Ethanol manufactured from non-food “cellulosic” feedstock is on course to be cost competitive with corn-based ethanol by 2016, according to an industry survey conducted by research company Bloomberg New Energy Finance.
The survey collected data and predictions on the production costs of 11 leading players in the cellulosic ethanol industry. All use a technique, commonly called enzymatic hydrolysis, to break down and convert the complex sugars in non-food crop matter, and a fermentation stage to turn the results into ethanol.
The results showed that in 2012, the cost of cellulosic ethanol production was $0.94 per litre, around 40% higher than the $0.67 per litre cost of producing ethanol from corn, which dominates the US biofuel market and is competitive with US gasoline. By 2016, respondents thought the price of cellulosic ethanol would match that of corn-based ethanol.
Harry Boyle, lead biofuel analyst at Bloomberg New Energy Finance, said: “The cellulosic ethanol industry has something of a history of over-promising cost reductions and under-delivering. However, it may be dangerous to assume that it will not become competitive this decade. If our survey proves accurate, cellulosic ethanol will make meaningful inroads into the vehicle fuel market during the last years of this decade.”
The survey found that the largest cost elements for producers in 2012 were project capital expenditure, feedstock and enzymes. The operating costs of the process have dropped significantly since 2008 due to leaps forward in the technology. For example, the enzyme cost for a litre of cellulosic ethanol has come down 72% between 2008 and 2012.
Improvements in running costs for cellulosic ethanol plants will turn the spotlight squarely onto capital costs, which survey respondents expected to make up fully 45% of the overall expense of manufacturing a litre of cellulosic ethanol by 2016 – with feedstock contributing a further 34%. Developers will have to find ways of reducing the initial outlay on the plant, and reducing risk to attract cheaper financing. Boyle said: “We expect therefore to see a shift in focus over the next five to 10 years – from technology enhancements to logistical planning – that in turn suggests the industry is maturing.”
Globally, there are 14 enzymatic hydrolysis pilots; nine demonstration-stage undertakings; and 10 semi-commercial scale plants either announced, commissioned, or due online shortly. Five of the semi-commercial facilities are located in the US, but a swing towards Brazil is expected in the near future, with two announced there so far.
Bloomberg New Energy Finance defines a semi-commercial facility as having capacity of 90m litres per year, requiring an initial outlay of approximately $290m. By 2016 the second and third tranche of plants will be reaching commissioning, with annual capacities ranging from 90 to 125m litres. The initial outlay per installed litre is expected to fall from the original $3, to $2, due to economies of scale and a reduction in over-engineering.