Week 10 - Chapter 15 - New Fuels: Biofuels Flashcards
(27 cards)
Fuel octane
Octane ratings are measures of fuel stability. These ratings are based on the pressure at which a fuel will spontaneously combust (auto-ignite) in a testing engine. The higher an octane number, the more stable the fuel.
The additive tetraethyl lead, or TEL, had been added to gasoline since the 1920s to improve the fuel octane, which improves engine compression and fuel economy of vehicles.
Retail gasoline stations in the United States sell three main grades of gasoline based on the octane level:
- Regular (the lowest octane fuel–generally 87)
- Midgrade (the middle range octane fuel–generally 89–90)
- Premium (the highest octane fuel–generally 91–94)
Ethanol
Biofuel produced from fermented sugars of a plant.
Alcohol-based biofuels (ethanol)—Essentially, the sugars of a plant are fermented to produce an alcohol of extremely high purity, called ethanol. Often, mixing in a denaturant (such as gasoline) serves to make it undrinkable and therefore not subject to beverage alcohol taxes.
This product can be used in appropriately designed gasoline internal combustion engines (ICEs), either as hydrous ethanol (with water) for high-concentration applications or as anhydrous ethanol for low-concentration blending with gasoline.
Biodiesel
Biofuel produced from oil-bearing plants.
Oil-based biofuels (biodiesel)—Crushing oil-bearing plants delivers an oil-based feedstock that can be transformed into biodiesel through a process of transesterification, or swapping of esters in a chemical reaction. Biodiesel, as the name suggests, can be used in diesel engines and represents a fairly close replacement of traditional diesel in energy content and chemical composition. Used oils in cooking grease can be similarly converted into biodiesel, though additional processing and purification is sometimes necessary to create a useful fuel.
Transesterification
Swapping of esters in a chemical reaction - used to make oil-based biofuels (biodiesel)
Bagasse
Fibrous portion of cane leftover from press in a mill, which can be used as feedstock to generate heat and electricity for the mill (though it is a low-value fuel due to high water content and low energy density).
At the mill, sugarcane is pressed to remove the juice from the fibrous portion of the cane, called bagasse. The bagasse left over is typically used on-site as a feedstock for a boiler to generate heat and electricity to power the sugar mill, though its high water content and low energy density makes it a low-value fuel. However, the high amount of bagasse by weight means plenty of fuel to meet a sugar mill’s needs.
Food vs. fuel debate
First-generation feedstocks currently in use tend to use the same farmland and other forms of capital as traditional food production, setting up a dynamic where rising demand for the agricultural outputs causes tension between food production and fuel production—a food vs. fuel debate.
Flex-fuel vehicles
In the United States, manufacturers sell flex-fuel vehicles that can use E85 fuel, or an 85% ethanol blend.
Due to ethanol’s more corrosive nature and slightly different combustion properties, flex-fuel vehicles need to have noncorroding metals and gaskets plus modified engine control systems and fuel injectors to accept the higher ethanol blends.
However, if properly designed, these vehicles can run on a wide range of fuel blends based on economics and local fuel availability.
Gasoline gallon equivalent (GGE)
A way of standardizing any specific fuel into a standard energy content. A typical standard for gasoline content is 33.5 MJ/L.
As Figure 15.8 makes clear, different fuels have different energy content per gallon. Thus, a car will run significantly farther on a gallon of gasoline than it will on a gallon of ethanol; gasoline and diesel have a higher energy density than the respective ethanol and biodiesel biofuels used as their substitutes.
To account for the difference in energy across fuels and combine them into blends, any specific fuel can be converted into gasoline gallon equivalent (GGE) based on its energy content, or liters of gasoline equivalent (LGE) in metric systems. While the precise energy content of a volume of fuel can vary modestly, for standardizing purposes a volume of gasoline is assumed to have a particular energy content; for example, a typical standard used as an energy content for gasoline is 33.5 MJ/L.
Once the energy content is standardized for particular fuels, the values can be combined for any blend of them. The Alternative Fuels Data Center notes that E10, a blend of 90% gasoline with 10% ethanol, will have 96.7% of the GGE of gasoline, while a gallon of E85 (85% ethanol) will have 73–83% of the GGE.
Lifecycle analysis
Analysis of how much carbon emissions are generated in the production of a product (in this context, biofuels).
A final consideration in determining the desirability of biofuels is the role they play in improving the emissions profile of combustion vs. existing fuels. Combustion of biofuels has a similar impact on emissions of nitrogen oxides, sulfur oxides, particulates, and ozone as combustion of the fuels they replace, since the amount of these pollutants emitted from vehicles is driven as much by vehicle design as by the fuels.
The carbon emission differentials are another story. Substantial scientific work has been conducted on the lifecycle analysis of biofuels to determine their carbon content, and the result is a range of estimates with mixed results, depending on which fuel is examined.
Based on these studies, first-generation biofuels typically have a modest average reduction in lifecycle emissions of carbon but can sometimes be produced in conditions with longer supply chains and higher conventional fuel input to the conversion process, resulting in increased emissions (negative emission reductions in the figure) over the fuels they displace.
Cellulosic feedstocks
Non-edible plant matter - the tougher and woodier portions of plant matter.
- Corn stover (stalks, stems, cobs of corn)
- Wood chips
- Switchgrass
- Other woody plants
Overcoming the feedstock limitations of biofuels, particularly those described in the food vs. fuel debate, requires accessing non-food sources of feedstock. One way to do this is to use plant matter that is nonedible, including the cellulose, hemicellulose, and lignin in plants, the tougher and woodier portions making up a large portion of their mass. The most common feedstocks include the nonedible portions of crops (such as corn stover, comprised of the stalks, stems, and cobs of corn) or other plants that are completely inedible like trees (wood chips), switchgrass, or other woody plants. Collectively, these are referred to as cellulosic feedstocks. Figure 15.10 shows the components of these various feedstocks compared to corn grain.
The challenge with using cellulosic feedstocks for fuel is that their tough outer cellular structures must be broken down before the sugars inside them can be extracted and converted into ethanol.
Microalgae
Microscopic plants converting sunlight and carbon dioxide into various outputs by photosynthesis. Microalgae that produce oils, or lipids, are most useful in biofuel production.
An alternate pathway for overcoming some challenges of conventional biofuels is the use of algae to synthesize oils, which can be converted into biodiesel using the methods outlined above. Doing so eliminates the need to grow crops on land, virtually eliminating the competition with food for feedstock inputs like arable land and fertilizer. This process typically begins with the production of microalgae, microscopic plants converting sunlight and carbon dioxide into various outputs by photosynthesis. Microalgae that produce oils, or lipids, are most useful in biofuel production. Commercial cultivation of algae can occur in open ponds or closed photobioreactors.
Open ponds
One of two options for producing migroalgae for biofuel.
Cultivation of algae in open ponds uses open water systems, circulating the water and algae to expose them to sunlight as the algae grow and the suspension thickens. Such a system typically injects carbon dioxide to enhance the growth of algae and must have a fairly constant supply of water to make up for evaporation.
Closed photobioreactors
One of two options for producing migroalgae for biofuel.
Cultivation in this manner circulates algae in nutrient-rich solutions through channels or tubes exposed to sunlight. The amount of capital required to develop one of these facilities is substantially higher than for an open pond system, but this type of system can control algal growth, improve yield, and dramatically reduce the amount of water required to produce the same amount of algae. This type of facility can be put on almost any type of land, presuming sufficient sunlight to support algal growth.
Drop-in fuels
Fuels that can be synthesized to identically match the types of fuels they are displacing - with identical hydrocarbon chains and mixes eliminating the need to change equipment or take on risks of failure or efficiency loss.
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Overcoming the technical limitations of ethanol and biodiesel fuels may be difficult until fuels can be synthesized to identically match the types of fuels they
are displacing.
Such fuels, with identical hydrocarbon chains and mixes eliminating the need to change equipment or take on risks of failure or efficiency loss, are also called drop-in fuels.
Particularly in demanding applications like aviation fuel combustion, which has a wide range of temperature and pressure over which fuels must perform predictably, precisely synthesizing identical fuels may be more important than developing replacement new fuels that require costly or risky engine adaptations.
Crush spread
Crush spread is a financial arbitrage opportunity between the value of the inputs to the biofuel production process (feedstocks) and the value of the outputs (oils, fuels, and coproducts).
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Commodity traders look for a disparity among these values in either the spot market or the futures markets and can simultaneously buy the feedstock and sell the outputs, locking in a processing margin.
Beyond the speculative opportunity, most biofuel plant owners use some version of this strategy to lock in their revenue and margins for the biofuel processing they are planning. The concept of crush can describe both the physical process and the financial arbitrage mechanism.
Specifically, for biodiesel made from soybeans, this crush spread involves buying soybeans and selling a proportional mix of soybean oil and soybean meal, based on the volume mix expected from the crushing process. For corn ethanol, this involves buying corn and selling ethanol and DDGS. Correctly using a crush spread in any biofuel production process requires understanding the losses and conversion efficiencies of a typical plant based on feedstock and process variations.
Diminishing marginal productivity
Blending mandates
In setting standards for biofuels, blending mandates establish a certain quantity or percentage of biofuels to be mixed into the refined fuel supply.
The standard usually specifies the precise fuel and level required to be blended into the fuel supply, and typically wholesale producers of fuel are expected to meet this standard. Many countries have a blending mandate requirement for ethanol or biodiesel (or both), with blends ranging from a couple percentage points to more than 20% in the case of Brazilian ethanol.
Renewable Fuel Standard (RFS)
In the United States, the blending mandate program began in 2005 and is known as the Renewable Fuel Standard (RFS).
The original version of the standard established a rising volume of ethanol required in the US fuel supply. Notably, the standard was not on a percentage basis but rather on a gross volume of ethanol required based on estimates of future transportation fuel supply and demand. Under this standard, refiners and importers, known as obligated parties, had to prove they met the blending requirements by accumulating blending certificates known as Renewable Identification Numbers (RINs). RINs could be generated from blending activity or purchased from other blenders who had accumulated excess RINs over their blending requirements.
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In 2010, the United States established a second RFS (RFS2) that tapered off the growth of the corn ethanol contribution to the fuel supply and established additional mandates for cellulosic ethanol and advanced biofuel contributions (see Figure 15.13). This way, total biofuel contribution could increase but with limited impact on corn and agricultural markets.
Unfortunately, despite substantial investment in technology and scaling up biofuel conversion facilities by incumbent blenders and venture-capital based companies, the volume of cellulosic ethanol production by 2015 was substantially below the statutory requirements laid out in RFS2.
In mid-2015, the EPA revised the rules for meeting these requirements, slashing the cellulosic ethanol production requirements by over 95% so that the industry could remain in compliance.
The lessons that can be drawn here include the risks associated with mandating production of technologies that are not yet technically proven. While production mandates that target cost reductions through scale can work, technologies that are not yet fully developed present a technology risk to the implementation of the policy for exactly these reasons.
Renewable Identification Numbers (RINs)
Blending certificates for obligated parties under an RFS to prove they met the blending requirements. These could be generated from blending activities or purchased from other blenders who had accumulated excess RINs over their blending requirements.
Monopsony
Monopsony occurs when there is a single buyer for a particular good or service.
In the same way that a monopolist can use its market power to influence price to its advantage, the monopsonist exerts a similar effect. In this way, monopsony has the same potential to create market failures and inefficient outcomes, resulting in selling prices that are too low and fewer goods sold than would otherwise occur in a competitive market.
Biofuels and their heavy feedstocks, which are costly to transport in their raw form, have the potential to operate under monopsony conditions. These characteristics create a situation where there may be only one local production facility or blender to which the feedstock or fuel can be sold. Such circumstances often have the potential to lead to exercise of market power as a monopsonist.
The situation is less of an issue when a fuel standard mandate is binding (creating an inelastic demand curve for buyers based on the total volume of fuels produced), but in an openly competitive market or when the fuel mandate is not binding, theory suggests that blenders enjoying a monopsony market would purchase less feedstock or refined biofuel at a lower cost than a competitive equilibrium would suggest.
S-curve
(Used to describe development lifecycle)
S-curves show a stylized deployment, where the early stages require tremendous preparatory work, and may result in little adoption, but as the conditions emerge that enable broader adoption, rapid growth can occur. Eventually, market saturation begins and adoption levels off.
These S-curve adoption stages can also be thought of in terms of system dynamics, where the early stages of product development occur with a stabilized loop of low or no adoption, followed by a change in the conditions that allow a reinforcing loop of rapid adoption to occur, and then a reversion to a stabilizing loop of market saturation when the innovation has reached its limit of reach or value creation for users.
First-mover advantages
Benefits to having a product or service available in marketplace early.
Include:
- interest
- trust
- control narrative
- dominant brand
- make fundraising and customer acquisition easier in a fast-growth industry
Having a product or service available in the marketplace early can help build interest, trust, and narrative about the product’s features and suitability for use. It can establish the dominant brand and make fundraising and customer acquisition easier in a fast-growth industry.
Positive externality
A positive externality is a benefit that is obtained by a third party through the actions of someone else and is an analog to a negative externality (discussed in Chapter 3).
Positive externalities exist all the time when individuals do things in their own interest that indirectly benefit others, including obtaining private health care that reduces contagion of disease to others, investing in education that diffuses to others, or painting a house to improve its property value, which makes nearby homes more valuable.
The main economic issue with technology investment is the potential for that investment to create positive externalities (see the Economics Box below). Paradoxically, while creating a surplus of positive benefits to society is generally considered valuable, an innovator that cannot fully protect or capture those benefits fails to fully realize the fruits of those efforts, which leads to a situation in which innovators tend to invest less in technology innovation than if they were able to reap more of the benefits the innovations create.
Spillover effects
Indirect benefits (like positive externalities) are also referred to as spillover effects.
The features that allow a positive externality to exist are the inability of the person taking an action to exclude others (nonexcludability) from these spillover effects.
