Biofuels. Energy Workshop for Financial and Capital Market Leaders. Terry Michalske

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Energy Workshop for Financial and Capital Market Leaders Biofuels Terry Michalske Director, Biological and Energy Sciences Sandia National Laboratories Sandia is a Multiprogram Laboratory Operated by Sandia Corporation, a Lockheed Martin Company, for the United States Department of Energy Under Contract DE-ACO4-94AL85000. October 23, 2007

Energy Challenges are Complex and Highly Interdependent Energy Security Secure Supply Reliability Efficiency Economic Productivity Growth in Demand Price Volatility Environmental Impact GHG Emissions Land and Water Use All Three Imperatives Must Be Addressed

The DOE Laboratories are Contributing to Our Nation s Energy Future Energy Supply, Energy Efficiency, and Environmental Stewardship Safe, Secure, Reliable Energy Supply and Infrastructure Science and Technology

Some Key Technology Innovation Challenges Wind Next Generation Wind Turbines Improve Energy Capture by 30% Decrease Capital Costs by 25% Biofuels Next Generation Biofuels New Feedstocks Improved Energy Crops Integrated Biorefineries Solar Photovoltaics Improved Performance Through Process Improvements Better Materials Concentration Harnessing Nanostructures Nuclear Closing the Fuel Cycle Advanced Reactor Development

The US is Facing Unprecedented Transportation Fuels Challenges Largest end use of energy by sector 97% of transportation energy comes from petroleum Two-thirds of petroleum is used for transportation -- 60% for ground Gasoline and diesel both produce about 20 pounds of CO 2 per gallon 7 tons per vehicle per year Transportation presents a unique challenge because onboard sequestration is not credible

Enabling a Transition Strategy for Transportation Fuels Unconventional fossil fuels will become conventional with technology insertion Liquid hydrocarbons offer numerous benefits safe, high energy density, adaptable infrastructure Hydrogen as an energy carrier is future objective A transition strategy can reduce imports and GHG emissions while using existing energy infrastructures Coal to Liquids and Expand and Biodiesel extend petroleum while managing carbon TODAY Synfuels and Biofuels Improve Efficiency and Understand Entire System FUTURE Hydrogen CRF

Biofuels from Domestic BioMass Present Significant Opportunities 2006 State of the Union Address President Bush called for a new national initiative to make cellulosic ethanol viable as a transportation fuel by 2012 and to reduce U.S. dependence on foreign oil by as much as 30%. US Sources of Biomass

Transportation Biofuels Conference US Senate Energy & Natural Resources Committee February 1, 2007 Sandia National Laboratories (SNL) The National Renewable Energy Laboratory (NREL) Pacific Northwest National Laboratory (PNNL)

Feedstock? corn starch, cellulosic biomass/energy crops, vegetable oils, municipal solid waste, algae, Biomass Feedstock Recovery / Economics CO2 Balance Economics? energy balance, infrastructure costs,, Sustainability? Carbon implications, water use, The Biofuels Challenge is Complex Several Pathways to Biofuels Are Possible Technical ST&E Challenges Bioscience, Biology, Combustion Agronomy, Chemistry, Materials, Chemical Engineering, Nano & Micro, Combustion Science, Computing, Metallurgy/ Materials,.. Conversio n Processing Utilization/ Consumptio n Distribution? Rail, truck, pipeline, Conversion? thermochemical, biological/fermentation, Fuel? ethanol, butanol, diesel, biocrude, Utilization? ICE design, emissions, fuel cell,

Ethanol Production Challenges Today Woody Crops; Ag & Fuel Forest ethanol Wastes is produced from starch (corn kernel) 4.9 billion gallons produced in 2006 13 years were required to reach 1 billion gallon production levels of US gas contains 10% ethanol Tax breaks currently $0.51/gallon 112 corn ethanol refineries in place with 76 under construction Ethanol is on track to consume 50% of corn yield (last year 20%) corn prices have spiked with the increased demand: $4 per bushel is a ten year price high Secondary effects include higher prices across the board for associated products (meat, etc.) Non-Food Energy Crops Cellulosic Biomass What s Needed Mandate: double the amount of ethanol blended with gasoline by 2012 Must develop alternative sources of feedstocks and processing to meet Federal goals Ethanol derived from cellulosic material is the most viable alternative Believed to cost 5x more today to establish a cellulosic biorefinery

Cellulosic Ethanol: DOE Summary From DOE Genomics:GTL White Paper

Cellulosic Ethanol Fuel Costs Ethanol from corn is now $1.10 $1.25/gal With the CAFE ethanol blender s credit, corn ethanol is competitive with gasoline. Cellulosic ethanol is not yet competitive: current cost for cellulosic ethanol proven at the pilot scale is ~$2.25/gal. Cellulosic ethanol expected to be competitive with corn ethanol in 2012

Cellulosic Ethanol Infrastructure Needs Farm to Plant A new biomass delivery infrastructure model to minimize the storage and delivery supply chain. Large, centralized feedstock collection depots will be required. Plant Gate To End User Dedicated ethanol pipelines will be needed. A rough cost estimate for pipeline is $1 million per mile installed (Reynolds, 2006). Fuel station retrofits - $25,000/station = $4B/30 years (in terms of capital depreciation ~ $0.07/gallon). NREL, A National Laboratory Market and Technology Assessment of the 30x30 Scenario; 2007 Reynolds, R. (2006). Ethanol s True Potential Contribution to U.S. Energy Security: Ethanol Demand Pull Study

Cellulosic Ethanol Greenhouse Gas/CO 2 Implications Well-to-Wheels Analysis of Advanced Fuel/Vehicle Systems May 2005, Argonne National Laboratory

Biodiesel from Soybean or Canola Long term Volume Potential 10B gal/yr Near/Mid term Volume Potential 1.5-3B gas/yr (via a combination of soy, canola, other crop oils, and waste grease) Assumptions significant advancements in plant science to improve oil yields, significant changes in land-use practices including conversion of land from grain to oil crops, significant reduction of soybean exports. Cost Estimates ($/gal) Soy Oil: $2.86 to $3.08 Canola Oil: $3.17 to $3.69 Vegetable Oil: $2.77 to $3.63 Assumptions Average USDA soy oil price forecast for 2007 of $0.26 0.29 cents per pound Capital, operating and energy costs from an Energy Information Administration (EIA) analysis. Producer profit assumed 15%, is the only unsupported assumption. K. S. Tyson, et.al. Biomass Oil Analysis: Research Needs and Recommendations. NREL/TP-510/34796, 2004 J. Sheehan, et al., An Overview of Biodiesel and Petroleum Diesel Lifecycles, NREL/TP- 580-24772, 1998. M. Ash et al. Oil Crops Outlook, USDA 2006. A. Radich, Biodiesel Performance, Costs, and Use, EIA 2004. R. Schnepf, Agriculture-Based Renewable Energy Production, CRS Report RL32712, 2007.

Biodiesel from Soybean or Canola Infrastructure Compatibility Pipelines are lowest cost mode of transporting fuel Some pipeline companies reluctant to handle biodiesel Mixing biodiesel with aviation turbine fuel and military JP-8 is one solution Continued shipping via tank truck and rail tank car with some regions employing barges is probable Transportation by truck and rail car is adequate at current biodiesel production levels Europe is presently shipping B5 through pipelines. Converting engines to biodiesel is relatively straightforward. Charles E. Wilson, Biodiesel Promise, Bulk Transporter Magazine, November 1, 2005

Biodiesel from Soybean or Canola Environment Benefits/Impacts Biodiesel from soy or canola has positive energy and CO 2 life cycle balances (from the joint DOE/USDA study): Canola Field Biodiesel uses 1/4 th of the fossil energy used to produce petroleum diesel. Overall lifecycle CO2 emissions from biodiesel are 78% lower than those from petroleum diesel. J. Sheehan, et al., An Overview of Biodiesel and Petroleum Diesel Lifecycles, NREL/TP- 580-24772, 1998. R. Marinangeli, et al., Opportunities for Biorenewables in Oil Refineries. Report to DOE under contract # DE-FG36-05GO15085.

Biodiesel/Biocrude from Algae Sun Carbohydrate R 1 R 2 Protein R 3 O C O C O C CO 2 Photosynthesis O CH 2 Natural oil O (TAGs) CH 2 O Transesterification CH 2 H 2 O Like green plants, algae create biomass through photosynthesis. Biomass consists of proteins, carbohydrates, & natural oils. Most of the natural oil is synthesized as triacylglycerides (TAGs). Some microalgae, such as diatoms, can produce up to 60% of their body weight in TAGs. Biodiesel fuel is derived from algal (or vegetable) oil by transesterification. Biodiesel

Biodiesel/Biocrude from Algae History & Potential Botryococcus braunii Microalgae have been studied as a source of biofuels for 50 years Originally to derive methane from wastewater treatment Early 70 s: hydrogen Early 80 s: bio-oil (biodiesel) US: $50M spent on the pre-genomic Aquatic Species Program ( ASP ) from 1980-1995 (NREL) Japan: $500M spent on RITE CO2 Abatement Program from 1990-2000 Microalgae Has Some Unique Advantages Grows with impaired water (brackish, municipal waste water) Greater photosynthetic efficiency than in higher terrestrial plants (as much as 5-10%, compared with <0.5% in higher plants) Can utilize industrial CO2 emissions as carbon source.

Sun Biodiesel/Biocrude from Algae O 2 Processing INPUTS CO2: flue gases, ethanol plant, other Water: wastewater, brackish, saline Nutrients: wastes, fertilizers, recycled water Microalgae strains INOCULUM SYSTEM Closed and open photobioreactors BIOFUELS MASS CULTURE POND Raceway-type, shallow Paddlewheel mixing CO2 transfer stations Large scale (> 1 hectare) CO-PRODUCTS RECLAIMED WATER Electricity CO 2 PROCESSING HARVESTING bioflocculation aquaculture microstraining New technologies Conversion to biofuels: (extraction, transesterificatoin, thermochemical conversion) Processing to co-products (animal feed, biopolymers, commodity chemicals) Fertilizers, soil conditioners BIOMASS

Biodiesel/Biocrude from Algae Fuel Cost Estimate $200-260/Bbl Volume Potential Potentially scalable to meet US transportation fuels needs with15,000 square miles (9.5 million acres) US currently uses 450M acres used for crop farming and >500M acres for farm animal grazing. Time to Market Difficult to estimate; technological and industrial precedents are lacking. Recent commercial/venture investments (start-up and otherwise) may yield moderate (1B gal/yr) production within 5 years e.g. Green Star Products/De Beers Fuel Ltd announcement (11/06) to use 90 GreenFuels photobioreactors to produce 90M gal/yr - 4x greater than the entire U.S. biodiesel output in 2006- in 5 years. Large-scale production (> 20B gal/yr) largely thought to be 15-20 years out with substantial needs for basic biological and engineering R&D to reach this level of production. Biodiesel Production from Algae, Department of Energy, 1998, Aquatic Species Program Final Report, National Renewable Energy Laboratory.

Recent R&D Developments US DOE Biorefineries - $200M

Recent R&D Developments US DOE Bioenergy Research Centers - $375M

Recent R&D Developments DARPA JP8 Biofuels - $5M

Other Recent Developments A Growing Awareness of Sustainability Issues Natl Academy of Science Workshop

Future Energy Development Will Put New Demands on Water Water Consumption Per-Unit-Energy and Water Use for Fuel Extraction and Processing Oil Refining NG Extraction/Processing Grain Ethanol Processing Biodiesel Processing Biocrude from Algae (Proc. Only) Lignocellulosic Ethanol*^ Oil Shale In-Situ*~ Oil Shale Ex-Situ* Oil Sands Coal to Liquid Hydrogen RE Electrolysis* Hydrogen (NG Reforming)* Corn Irrigation for EtOH Soy Irrigation for Biodiesel 1 10 100 1000 10000 100000 * Estimates based on unvalidated projections for commercial processing ^ Assuming rain-fed biomass feedstock production ~ Water Consumption for Electric Power from Evaporatively- Cooled CCGT MMBTU Note: Petroleum Refining Consumes 1-2 Bgal/day and 1 MMBTU= ~8 gallons of gasoline

Economic and Public Acceptance Issues Moving biomass is expensive, Distributing some biofuels (ethanol) is problematic, and Economically viable and ecologically sustainable pathways to biofuels vary with geographic locale and climate, Public acceptance of Genetically Modified Organisms (GMO s): Synthetic biology approaches are being developed now for closed (reactor) systems. Closed system photobioreactors can be employed for GMO algae Large-scale, open-air cultivation of GMO crops is already occuring in the US Multiple pathways will be required to meet US needs for transportation fuels Pew Initiative on Food and Biotechnology Fact Sheet

Biofuels will be part of the transportation energy mix going forward. Sustainability will be a key issue in determining how large.