Commentary


Nature Biotechnology 24, 761 - 764 (2006)
doi:10.1038/nbt0706-761

Implementing biofuels on a global scale

Alain A Vertès1, Masayuki Inui1 & Hideaki Yukawa1

  1. Alain A. Vertès, Masayuki Inui & Hideaki Yukawa are at Research Institute of Innovative Technology for the Earth, 9-2 Kizugawadai, Kizu-cho, Soraku-gun, Kyoto 619-0292, Japan. e-mail: mmg-lab@rite.or.jp


Is the introduction of renewable biofuels a simple problem of technology development and diffusion or does it require an industrial revolution?


Implementing biofuels on a global scale

Newscom/BEP/Jean Marc Loos/L'Alsace

Fossil fuel emissions and global warming, and concerns over reserves of oil, coal and natural gas are providing impetus to the search for more environmentally friendly forms of energy. But renewable energy solutions will be implemented only if they make sound economic sense.

The recent establishment of the Regional Greenhouse Gas Initiative, a carbon cap-and-trade strategy to help curb global warming by nine states in the northeast United States, is significant not only because it sharply contrasts with US federal policy but also because it sends a message, rather than presents a solution. Regardless of the lip service of national politicians to sustainable energy solutions and reduced greenhouse gas emissions, several key socioeconomic, technological and financial mechanisms continue to hinder the implementation of more global and proactive actions in energy policy to prevent dramatic climate change.

The current energy mix that fuels the global economy is mostly composed of fossil sources. This orientation is increasingly recognized as the single most important human-made factor that has an impact on global weather. With the terrestrial atmosphere constituting a vital commons, clear understanding of the challenges and opportunities that lie ahead is critical for policymakers, technologists, manufacturers and the general public to cooperatively and actively drive energy change management. A forward-looking attitude toward energy change is important to maximize the economic benefits that can be derived from the new opportunities that will arise as the global economy is forced to transition from a fossil fuel to a renewable fuel economy.

The speed with which biomass-derived fuels (e.g., methyl/ethyl esters, ethanol or hydrogen) are implemented will be determined by several factors: the adaptability of the existing energy value chain, the level of resistance to the emergence of new value chains, the minimization of the cost of this change and our ability to retrofit existing energy infrastructures to new fuels. Unilateral voluntary CO2 emission reductions present one practical solution to offer incentives for the development and adoption of alternative fuels.

Socioeconomic aspects

Energy for industrial, commercial and residential purposes, electricity generation and transportation is primarily supplied by fossil and nuclear fuels. The model for this energy economy is stabilized by the constant availability at any given time of known and unknown (but predictable) petroleum reserves in sufficient quantities to balance supply and demand, despite the existence of geopolitical externalities. In recent years, however, this delicate equilibrium has increasingly been upset by the predictable impending shortage of petroleum, resulting from the declining rate of discovery of new oil fields of significant sizes, the growth of existing economies and the burgeoning energy demands of emerging economies, such as China and India. The term 'peak oil' has been coined to designate this point in history when oil production will peak and start to decline. Combined with environmental concerns over rising atmospheric concentrations of greenhouse gases, such as CO2 and methane generated from fossil fuel combustion, these sustainability issues increasingly are viewed as a near-term threat to continued quality of life and economic growth across the globe1, 2, 3, 4.

The 'economic function' is the product of three main input parameters: workforce size, productivity and resources4, 5. In conditions of limited resources, capital investments for technological innovation may extend the useful life of finite reserves6 or introduce resource substitutability properties4. The time horizon expansion of finite reserves is dependent on choices (akin to discount rates used in corporate finance) regarding reserve utilization rates. Derivation of the economic function applied to energy suggests that the variation of the energy need is the sum of the variations affecting population, gross domestic product (GDP) per capita and energy use per unit of GDP.

In the context of constant population expansion, beyond implying that the exhaustion of energy sources would stall the economic engine, this equation suggests that any change that tends to consistently decrease energy efficiency (e.g., a dramatic rise in energy cost due to either energy supply disequilibrium or the integration of the cost of atmospheric CO2 remediation) would have a negative impact on economic output if such a rise were not compensated by a concomitant corresponding increase in productivity. As demonstrated by the controversy surrounding the Kyoto Protocol for regulating CO2 emissions7, in the absence of perfectly equivalent substitutes, there is thus a strong preference (akin to a high discount rate) for the value (and use) today, instead of tomorrow, of fossil or nuclear fuels, and for delaying or decreasing today's CO2 remediation or sequestration expenditures, unless near-term environmental and economic threats can be readily identified8.

Clean technologies, such as low-emissions coal-fired power stations, and technologies that enable more efficient energy usage (e.g., novel insulation materials for large building complexes) can be equated to both value-generating financial options and to productivity increases. These technologies are certainly valuable, but they only delay, rather than solve, energy-related global problems. And although sustainable biofuels promise suitably long-term energy solutions to fossil or nuclear fuels that have clear environmental benefits, because global implementation would involve disruptive innovations9 (e.g., biodiesel (methyl/ethyl esters)10, bioethanol11 or biohydrogen12, 13), they predictably meet various forces of resistance, despite the fact that they are becoming economically competitive, at the level of the fossil fuel value chain (Fig. 1 and Box 1; ref. 14).


In the context of powerful political lobbying by the oil and coal industries, these forces are still, to date, strong enough to maintain a global status quo, despite the growing prominence of global warming issues and the rapid approach of the peak oil point2. In addition, despite rising atmospheric CO2 levels1 and accumulating evidence of associated elevated temperatures15, remaining scientific uncertainties as to the time scales involved and the extent to which these atmospheric changes will affect the global climate continue to be exploited by politicians in heated political debates. The question is whether entrenched political positions are hindering optimal crisis management and thus preventing actions early enough in the energy crisis cycle to have the necessary impact15, 16.

In principle, the scientific challenges of closing the CO2 cycle by harnessing photosynthesis conducted by algae, photosynthetic microorganisms, crops, plants and trees for energy production are tractable, provided sufficient investment in R&D, particularly in fuel production from such feedstocks as lignocellulosic biomass or lignocellulose-rich municipal waste11. These energy sources would mitigate both the effects of shrinking fossil fuel reserves and rising atmospheric CO2 levels. Nevertheless, predictable resistance to change, and resistance to preparing for change, is not limited to the immediate environment of the fossil fuel industry and is not the only hurdle that impedes the implementation of bioenergies.

In fact, the large-scale production of commodity biofuels represents an industrial process operating at the novel and deep-reaching intersection of three main economic domains: agriculture/forest-and-land management, the biotech sector and the chemical sector. As a result, in addition to profound multi-sector restructuring that would be required, new specific value chains need to be created that comprise steps of raw materials farming, collection and transport, pretreatment, saccharification and fermentation, biofuel recovery, by-products purification and valorization, waste treatment and biofuel storage and distribution.

Several factors are key to implementing this objective. First, biofuels must be produced in a cost-effective manner using raw materials (e.g., lignocellulosic materials). The production process should minimize soil erosion, labor cost and competition with existing land for food/feed production. It must have the ability to derive net energy gains as well as positive environmental impacts. Second, the novel value chains described above need to integrate economies of scale and scope similar to those from which traditional petrochemical refineries benefit by offering the possibility of producing a variety of compounds including chemical building blocks and intermediates. This need is at the core of the biorefinery concept17, a term that refers to a cluster of integrated biotech industries to produce compounds to serve both the energy and chemical commodities market, and high-value product industries, such as the feed, food, cosmetic, materials (polymers) or pharmaceutical industries. The innovation challenge that this new refinery concept poses thus reaches far beyond that of biofuel manufacturing process development, as novel industrial chemistries, including novel applications for a variety of biological precursors, need to be developed, and particularly novel polymers and their uses.

Technological and financial aspects

Biotech has already provided societal benefits, bringing innovative healthcare products to market with high consumer value that address unmet medical needs. On the other hand, and despite successes that have been attained in green chemistry programs18, production of commodity products, such as fuels or electricity by biotech means is still lagging12, as it requires intense cost competition at all levels of deeper branching economic value chains.

In particular, the technology risks associated with the implementation of unproven disruptive biotechnologies9, such as the exploitation of lignocellulosic biomass as an energy feedstock, represent a major economic hurdle, given that ethanol is currently produced using easily accessible carbohydrates mostly derived from corn or sugar cane11 and methyl/ethyl esters (biodiesel) are for the most part derived from vegetable oils19. Similarly, no commercial-scale hydrogen process is yet in use13, 20, although promising processes are under development21. Furthermore, the transition to renewable fuels poses formidable, global-scale retrofitting issues for existing end-user equipment at all levels of today's value chains. This fuels resistance to change, as demonstrated by the relatively larger acceptance of biodiesel as a transportation fuel because it can power any diesel engine without modification10.

As a result, the shift from traditional fossil fuels and biodiesel to more exotic biofuels, such as hydrogen, would constitute a revolutionary change22 not unlike the Industrial Revolution, during which wide-reaching new technologies were adopted according to standard S-curve shaped models of technology diffusion23. Such transitions are often characterized by an initial decrease in productivity as the growth potential of the new technology matures. The predicted transient initial economic decline that would be induced by the cost of the implementation of bioenergies constitutes the chief hurdle at both the corporate and macroeconomic level. For corporations, given the operation size required to address the needs of, for example, the energy transportation market, biorefinery projects would require financial investments of a magnitude similar to those currently required for traditional petrochemical refineries. The financial risks associated with these projects include technology risks (which comprise scale-up risks11), raw materials supply risks (which comprise seasonality risks) and market risks (which comprise political risks, such as the continued provision of tax credits, which constitute a critical competitivity factor)24, 25.

Conventional forms of financing are typically not available for implementing emerging technology operations, as many institutional lenders are not accustomed to managing the risks associated with unproven or ill-understood technologies used in the manufacture of products for unproven markets26. These risks are familiar to financiers of biotech enterprises, however. What is more, the specialized financial mechanism of 'project finance', typically used for funding large long-term infrastructures under conditions of limited financial recourse, could perhaps be a suitable enabler provided revenue streams can be accurately projected and secured26. Furthermore, major petrochemical corporations nowadays often comment in their annual reports on the relevance of offering a more diversified energy source portfolio, thereby signaling that bioenergy technologies constitute options of growing financial value. Moreover, a growing number of emerging companies target the niche market of 'green power' by offering to consumers, sometimes willing to pay a premium, electricity generated solely by renewable means, such as hydroelectricity, photovoltaic, eolian or geothermal power. This impetus for renewable energies should translate to increased funding from cash reserves or equity financing by a variety of players ranging from large multinational corporations from an array of industrial sectors to venture capital investment partnerships. As a result, public policy can play an important part in the development and diffusion of bioenergy technologies by crystallizing these efforts and facilitating financing27, 28. For example, the biofuels market would be stimulated by a well-established global carbon bond market where a capped number of CO2 emission rights would be exchanged that are freely and globally transferable and the S-curve hurdle could be lowered by providing stable and long-lived tax incentives and renewable fuel standards to set market prices25.

The Industrial Revolution was a wide-ranging phenomenon that affected all aspects of society, lifestyle, industry value chains and the economy. As such, it was a period of painful societal upheaval and anxiety, as much as it was an unprecedented period of hope and wealth creation. It is important to note that the passage of ground transportation from horse and buggy to steam or internal combustion engines, and the presently unfolding energy revolution characterized by the displacement and replacement of fossil fuels by renewable fuels are events of radically different natures. The automobile, enabled by the combustion engine, constituted a technological discontinuity that was adopted only once its performance (that is, speed) surpassed those of the incumbent modes of personal transportation, thus driving the creation of complement structures, such as roads and refueling stations. In contrast, the present renewable energy revolution, which benefits from existing and adaptable complementary network structures, is not based on superior performance that can be immediately and directly appreciated by the end-user; rather, it is justified by benefits that integrate only in terms of global productivity gains that are not only difficult to perceive by individual users, but are also distant in time and thus difficult to appreciate. An additional lesson from the past remains that the growth of the oil industry stemmed particularly from immediate supply concerns, resulting from the decline of whale populations and subsequently the decline of the whaling industry as a provider of light fuel.

Conclusions

Many of the socioeconomic, technological and financial barriers to the introduction of biofuels would be swept aside if a dramatic productivity leap were achieved that both simplified economic forecasting models and lowered costs. However, harnessing the potential of biomass to generate energy on an industrial scale constitutes a multi-corporation project management problem. Thus, unlike cost-comparative cumulative probability distributions (S-curves) for single corporations in established markets29, assessing the feasibility of an enterprise in the biofuel sector is complicated by its positioning within a conglomerate framework of independent entities that both compete and cooperate with one another. Likewise, rising atmospheric CO2 levels constitute a global problem that requires multi-national cooperation, as the atmosphere constitutes a commons30 that can only be successfully regulated31 but not enclosed, although emission trading would enable it to be given (albeit imperfectly) absolute value as property, since when emissions are capped, permits to release CO2 become valuable financial assets.

A purely mechanistic reading of the forces at play in the current energy paradigm (Fig. 1) suggests that no change will occur until fossil fuel supply disequilibria and global warming issues become more costly to the economy (including its hedonistic component) than the cost of action. The danger is that inertia in Earth's meteorological system may make the effects of countermeasures—once countermeasures are implemented on a global scale—only directly observable after a significant lag-time. This might be measured in decades; it might even be centuries.

In terms of what practical actions need to be taken, perhaps a way forward is for local governments to lead by example and demonstrate a viable working model, where new business opportunities will arise from the challenges32. As suggested by James Brooks, director of air quality for the state of Maine8 (one of the US states involved in the Regional Greenhouse Gas Initiative), such a course of action could provide the impetus to a national and international transition to alternative fuels compatible with climate protection. This strategy is similar to approaches successfully used to cut sulfur dioxide emissions, or to implement multi-national measures for enforcing smoking cessation in public places to solve public health concerns33, despite widespread multi-sector opposition; it is also similar to the approach used for successful partial implementation of the Montréal Protocol to remedy ozone depletion via a partnership integrating chemical manufacturers, scientists and policy makers31.



Top

References

  1. Wuebbles, D.J. & Jain, A.K. Fuel Proc. Technol. 71, 99–119 (2001). | ChemPort |
  2. Deffeyes, K.S. The Impending Oil Shortage (Princeton University Press, Princeton, NJ, 2001).
  3. Jackson, T. Material Concerns: Pollution, Profit, and Quality of Life (Routledge, London, 1996).
  4. Stern, D.I. in Encyclopedia of Energy, vol. 2 (ed. Cleveland, C.J.) p. 35–51 (Elsevier, Amsterdam, The Netherlands, 2004).
  5. Solow, R.M. Q. J. Econ. 70, 65–94 (1956). | Article | ISI |
  6. Lovins, A.B., Lovins, L.H. & Hawken, P. Harv. Bus. Rev. 77, 145–158 (1999). | PubMed | ChemPort |
  7. Editorial. Nature 435, 713–714 (2005). | Article | ISI |
  8. Marris, E. Nature 437, 11 (2005). | Article | PubMed | ISI | ChemPort |
  9. Evans, N.D. Business Innovation and Disruptive Technology (Pearson Education Inc., Upper Saddle River, NJ, 2003).
  10. Bozbas, K. Renew. Sust. Energy Rev., in the press.
  11. Wyman, C.E. Annu. Rev. Energy Environ. 24, 189–226 (1999). | Article |
  12. Lynd, L.R., Wyman, C.E. & Gerngross, T.U. Biotechnol. Prog. 15, 777–793 (1999). | Article | PubMed | ChemPort |
  13. Chornet, E. & Czernik, S. Nature 418, 928–929 (2002). | Article | PubMed | ChemPort |
  14. Porter, M.A. Competitive Strategy (Simon & Schuster Inc., New York, 1980).
  15. Foley, J.A. Science 310, 627–628 (2005). | Article | PubMed | ChemPort |
  16. Watkins, M.D. & Bazerman, M.H. Harv. Bus. Rev. 81, 72–80 (2003). | PubMed |
  17. Kamm, B. & Kamm, M. Appl. Microbiol. Biotechnol. 64, 137–145 (2004). | Article | PubMed | ChemPort |
  18. Anastas, P.T. & Warner, J.C. Green Chemistry. Theory and Practice (Oxford University Press, Oxford, 1998).
  19. Kim, S. & Dale, B.E. Biomass Bioenergy 29, 426–439 (2005). | Article |
  20. Penner, S.S. Energy 31, 33–43 (2006). | Article | ChemPort |
  21. Yoshida, A. et al. Appl. Environ. Microbiol. 71, 6762–6768 (2005). | Article | PubMed | ChemPort |
  22. Jordan, J.L. Economic Commentary (Federal Reserve Bank of Cleveland, Cleveland, 2001).
  23. Geroski, P.A. Res. Policy 29, 603–625 (2000). | Article |
  24. Von Bremen, L. & Schmoltzi, M. Trends Biotechnol. January, 16–22 (1986).
  25. Ryan, L., Convery, F. & Ferreira, S. Energy Policy, in the press.
  26. Keller, J.B. & Plath, P.B. Appl. Biochem. Biotechnol. 77–79, 641–648 (1999). | Article |
  27. Deutch, J. in 23rd MIT Global Change Forum (Joint Program on the Science and Policy of Global Change, Cambridge, MA, Arlington, VA, 2005).
  28. Wiser, R.H. & Pickle, S.J. Renewable Sustainable Energy Rev. 2, 361–386 (1998). | Article |
  29. Chapman, C. & Ward, S. Int. J. Proj. Manag. 22, 619–632 (2004). | Article |
  30. Hardin, G. Science 162, 1243–1248 (1968). | Article | ISI | ChemPort |
  31. Hileman, B. Chem. Eng. News 83, 13 (2005)
  32. O'Neill Packard, K. & Reinhardt, F. Harv. Bus. Rev. July–August, 129–135 (2000).
  33. Sandford, A. Respirology 8, 7–16 (2003). | Article | PubMed |

MORE ARTICLES LIKE THIS

These links to content published by NPG are automatically generated.

NEWS AND VIEWS

Metabolic engineering delivers next-generation biofuels

Nature Biotechnology News and Views (01 Mar 2008)

Engineering direct conversion of CO 2 to biofuel

Nature Biotechnology News and Views (01 Dec 2009)

See all 5 matches for News And Views