Obama's biofuel challenge: John Kemp

-- John Kemp is a Reuters columnist. The opinions expressed are his own --

By John Kemp

LONDON (Reuters) - Despite its conservatism in other policy areas, the incoming Obama administration may not have much choice but to be radical in energy policy and climate change because existing policies are running up against their natural limits:

(1) The cyclical downturn has slashed oil prices by two-thirds since the summer and threatens to reverse the drive for improved efficiency and smaller cars unless the federal government responds by tightening fuel-economy standards or raising gasoline taxes.

(2) The volume of ethanol being blended into the domestic gasoline supply is rapidly approaching the technical limits of the existing car fleet (the so-called "blending wall").

(3) Production of ethanol from corn starch is running up against land constraints, so the administration needs to bring on the long-promised but much-delayed "second-generation" of biofuels made from municipal and farm waste (including corn stalks) or specially grown nonfood crops (including switchgrass).

The underlying problem is that a huge area of agricultural land is being used to grow crops that replace only a tiny fraction of U.S. fuel requirements.

In 2007-08, some 27 million acres of corn were planted for ethanol, out of a total of 90 million acres planted to corn and 325 million planted to all major crops. But this corn (which used 8 percent of the total growing area) produced only 9 billion gallons of ethanol (displacing only 6 percent of the domestic gasoline supply).

The 2007 Energy Independence and Security Act (EISA) stipulates that ethanol blending must increase to 15 billion gallons by 2012 and an extraordinary 36 billion gallons by 2022.

To produce all that extra ethanol from corn would require sowing an extra 18 million acres by 2012 and 81 million acres by 2022 (here).

The total planted area would have to rise from 325 million to more than 400 million acres in little more than a decade - more than the United States has ever farmed in history. U.S. farmers would need to bring an area the size of the state of New Mexico or the whole of Great Britain and Ireland into cultivation for the first time. Clearly this is impractical.

Moreover, making ethanol from corn kernels is not a particularly efficient way to produce energy. Most studies show almost as much energy is used growing, transporting, and distilling the corn, then transporting the resulting ethanol as the ethanol itself contains, so the "net energy balance" is approximately zero.

Making ethanol from sugarcane or from municipal and farm waste has a much more favorable energy balance. Much of the energy required for distillation and processing can be supplied by burning the non-carbohydrate parts of the feedstock (which are not required for ethanol conversion) in highly efficient combined heat and power plants which provide the necessary heat and power to run the distilleries. This dramatically increases the net energy balance.

SECOND-GENERATION ETHANOL

EISA responded to these concerns by capping the amount of fuel ethanol that can be produced from corn starch at 15 billion gallons, out of the total 36 billion gallons eventually envisaged by 2022. From 2012 onwards, the majority of the new ethanol must come from "second-generation" biofuels derived from plant cellulose, municipal wastes and other crops (here).

As early as 2013, EISA envisages 1 billion gallons of ethanol will come from second-generation ethanol produced from cellulose, rising to as much as 16 billion gallons by 2022.