Agriculture as a Producer of Energy

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Agriculture as a Producer of Energy

• Vernon R. Eidman
• Department of Applied Economics
• University of Minnesota

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Purpose of Paper

• Document the amount of energy used by the U.S.
  economy and agricultures role in supplying it.
• Review current state of technology in energy
  production from agricultural biomass.
• Summarize recent literature on agricultures
  potential to supply energy.

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U.S. economy consumed 97.1 quadrillion Btu of
energy in 2001.
Petroleum and Petroleum Products 39
Natural Gas 24
Coal 23
Nuclear 8.2
Renewables 5.8
Net imports make up 27 of total energy consumed, 60 of petroleum and 18 of natural gas. Net imports make up 27 of total energy consumed, 60 of petroleum and 18 of natural gas.
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U.S. Renewable Energy Flows as a Percentage of
Total, 2001
Hydroelectric 2.36
Geothermal 0.32
Solar 0.06
Wood 2.24
Waste 0.57
Ethanol and Biodiesel 0.15
Wind 0.06
Total Renewables 5.76
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Production of ethanol, biodiesel, and electricity
generated from wind turbines has been increasing
rapidly.

• 2003 ethanol production, 2,810 million gallons,
  was up 32 from 2002, and represented 2.1 of
  U.S. gasoline supply.
• 2003 biodiesel production, 20 million gallons,
  was up 33 from 2002 and represented 0.05 of
  U.S. diesel consumption in 2003.
• Electricity generated from wind in 2002 was 10.5
  million megawatts, up 56 over 2001, and
  represented 0.3 of U.S. electricity consumption.

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Real prices of gasoline, diesel and natural gas
have been higher during the 2000-2003 period than
for 1994-1999

• Average gasoline and diesel prices have been 35
  higher.
• Natural gas prices have been 26 higher.
• Real electricity prices have been relatively
  constant over the past 8 years.

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Energy Production from Agricultural Biomass
Technology and Costs
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Ethanol
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Ethanol from Starch

• Shapouri, et.al. USDAs 1998 Ethanol Cost of
  Production Survey
• Wet-mill processing grain
• Dry-mill processing grain
• Dry-mill processing waste starch and sugar
• Upper Midwest study conducted in 2003 reflects
  state of the art for dry-mill operations
  processing grain

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Rack Ethanol Prices are highly dependent on the
wholesale gasoline price.

• The demand for ethanol as an oxygenate can be
  expected to command a premium price when ethanol
  supplies are short.
• Ethanols demand as a fuel extender is driven
  largely by the wholesale price of gasoline.

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Ethanol from Lignocellulosic Biomass

• Lignocellulosic biomass is the leafy or woody
  part of plants. Sources for ethanol production
  include wood, wood waste, paper, corn stover,
  sugar cane bagasse, rice and wheat straw,
  switchgrass, etc.
• Primary components are cellulose, hemicellulose,
  and lignin.

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National Renewable Energy Laboratory is
developing a conversion process called
co-current dilute acid prehydrolysis and
enzymatic hydrolysis.

• Pretreat biomass with dilute sulfuric acid to
  convert hemicellulose to sugar and other
  compounds.
• Remove acid and compounds that would be toxic to
  fermenting organisms.
• Add cellulase enzyme and maintain temperature to
  promote conversion of cellulose to glucose and
  ferment sugars to ethanol.
• Separate ethanol from water and solids.
• Burn waste products in a fluidized bed combustor
  to produce high pressure steam for electricity
  and process heat.

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There are many uncertainties in the technology
and cost of inputs.

• Three of the most important are
• The conversion rate
• The cost of the feedstock
• The cost of the cellulase enzyme

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The estimated cost per gallon follows Aden et
al.(2002)

• The investment and operating costs are for the
  nth plant.
• Plant processes 2205 tons per day.
• Plant operates 350 days per year, using 771,750
  dry tons of lignocellulosic biomass.
• Estimated investment cost is 197.4 million.

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Speculation on When Commercial Plants May Be
Built to Produce Ethanol from Lignocellulosic
Biomass

• There is currently 1 pilot plant in operation.
• Construction on pilot plants may begin over next
  few years.
• May have access to niche sources of biomass at
  favorable costs.
• May have several small plants in operation by
  2010.
• Expected construction time is 2.5 years,
  suggesting it is unlikely large-scale plants
  using the new technology will be in production in
  less than 10 years.

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New Technology in Lignocellulosic Biomass
Processing

• Emphasis on developing cellulase enzyme that
  provides higher and more rapid conversion.
• Development of a biorefinery capable of producing
  a range of products liquid fuels, power,
  chemicals.

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Biodiesel

• Feedstock used depends on available supply,
  quality of feedstock and price.
• Potential diesel feedstocks produced in the
  United States, 3 year average (1993-95).
  Duffield, et.al. U.S. Biodiesel Development 1998

Soybean oil 51.9
Corn oil 7.2
Cottonseed oil 4.2
Sunflower oil 3.0
Other vegetable oils 3.2
Yellow grease 9.1
Inedible tallow 12.6
Edible tallow 5.2
Lard 3.6
Total 100
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Feasibility of biodiesel production facility
Haas et al. 2004

• Continuous-process vegetable oil
  transesterification, and ester and glycerol
  recovery.
• Assumes partial purification of glycerol and
  selling 80 glycerol to industrial glycerol
  refiners.
• 10 million gallon per year plant
• Feedstock is crude degummed soybean oil

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Feasibility of biodiesel production facility
Haas et al. 2004

• Total investment is 11. 5 million or 1.15 /
  gallon of annual capacity.
• 7.4 pounds of soy oil per gallon of biodiesel.
• Operating costs are 0.2550.
• Capital costs are 0.2292 per gallon.
• Sale of co-product 0.128 per gallon.
• Cost per gallon of biodiesel
• 1.83 per gallon with degummed soybean oil
  costing 0.20 / pound.
• 2.58 per gallon with degummed soybean oil
  costing 0.30 / pound.

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Electricity from Wind Power
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EIA estimates generating electricity using wind
turbines is competitive with other sources of
energy.a

• New generating capacity for 2010
• Gas is lowest cost, 49.66 mills/Kwh
• Wind is a close second, 50.54 mills/Kwh
• New generating capacity for 2025
• Coal is lowest cost, 53.20 mills/Kwh
• Gas is second, 54.38 mills/Kwh
• Wind is third, 58.33 mills/Kwh

aSource EIA, Annual Energy Outlook, 2004.
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The rate of development of generating capacity
from wind has been highly dependent on the
availability of the Federal Production Tax
Credit, which expired December 31, 2003.
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Anaerobic Digesters

• Enable large livestock operations and food
  processors to deal with a social problem
• Are management intensive
• Economic feasibility usually rests on reducing an
  expense (for disposal of waste, etc.), and
  substitution of the gas produced for purchased
  fuel and/or use of the gas to generate electricity

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Resource Base and PotentialGrowth of Bioenergy

• U.S.D.A. Effects on the Farm Economy of a
  Renewable Fuels Standard for Motor Vehicle Fuel.
  Washington, DC Office of Energy Policy and New
  Uses, USDA, 2002.
• De La Torre Ugarte, et.al. The Economic Impacts
  of Bioenergy Crop Production on U.S. Agriculture.
  Agricultural Economics Report 816. Washington,
  DC USDA, Office of Energy Policy and New Uses,
  2003.
• Gallagher, et. al. Biomass From Crop Residues
  Costs and Supply Estimates. Agricultural
  Economics Report 819. Washington, DCUSDA, Office
  of Energy Policy and New Uses, 2003.

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Summary comments on Projected Growth in Ethanol
and Biodiesel

• Model suggests U.S. can produce 4.4 billion
  gallons of ethanol from grain.
• Producing as much as 124 million gallons of
  biodiesel from soybean oil causes major
  adjustments in other domestic uses and exports of
  soybean oil.
• The model results would be somewhat different
  starting from current stocks and prices, but
  probably not too different.

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Meeting Clean Air Mandates without MTBE

• U.S. used 2.4 billion gallons of methyl tertiary
  butyl ether (MTBE) during 2002.
• Ethanol has a higher percentage of oxygen than
  MTBE and only about 1.2 billion gallons is
  needed.
• Ethanol production in 2002 was 2.1 billion
  gallons, suggesting ethanol can supply the demand
  for oxygenate for gasoline.

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Blending Biodiesel and Diesel Fuel

• Blending even small percentages of biodiesel with
  petroleum diesel improves lubricity and reduces
  emissions.
• U.S. consumed 39,930 million gallons of diesel
  fuel.
• 2 blend would require 798.6 million gallons of
  biodiesel
• 5 blend would require 1,996.5 million gallons of
  biodiesel

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Bioenergy Crop production Bioenergy Crop production Bioenergy Crop production
Wildlife Management Scenario Production Management Scenario
Million Acres 19.40 41.90
Million Dry Tons 96.00 188.10
Quads 1.54 2.92
a Source De la Torre Ugarte, et. al., Table 15. a Source De la Torre Ugarte, et. al., Table 15. a Source De la Torre Ugarte, et. al., Table 15.
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Biomass from Crop Residue

• Estimated supply functions for crop residue by
  region.
• Excluded residue needed for conservation and
  erosion control.
• Assumed residue is available at its opportunity
  cost

Source Gallagher, et al.
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Results on Crop Residue Indicate

• 2/3 of total industry supply in U.S. would be
  available in Corn Belt and ¼ would be available
  in Great Plains.
• Industry supply is 145 million tons
• 90 of industry supply, 130.5 million tons, would
  be available for 35 per ton

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Summary of Bioenergy Supplies from Agriculture

• With stronger world petroleum demand, the demand
  for ethanol and biodiesel is expected to remain
  strong.
• 4.4 billion gallons of ethanol from grain
• 0.1 to 0.2 billion gallons of biodiesel, although
  not all from soybean oil

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Summary of Bioenergy Supplies from Agriculture

• Producing above levels of ethanol and biodiesel
  will result in fewer acres shifting from major
  crops to switchgrass.

Wildlife Scenario Production Scenario
Million Dry Tons Million Dry Tons
Bioenergy Crop Production 96.0 188.10
Adjustment for Corn, S.B. Acerage -35.4 -57.4
Crop Residue 90 of Ind. Supply 130.5 130.5
Total Lignocellulosic Biomass 191.1 261.2
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World Ethanol Production for All Uses, 2001a
Million Gallons Percent of World
Americas 5,441.0 61.3
Europe 1,670.7 18.8
Asia 1,576.6 17.8
Oceania 47.4 0.5
Africa 140.8 1.6
Total 8,876.6 100.0
a Source Berg, Christoph. World Ethanol
Production 2001. The Distilling and Ethanol
Network. Available at http//www.distill.com/worl
d_ethanol_production.htm
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EU Biodiesel Industry Estimated Production, 2002
Country Million Gallons
Germany 135.2
France 110.0
Italy 63.1
Austria 7.5
Denmark 3.0
U.K. 0.9
Sweden 0.3
Total 320.0

• Source Foreign Agricultural Service, USDA. EU
  Biodiesel Industry Expanding Use of Oilseeds.
  September 20, 2003. Available at
  http//fas.usda.gov.
• Conversion from metric tons to gallons based on
  7.337 pounds per gallon. Source is Chevron
  Products Company. Diesel Fuels Technical Review,
  Chevron, USA, 1998, p. 28 31.

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Some Areas for Further Research

• Analyze the role of other crops and imports of
  vegetable oils as feedstock for biodiesel.
• Analyze the role of imports and exports in the
  development of the biofuels industry.
• Complete a more integrated analysis of the amount
  of ethanol from grain, biodiesel and
  lignocellulosic biomass that would be supplied at
  various price levels, and update this
  periodically.
• Study the economic feasibility of biorefining.