New generation biofuels coming soon

By Tom Bergin

LONDON (Reuters) - The credentials of biofuels might have been dented by claims that current production methods are inefficient, lead to deforestation and drive up food prices, but a German firm hopes to change all this with new technology.

Tom Blades, chief executive of Choren, said his company planned to start the world's first commercial-scale plant to manufacture transport fuels from plants, using second-generation technology, later this year.

However, Blades said it would take time before the processes were refined to give western leaders concerned about energy security and people worried about climate change a realistic fossil fuel alternative.

"I wouldn't say we have discovered the holy grail but we're in the lead in the quest," Blades told Reuters on Wednesday.

Currently, there are two main types of biofuels -- ethanol, which is made by distilling sugars from corn or sugar cane, and biodiesel made by processing plant oil.

Rising biofuel demand due to government incentives has pushed up the prices of feedstocks, which are also foodstuffs, and led to rain forest being felled for oilseed plantations.

Inefficient production methods, which mean the equivalent of nearly a liter of fuel is used to produce a liter of biofuel, has seen limited net CO2 reduction, and high costs.

Second generation biofuels would use non-food crops such as straw and waste lumber, be more energy efficient, require less land use, offer more CO2 reduction, be cheaper and offer greater energy security.

Yet so far second-generation biofuels production has been essentially experimental.

Choren's new plant in Freiberg will manufacture a synthetic diesel from woodchips that produces much less CO2 than existing biofuels. Nonetheless, scale and cost will be remain an issue.

Blades said the plant would produce only 300 barrels per day (bpd) of "SunDiesel" at a cost of 0.90 euros per liter.

This compares with 0.48 euros per liter for regular diesel, based on a $65 per barrel crude price, and around 0.60 for first generation biodiesel.

Without tax breaks or government-mandates for biofuel use, Choren's diesel will not be economic and even with these, the Freiberg plant will not be a lucrative venture.

"It's not going to make us rich .. we're still on target to make a black zero," Blades said.

MORE PLANTS PLANNED