Bioenergy: Where We Are Bioenergy: Where We Are and Where We Should Beand Where We Should Be
Daniel G. De La Torre UgarteDaniel G. De La Torre UgarteChad M. HellwinckelChad M. Hellwinckel
Where we are:Where we are:
Longer term: 30 years of chronic low prices. culture dependent upon fossil fuels.
Recently: Current high commodity prices. Criticism of biofuels policies.
Where we are:Where we are:
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8
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12
14
16
Year
$ p
er b
ush
el Corn
Wheat
Soybeans
Rice
Corn = $5.80Wheat = $7.98Soybeans = $13.93Rice = $17.55Cotton = $0.689
September delivery
Commodity prices on the rise
Where we are:Where we are:Long term trendsLong term trends
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50
100
150
200
250
300
350
1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007
Pri
ce In
dex
Nominal Real
Source: International Financial Statistics Online, IMF February 10,2008. Except for real price in 2007, which is estimated by author.
30+ years of declining and or flat prices
Where we are:Where we are:Agriculture and PovertyAgriculture and Poverty
Developing world 5.5 billion people 2.5 billion are in households involve in Ag 1.5 billion are smallholder households
800 million people food insecure 80% of food insecure people are in rural areas In many developing countries:
>50% of employment in agriculture >25% of GDP from agriculture
Increase in GDP from Ag is twice as efficient for poverty reduction than any other sector. (2008 World Bank Development Report)
Energy Output to Input Egypt (Historical) = 1.8 Afghanistan (today) = 2.9 U.S. (1920) = 3.1 U.S. (1974) = 0.7
Where we are:Where we are:Energy Production through Agriculture Created CivilizationEnergy Production through Agriculture Created Civilization
Now using more energythan creating
Where we are: Where we are: Global Oil SituationGlobal Oil Situation
• Challenge of agriculture is to, once again, be a net SOURCE of energy.
Where we want to be:
Maintain higher price levels than historical trend, while avoiding price spikes.
Transform agriculture into a net energy source once again.
While… Improving soil health.
Providing adequate food to all.
Not all Biofuels are “created” equalNot all Biofuels are “created” equalAdvantages of Dedicated Energy Crops:
Does not have to compete directly with food crops for land resources= fewer price spikes
Perennial grasses, fewer field operations, lower chemical and fertilizer use= better energy conversion (EROEI 1.8 to
8)
Perennial grasses, root structure= improved soil + carbon sequestration
Bulky, therefore production dispersed= value-added spread throughout growing
regions
The Energy BillThe Energy BillEnergy Investment and Security Act of 2007Energy Investment and Security Act of 2007
A B C D E F
Year
Volume of Renewable
FuelCorn
EthanolAdvance Biofuels
Cellulosic Biofuels
Biomass disesel
Other advanced biofuels
A = B+C B=A-C C=D+E+F
2008 9,000 9,000 0 0 0 02009 11,100 10,500 600 0 500 1002010 12,950 12,000 950 100 650 2002011 13,950 12,600 1,350 250 800 3002012 15,200 13,200 2,000 500 1,000 5002013 16,550 13,800 2,750 1,000 1,7502014 18,150 14,400 3,750 1,750 2,0002015 20,500 15,000 5,500 3,000 2,5002016 22,250 15,000 7,250 4,250 3,0002017 24,000 15,000 9,000 5,500 3,5002018 26,000 15,000 11,000 7,000 4,0002019 28,000 15,000 13,000 8,500 4,5002020 30,000 15,000 15,000 10,500 4,5002021 33,000 15,000 18,000 13,500 4,5002022 36,000 15,000 21,000 16,000 5,000
0
5
10
15
20
25
30
35
40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
year
Bill
ion
s o
f G
allo
ns
How fast will cellulosic grow?How fast will cellulosic grow?
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5
10
15
20
25
30
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40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
year
Bill
ion
s o
f G
allo
ns
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5
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25
30
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40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
year
Bill
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s o
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Corn Grain Corn Stover Wheat Straw Switchgrass
Advanced MovementAdvanced Movement
LegislatedLegislated
Standard AssumptionsStandard Assumptions
15 bil. from corn15 bil. from corn
13.5 bil. from corn13.5 bil. from corn
9.8 bil. from corn9.8 bil. from corn
Legislated:Legislated: Mandates the production
of 21 billion gallons of non-corn ethanol.
Standard Assumptions:Standard Assumptions: Model chooses most cost
efficient feedstock for ethanol production
Advanced Movement:Advanced Movement: improve yields of
switchgrass by 1.5% per year
reduce conversion costs by 20% by 2022
17 bil.17 bil.
9.4 bil.9.4 bil.
8.2 bil.8.2 bil.
How fast will cellulosic grow?How fast will cellulosic grow?
‘Advanced Movement’ Scenario:Reduces pressure on food crops Reduces cost of ethanol production
Projected drop corn price2010 2015 2020 2025
Corn -1.05 -1.22 -0.81 -0.75
Wheat -0.01 -0.21 -0.18 -0.11
Soybeans -0.35 -1.66 -1.44 -1.02
Cotton 0.00 0.01 0.01 0.01
Ded Energy Crop 7.57 -0.25 -8.22 -6.07($/ton)
Cost of Ethanol -0.48 -0.41 -0.38 -0.35Production
Change in projected prices between'Legislated' and 'Advanced' scenarios
-1.40
-1.20
-1.00
-0.80
-0.60
-0.40
-0.20
0.00
2010 2015 2020 2025
EISA_standard EISA_advanced
How fast will cellulosic grow?How fast will cellulosic grow?
Dedicated crop price moves to above $40 per dry ton in all scenarios.
Standard=$1.47/gal
Legislated=$1.49/gal
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30
40
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60
70
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Year
$ p
er d
ry t
on
Legislated Standard Advanced
Advanced=$1.31/gal
Dedicated energy crop price
Cost of ethanol production
Projected Bio-energy Dedicated Crop Acreage under EISA, 2025Projected Bio-energy Dedicated Crop Acreage under EISA, 2025Projected Bioenergy Dedicated Crop Acreage, 2025
Acreszero
1 to 20,000
20,000 to 50,000
50,000 to 100,000
100,000 to 300,000
300,000 to 1,300,000
Source: POLYSYS model, Agricultural Policy Analysis Center, University of Tennessee
Projected Acreage Converted from Cropland Projected Acreage Converted from Cropland to Dedicated Crop Production under EISA, 2025to Dedicated Crop Production under EISA, 2025
Projected Acreage Converted from Cropland to Dedicated Crop Production, 2025
Acreszero
1 to 20,000
20,000 to 50,000
50,000 to 100,000
100,000 to 300,000
300,000 to 1,300,000
Source: POLYSYS model, Agricultural Policy Analysis Center, University of Tennessee
ConclusionsConclusions
Investments in dedicated energy crops could: lower commodity price spikes while
increasing prices above historic trend.
first step in the transformation of agriculture into a source of energy (once again).
Department of Agricultural Economics, Institute of AgricultureUniversity of Tennessee http://www.agriculture.utk.edu/
Agricultural Policy Analysis Centerhttp://agpolicy.org/
Thank Thank youyou ! !
Bio-based Energy Analysis Grouphttp://beag.ag.utk.edu/
Projected Acreage Converted from ‘cropland in pasture’ Projected Acreage Converted from ‘cropland in pasture’ to Dedicated Crop Production under EISA, 2025to Dedicated Crop Production under EISA, 2025
Projected Acreage Converted from Pastureland to Dedicated Crop Production, 2025
Acreszero
1 to 20,000
20,000 to 50,000
50,000 to 100,000
100,000 to 300,000
300,000 to 1,300,000
Source: POLYSYS model, Agricultural Policy Analysis Center, University of Tennessee
Biofuels Expansion took-off when Biofuels Expansion took-off when S/U ratios were decliningS/U ratios were declining
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
1980/81 1983/84 1986/87 1989/90 1992/93 1995/96 1998/99 2001/02 2004/05 2007/08
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Corn Rice Wheat
Source: USDA
Animal feed has been driving growth Animal feed has been driving growth in world demand for grains & proteinin world demand for grains & protein
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
00
0 t
on
s
World Feed Demand Feed Demand minus USA Fuel Demnd
Source: OECD-FAO Agricultural Outlook 2007-2016 - OECD © 2007 - ISBN 9789264025097
Feed long term driver of ag. demand
Biofuels demand, the straw that broke the camel’s back
Developing countries are reproducing diet of the west based on high content of animal protein
Commodity Prices on the Rise!Commodity Prices on the Rise!
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2
4
6
8
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16
Year
$ p
er b
ush
el Corn
Wheat
Soybeans
Rice
Corn = $5.20Wheat = $10.36Soybeans = $13.98Rice = $16.34Cotton = $0.695
March delivery
Global Anthropogenic GHG EmissionsGlobal Anthropogenic GHG Emissions
Source: Fourth Assessment Report, IPCC (2007)(a) Global annual emissions of anthropogenic GHGs from 1970 to 2004. (b) Share of different anthropogenic GHGs in total emissions in 2004 in terms of CO2-eq. (c) Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of C02-eq (Forestry includes deforestation.)
0.26% Searchinger, et al.GHG for ag and forestry is to address the 31% of annualemissions coming. If we take care of this we take care of
Biofuels OpportunityBiofuels Opportunity
Transportation Fuels Consumption:Gasoline: 21 m barrels / day (Ethanol 3%)Diesel: 21 m barrels /day (Biodiesel 0.2%)
Equivalent of:Ethanol: 30 million barrels / dayBiodiesel: 23 million barrels / day
Hypothetically:Ethanol: 300m ha of sugar or 590m of cornBiodiesel: 225m ha of palm
0.00
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1.00
1.50
2.00
2.50
3.00
3.50
4.00
2010 2015 2020 2025
EISA_legislated EISA_standard EISA_advanced