Biofuel industry: From boiling point to freezing point?
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Biofuel industry: From boiling point to freezing point? 2009-02-11 China Chemical Information Network http://www.cheminfo.gov.cn/Images/ad/njsi*n03174.GIF Decline after a period of peak success Over the past two years, in the highly popular field of renewable energy, ethanol production in the United States has continued to reach new heights. Last October, U.S. ethanol production reached a record high: according to a report issued by the U.S. Energy Information Administration (EIA), the United States produced 800 million gallons of ethanol in October 2008, which represented a 44% increase compared to 600 million gallons produced in the same period the previous year. Meanwhile, the vulnerabilities of the U.S. ethanol industry came into sharp focus when VeraSun Energy, headquartered in North Dakota and the second-largest ethanol producer in the country, announced its intention to file for bankruptcy last October. This was just one of six ethanol producers that ceased operations or filed for bankruptcy in the fourth quarter of last year; the company had only opened a new ethanol plant in North Dakota in July of that same year. Market analysts point out that more bankruptcy filings will be submitted in 2009. As of mid-last year, there were 154 ethanol plants operating in the United States, with another 56 under construction or in the process of expansion. If all these new plants and expansion projects are completed, the country’s annual ethanol production will reach 13.7 billion gallons. However, this is still less than half of the 33 billion gallons of ethanol fuel that the Renewable Energy Act passed at the end of 2007 called for by 2020. This also fails to meet the requirement set forth in the New Energy Act, which calls for ethanol consumption to reach 15 billion gallons by 2015. So, it seems like the ethanol industry in the United States must be a very promising industry. However, as the weaknesses in the underlying industries related to renewable energy become increasingly apparent, along with the impact of the global financial crisis, analysts believe that there is an excess capacity for ethanol production in the United States. According to sources, due to deteriorating market conditions, including tightened credit and a sharp drop in the price of fuel ethanol, about 16 ethanol plants have shut down over the past two months. The annual production capacity of these plants is around 1.5 billion gallons, which means that ethanol production in the United States has declined by about 20%. In the first quarter of 2009, demand for biodiesel will begin to decline gradually in both domestic and overseas markets. Within the United States, the rapid decline in international oil prices, from $140 per barrel half a year ago to $40 now, has had a significant impact on the prices of biofuels. This has reduced the profit margins for biofuels, while the weak global economy has further decreased the demand for them. The impact of low oil prices: In the case of industrial ethanol, the prospects for this industry reflect a weak overall economy. In some key consumer markets, such as the demand for ethanol fuel, it is likely to decline by around 10% in 2009. Any industrial demand related to ethanol will also decline; for example, consumption in the fields of cleaners and detergents is continuously decreasing. Alcoholic beverages may be the only sector of ethanol consumption likely to increase this year. Last year, consumption in this sector increased by 7% to 8%; however, a weak U.S. economy could also dampen beverage consumption. An industrial ethanol producer said that their profit pressures also depend on debt, and few factories are free from it. Over the past few years, driven by high oil prices and the New Energy Act, a large number of ethanol plants have been expanded or newly built, and the capital market has also shown enthusiasm for investing in the new energy sector. No one denies that the rapid development of new energy sources over the past few years has been directly attributed to high oil prices, and the CEO of River Stone Company also acknowledges this fact: \"It is high oil prices that have provided us with the opportunity to invest in new energy sources; if oil prices drop back to $10 per barrel, I believe no one will be talking about renewable energy anymore.\" ” When oil prices are $75 per barrel, it only costs half as much to produce a barrel of ethanol fuel as it does to produce a barrel of gasoline. This also means that when oil prices drop to the current level of $40, investing in ethanol fuel is a unprofitable venture. The industry will go through a transition period, during which the number of manufacturers will decrease, said an analyst; this transition period is likely to last between 2 and 4 years, depending of course on oil prices. Investors will also put a strong brake on new ethanol refinery projects, thereby curbing the sharp increase in ethanol production capacity over the past few years. Finding an alternative: Some representatives of the biofuel industry still believe that biofuels made from soybeans and corn have little impact on the supply and prices in the food market. However, manufacturers are increasingly inclined to develop second-generation biodiesel using jatropha seeds and algae as raw materials. These two potential fuel sources can produce more biodiesel than traditional feedstock sources from the food sector. Market analysts and producers believe that producing biofuels from algae is promising, as it is abundant everywhere, has an impressive yield, and most importantly, is inexpensive. Analysts estimate that if algae worldwide were used to produce biodiesel, the output would be more than 2,000 times that of food-based ethanol fuels, and research on the commercial production of biofuels from algae has been ongoing for 5 years. If second-generation biodiesel made from algae is put into commercial production, it will **alleviate public protests over food shortages and rising prices caused by food-based ethanol. It is also expected to reduce the high production costs of biofuels, thereby eliminating the significant pressure associated with fluctuations in oil prices and enabling them to compete effectively with fossil fuels. Perhaps, in the near future, it will be technically feasible to produce biofuels from seaweed. However, large-scale use of seaweed will lead to a sharp decline in the numbers of marine animals that feed on it, thereby disrupting the ecological balance of the entire marine ecosystem and triggering larger waves of environmental protests. This will also be another urgent issue that investors, developers, and manufacturers need to address.
The development of an industry should be judged by the benefits it brings to humanity in the long term!
It hasn’t reached the freezing point; mainly, bioenergy is currently too unstable, so people have become more cautious. In the long term, the role of bioenergy will become increasingly important.
Personally, I think biofuels remain a good direction. Crises and production stops are only temporary; as oil prices rise, this industry will thrive again, and there will be more projects
Bioenergy and food should not compete with each other.
It will start to develop again during the next round of high oil prices.
The next round of high oil prices is bound to come, but how long will it take?
Is it possible for bioenergy to become a mainstream energy source? Of course, in a strict sense, current mainstream energy sources such as oil, coal, and natural gas are also forms of bioenergy. But the problem we face at present is the depletion of these mainstream energy sources. That’s why we’re trying to develop other bioenergies! Think about it: the biological energy that has been accumulated over hundreds of millions of years can be exhausted by just a few generations of us. How can the plants and their fruits that grow on farmlands, in dense forests, and on grasslands each year meet our enormous energy needs? Moreover, the harvest each year is also needed to provide food for humans. Therefore, I believe that to solve the energy problem, we need to look for solutions in other areas, such as solar energy – after all, the sun is our source of energy. Think about it: all living organisms convert solar light energy into usable form through photosynthesis. So why not start by utilizing solar energy, and work at the next stage of this energy conversion process? Everyone should understand that the fewer reaction steps there are, the higher the energy efficiency! Therefore, the bioenergy being discussed at present can at most serve as a supplement; it cannot become the mainstream!
Ethanol produced from grains is just one type of biomass energy; this approach is feasible for a certain period of time, but it is not viable in the long run. I believe that biomass energy derived from waste materials is the hope for the future.
As a new form of energy, biomass energy certainly has broad application prospects. However, it is not the only alternative energy source; among the many such sources, those that can be developed more rapidly and bring quicker benefits, as well as those for which technology can advance swiftly, will surely be given priority. The strong growth momentum of wind energy is an example of this. Due to technical limitations, the efficiency of biomass energy is too low, so it may not have much momentum at present. But as time goes by and technology matures, it will surely find its place. After all, human demand for energy continues to rise, and the current main sources of primary energy will also run out in the near future