany June 23, 2009 5
U.S. Ethanol Production by Year (Source: Renewable Fuels Association)
9048
-1,000
1,000
3,000
5,000
7,000
9,000
11,000
13,000
15,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Mill
ions
of G
allo
ns
D.G. Tiffany June 23, 2009 6
In the 1990’s• More favorable economies of scale were
realized.• Mandated markets- 1990 Clean Air Act
and state measures established a base.• Better business models emerged (LLCs)• Farmers were highly motivated to invest in
value-added enterprises.• State incentives put bankers at ease.• Rising crude oil prices helped industry
from 1993 on.D.G. Tiffany June 23, 2009 7
D.G. Tiffany June 23, 2009 8
Historical View: Crude Oil Prices and Use
U.S. Crude Oil Consumption and Refiners Acquisition Price Levels
($2005) Source: Energy Information Agency
5 ,000, 000
5 ,500, 000
6 ,000, 000
6 ,500, 000
7 ,000, 000
7 ,500, 000
8 ,000, 000
1 970 197 5 198 0 1 985 19 90 1995 20 00 20 05 201 0
Th
ou
sa
nd
s o
f B
arr
els
An
nu
all
y C
on
sum
ed
$0
$20
$40
$60
$80
$10 0
$12 0
Pri
ce p
er
Ba
rre
l ($
20
05
)
ConsumptionPrice
Since 2000• Crude Oil price increases continue
• VEETC and tariff on imports protect domestic producers.
• MTBE is banned by many states and loses liability protection as an oxygenate.
• Hurricane Katrina contributed to cheap corn, higher energy prices for late 2005-2006.
• Publicity battles for industry– Blamed for Food Costs Rises– Indirect Land Use Change– Unrecognized Value in Reducing Price of Gasoline
D.G. Tiffany June 23, 2009 9
D.G. Tiffany June 23, 2009 10
U.S. Ethanol Capacity: in Use, under Construction a nd Idle on January 1 (Source: Renewable Fuels Association)
10,569
2,066
1,906
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Mill
ions
of G
allo
ns
Idle Capacity
Under Construction
Capacity in Use Production of 9,048
Production of 6,500
Considering Advanced Biofuels• Avoid “blend wall” by drop-in fuels
– Dimethyl ether
– Biobutanol(Avoid issues with Reid Vapor Point)
• At this time there are tougher technical issues with biochemical and thermochemical ethanol production.– R & D situations are not as well-suited to
farmer-investors as established processes.
D.G. Tiffany June 23, 2009 11
Technical and Economic Issues• Pretreatments and organisms are often
incompatible• State of Technology estimates represent
“dream team” yields.• Over-optimism for “cheap feedstocks.”• Biomass feedstocks lack
– Market grades
– Opportunities to hedge– Market middlemen for procurement
D.G. Tiffany June 23, 2009 12
D.G. Tiffany U of Minnesota 6/01/2009
13
Subsidies and Incentives Received for Producing Eth anol Using Various Technologies
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
Corn-NG &Electricity
Corn-Coal:Proc. Heat
Corn-Stover:Proc. Heat
Corn-Stover: CHP +Grid
Biochem-Stover:CHP +
Grid
Biochem-Switchgr: CHP
+ Grid
Dol
lars
per
De
natu
red
Ga
llon
Biomass Crop Assistance Program
Cellulosic Ethanol Credit
Volumetric Ethanol Excise Tax Credit
Renewable Electricity Credit
Small Producer Payment
Advanced Biofuels Face Competition from Corn
Corn dry-grind plants can be vastly improved w/ less tech. & operational risk.
D.G. Tiffany June 23, 2009 14
Corn Crop Yield Learning Curve
Cumulative corn production [109 T]
2.5 5 10 15
Cor
n cr
op y
ield
[T/h
a]
4
6
8
10
Cumulative corn production [109 Bu]
100 200 400 500
Cor
n cr
op y
ield
[Bu/
Acr
e]
75
100
125
150
175
Extrapolated corn crop yield to 2020
1975
2008
2020
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 15D. G. Tiffany, June 11, 2009 15
Project ObjectivesDetermine Technical Feasibility of Using Biomass to Provide
Process Heat and Electricity at Ethanol Plants
Determine Economic Sensitivity of Using Biomass with Appropriate Technologies under Various Economic Conditions
www.biomassCHPethanol.umn.edu
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 1616
Biomass Fuel for Dry-Grind Plants
• Reduce energy costs, Improve ROI--$$$• Generate reliable power for the grid• Improve Renewable Energy Ratio
– Defined as: Energy Out / Fossil Energy In
• Lower the overall greenhouse gas emissions from ethanol production
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 1717
3 Biomass Fuels and 3 Levels of Intensity of Use
• Corn Stover Combusted in Fluidized Bed• DDGS Gasified in Fluidized Bed• Syrup + Stover Combusted in Fluidized Bed
• Process Heat• Combined Heat and Power (CHP)• CHP + Sales of Power to the Grid
D.G. Tiffany June 23, 2009 18
Corn Stover Combustion, Level 2: CHP
D.G. Tiffany June 23, 2009 19
Corn Stover Combustion, Level 3: CHP + Grid
D.G. Tiffany June 23, 2009 20
Integrated Gasification Combined Cycle(FERCO SilvaGasTM Process)
D.G. Tiffany June 23, 2009 21
190 million liter (50 MMgal) per year ethanol facility
D.G. Tiffany June 23, 2009 22
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 23
Fuel Energy Input Rate
0
20
40
60
80
100
120
ProcessHeat
CHP CHP + Grid IGCC
MW th
Syrup & Cobs IGCC
Corn StoverCombustion
Syrup & Corn StoverCombustion
DDGS Gasification
Syrup & CobsCombustion
Syrup & Nat GasCombustion
190 ML/yr ethanol facility
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 24
Gross Electricity Generation (and Use)
-10
-5
0
5
10
15
20
25
30
35
ProcessHeat
CHP CHP + Grid IGCC
MW
e
Syrup & Cobs IGCC
Corn StoverCombustion
Syrup & Corn StoverCombustion
DDGS Gasification
Syrup & CobsCombustion
Syrup & Nat. GasCombustion
D.G. Tiffany June 23, 2009 25
Renewable Energy Ratio (LHV)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Conven
tiona
lPro
cess
Hea
t
CHPCHP +
Grid
IGCC
Rat
ioSyrup & Cobs IGCC
Corn StoverCombustion Syrup & Corn StoverCombustion DDGS Gasification
Syrup & CobsCombustionSyrup & Nat. GasCombustionConventional
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 2626
Baseline ROR’s for 50 MM Gallon PlantCo nventional Plan t #1 Proc. Heat #2 CHP #3 CHP + Grid 50M M G al
Stover 3.66% 5.40% 5.97% 4.21% S tover
Syrup + Sto ver 8.04% 7.80% 6.05% S yrup + S tover
DDGS 6.25% 7.28% 5.79% DD GSSyrup + N at. Gas 4.76% 3.64% S yrup + Na t. G as
Rates of Return on Investment for 50 MM Gal. Dry- Grind Plants: Conventional Plants versus those Using Stover o r Sy rup + S tover or
DDGS at Various Intensities
0.00%
5.00%
10.00%
15.00%
C onventiona lPlant
#1 Proc. H eat #2 C HP #3 CH P + Grid
Per
cen
t Rat
e of
Ret
urn
Stover Syrup + Sto ver DD GS
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 2727
Use of Biomass at Ethanol Plants• Technically feasible and fiscally prudent ,
especially when policies favoring low carbon fuel standards are adopted.
• Improves energy balance and drastically reduces the carbon footprint of ethanol produced from corn.
• Each 1 Billion gallons of ethanol capacity can produce 300 MWe for the grid, probably 450 MWe for IGCC.
• Use of biomass as a fuel at ethanol plants can be a bridge technology to other technologies for biofuels production.
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 28
Stover Harvest, Densification &Transport to Plant
Agricultural –One harvest per year
Industrial –Requires supply throughout the year
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 29
Harvesting/Local Storage
• Major participation from Nalladurai Kaliyan and David Schmidt occurred on the densification and logistics aspects of this research.
29
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 30
Tub-Grinding/Roll-Press CompactionFeed
Roll Roll
Compact
30
www.biomassCHPethanol.umn.edu
Total Cost
$77/ton of corn stover delivered (MC = 15% w.b.)
Payment to Farmer
Truck Transportation of Compacted Corn
Stover
Tub Grinding/Roll Press
Compaction
Local Storage Cost/
Local Storage Loss
Collection/Transport to Local
Storage
Nutrient Replacement
(N-P-K)27%
36%
4%
16%
8% 9%
31D.G. Tiffany June 23, 2009
History of Fertilizer Prices
D.G. Tiffany June 23, 2009 32
Fertilizer Prices (Source: Meadowlands Cooperative June 10, 2009)
Analysis Jun-08 Jun-09 Fall App. 2009
Anhydrous Ammonia 82-0-0 870.00$ 691.98$ 435.00$
Urea 46-0-0 460.00$ 480.00$ 305.00$
Potash (K2O) 0-0-60 670.00$ 649.97$ 683.00$
Diammonium Phosphate 18-46-0 865.00$ 629.85$ 351.00$
Price per lb. of Nitrogen
Anhydrous
Ammonia 0.5305$ 0.4219$ 0.2652$
Price per lb. of Nitrogen Urea 0.5000$ 0.5217$ 0.3315$
Price per lb. of K Potash (K2O) 0.5583$ 0.5416$ 0.5692$
Price per lb. of P2O5
Diammonium
Phosphate 0.9207$ 0.6642$ 0.3685$
Prices per Ton of Product
Prices per Ton of Major Nutrient
www.biomassCHPethanol.umn.edu
Life-Cycle Fossil Energy Consumption
1017 MJ/dry tonne (i.e., 7% of dry corn stover energy)
Tub Grinding/Roll Press
Compaction
Local Storage Loss
Collection/Transport to Local
Storage
Nutrient Replacement
(N-P-K)
Truck Transportation of Compacted Corn
Stover
6%
49%
19%
3%
23%
33D.G. Tiffany June 23, 2009
www.biomassCHPethanol.umn.edu
Life-Cycle GHG Emissions
102 kg of CO2e/dry tonne of corn stover(includes combustion emission, but not SOC)
Truck Transportation of Compacted Corn
Stover
Tub Grinding/Roll Press
Compaction
Local Storage Loss
Collection/Transport to Local
Storage
Nutrient Replacement
(N-P-K)
Corn Stover Combustion(CH4, N2O) 32% 29%
13%
2%19%
5%
34D.G. Tiffany June 23, 2009
www.biomassCHPethanol.umn.edu
Life-Cycle GHG Emissions
7 g of CO2e/MJ of dry corn stover(includes combustion emission, but not SOC)
7
60
99
0
20
40
60
80
100
Corn Stover Natural Gas Coal
Gra
m o
f CO
2e/M
J of
fuel
ene
rgy
35D.G. Tiffany June 23, 2009
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 36
GHG Emissions of Ethanol using
Corn Stover as a Fuel using BESS*
Convent.
Corn
Ethanol
CHPCHP +
GridBIGCC
GHG
Reduction52% 82% 92% 115%
GHG
Reduction
with CO2
Sequst.
85% 116% 126% 149%
36
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 37
Amount of Biomass Required, %
DDGS
Corn stover Syrup + stover
Ethanol corn acres
All corn acres*
Ethanol corn acres
All corn acres*
Process heat 70% 27% 9% 9% 3%
CHP 80% 30% 10% 12% 4%
CHP + grid 100% 40% 13% 27% 9%
*Assumes 1/3 of corn acres go for ethanol 37
D.G. Tiffany June 23, 2009 38
Will Logistical Requirements be too difficult? No!!!
• Heat and Power using Stover for 50 million gallons ethanol per year
• 400 to 500 tons per day of stover– 16 to 20 truckloads (25 tons each) of
briquettes or pellets per day or– 640 to 800 bales (1250 lbs each) per day
• 60 truckloads of corn per day• 20 truckloads of DDGS per day
D.G. Tiffany U of Minnesota 6/01/2009
Changes on the Land and in the Soil
39
Doug Tiffany April 24, 2009 40
Biomass Harvest Rates Must Consider Maintenance of Relic Soil
Organic Carbon• Preservation of relic
soil organic carbon is key issue associated with biomass harvest
www.biomassCHPethanol.umn.edu
D.G. Tiffany June 23, 2009 41
U.S. Dept. of Energy Encourages CHP
• Utilize Process Heat before or after using to generate electricity-cuts GHG by 53%.
• Requires greater investment, coordination with power utilities.
• Source: Combine Heat and Power: Effective Energy Solutions for a Sustainable Future, ORNL. http://www.osti.gov/bridge
D. G. Tiffany, June 11, 2009 41
Doug Tiffany April 24, 2009 42
Growing Demand and Retirements
0
200
400
600
800
1000
2005 2015 2025 2035 2045 2055
TW
h pe
r yea
r
projected demand
Source: Jones et al., 2006
D.G. Tiffany June 23, 2009 43
DOE Goal: CHP Expansion from 9% to 20% of U.S. Capacity by 2030
Source: Combine Heat and Power: Effective Energy Solutions for a Sustainable Future, ORNL. http://www.osti.gov/bridge
U.S. CO2 Emissions 2006-2030 and Effect of 20% CHP
Source: Combine Heat and Power: Effective Energy Solutions for a Sustainable Future, ORNL. http://www.osti.gov/bridge
D.G. Tiffany June 23, 2009 44
D.G. Tiffany June 23, 2009 45
Summary• 2nd Generation biofuels may suffer stigma as
poor investment from adverse publicity directed toward corn dry-grind facilities.
• Using biomass as a fuel producing CHP requires implementation of known technologies.
• Plentiful amounts of biomass are at the plants or nearby.
• Logistics are not a deal-breaker, but expect stover to cost about $80 per ton as a densified product at the plant.
• GHG emissions of the ethanol produced can be vastly improved when CHP is implemented at dry-grind plants.
D.G. Tiffany June 23, 2009 46D. G. Tiffany, June 11, 2009 46D. G. Tiffany U of Minnesota 46
Thank you!• [email protected]
(612) 625-6715
www.biomassCHPethanol.umn.edu