By Adebola Agunbiade
Transport Sector Analysis
Having analysed Biofuel as a whole in my previous article, we will now have an analysis of the transport sector in the country (US) mainly because it is the sector which uses biofuels the most. The graph below shows renewable fuel consumption by source and sector in the US.
Figure 4: Chart showing Renewable Fuels Primary Energy Consumption by source and sector in the US in the year 2008.
In 2008, about 37% of total energy consumed was made up of petroleum products- a confirmation of oil dependence theory in the country. This was as a result of (1) high import levels (2) non-competitiveness of the world market which is mainly controlled by OPEC (3) Oil’s major role in the US economy and low availability of economical oil substitutes. Transportation is core to the oil dependence issue because it accounts for about 68.7% of oil consumed in the US (2007 estimate) and about 28% of total primary energy consumed in 2008. (See chart below)
Figure 5: Primary Energy Consumption in the US by source and sector for the year 2008
Source: EIA Annual Energy Review 2008
A large part of the sector is also run by the importation of fuels such as finished gasoline, fuel oil and aviation fuel. “In 2004, about 15bn gallons of finished motor gasoline and gasoline-blending components were imported”. These fuels are applied in different vehicles as observed below.
Figure 6: Chart showing various vehicles types used in the transport sector in the US.
The next chart shows us the various fuels which are used by these cars with their percentage distribution.
Figure 6: Chart showing % of various fuels used for transportation in 2007
Source: U.S. Department of Energy
Gasoline and Diesel have the highest consumption ratios which make them the target of alternative fuels. Production of both increased by 27% for gasoline and 36% for diesel between 1973 and 2004; Gasoline consumption alone was about 138bn gallons in 2008- which is about 380mm gallons daily i.e. 62% of total energy used in the transport sector and 46% of petroleum consumed.
Continued high oil prices and the walk through of the EPAct2005 is the main driver behind the use of ethanol and biodiesel in this sector; however, the growth of the industry (biofuel) and its potential is hinged on resolution of the issues affecting the demand and supply of biofuels. For major biofuels such as cellulosic ethanol, corn-based ethanol and biodiesel, settlement of the economic, technical and regulatory issues is critical to further development of the industry in the country. The next part of my analysis will focus on the current situation of the transport sector as is and see how viable the biofuel option will be.
Biofuels Use in the US Transport Sector
We have already outlined the basics of ethanol and biodiesel. We will now dimension them further:
Ø First step: Current status based on production (crop and farmland), infrastructure (plant capacity) and technology (motor vehicles and fuelling sites)
Ø Second step: Requirements based on the same criteria needed to meet the target.
Ø Third Step: Projections based on EIA Reference Case data.
Ø Finally we shall then make our conclusions based on the analysis carried out.
First Step: We would first take a look at what the production of ethanol and biodiesel is currently in the US today based on the criteria stated above. Our data will be based on 2008 data.
Table 1: Table showing 2008 statistical data for Ethanol and Biodiesel
Source: Table is based on compilation of data from various sources
Second Step: We would look at the target set by the RFS2 (Renewable Fuel Standard) and also see what the country needs to meet this target.Table 2: Table showing the RFS2 targets as set by the United States Government
Source: Short term Energy Outlook April 2009
Based on the above data, we will now examine the requirements for meeting target set for biofuels production. Since the cellulosic ethanol is yet to be produced in large and viable quantities we will have to assume that the expected 31 billion gallons per annum target by 2022 will have to be met by using corn as feedstock. The Biodiesel target of 1bn gallons by the year 2022 will also be based on the same criteria set previously and the data used above.
Table 3: Table showing estimated requirements of Ethanol and Biodiesel based on various criteria necessary to meet the RFS2 target.
Note: Calculated based on 2008 data collected above.
The requirements for ethanol were obtained by using a proxy of only corn ethanol of 31bn being 15bn corn and 16bn cellulosic because currently there is no available data for cellulosic ethanol and there are still some issues as regards it. Some of these issues are:
ü The only technology which has currently been established for use in cellulosic production is not a cheap one and there are questions as to whether this technology actually produces more energy than it consumes. Other methods such as enzyme use are dependent on finding the correct fungi and bacteria and being able to engineer them to produce the correct enzyme also. Though this method is being improved, there are still other improvements to be made. Lastly, the thermo chemical gasification method seems like the cheapest but is still being developed.
ü It has been estimated that it based on these improvements being made; it will take between 4 to 5 years for cellulosic ethanol to be commercially viable.
Due to these issues and many more, the target which was originally set at 100mm gallons for 2010 was reduced to 6.5mm but there is still the question as to whether this is possible
Third step: We will now examine at the projections which have been made by the EIA.
Table 4: Table showing forecasted figures by EIA Reference Case for Ethanol
Source: EIA Annual Energy Outlook 2010
Figure 5: Table showing forecasted figures by EIA Reference Case for Biodiesel
Source: EIA Annual Energy Outlook Reference Case 2010
Figure 7: Graph showing Gasoline and Ethanol consumption current and forecasted based on EIAs Reference Case
Source: EIA Annual Energy Outlook Reference Case 2010
Figure 8: Graph showing Gasoline and Ethanol prices current and forecasted based on EIA Reference Case
Source: EIA Annual Energy Outlook 2010 Reference Case
We have succeeded in examining most components of the ethanol and biodiesel industry current situation, conducting an independent analysis of what we feel are the requirements necessary to meet the RFS2 target, looked at the projections as forecasted by the EIA and also, based on the same reference case, examined at the current and projected consumption of ethanol and also prices estimates.
Bringing it home
If the United States wants to get an alternative to oil that is viable for the country as a whole, it has to integrate with its policies the fact that the solution has to be one of ‘the present’ and not years to come; the technology and resources to achieve this replacement of gasoline and diesel with biofuels exists today. This article has examined different -but not all- aspects of the RFS2 and the transport sector and from the analysis; we can suggest that meeting the U.S targets for ethanol production will be very difficult; Whereas meeting future demand for biodiesel may be relatively easy.
Firstly, the most reliable source of producing ethanol is corn. The use of cellulosic source for ethanol production is still yet to be tested and produced to a very large scale and it is expected that by 2022 cellulosic ethanol will account for more production of ethanol than the use of corn if the cellulosic source of ethanol production proves not to be viable then the country would have to rely solely on corn for its ethanol production.
The use of corn also comes with further challenges. Relying on corn for meeting the 31 billion gallon target set by the government requires about 12.4bn bushels of corn (the highest amount of corn produced for all uses within the country was 13.2bn in 2008) this will require 78.9 million acres which is about 42 % of the country’s current available land. Furthermore there is the food vs. fuel debate which argues that the use of corn for ethanol purposes will eventually result in the high cost of food products.
There are still huge capital investment requirements for the development of infrastructure and new retail outlets. While this problem can easily be solved as long as there is enough investment in the sector there will still be a need for government policies to be put in place in order to ensure that private investments are directed towards that sector.
Adebola suggests that the RFS target of 16bn set by the government is too ambitious. In her opinion, setting the goal alone is not good enough; policies for investments in the cellulosic industry should be developed to kick start the industry and this will also drive both urban and rural economies and increase the benefits of production of biofuels.
According to her anayslis, the RFS2 in itself may be too ambitious in the sense that its main aims of achieving 31bn gallons of ethanol by 2022 could depend highly on a relatively new technology and the use of a crop which may not be able to meet the ethanol production set target. Adebola suggests that biofuels use in the transport sector is an efficient way of tackling the energy security issue as regards reduction in oil dependence, reduction in GHG emissions and energy efficiency also. Gritty, great analysis indeed. For more information on this article and to view Adebola's professional profile, click here.-->