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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts 1 Liquid Fuels for Transportation Worldwide demand for energy has been increasing as a result of continued population increases and economic growth, particularly in developing countries. Because fossil fuels continue to dominate the global energy market, rising energy use results in increased greenhouse gas emissions from that sector. In fact, emissions from the use of fossil fuels and emissions of carbon from plants and soil as a result of changes in land use have been identified as two primary sources of carbon dioxide1 (CO2) emission (Solomon et al., 2007). Increasing energy supply to support population growth and economic growth while reducing CO2 emission from the energy sector certainly poses a serious challenge to the current generation and future generations because our very way of life is at stake. An option for the energy sector to secure supply and to reduce its greenhouse gas emissions is to diversify its energy sources and invest in technological change to provide energy with low or zero CO2 emission. The National Academies initiated a series of studies, “America’s Energy Future,” in 2007 to provide authoritative estimates of the current contributions and future potential of existing and new energy supply technologies, their effects, and their projected costs. Because of considerable uncertainty and disagreements about the prospective costs and performance of alternative liquid transportation fuels (biofuels and coal-to-liquid fuels in particular), the National Research Council appointed an independently operating panel to examine those issues in 1 CO2 is one of the most important greenhouse gases. Other greenhouse gases include water vapor, methane (CH4), nitrous oxide (N2O), halocarbons, and ozone (O3).
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts depth. This is the report of the Panel on Alternative Liquid Transportation Fuels. (See Appendix C for information on the panel members.) DEMAND FOR LIQUID TRANSPORTATION FUELS Transport activity is one of the key components of continued economic growth and social stability in industrialized societies. Demand for transportation fuels increases around the world as economies grow. Oil has been the primary source of liquid transportation fuels since the early 1900s largely because of its favorable energy density, ease of distribution, low cost, and abundance. The world demand for oil has increased from 11 million barrels per day of oil equivalent (MBDOE) in 1950 to 57 MBDOE in 1970 to about 85 MBDOE in 2009 and is projected to be 116 MBDOE in 2030 (ExxonMobil, 2008; IEA, 2009). From 1985 to 2005, global energy demand for transportation increased by an average of 2.2 percent per year (ExxonMobil, 2007), and it is expected to increase by an average of 1.4 percent per year from 2005 to 2030 (Figure 1.1) (ExxonMobil, 2008). As seen in late 2008 and early 2009, oil demand dropped rapidly as the global economy FIGURE 1.1 Worldwide demand for energy for transportation, 1980–2030. Reprinted from ExxonMobil, 2008. Copyright 2008, with permission from ExxonMobil.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts slowed down into a recession. When the global economy recovers in the long term and as the economies of developing countries grow with their populations, the demand for oil will grow again. The majority of current demand for liquid transportation fuel is met by the Organization of the Petroleum Exporting Countries (OPEC) crude and non-OPEC crude and condensate (ExxonMobil, 2007). Other energy sources that contribute a small fraction of transportation fuels include oil sands, natural gas, and biofuels. Whether and when global petroleum production will reach its peak (beyond which it will decline) and be unable to meet global crude-oil demand is uncertain. By the end of 2006, the proven worldwide reserves of oil—that is, resources that are discovered, recoverable with current technology, commercially feasible, and remaining in the ground—was reported to be 1,372 billion barrels (BP, 2007). The primary source of energy for transportation in the United States and elsewhere is oil. Between 2007 and 2008, when this report was written, the crude-oil price fluctuated from about $70/bbl when the committee convened its first meeting in November 2007 to a record high of $147/bbl in July 2008 and then dropped to about $35/bbl at the end of 2008. Volatile oil prices, oil importation in large quantities and its associated tremendous shift of U.S. wealth overseas, a tight worldwide supply-demand balance, and fears that oil production would peak in the next 10–20 years all motivate a search for domestic sources of alternative fuels. The United States uses 25 percent of global oil production for 4.5 percent (U.S. Census Bureau, 2008) of the global population. The United States imports about 56 percent of its oil and in 2008 spent $10–38 billion each month (depending on oil price and demand) overseas for oil. U.S. oil demand stems from four main sectors: transportation, industry, electricity generation, and residential and commercial use. Transportation is by far the largest consumer, at nearly 70 percent (EIA, 2009) (Table 1.1). Domestic demand TABLE 1.1 Consumption of Liquid Fuel in United States in 2008, by Sector Sector Liquid Fuel Consumption (millions of barrels per day) Residential and commercial use 1.10 Industry 4.94 Transportation 13.66 Electricity generation 0.22 Total 19.54 Source: EIA, 2009.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts FIGURE 1.2 CO2 emissions from fossil-fuel combustion by different end-use sectors. Source: EPA, 2008. for oil steadily increased by 1.4 percent from 1980 to 2005 (NPC, 2007), but domestic oil production has been decreasing (Zittel and Schindler, 2007). Proven oil reserves in the United States at the end of 2006 were 29.9 billion barrels (2.5 percent of the total world reserves); that is in stark contrast with the 35.1 billion barrels at the end of 1986 (BP, 2007). Options for reducing reliance of U.S. transportation on oil are few. The nation could reduce the amount of oil that it uses by reducing driving and improving vehicle fuel efficiency; energy efficiency of the transportation sector is discussed in detail in another report in the America’s Energy Future series, Real Prospects for Energy Efficiency in the United States (NAS-NAE-NRC, 2009c). Or it could diversify its portfolio of fuels. The U.S. transportation sector contributes the most greenhouse gas emissions among all end users of domestic fossil fuel. Transportation activities accounted for one-third of total greenhouse gas emissions in the United States in 2006 (Figure 1.2) (EPA, 2008). The strategies for reducing greenhouse gas emissions from the transportation sector are similar to those for reducing oil dependence: reducing driving, improving vehicle fuel efficiency, and using fuels that have low greenhouse gas emissions over the life cycle of their production and use.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts ALTERNATIVE TRANSPORTATION FUELS The use of alternative transportation fuels constitutes one of the few options for reducing U.S. reliance on oil. Alternative fuels include liquid fuels produced from unconventional oil (such as that from oil sands, heavy oils, and oil shale), natural gas, hydrogen, biomass-based fuels, and fuels produced from coal. Successful development and commercialization of those fuels would depend on their cost competitiveness compared with that of conventional gasoline and on the amount of fuel that could be supplied annually. In addition to economics, technological status, and potential supply, sustainable development of alternative transportation fuels would take environmental and social concerns into consideration. Use of fuels that contribute less greenhouse gas emission than gasoline needs to be part of the strategy to reduce greenhouse gas emissions while improving energy security. Interest in domestic alternative fuels that contribute less greenhouse gas than gasoline has led to large increases in U.S. ethanol production—primarily from corn—and increased use of biodiesel fuel from soybean and other vegetable oils. Because corn and vegetable oils are sources of food for humans and feed for animals, their use to increase biofuel production has sparked the debate of “food versus fuel.” Furthermore, actual greenhouse gas emission reductions resulting from the substitution of grain ethanol for gasoline or biodiesel for diesel are small. In short, for alternative transportation fuels to take hold in the United States, they have to be price-competitive, environmentally sustainable, and socially acceptable. A comparison of the economies of various alternative transportation fuels requires estimation of their total costs of production, from the cost of raw materials for fuel production to the resources used in the process of distributing the fuel to vehicles. A life-cycle assessment of greenhouse gas emissions that takes into account the uptake and release of greenhouse gases as a result of feedstock production and materials and energy used in production and consumption of each fuel type would have to be conducted to assess the environmental effects. An assessment of the potential supply, life-cycle costs, and environmental effects of different alternative liquid fuels can help guide policy to improve America’s energy security and to reduce the greenhouse gas emissions from the transportation sector. As history and many studies—for example, NRC (2004, 2005, 2008)—have shown, it will take decades to transform the U.S. transportation and fuel system to one that uses primarily domestic sources, has lower CO2 emission, and meets the nation’s transportation energy demand during the transition. A potential conflict
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts between the need for more domestic fuel supply and the need to reduce carbon emission from transportation and transportation fuel can be avoided if high priority is placed on improving fuel-consumption efficiency and on developing and implementing alternative, low-carbon, new fuel technologies. The joint challenge of providing transportation fuel and reducing greenhouse gas emissions drives the U.S. Department of Energy toward the vision of producing transportation fuels with low greenhouse gas life-cycle emissions from domestic sources. PURPOSE OF THIS STUDY The purpose of this study was to examine the technical potential for reducing reliance on oil for transportation, principally in automobiles and trucks, through the use of alternatives fuels. (See Appendix B for the complete statement of task.) Hydrogen and natural gas as sources of energy for transportation have been discussed extensively in the published literature (Ingersoll, 1996; Di Pascoli et al., 2001; NRC, 2004, 2005, 2008) and are discussed briefly in this report. There is no substantial production of oil from tar sands and no production of oil from shale in the United States. The potential of those sources is discussed in the report America’s Energy Future: Technology and Transformation (NAS-NAE-NRC, 2009a). The panel recognizes that biomass can be used for power generation and that the electricity generated could be used to power electric vehicles or plug-in hybrid electric vehicles. However, those topics are discussed extensively in two other reports in the America’s Energy Future series. Biomass for electricity is discussed in Electricity from Renewable Resources: Status, Prospects, and Impediments (NAS-NAE-NRC, 2009b), and electric and plug-in hybrid electric vehicles are discussed in Real Prospects for Energy Efficiency in the United States (NAS-NAE-NRC, 2009c). The focus of this panel’s study was limited to liquid fuels that can be derived from biomass and coal feedstocks. Coal and biomass are abundant in the United States, but as feedstocks for transportation fuels they have different constraints and environmental effects. Although the United States has at least 20 years’ worth of coal reserves in active mines and probably has enough to meet the nation’s needs for more than 100 years at current rates of consumption (NRC, 2007), coal is a nonrenewable source of energy. Thus, coal-to-liquid fuels would not be a sustainable solution to the problem of oil dependence. Combustion of coal also releases the highest greenhouse gas emission per unit energy of all fossil fuels. Although technologies for producing liquid fuels from coal are well developed and are being used com-
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts mercially, they have not been integrated with technologies that would capture the CO2 stream released from the coal facility and store it geologically. In contrast, biomass is a renewable resource that can also offer net CO2 benefits because living plants take up CO2 through the process of photosynthesis. Although biomass can be produced continuously over a long term, the amount that can be produced at a given time is limited by the availability of the natural resources that support biomass production. Most arable land in the United States is already being used for food, feed, and fiber production. Although the technologies for producing fuels from plant sugar and starch are known and used commercially, the technologies for producing fuels from lignocellulosic feedstock have yet to be demonstrated on a commercial scale. To address the statement of task, the panel focused on technologies for converting biomass and coal to alternative liquid fuels that are commercially deployable by 2020. Technologies deployable after 2020 were also evaluated, but in less depth. For the purpose of this study, commercially deployable technologies are ones that have been scaled up from research to development to pilot plant and then have gone through several commercial-size demonstrations. Thus, the capital and operating costs of a plant using commercially deployable technologies have been optimized so that the technology can compete with other options. Commercial deployment of a technology is the rate at which it penetrates the market. Deployment depends on market forces, capital and human availability, other competitive technologies, public policies, and other factors. To be consistent with the other studies in the America’s Energy Future series, the panel: Evaluated the state of technology development on the basis of estimated times to initial commercial deployment, Evaluated key research, development, and demonstration challenges for technologies to be ready for commercial deployment, Developed current and projected costs and CO2 emissions of technologies deployable by 2020, Evaluated environmental, economic, policy, and social factors that would enhance or impede development and deployment, Estimated the potential supply curve for liquid fuels produced from coal or biomass with the technologies that could be deployed by 2020, and Reviewed other alternative fuels that would compete with coal-based and biomass-based fuels over the next 15 years. The panel was asked not to include recommendations on policy choices.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts CONTEXT OF REPORT The panel’s work began when prices of fossil fuels and of raw materials and capital for infrastructure were rising rapidly (November 2007). As the study progressed, those prices reached a peak (for example, crude oil reached $147/bbl on July 11, 2008) and then fell steeply. Although this report makes no attempt to forecast fuel prices, it is clear to the panel that the incentives for businesses and individuals to invest in and deploy technologies for alternative transportation fuels will depend largely on fossil-fuel and raw-material prices and on public policies and regulations that govern fuel production, distribution, and use. The oil crises of the 1970s sparked a number of energy-policy changes at the federal, state, and local levels. Price controls and rationing were instituted nationally with a reduced speed limit to save gasoline. The Energy Policy and Conservation Act of 1975 created the strategic petroleum reserve (SPR) and mandated the doubling of fuel efficiency in automobiles from 13 to 27.5 miles/gal through the corporate average fuel economy (CAFE) standards. Alternative fuels have been promoted in several government incentives and mandates. Synthetic Liquid Fuels Act of 1944—authorized the construction and operation of demonstration plants to produce synthetic liquid fuels from coal, oil shale, agriculture, and other substances. Energy Security Act of 1980—provided insured loans to small ethanol plants that produced less than 1 million gallons per year and established the Synthetic Fuels Corporation. Alternative Motor Fuels Act of 1988—encouraged auto manufacturers to produce vehicles that operate on E85 (ethanol and gasoline blend that contains 85 percent ethanol) or other alternative fuels. Energy Policy Act of 1992—set a number of alternative-fueled vehicle (AFV) requirements for government and state motor fleets. It also extended the fuel tax exemption and the blender’s income tax credit to two blend rates of 5.7 percent and 7.7 percent in addition to the blend rate of 10 percent. The federal government never met the mandated use of alternative fuels in its own fleet. Energy Policy Act of 2005—established a national renewable fuel standard (RFS) that mandates an increase use of renewable fuels from 4.0 billion gallons per year in 2006 to 7.5 billion gallons per year in 2012.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts Energy Independence and Security Act of 2007—amends RFS to set forth a phase-in for renewable fuel volumes beginning with 9 billion gallons in 2008 and ending at 36 billion gallons in 2022. In addition to energy policies, the American Jobs Creation Act of 2004 also encourages the production of biofuels by providing a $0.51 tax credit per gallon of ethanol blended to companies that blend gasoline with ethanol and a $0.50–1.00 tax credit to biodiesel producers. Many U.S. state programs are designed to encourage the growth in alternative transportation fuel use (NASEO, 2008). Even though many public policies have addressed transportation energy supply and use over the past 60 years, the use of alternative transportation fuels in the U.S. market is still small as of 2008. Although many factors contribute to the low market penetration of alternative fuels (for example, low oil prices), the fact that many of the policies have not been durable and sustainable over time has played a significant role. There are many choices of biomass feedstocks and technologies for converting biomass and coal to liquid fuels. In the time available, the panel could not provide detailed assessments of every potential biomass feedstock or conversion technology. Thus, the panel focused on biomass feedstock and technologies that could potentially (1) be commercially deployable over the next 10–15 years, (2) be cost competitive with petroleum fuels, and (3) result in significant reductions in U.S. oil use and greenhouse gas emissions. The panel identified what it judged to be “aggressive but achievable” deployment opportunities for the alternative fuels. Over the course of this study, it became clear that given the costs of alternative fuels compared to petroleum-based fuels, significant deployment for alternative fuels into the market will likely not be achieved without some realignment of public policies, regulations, and other incentives and by substantial investments by both the public and private sectors. There continues to be a great deal of uncertainty about some of the factors that will directly influence the rate of deployment of new transportation fuel supplies. Because of these uncertainties, the transportation fuel supply and cost estimates provided in this report should be considered as important first-step assessments rather than forecasts.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts STRUCTURE OF THIS REPORT The panel approached the statement of task on three parallel tracks. First, it estimated the biomass resources that would be available for fuel production without affecting the cost and supply of food and feed or incurring adverse environmental effects (Chapter 2). Second, it assessed the cost, energy use, and environmental effects of the conversion of biomass to liquid transportation fuels by biological processes (Chapter 3). Third, it assessed the same characteristics for the conversion of biomass, coal, or combined biomass and coal by thermochemical processes (Chapter 4). The panel discusses the distribution of ethanol, which is not compatible with the existing petroleum-distribution infrastructure (Chapter 5). The three sets of assessments were then integrated to provide a life-cycle assessment of the costs and CO2 emissions of various liquid fuels produced from biomass and coal with different conversion processes. The cost and CO2 life-cycle emissions estimates of biofuels and coal-to-liquid fuels produced biochemically or thermochemically were set on a consistent basis for comparison, and the supply of liquid transportation fuels produced from biomass and coal was estimated at different price points (Chapter 6). The overarching findings of the study and the panel’s recommendations for research and development (Chapter 7) and the key challenges to commercial deployment (Chapter 8) are then presented. Other alternative transportation fuels are also discussed (Chapter 9). The chapters on biomass supply, biochemical conversion, and thermochemical conversion (Chapters 2, 3, and 4, respectively) are structured to address the following issues in order: the feasibility of biomass supply or the commercial readiness of each technology, research and development needs, modeling to estimate costs, estimated CO2 emissions and other environmental effects, and challenges for each technical subject. Although Chapter 2 provides estimates of costs of various biomass feedstocks, one assumed feedstock cost was used in the model simulations in Chapter 3 to assess whether biorefinery size or feedstock composition has any effect on the costs of biochemical conversion. Those trends would not be as apparent if variations in feedstock costs had been included in the simulations. Similarly, Chapter 4 used an assumed biomass cost and coal cost. In Chapter 6, the estimated costs of biochemical and thermochemical conversion are put on a consistent basis and are integrated with the different feedstock costs to provide life-cycle costs of biomass-based and coal-based fuels. Likewise, the CO2 uptake and emission estimates in Chapters 2, 3, and 4 are integrated and put on a consistent basis in Chapter 6 to provide estimates of life-cycle emissions that can be
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts compared. Quantities are expressed in standard units that are commonly used in the United States. Greenhouse gas emissions, however, are expressed in tonnes of CO2 equivalent (CO2 eq), the common metric used by the Intergovernmental Panel on Climate Change. The Panel on Alternative Liquid Transportation Fuels provides estimates of total costs of fuel products that include the feedstock, technical, engineering, construction, and production costs that were put on a consistent basis and at one time. However, the price of fuel products is dynamic because the costs of feedstock, labor, and construction fluctuate and are influenced by multiple factors, including shortages in labor or construction material, government policies, and the economic environment; and the cost estimates are sensitive to debt-to-equity ratios, interest rates, the discount rate, and specific corporate goals (such as return on capital and risks). Therefore, the cost estimates in this report are not predictions of fuel costs in 2020; rather, they provide a comparison of technologies on a level playing field. Cost estimates in this report do not include taxes or subsidies. Gasoline and other potential taxes and carbon prices could change the relative competitiveness of alternative fuel choices. REFERENCES BP (British Petroleum). 2007. BP Statistical Review of World Energy: June 2007. Available at www.bp.com/statisticalreview. Accessed March 2, 2009. Di Pascoli, S., A. Femia, and T. Luzzati. 2001. Natural gas, cars and the environment: A (relatively) “clean” and cheap fuel looking for users. Ecological Economics 38:179-189. EIA (Energy Information Administration). 2009. Annual Energy Outlook 2008 with Projections to 2030. U.S. Department of Energy. Available at http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html. Accessed April 2, 2009. EPA (U.S. Environmental Protection Agency). 2008. Inventory of U.S. Greenhouse Gas Emission and Sinks: 1990-2006. EPA 430-R-08-005. Washington, D.C.: U.S. Environmental Protection Agency. ExxonMobil. 2007. The Outlook for Energy: A View to 2030. Irving, Tex.: ExxonMobil. ExxonMobil. 2008. The Outlook for Energy: A View to 2030. Irving, Tex.: ExxonMobil. IEA (International Energy Administration). 2009. Oil Market Report. Available at http://omrpublic.iea.org/currentissues/full.pdf. Accessed January 30, 2009. Ingersoll, J.G. 1996. Natural Gas Vehicles, Lilburn, Ga.: Fairmont Press, Inc.
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Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Environmental Impacts NASEO (National Association of State Energy Officials). 2008. State Alternative Fuels. Available at http://www.naseo.org/committees/energyenvironment/archive/alt_fuels.htm. Accessed January 30, 2009. NAS-NAE-NRC (National Academy of Sciences-National Academy of Engineering-National Research Council). 2009a. America’s Energy Future: Technology and Transformation. Washington, D.C.: The National Academies Press. NAS-NAE-NRC. 2009b. Electricity from Renewable Resources: Status, Prospects, and Impediments. Washington, D.C.: The National Academies Press. NAS-NAE-NRC. 2009c. Real Prospects for Energy Efficiency in the United States. Washington, D.C.: The National Academies Press. NPC (National Petroleum Council). 2007. Hard Truths—Facing the Hard Truths About Energy: A Comprehensive View to 2030 of Global Oil and Natural Gas. Washington, D.C.: NPC. NRC (National Research Council). 2004. Review of the Research Program of the FreedomCAR and Fuel Partnership: First Report. Washington, D.C.: The National Academies Press. NRC. 2005. Assessment of Resource Needs for Development of Fuel Cell and Hydrogen Technology. Washington, D.C.: The National Academies Press. NRC. 2007. Coal Research and Development to Support National Energy Policy. Washington, D.C.: The National Academies Press. NRC. 2008. The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D Needs. Washington, D.C.: The National Academies Press. Solomon, S., D. Qin, R.B. Alley, T. Berntsen, N.L. Bindoff, Z. Chen, A. Chidthaisong, J.M. Gregory, G.C. Hegerl, M. Heimann, B. Hewitson, B.J. Hoskins, F. Joos, J. Jouzel, V. Kattsov, U. Lohmann, T. Matsuno, M. Molina, N. Nicholls, J. Overpeck, G. Raga, V. Ramaswamy, J. Ren, M. Rusticucci, R. Somerville, T.F. Stocker, P. Whetton, R.A. Wood, and D. Wratt. 2007. Technical summary. In Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovermental Panel on Climate Change, S. Solomon, D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor, and H.L. Miller, eds. Cambridge, Mass.: Cambridge University Press. U.S. Census Bureau. 2008. Population Clocks. Available at http://www.census.gov/. Accessed July 9, 2008. Zittel, W., and J. Schindler. 2007. Crude Oil: The Supply Outlook. EWG Series 3/2007. Ottobrunn, Germany: The Energy Watch Group.