Biofuels lead growth in U.S. biomass energy

The use of energy from biomass resources in the United States grew more than 60% over the decade between 2002 and 2013 -- primarily in the form of increased use of biofuels like ethanol and biodiesel that are produced from biomass.


A fuel pump displays prices for gasoline blended with up to 10% ethanol.

According to the U.S. Energy Information Administration, biomass accounted for about half of all renewable energy consumed in 2013 and 5% of total U.S. energy consumed. The three primary sources of this biomass are wood and forest products byproducts, waste including municipal solid waste and landfill gas, and raw organic feedstocks like corn and soybean oil used to produce biofuels.

Of biomass energy resources, biofuels experienced the greatest growth over the last decade. From 2002 to 2013, biofuels created from biomass grew more than 500%, driven largely by increases in U.S. production of ethanol and biodiesel for blending as transportation fuels. These biofuels are typically produced from feedstocks such as agricultural crops and other plant material, animal byproducts, and recycled waste. For U.S. ethanol production, corn is the dominant feedstock, while biodiesel producers rely on soybean oil for just over half of feedstock needs and an array of biomass resources for the rest. Market demand for these biofuels comes in part from federal mandates such as the U.S. Environmental Protection Agency's Renewable Fuel Standard, which requires the blending of certain volumes of biofuels into gasoline and diesel.

Meanwhile, EIA data shows that consumption of wood and waste energy increased just 4% over the decade. About two-thirds of U.S. wood energy is consumed for industrial processes, while nearly all U.S. waste energy is consumed for electric generation or industrial processes.

If this trend continues, woody biomass and waste energy will continue to hold their positions in our portfolio of energy resources, while continued growth in the conversion of biomass into biofuels for transportation and other needs will increase biofuels' weighting in the nation's energy mix.  At the same time, debates continue over the cost and value of programs encouraging the growth of corn as a biofuel feedstock.  What does the future hold for biomass in the U.S.?

Does blending ethanol in transportation fuels lower costs?

While widespread drought has driven corn prices up in the U.S., pinching ethanol producers, debate has emerged about the economic impacts of blending corn-based ethanol into gasoline and diesel used as transportation fuel.

As local gas pumps may tell you, U.S. transportation fuels may contain ethanol.

Under the EPA's U.S. Renewable Fuel Standard program, transportation fuel sold in the United States must contain a certain amount of renewable fuel.  Corn is the feedstock for the vast bulk of the ethanol biofuel used to meet the renewable fuel standard.  Despite near-record levels of corn planting, drought across much of the country has led to crop reductions and high prices for corn.  At the same time, the demand for gasoline and diesel has not grown as it had been projected to do.  This slackening of demand comes from both increases in vehicle energy efficiency and decreases in fuel demand due to the economic slowdown.  Between higher feedstock costs and reduced product demand, many biofuel ethanol producers are struggling or failing to turn a profit.

Some policy questions surrounding the blending of corn ethanol into transportation fuel remain controversial.  One argument used to support the practice points to evidence that blending ethanol into gasoline and diesel reduces the cost of fuel.  A widely-cited study by Xiaodong Du and Dermot Hayes titled "The Impact of Ethanol Production on U.S. and Regional Gasoline Markets" found that over the period of January 2000 to December 2011, growth in ethanol production for fuel reduced wholesale gasoline prices by an average of $0.29 per gallon.  Looking at 2009 alone, they reported that the average effect across all regions increased to $1.09/gallon, with regional price suppression  impacts ranging from $0.73/gallon in the Gulf Coast to $1.69/gallon in the Midwest. 

Not so, according to a study released earlier this month by Christopher Knittel and Aaron Smith.  Their July 12, 2012 paper, Ethanol Production and Gasoline Prices: A Spurious Correlation, disputes many of the findings of Du and Hayes's research.  In Knittel and Smith's view, the previous researchers' results were "driven by implausible economic assumptions and spurious statistical correlations".  Like Du and Hayes, Knittel and Smith provide a detailed analysis of the "crack spread" and "crack ratio", measures of the margin associated with refining.  They challenge the accuracy of the previous study's results, arguing that "the empirical results are extremely sensitive to the empirical specification; however, empirical models that are most consistent with economic theory suggest effects that are near zero and statistically insignificant."

Which view is more accurate is a question that remains to be seen.  The answer may have implications for the future course of U.S. policy on blending corn-based ethanol into gasoline and diesel fuels used for transportation.

Corn, ethanol, drought, and demand

Corn plays an important role in current United States transportation fuel policy - but environmental and economic factors are putting the pinch on corn ethanol producers.

The U.S. Renewable Fuel Standard program requires transportation fuel sold in the United States to contain at least a minimum volume of renewable fuel.  This renewable fuel is generally ethanol, produced by fermenting sugars contained in plant feedstocks like sugar cane and sugar beets, or sugars produced by converting plant-based starches like corn starch.  The program's goals include reducing greenhouse gas emissions from the transportation sector, reducing petroleum imports, and encouraging the development and expansion of the domestic renewable fuels sector.

In the U.S., more than 95 percent of operating ethanol plants reportedly use corn starch as their feedstock.  According to the U.S. Department of Agriculture, U.S. farmers planted 96.4 million acres of corn this year, the highest corn acreage since 1937.  Favorable field conditions this spring led to the quickest planting pace on record, with nearly all of the corn planted by May 20 and plants emerged by June 3.

This summer's high temperatures and widespread drought conditions - with nearly 56% of the area of the 48 contiguous states experiencing drought - have hurt the U.S. corn crop, resulting in reduced estimates for this year's crop.  This anticipated reduction is driving corn prices up, with the commodity trading at over $7 per bushel (contrast a 2007 U.S. Energy Information Administration analysis of transportation biofuels assuming corn prices of about $2 per bushel).  This price increase is cutting into ethanol producers' bottom line.

At the same time, transportation fuel consumers are driving less.  Between increased fleet efficiency prompted by both governmental mandates and a natural desire to cut costs, and the overall slowdown in the national economy, overall demand for ethanol fuel has not grown at the pace previously projected.

According to Reuters, the average ethanol plant operating in Illinois is currently losing 32 cents on every gallon it produces.  As a result, many ethanol plants are running below their production capacity, and several have announced planned closures.  EIA data shows that ethanol production dropped 4% last week to 821,000 barrels per day, the lowest production rate since July 23, 2010.

Proponents of blending ethanol into transportation fuels point to its nature as a renewable biofuel, lower cost than gasoline, and ability to be produced domestically.  Critics question the wisdom of converting a potential food crop into an energy commodity, as well as the economic and environmental consequences of current pro-ethanol policies.  Whatever the ultimate outcome, the climatic and economic conditions affecting the corn ethanol industry may be calling into question the sustainability of the current system.

Biofuels power first commercial airline flight

Today marks the first U.S. commercial airline flight powered by biofuels.  United Airlines has selected a Boeing 737-800 for the route from Houston to Chicago.  The plane will be powered by Solajet, a fuel blend of 60 percent petroleum-based jet fuel and 40 percent biofuel produced by California-based algae producer Solazyme.


Biofuels appear poised to play an increasing role in the transportation sector.  Biofuels have traditionally included liquid fuels like ethanol (derived from corn or cellulosic sources) and biodiesel.  Biofuels typically rely on plants or algae to convert solar energy into chemicals that can be refined and modified to produce usable fuels.  The wood (biomass) burned in hearths and stoves around the world represents a very basic biofuel, but today's advanced biofuels can involve significantly more technology.  The U.S. Department of Energy is funding research and development efforts to produce "drop-in biofuels", which can be  used as additives or even replacements for liquid fuels like gasoline, diesel and jet fuels -- without requiring consumers or distributors to modify their engines and fuel distribution networks.

United Airlines is not the only carrier to take its biofuels experimentation live this week.  On Wednesday, Alaska Airlines will fly two commercial flights from its bases in Seattle and Portland, Oregon, to Washington, D.C.  Alaska Airlines' jets will be powered by a fuel blend composed of 20% biofuels from used cooking oil.  Alaska Airlines chose Dynamic Fuels as its supplier; Dynamic Fuels is a joint venture between food product giant Tyson Foods and synthetic fuel producer Syntroleum.