Next-Generation Biofuels Edge to Center
US: January 14, 2008
NEW YORK - The quest by executives and venture capitalists to build a
next-generation biofuels industry has made strides this year as oil reached
US$100 a barrel and the world's largest energy consumer laid down ambitious
new mandates for alternative fuels.
Prices for the agricultural commodities that traditional biofuels are made
from have soared to historic levels in recent months on global demand for
both fuels and food, driving up all grain prices and hurting customers
ranging from Mexican peasants to US beer makers.
The price of corn, the traditional US feedstock for ethanol, has hit an
11-year high, while soy, the country's main ingredient in biodiesel, set a
record this week, adding further incentives to kick-start non-food sources
for alternative fuels.
Cellulosic ethanol, a fuel that can be made from grasses and wood pulp,
holds promise, but the first trickle of that fuel into the ocean of global
motor fuel is not expected for at least four years.
"I think cellulosic ethanol will come. The question is how high will the
price of food crops have to go before it becomes profitable to use new
materials to make new fuels," said Lester Brown, the president of the Earth
Policy Institute, who had predicted last year that corn prices would spike.
The Reuters Global Agriculture and Biofuels Summit, to be held in the
Americas, Asia, and Europe on Jan. 14 and 15, will explore these issues and
more, including production wars between the world's biggest ethanol
producers, and the struggles for profits between them and oil refiners.
The chief executive of the No. 1 US ethanol company, Poet, and an executive
from Archer Daniels Midland are scheduled to give their outlooks at the
summit.
Versun Energy Corp, which is merging with US BioEnergy Corp to become the
country's largest ethanol company, is also lined up to participate, along
with Brazil's state oil company, Petrobras.
MANDATES
The new US energy law signed by President George W. Bush late last month
calls for output of ethanol made from corn to peak in 2015 and for new
advanced biofuels to begin growing in overdrive that year.
By 2022, production of US biofuels made from new sources -- even garbage
that contains carbon -- is mandated to overtake output of corn ethanol, and
the law calls for the country to boost overall blending of biofuels
five-fold to 36 billion gallons per year.
Studies have found that switchgrass, expected to be a leading fuel source
for cellulosic ethanol, could cut greenhouse gas emissions much more than
gasoline and fuels made from corn and sugar. But the price of cellulosic
ethanol is currently about double the price of corn-based ethanol. Whether
companies can cut the costs is uncertain.
"Corn is still going to be grown to make ethanol. Whether (cellulosic) ever
takes a chunk of crop land away from corn is all going to come down to
economics," said Ken Vogel, a researcher for the US Department of
Agriculture.
Nagging questions linger about the wisdom of pushing the land harder over
the next few years to fuel more vehicles, whether with industrial corn in
the United States or palm oil in Asia.
And other countries, such as Argentina, Colombia, and the Democratic
Republic of Congo, are beginning to take part in the boom.
The sky high grain prices threaten a recovery in profit margins this year
for making corn ethanol. The smaller biodiesel industry may see new
bankruptcies and closures.
But is cellulosic ethanol the answer?
Touted as ideal to grow on marginal lands where food crops can't be grown,
it has received criticism from ecologists who say growing crops on such
lands will lead to massive soil erosion. (Editing by Walter Bagley)
Story by Timothy Gardner
REUTERS NEWS SERVICE
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