Which technologies are likely to enable us to meet longer-term sustainable biofuels targets for transport?

By GenetiFuel (Howard Siow, Dr Desmond Lun, Lawrence Auffray) August 2011 Government mandates and energy independence is driving the rapid commercialisation of sustainable biofuel technologies. This paper looks at which of the current technologies is likely to meet the sustainability, energy independence, total cost and scale requirements to replace fossil fuels. Energy from the combustion of fossil fuels is the largest source of air pollution and greenhouse gases. These environmental implications of fossil fuels have generated political pressure to diversify fuel sources. Among the alternatives to fossil energy are renewable (including biofuels) and nuclear energy. While the high capital intensity of power generation means that changes in the fuel mix occur only very gradually, the proportion of power generation using modern renewable technologies is projected to grow rapidly from 1% in 2005 to 6% in 2030, including biofuels (source: OECD). Toughening climate change policies are likely to accelerate.i

The Market for Liquid Fuel

According the Central Intelligence Agency (CIA) 2009 Fact Book, the world consumes 84 million barrels of fossil fuels (BBL) per day, or 13.3bn litres of oil per day. Of this, USA consumes 18.7M BBL/day, Europe consumes 13.6M BBL/day, and China consumes 8.2M BBL/dayii. By 2030, global oil consumption is expected to increase by more than 20% to over 100 million BBL per dayiii.

Global Crude Oil Demand Forecast to 2030 Millions Barrels per Day
30 25 20 15 10 5 0 China India EU USA

2030 2020 2010 2002

Source: Algae 2020 Study, Emerging Markets Online Consulting Services, IAE, EIA forecasts

Chinas energy consumption projected to exceed 20% of world consumption, thus outpacing the rest of the BRICs % of World, Per dollar of GDP
25 Brzail India 20 Russia China

15

10

0 1990 2000 2005 2010 2015 1020 2025 2030

Source: Energy Information Administration, Goldman Sachs Global Markets Institute

Governments are determined to develop alternatives to fossil fuels. Instability in oil producing countries has increased oil supply and price uncertainty, and local inflation. Voters are increasingly looking towards governments sustainability credentials. A 2010 study by McKinsey found that government mandates are the key drivers towards production of new biofuels.

Top Drivers for Biofuels Growth Percent

Mandate Improved energey security Development of affordable fuels Need for sustainable fuels Other

31% 20% 19% 19% 11%

Regulatory

Source: Oberman R, Sustainable Biofuels Growth: Hurdles and Outcomes (2010)

In the USA, federal law requires that 36 billion gallons (equivalent of 136 billion litres/year, 2.74 million BBL/day, about 10% of their oil consumption) of renewable biofuels be consumed annually by 2022, and that no more than 15 billion gallons of that be from corn ethanol.

Ethanol and Advanced Biofuel Mandate in USA Federal law requires that 36 billion gallons of renewable biofuels be consumed annually by 2022 and that no more than 15 billion gallons of that be from corn ethanol. Federal mandated totals (Billions gallons)

Corn ethanol 40 35 30 25 20 15 10 5 0 '02 '04 '06 '08

Advanced biofuels

'10

'12

'14

'16

'18

'20

'22

Source: Energy Information Administration; 2009 Ethanol Industry Outlook http://blog.oregonlive.com/environment_impact/2009/06/mandate.jpg

Region Brazil

Key biofuels and clean energy policy drivers 1) Ethanol: National Alcohol Program (PROALCOOL) requiring a minimum of 25% anhydrous ethanol. In practice, most vehicles in Brazil are now flex-fuel capable for up to an 85% blend of ethanol (E85) and some can run on E100. 2) Diesel: Mandated minimum 5% biodiesel blend.

European Union

1) Diesel: Directive for Renewable Energy (DRE), establishing an EU-wide binding target of 10% of transport energy from renewable sources by 2020, with implementation handled by Member States. 2) Jet fuel: Proposal that all flights to Europe - not just flights associated with European carriers - be required to comply with European cap and trade regulations beginning in 2012.

United States

1) Blendstock: Volumetric excise tax credit (VEETC) - "Blenders' Credit" currently set at $0.45 per gallon for ethanol and $0.60 per gallon for advanced alcohols 2) All biofuels: RFS2 mandate for 36 billion gallons of biofuels for

road transportation by 2022, with associated RINS ranging in value based on the type of biofuel and market conditions. 3) California's legislature codified the state's renewable portfolio standard, which calls for 33% of electricity to come from renewables by 2020. There has also been discussion about increasing the RPS to 40%. China Under its 12th Five Year Plan, China increased its solar installed capacity targets to 10GW by 2015 and 20GW in 2020, with discussions about a potential 50GW target by 2020. The country's nuclear plans are being re-examined, but further development will likely proceed. Germany suspended production at 7 nuclear plants, representing about 25% of its nuclear capacity. Germany also targets 80% of power from renewable sources by 2050. Solar installed capacity target moved to 67GW from 20GW by 2020. Increased solar installed capacity target from 8GW to 23GW by 2016. Reducing nuclear's share of the overall generation mix and increasing solar subsidies to accelerate installations ahead of summer 2011.

Germany

India

Italy

Japan

Increases in consumption and these government mandates for biofuels has driven significant investment into biotechnology, including techniques that can helpiv: Increase biomass yield/ha while reducing the needs for production inputs; Improve crop quality (higher biofuel yields); Contribute to also grow energy crops in areas with marginal conditions; Develop efficient micro-organisms and enzymes to convert the (hemi)cellulose to sugars, which can then be fermented into biofuel; and Convert agricultural waste into biofuels. These techniques cannot be scaled up economically or without jeopardising food security. Yanosek and Victor argue that the rush to meet the collective 2020 targets are only developing short-term solutionsv that may not actually drive us towards the ultimate objective of supporting a sustainable replacement to fossil fuels. For example: Arable farming land and feedstock being used to produce fuel crops like sugar cane, corn and wheat. Subsistence farmers in Africa being displaced to plant poisonous Jatropha plants.

Current BioFuel Technologies

There are generally 2 types of biofuel production: 1. Biofuel generated from farmed crops. Sugarcane (Brazil), Corn (USA and China) or Wheat (Europe) crops are harvested and the sugars are converted to ethanol in a chemical process. The cost is as low as 23c/litre in Brazil. The future is to scale and lower costs by making the process more efficient and by using cheaper biomass materials or developing technology to extract sugars from cellulosic feedstock (switchgrass) that can grow in less arable land. This technology is currently cost competitive with fossil fuels and can scale up to a maximum of 50% of current fossil fuel capacity. It is, however, highly sensitive to the price of raw materials (crops) and has to compete for arable farmland. The goal of crop-based biofuels is to be able to economically produce biofuel from cellulosic feedstock like switchgrass plants that can be cultivated on low-quality non-farm land, and thus not compete with arable farmland. The risk with this technology is the potential environmental issues of farming large areas of this previously uncultivated land, and the significant scientific challenge to economically utilize cellulosic feedstock. 2. Biofuel generated from Algae. Algae is cultivated in open ponds or photobioreactors (PBS), harvested and refined into biofuels. Algae seems an idealistic futuristic concept, where some organisms are placed in waste water or sea water, multiplies and grows and consumes sunlight, CO2 (potentially next to a coal power station), nutrients and generates an energy dense biofuel. But we are a long way off from it being commercial without significant subsides. The lowest current cost is $2.37/litre in open ponds, and $6.30/litre in PBS. The future is to scale and lower costs by reducing the capital and operating costs of running PBS and using synthetic biology to do almost all the processing and refining inside the algae organism. Although this technology is not currently cost competitive with fossil fuels and in its relative infant stages (few commercial scale projects), algal biofuel has the potential for significant scale and does not compete with arable farmland if technological hurdles can be overcome. The challenge of algae-based biofuel production is to be able to economically harvest the algae mass from the ponds or bioreactors, and economically extract the oil from the algae. Synthetic biologyvi aims to create algal-based organisms that can efficiently consume sunlight and carbon dioxide and convert it directly into high quality biofuels or even jet fuel without the need for expensive refining and processing. This technology has already been proven to work by GenetiFuel with biologically similar E. coli bacteria, which does not naturally produce biofuel.

Biofuel generated from farmed crops

Some studies have shown that scaling up ethanol produced from farmed crops in Brazil have the ability to replace 50% of fossil fuels vii.

There is enough land for biofuels but 80% lies in the South

Source: Brunner G, Niton Capital, Biofuels and Sustainability (2009)

Enough biofeedstock to replace 50% of fuel Incremental Feedstock Potential 2020 (Millions tons)

Wheat/corn Sugarcane Agricultural residues Energy crops Forestry Total

200 800 1,000 900 900 3.900 Enough for 360 billion gallons

Source: FAPRI, FAOSTAT, Riese J, McKinsey, Beyond the Hype Perspectives on Growth in the Biofuels Industry (2007)

Crop-based Ethanol Production Cost US$ per liter (2007)

Brazil (sugarcane)

0.18

0.05

0.23

USA (corn)

0.25

0.13

0.39

EU (wheat)

0.34

0.18

0.52

China (corn)

0.48

Raw materials

Conversion

Source: National Renewable Energy Laboratory (NREL), SRI, McKinsey analysis

Ethanol made from refined farming crops can be produced from Brazil sugar cane for as little as 23c/litre. McKinsey researchviii suggests that by 2020, the cost of producing a litre of ethanol in Brazil, shipping that litre to Western Europe, paying all relevant tariffs and taxes, and delivering it to the consumer will be roughly $0.73far less than todays prevailing price of $1.60 for a litre of gasoline in the European Union:

Cost to produce 1 litre of ethanol in Brazil and export to Western Europe (2020) US$ per litre

Source: Centro de Estudos Avancados em Economia Aplicada (CEPEA), University of Sao Paulo, FNP, National Renewable Energy Laboratory (NREL), McKinsey analysis

Biofuels from farmed crops is scaling up quickly with downstream consequences

At current food price and crude oil price levels, farm land used to produce crop-based biofuels is set to increase rapidly. Emerging technologies will probably make it possible to produce ethanol or other drop in fuels more cheaply with cellulose derived from other feedstocks, such as switchgrass (which can grow in a broader range of habitats, including relatively inhospitable ones). These technologies will require significant scientific breakthrough before becoming commercially viable within the next 10-20 years. Biofuels from residues from other agricultural crops may be cost effective at producing 5-10% of fuel requirements. For example, in China it may be possible to produce ethanol from rice straw at a cost of about $0.16 a litre. ix

As the cost of oil increases and to meet government mandates, there is an increased drive on production of biofuel crops. However in scaling up from 71.5 million litres/day to potentially 13 billion litres per day (183 times increase in production to replace fossil fuels), the potential impact on the land and environment to achieve such large increases in crops in South America and Africax has to be questioned. This intensive farming is driving the use of arable farming land or rainforests in some of the worlds poorest nations to produce oil for the worlds richest nations. The key challenges with crop-based biofuel are: 1. Competition for food-based agriculture for arable farmland, including political challenges around food prices and water security/shortages

xi

2. Competition for feedstock from a growing list of market entrants. 3. Increasing feedstock costs and feedstock price volatility. According to the World Bank, the cost of maize (up 84 percent), sugar (up 62 percent), wheat (up 55 percent) and soybean oil (up 47 percent) have now risen to near record highs from mid-2010 to mid-2011.xii 4. Technology to extract cellulosic feedstock is still in infancy, and is a very difficult scientific problem. It is predicted to be solved by 2020, but like nuclear fision (power from water), it is still a large unknown. 5. Government mandates for non-crop based biofuels

Biofuel generated from Algae

Algae at first take is an ideal organism for creating feedstocks to manufacture biofuel. Algae: Blooms when exposed to sunlight, carbon dioxide, and some basic inexpensive nutrients Grows almost anywhere, even on sewage or salt water, and does not require fertile land or food crops Minimizes competition with conventional agriculture Can capture/recycle stationary emissions of carbon dioxide, wastewater and excess heat from power stations and other heavy polluting industries, and provide carbon creditsxiii Compatible with integrated production of fuels and co-products within biorefineriesxiv Can produce other higher value products (Singh and Gu, 2010) and jet fuels It has high area productivity and one of the fastest growing plants in the world. The sugarcane plant, which flourishes only in tropical climates like those of Brazil, produces 6,000 liters of ethanol per hectare, compared with only 3,500 liters from corn.xv

Typical oil yields from the various biomass sources in ascending order Oil yield (litres/hectare)
Corn Soybean Peanut Canola Rapeseed Jatropha Karanji (Pongamia pinnata) Cconut Oil palm Microalgae (70% oil by wt.) Microalgae (30% oil by wt.)
Source: Chisti

172 446 1,059 1,190 1,190 1,892 2,590 2,689 5,950 136,900 58,700

Algae has significant technological challenges

The biggest challenge of algal-based biofuels is cost and complexities in scaling up. Algae biofuel producers are working towards finding an algal strain with a high-lipid content, fast growing, easy to harvest, and reduction in very high extraction and processing costs. Because of these significant challenges, few large scale commercial projects existxvi. Current R&D challenges with Algal Biofuels technology arexvii: 1. Feedstock Algal Biology: strain selection and genetic manipulation for "best" breeds Algal Cultivation: evaluate cultivation technologies (open, closed, hybrid, coastal, photobioreactor, heterotrophic, mixotrophic) for cost, scalability and environmental impactxviii Harvesting and Dewatering: Evaluate cost and sustainability of approaches (sedimentation, flocculation, dissolved air floatation, filtration, centrifugation, mechanized seaweed harvesting) 2. Conversion Extraction and Fractionation (eg. sonication, selective extraction): minimise waste and energy to achieve high yield of desired intermediates; preserve co-products Fuel Conversion (eg. thermochemical conversion, anaerobic digestion): improve efficiency, redice contaminants and emissions Co-products (high value chemicals and materials, like bioplastics, animal feed, biogas, fertilizers, industrial enzymes): improve extraction and recovery 3. Infrastructure Distribution and Utilization: Establishing supply chain and meeting regulatory classification requirements Resources and siting: Integrate production systems with wastewater treatment, CO2 and land resource requirements Algae-based biofuels is waiting for a disruptive technology to overcome these technological issues and significantly improve the economics.

The next generation of Algae biofuel technology

To overcome these challenges, the future of Algae-based biofuels is to create a completely new algae organism, using synthetic biology that can directly produce and secrete finished biofuels and high value products. Synthetic biology allows organisms to be genetically engineered on a large scale to fundamentally modify their behaviour. As opposed to traditional genetic engineering, which typically involves modifying single genes to improve traits, synthetic biology uses engineering principles to modify whole systems of genes, allowing fundamental changes in function. Synthetic biology is made possible by rapid advancements in genomic technologies for sequencing and synthesizing DNA that are revolutionizing biology and biological engineering. The aim of synthetic biology for biofuel production is to manufacture an organism capable of harnessing solar energy to convert carbon dioxide to fuels such as biodiesel, biogasoline, and biojet fuel at maximum efficiency and of secreting the fuel into the organisms growth media so that it can be easily skimmed from the bioreactor. This would eliminate the major costs associated with algae harvesting and extraction, and also refining the algal oil into finished products. The only major process cost would be the cost of running photobioreactors to grow the organism. Though the technology still requires significant development, it is the most viable candidate for producing biofuel in a way that is scalable, sustainable, and cost competitive to fossil fuels. Genetifuel is taking a rational design approach to synthetic biology that uses computer modelling to identify how organisms need to be modified for biofuel production. We have proven our approach on engineering the bacterium E. coli to efficiently produce fatty acids, which are close chemical relatives of biodiesel, biogasoline, and biojet fuel. E. coli converts sugars to fatty acids, which Is not ultimately scalable because the sugars need to be obtained from food crops. Genetifuel is now working on applying our rational design approach to a strain of blue-green algae, allowing direct, high-efficiency conversion of carbon dioxide to fatty acids using solar energy.

The goal of synthetic biology algae is to achieve large scale biofuels with low capital costs that can produce biofuel below the cost of mining and refining fossil fuel-based petrol. However an important advantage of synthetic biology Algae is that the algae-based organisms can also produce a number of other amino fatty acid based products very cost effectively. Companies such as Amyris has taken advantage of this to profitably make products at up to $4 per litre.

Higher value products that can be manufactured from synthetic biology Algae Market size (billions, log scale)

Source: Goldman Sachs Research

Algae 2020 study has reported the estimated costs to produce algae oils and algae biodiesel today between $9 and $25 per gallon in ponds, and $15$40 in photobioreactors (PBRs). Since algae production systems are a complex composite of several sub-sets of systems (i.e. production, harvesting, extraction, drying systems), reducing the number of steps in algae biofuels production is essential to providing easier, better, and lower cost systems. A crucial economic challenge for algae producers is to discover low cost oil extraction and harvesting methods. With the advent of cheaper photobioreactors (PBRs), these costs are likely to come down signicantly in the next few years. In the present scenario, reducing these costs is critical to algae biofuel companies for its successful commercial implementation. Extraction systems with estimates up to $15 per gallon of oil produced depending on the extraction method can be less than cost-effective. For example, Origin Oil has developed a technology to combine harvesting and extraction systems into a single process that is designed to reduce system complexity and costs for algae producers. Another example is to employ a method that uses algae cells as mini-processors and reneries in a process referred to as milking the algae that will consume CO2 and excrete hydrocarbon fuels directly.

One company, Algae to Energy, uses a patented system from Missing Link Technology that can extract algae oil from 0.08 up to $0.29 per gallon (depending on the species used) compared to other algae extraction methods ranging from $2 a gallon up to $12 per gallon. Another example is a harvesting technology from Algae Venture Systems that costs less than $0.30 per gallon of oil harvested compared to traditional centrifuge technologies which can cost up to $1 or more per gallon. Cost reductions in algae production systems are essential for algae producers to establish economically sustainable and protable enterprises. Examples of this include Arizona States bluegreen algae that excrete a kerosene type of jet fuel and Algenols bluegreen algae that excrete ethanol fuel directly. There are also a few species of algae that will naturally excrete oils from the cells. By milking the algae, these algal microreneries help to bypass the harvesting, extraction and rening systems all together by excreting forms of biofuels directly from the cells. These methods have the capability to signicantly reduce production costs, and help to simplify complex processes for emerging algae producers and customers of new algae biofuels production systems. Finally the co-production of some more valuable fraction and their marketing is also important for the success. Even with algae species with up to 50% oil content, the additional 50% of the biomass remains. This biomass fraction contains valuable proteins for livestock, poultry and sh feed additives valued from $800 up to $2500 per tonne.xix

Conclusion
Some groups have claimed that current crop-based biofuels technologies not only can be produced for less than fossil-fuel based fuel, but can also be scaled up to supply perhaps 50% of global oil demands. These economics means government mandates for biofuels are likely to continue to drive the conversion of food crops to oil crops. Given forecasted severe global food and water shortages and already worrying signs about the displacement of food crops to produce more profitable oil crops, the trend is moving towards biofuel sources such as microalgae, which are not crop based. Microalgae still faces significant scale and production cost constraints. Despite aggressive claims to be able to scale up and achieve costs of between US$0.50 to US$1.00 per litre, the algae biofuel industry is still perhaps 10 years and many hundreds of millions of dollars of research away from achieving its scale and cost objectives. Companies like GenetiFuel are trying to solve these significant issues by engineering new algaebased organisms that can organically produce finished biofuel or oil products. While these technologies appear to be able to achieve cost and scale requirements, there are still scalability issues that will need to be solved over a 5 year time period.

Authors
GenetiFuel GenetiFuel is in the process of raising US$3.5m for building a pilot of its biofuels using synthetic biology.

Lawrence Auffray CEO, GenetiFuel lawrence_auffray@genetifuel.com Ph. +61 401 164 860 (Australia) Lawrence has over 20 years business experience primarily in the energy sector ranging from commercial & financial advisory, business management, project management, consulting/strategy, regulatory, policy, risk business planning and operations. He is a member of the Infrastructure Partnership Australia Energy and Sustainability Taskforce As an Engineer and recognised leader in the sector has advised many clients in moving to a low carbon economy

Dr Desmond Lun Chief Scientist, GenetiFuel Desmond started research at MIT in 2002 (10 years of research experience) and is a recognized expert in complex systems engineering and synthetic biology. He is currently Associate Professor, Department of Computer Science and Center for Computational and Integrative Biology, Rutgers, The State University of New Jersey He received his PhD in electrical engineering and computer science from the Massachusetts Institute of Technology (MIT) and did postdoctoral training in genetics at Harvard Medical School. Desmond has published 15 peer-reviewed journal papers.

Howard Siow Strategy, GenetiFuel Howard has 7 years management consulting experience in the Energy & Utilities sector with PriceWaterhouseCoopers, Accenture, AGL, Energex, Energy Australia and TXU (TRUenergy / SP Ausnet). His experience includes large energy reform, energy business model review, process and technology change and sales & marketing. Howard has experience in managing and growing successful startup companies.

Goldman Sachs, Clean Energy Report (2011) CIA World Fact Book (2009), https://www.cia.gov/library/publications/the-world-factbook/rankorder/2174rank.html iii Algae 2020 Study, Emerging Markets Online Consulting Services, IAE, EIA Forecasts iv Carrez D, European Association for Bioindustries, Biofuels in Europe (2007) v Victor D, Yanosek K, The Crises in Clean Energy (2011) (http://www.foreignaffairs.com/print/67876) vi Victor D, Yanosek K, The Crises in Clean Energy (2011) (http://www.foreignaffairs.com/print/67876)
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Riese J, McKinsey, Beyond the Hype Perspectives on Growth in the Biofuels Industry (2007) Assis V, McKinsey Quarterly: Positioning Brazil for biofuels success (2007), https://www.mckinseyquarterly.com/Food_Agriculture/Strategy_Analysis/Positioning_Brazil_for_biofuels_success_1 950 ix Assis V, McKinsey Quarterly: Positioning Brazil for biofuels success (2007), https://www.mckinseyquarterly.com/Food_Agriculture/Strategy_Analysis/Positioning_Brazil_for_biofuels_success_1 950 x FAPRI, FAOSTAT, expert interviews, McKinsey analysis xi http://crossedcrocodiles.files.wordpress.com/2011/06/africabiofuelslandgrab.jpg xii The World Bank, Near Record High Food Prices Keep Poorest People on the Edge (August 2011), http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22982095~pagePK:34370~piPK:34424~theSiteP K:4607,00.html xiii US Department of Energy, National Algal Biofuels Technology Roadmap (2010) xiv US Department of Energy, National Algal Biofuels Technology Roadmap (2010) xv Assis V, McKinsey Quarterly: Positioning Brazil for biofuels success (2007), https://www.mckinseyquarterly.com/Food_Agriculture/Strategy_Analysis/Positioning_Brazil_for_biofuels_success_1 950 xvi Ribeiro L, Innovative Biofuel Technologies: Microalgae Analysis (2011) xvii US Department of Energy, National Algal Biofuels Technology Roadmap (2010) xviii US Department of Energy, National Algal Biofuels Technology Roadmap (2010) xix Singh J, Gu S, Commercialization potential of microalgae for biofuels production (2010)
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