Annual Energy Outlook 2006 with Projections to 2030 - Usinfo.org

Issues in Focuscost reductions are likely to be achieved by increasingproduction scale and implementing incremental processoptimizations. Energy is a significant componentof operating costs, followed by catalysts, chemicals,and labor. Production costs are highly localized.The greatest challenge facing biofuels production is tosecure sufficient raw material feedstock for conversioninto finished fuels. Production of biofuelsrequires significant land use dedicated to the growthof feedstock crops, and land prices could represent asignificant constraint.Ethanol. Ethanol, the most widely used renewablebiofuel, can be produced from any feedstock that containsplentiful natural sugars. Popular feedstocksinclude sugar beets (Europe), sugar cane (Brazil), andcorn (United States). Ethanol is produced by fermentingsugars with yeast enzymes that convert glucose toethanol. Crops are processed to remove sugar (bycrushing, soaking, and/or chemical treatment), thesugar is fermented to alcohol using yeasts andmicrobes, and the resulting mix is distilled to obtainanhydrous ethanol.There are two ethanol production technologies: sugarfermentation and cellulose conversion. Sugar fermentationis a mature technology, whereas celluloseconversion is new and still under development. Cellulose-to-biofuel(bioethanol) can use a variety of feedstocks,such as forest waste, grasses, and solidmunicipal waste, to produce synthetic fuel.Capital costs for a corn-based ethanol plant can rangefrom $21,000 to $33,000 (2004 dollars) per barrel ofcapacity, depending on size [72]. Manufacturing costscan be as low as $0.75 per gallon, as demonstratedby the low-cost production in Brazil, where climateconditions are favorable and labor costs are low.One industry risk is drought, which can limit theavailability of feedstocks. Another issue is competitionwith the food supply. Based on current land use,industry trade sources estimate that annual corn ethanolproduction in the United States is limited toCapital costs in transition for synthetic fuel facilitiesThe chart below shows the range of capital investmentcosts for the synthetic fuel technologies. A traditionalcrude oil refinery is shown as a point ofreference. Each of the alternative fuel technologiesis more expensive than an oil refinery, with a rangeof capital costs for each technology resulting fromindividual site location factors, facility layouts, competingvendor technologies, and production scale.Over time, investment costs for synthetic fuel facilitiesare expected to decrease as a result of “learning-by-doing.”As the installed base of synthetic fuelplants grows, cost reductions are expected to parallelthose seen in the past for LNG liquefaction facilities,which have achieved cost reductions oftwo-thirds over the past three decades.At present, observed capital costs generally areinversely proportional to installed capacity. There isabout 300,000 barrels per day of installed corn ethanolcapacity in the United States, whereas biodieselcapacity amounts to about 12,000 barrels per dayof dedicated capacity plus another 7,000 barrelsper day of swing capacity from the oleochemicalindustry.(Malaysia and South Africa) and global CTL capacitytotals 150,000 barrels per day at the original developmentplants in South Africa. There is no commercialBTL capacity in the United States or elsewherein the world, except for pilot plants.Putting the current production capacity of these variousfuels into perspective with traditional oil-basedfuels, U.S. refining capacity for all nonconventionalliquid fuels is over 17 million barrels per day, out of aworldwide total that is approaching 83 million barrelsper day.Range of capital investment costs for synthetic fuelfacilities (thousand 2004 dollars per daily barrelof capacity)Oil RefineryBiodieselEthanol (Corn)Gas-To-LiquidsThe liquefaction industry is still in its infancy. Atpresent there are no commercial GTL or CTL plantsin the United States other than pilot plants. Worldwide,GTL capacity is nearly 60,000 barrels per dayCoal-To-LiquidsBiomass-To-Liquids0 20 40 60 80 100 120 140 160Energy Information Administration / Annual Energy Outlook 2006 57