The future of fuel

Stringent regulations mean that biofuel is on the increase. But is it here to stay?

Last year saw the most successful year in history for world ethanol production. Biofuel is now becoming one of the fastest growing markets within the food and agriculture sector. Grains, for example corn, wheat, barley, triticale and sugarcane are all raw materials for biofuel production.

The increase, based on a number of factors, promises new political initiatives, and an increasingly stable economic environment as well as technological advances that would only help to boost future demand.

Governments worldwide recognise the environmental and economical potential that biofuels have to offer. It can produce up to 70% fewer carbon emissions than petrol; if bioethanol replaced just 5% of the petrol in the UK, the carbon reduced would be equivalent to taking one million cars off the road. It can be easily blended with conventional grades of petrol (5% bioethanol, 95% petrol) and dispensed through normal unleaded petrol pumps, without the need for modification of conventional petrol cars.

Because of these factors, the renewable fuel can be incorporated into several areas of public policy including reduction of greenhouse gases, fuel security, air quality, technological innovation, industrial employment and community, and rural economy regeneration.

Unica, São Paulo, Brazil. Sugarcane is the main driver for biofuel production

But is the industry pitching itself too high? Is it really that stable? And are the promises that biofuel will be on the increase year on year an exaggeration? Several challenges have inhibited biofuel growth, for example weather-related production, particularly in Southeast Asia, have highlighted the vulnerability of biofuel schemes. Cost of production means that, at present, biofuels cannot compete on price with fossil fuels. A major political issue sorrounds how ethanol is traded around the world. Today, ethanol is traded in many different forms, such as ETBE (Ethyl tertiary butyl ether – ethanol and isobutene mix) and many other blends. This poses a problem for market transparency.

There is still also considerable resistance from the oil industry to accept bioethanol as a commercially viable option, particularly in Europe, where sales have remained below expectation. Over the last ten years, prices for crude oil have increased over 300%, while values for the world’s two major feedstocks from ethanol production, (sugar and corn) have shown remarkable stability. It is this widening gap that is making biofuel increasingly popular, increasingly competitive and more compelling for economic reasons.

Presently, the largest producer of biofuel is Brazil. In the last two years, its fantastic growth in the ethanol industry has been attributed to a series of good harvests, rising sugar prices and technological advances in the motor industry. The main driving force for the increase is simply that ethanol’s discount against gasoline is consistently between 40% and 60%. But this alone was not enough to drive the market. 2003 saw the introduction of flex-fuel vehicles (FFVs), which can use a blend of up to 85% bioethanol and by 2005, FFVs sales have overtaken conventional petrol powered vehicles. This new motor technology enabled the ethanol market to grow and provided consumers in Brazil with more choice than ever before.

This combination of domestic demand driven by FFVs and Brazil’s future export opportunities could see ethanol production double in the next few years.

Unlike Brazil and the US, the UK has taken a much more cautious approach to biofuel. There are several projects looking at production and viable usage of biofuels. One such project is the Wessex Biofuels project. In June 2005 Wessex Grain founded a new company, Green Spirit Fuels to look at building a bio-refinery to convert wheat into ethanol, once the Government has made the economic climate more attractive for biofuel production in this country.

Since then, planning permission has been granted and building is due to commence in autumn this year, production is scheduled to start in spring 2008 to produce 105,000 tonnes of bioethanol. This will be Britain’s first bioethanol plant and already there is huge demand for it. Green Spirit Fuels recently announced that it now plans to build a second plant on Humberside that will produce 200,000 tonnes per year of bioethanol from 2009.

Currently, construction of a new £20 million biofuel plant is underway at British Sugar’s factory at Whissington, in West Norfolk. The venture is in collaboration with BP and Dupont and is expected to produce the first commercial biobutanol from sugar beet in February 2007.

The plant will continue to use locally grown sugar beet as the feedstock and the biobutanol produced will be blended with petrol in the UK. Unlike bioethanol, up to 10% biobutanol can be blended with petrol without modification to existing vehicles, and there is potential to increase this concentration in the future. Biobutanol also has other advantages over bioethanol in that it has an energy content closer than that of petrol and offers better fuel economy than petrol/ethanol blends. They have also agreed to undertake a joint feasibility study to look at producing biofuel from cereal, and if successful, could lead to construction of much larger facilities.

Biorefineries are not new – processing primary agricultural products for the food, drink and animal feed industry has been around for decades. However, biorefineries for the non-food market, transport fuel, energy and chemical feedstock are a major initiative in the UK

How long will it be before we start choosing cars not only based on make and model, but also the type of fuel it runs on? The Swedish car maker Saab have launched a series of flex-fuel cars which can run on both pure petrol and eco-friendly renewable bioethanol without any adjustment required by the driver. The bioethanol car engine is said to have been hardened and has the benefit of producing much lower carbon dioxide emissions in exhaust gases - in fact, between 50% and 70% cleaner that when running on petrol.

March this year also saw the launch of Britain’s first filling-station pump dispensing bioethanol, tying in with the first deliveries of the Saab 9-5 BioPower flex-fuel car. Branded Harvest BioEthanol E85, it retails at approximately 2 pence per litre less than petrol. To date, 10 Biofuel filling stations have been implemented in the Norfolk, Suffolk and Somerset area, with more scheduled. It seems that only now corporate companies are recognising the long term potential of biofuel. The use of bioethanol in petrol was actually introduced at the end of last year, with one leading supermarket having 200 petrol forecourts selling standard unleaded petrol with 5% bioethanol included. The price remains the same as standard petrol, and consumers feel that they are helping the environment without paying a higher price.

The government have committed to provide 20pence per litre fuel tax reduction for bioethanol from January 2005 and have stated that ‘the government will also consider other means of support, such as capital incentives, grants or regulatory solutions’. The EU Biofuel Directive recommended that 2% of transport fuel should be sourced by 2005, which equates to 400,000 tonnes of bioethanol in UK’s 20 million tonne petrol market – the Wessex plant will produce 100,000 tonnes of bioethanol per annum.

Since then, the government announced a more realistic target of 0.3% for 2005 and by 2010, 5% of bioethanol will come from renewable sources.

Aside from the limited numbers of biofuel plants, is the UK able to produce enough crops to convert to fuel? On average, UK farmers produce 3.5 million tonnes of grain in excess of what they can sell. This, if converted efficiently, would contribute to 5% of the UK’s petrol consumption fulfilling the UK government’s 2010 target. Additional feedstocks could come from domestic or imported crops, or biofuel itself could be imported from other countries. Either way, importing raw materials or finished goods is likely to come under attack for economic and ethical reasons, for example diverting food crops from hungry nations. Also, increasing the UK crop market for biofuel is also likely to come under scrutiny, as this may drive the price of food crops in order to compete for land. However there is an argument that suggests that, as the selling price of cereals has been below the cost of production for several years, the new market for biofuel production will sustain agricultural production for the benefit of both fuel and food security.

All in all, biofuel is becoming big business. Driven by rocketing fossil fuel prices and ever growing ethical concerns for greenhouse gases, biofuel is certainly here to stay.

By Michael Wong
Michael Wong has a Masters degree in chemistry and has been in the scientific instrumentation industry for over 6 years. He has recently moved to FOSS UK, where he has implemented a number of exciting marketing initiatives