5.2 Advanced biodiesel from lignocel-lulosic feedstocks

The benefits of advanced biodiesel from lignocellulosic feedstocks are similar to those offered by advanced bioethanol. They also share the common challenge of high costs and unproven technology solutions at commercial production scales. The most promising near term production route for advanced biodiesel is the thermochemical production route. However, funding is needed for more R&D, demonstration and commercial-scale projects to explore the most promising pathways, debottleneck and optimise processes and gain experience with different feedstocks and operating regimes.

The thermochemical routes for biodiesel involves processes where pyrolysis/gasification technologies are used to convert the lignocellulosic feedstock into a fuel, synthesis gas or crude bio-oil. A wide range of biofuels can be reformed from this. Although gasoline can be produced from thermochemical routes, this is predicted to be more expensive than biochemical routes, so the main products are likely to be biodiesel, bionaptha and jet kerosene.

The main three routes for thermochemical biodiesel production are:

  • Biomass-to-liquids, which includes Fischer-Tropsch synfuels and biodiesel, from gasified biomass.
  • Diesel production through hydrothermal upgrading.
  • The fast pyrolysis of biomass into "bio-oil" and then refined to diesel.

Gasifying biomass opens the way to producing a number of different fuels, including biodiesel. The most common means of achieving this is through digesters that create the right environment for the bacterial breakdown of the biomass into methane. Typically they use anaerobic digestion. However, impurities mean this is unlikely to be used for biodiesel production.27

A number of new technologies are under development that are designed to yield a variety of different gases and end products. Broadly speaking, they generally use chemicals and/or heat to break down the biomass into gases with little or no microbial action. The choice of which process is used depends on the feedstock, as lignin cannot be easily transformed into gas, and the lignin component of plants can range from 0% to 35%. For plants with a high lignin content, the heat-dominated process would be more effective and hence economic.

Once the biomass has been gasified, the gas is cleaned and can be turned into a number of different fuels by a number of different processes. The fuels produced could be biodiesel, methanol, synthetic gasoline or dimethyl ether (DME) and gaseous fuels such as methane or hydrogen.

The biomass-to-liquids (BTL) process with gasifica-tion can then use Fischer-Tropsch synthesis to convert the gas into diesel fuel and naptha. A variety of other products, mainly chemicals (e.g. waxes and lubes) are produced from this process. If this fuel pathway is to be successful, markets for these other chemicals will need to be found.

An alternative process under development is the hy-drothermal upgrading (HTU) of biomass to diesel. In this process, cellulosic materials are dissolved in water under high pressure, but at a low temperature. The process then uses various reactions to convert the cel-lulosic feedstock into a "biocrude".28 Various hydrocarbon liquids are then created, predominantly diesel, in a hydrothermal upgrading unit.

"Fast pyrolysis" is another promising process for bio-diesel production. It rapidly heats biomass in an air-free environment, and then quickly cools it, thereby forming a liquid "bio-oil" and various solids and vapours/gases. The bio-oil can then be turned into diesel or other fuels.

Advanced biodiesel capital costs

At the end of 2012 no commercial-scale BTL plant via a syngas route was in operation and there was only one BTL plant with fast pyrolysis, refining the bio-crude into diesel.29 This means capital and perhaps even more importantly operating costs are yet to be determined with any confidence. Advanced biodiesel from algae is only at the pilot phase, and costs are even higher and more uncertain. The difficulties in scaling up process designs from pilot and demonstration scale are numerous and it will take some time for reliable data to emerge.

The current estimates of costs for the nth commercial plant using today's technologies and performance from pilot-scale or demonstration plants vary by technolo-gy.30 The fast pyrolysis of biomass feedstocks to bio-crude and subsequent refining to biodiesel and other drop-in fuels is estimated to have the lowest capital costs at around USD 1/litre/year of production capacity for a plant with annual capacity of 289 Ml/year (Jones, 2009). Low- and high-temperature BTL processes are significantly more expensive. Estimated capital costs for a 123 million litre/year low temperature and a 158 million litre/year high temperature plant are USD 3.5 and USD 3.3/litre/year of capacity respectively for the nth plant (Swanson, 2010). The production of biodiesel from algae is still only at the R&D and pilot stage, so costs are high and very uncertain. Algae production in ponds is estimated to incur total capital costs of USD 10.3/litre/ year of capacity. Using photobioreactors to grow algae is more capital intensive, requiring USD 16.6/litre/year of capacity before indirect costs (Davis, 2011 and US DOE, 2013).

There are very few advanced biodiesel commercial-scale projects in operation, although there are numerous plans for the coming years subject to progress in proving processes at near commercial-scale in demonstration projects. It is difficult to compare today's costs to that of what can be expected in the future, once there is large-scale deployment using a variety of feedstocks and processes around the world. It is also potentially misleading until more data is available. Taking this qualification into account, these estimates of cost for the nth plant can be compared to some of the operating and announced commercial-scale advanced biodiesel projects, limited in number though they are.

The first commercial-scale facility using the fast pyroly-sis and biocrude refining process route is the USD 215 million KiOR Inc. plant in Columbus, Mississippi. This is a relatively small-scale plant, with production capacity of around 50 Ml/year. Per unit capital costs are expected to be high for a small-scale plant, and are estimated to be USD 4.4/litre. KiOR's second commercial plant will have a capacity of 152 Ml/year and capital costs of around USD 375, implying installed costs of USD 2.5/ litre/year of capacity (Figure 5.6). Assuming a plant scaling factor31 of between 0.7 and 0.8 and taking the capital costs of the nth plant as the base, implies capital costs for these two smaller plants as follows, once the technology is mature. They may be in the range of USD 1.5 to 1.8/litre/year of capacity for the 50 Ml/year plant and between USD 1.2 and 1.3/litre/year of capacity for the 152 million litre/year plant. The gap between these estimates and the costs for these first facilities suggests that significantly more deployment will be required to shift from today's high capital costs for the first-of-a-kind plants to the lower costs projected for the fully commercialised and mature solution.

ClearFuels Collinwood, Tennessee gasification and FT synthesis to hydrocarbon project has a proposed capacity of around 76 Ml/year and capital costs of USD 2.6/ litre/year of capacity. Very similar to KiOR's proposed Natchez plant. Sundrop Fuels proposed Alexandria, Louisiana plant has similar installed costs per unit of capacity, but is the most ambitious in scale, with annual production capacity of 190 Ml/year.

The estimated capital cost breakdowns for BTL and fast pyrolysis solutions per litre of annual capacity are provided in Figure 5.7. The indirect costs associated with the plant including engineering and supervision, construction, legal and other fees are significant for all plants. The contingency reserve for each project is assumed to be 20% of the total direct and indirect costs for the two BTL plants.

Pretreatment, gasification and syngas cleaning account for 33% of the high temperature BTL with FT synthesis and 24% for the low temperature route. In contrast, the share of FT synthesis is higher in the low temperature route, at 14%. The shares for power generation, air separation and balance of plant are similar for low and high temperature gasification and contribute to around one fifth of the total capital costs.

For fast pyrolysis, the hydrogen plant dominates capital costs, accounting for 29% of the total. The front end of the process is the next largest share of capital costs, with fuel handling and preparation and the equipment needed for fast pyrolysis accounting for a fifth of the total capital costs. The equipment required for the upgrading of the pyrolysis oil to biocrude accounts for 18% of the total capital costs.

Figure 5.6: Operating, planned or under construction advanced biodiesel plant capital costs

Sources: Brown and Brown, 2013 and F.O. Licht, 2013.

Figure 5.7: Advanced biodiesel capital cost breakdown for BTL with FT synthesis and fast pyrolysis routes, future plant

Sources: Swanson, 2010 and Jones, 2009.

Feedstock costs of advanced biodiesel plants

As with conventional plants, the two drivers of the total feedstock cost per unit of biodiesel are the biodiesel yield per tonne and the price per tonne of the lignocel-lulosic feedstocks. The issues surrounding feedstock production cost and the heterogeneous nature of lig-nocellulosic feedstocks are the similar to those faced by advanced bioethanol. The difference for biodiesel is that heteregoneous feedstocks pose a challenge for gasification and the quality and consistent composition of the gas produced rather than for pretreatment and hydrolysis. This can have an impact on the gas clean-up design and costs.

As with lignocellulosic feedstocks for ethanol production, the planting and harvesting of dedicated feedstock crops can provide large supply opportunities. However, it will typically be more expensive than agricultural or forestry residues and wastes that may be available at low or no cost at the site of production. These may be available, though, in quantities that may limit the scale of production to less economic levels.

Where residues are available at the food/agricultural or forestry processing site, feedstocks range from costing nothing to as much as USD 80/tonne32. This is where biomass crops are the source, or residues need to be collected from the production site, stored and transported to the plant. For the purposes of this analysis a central estimate of USD 65/dry tonne is used, with sensitivities at USD 30 and USD 100/dry tonne, as with advanced ethanol.

Yields from cellulosic feedstocks for gasification and FT synthesis are projected to be lower than for ethanol at around 180 litres/dry tonne for the low temperature route and 230 litres/dry tonne for the more capital-intensive high temperature route. However, the yield for fast pyrolysis and biocrude to diesel refining is currently estimated to be higher at around 250 litres/dry tonne (US DOE, 2013). KiOR Inc. Columbus facility is expected to yield around this level and a new catalyst is expected to boost this to around 275 litres/dry tonne without any capital modifications, while their long-term goal for future plants is to achieve 340 litres/dry tonne (Biofuels Digest, 2012).

Figure 5.8 presents the costs per litre of biodiesel for the gasification and FT synthesis route and for pyrolysis biocrude that is upgraded to biodiesel for lignocellulosic feedstock costs of USD 30 to USD 100/dry tonne.

Other operating costs for advanced biodiesel plants

Operating costs for advanced biodiesel plants are expected to be significant even after costs are driven down through commercialisation. The fully commercialised, debottlenecked BTL plants of the future using FT synthesis are anticipated to have operating costs of around USD 0.18/litre for high temperature processes and USD 0.22/litre of biodiesel for low temperature pro- cesses. Sales of electricity are expected to reduce these costs by USD 0.04/litre for high temperature processes and USD 0.06/litre for low temperature processes, reducing the net other operating costs to USD 0.14/ litre and USD 0.16/litre respectively (Swanson, 2010). For fast pyrolysis to biocrude and then upgrading to biodiesel, operating costs are estimated to be around USD 0.16/litre of biodiesel if the hydrogen required is produced onsite from biomass (Jones, 2009).33

Figure 5.8: Advanced biodiesel feedstock costs per litre as a function of biomass costs and process yields for BTL with FT synthesis and fast pyrolysis

Sources: Based on Biofuels Digest, 2013; Swanson, 2010; and Jones, 2009.

Fixed operating costs (labour, insurance, etc.) are the largest component of the other operating costs for gasi-fication and FT synthesis, while other major costs are the production of steam and the hydroprocessing costs (Figure 5.9). The lower capital costs for a low temperature route for gasification and FT synthesis are offset to some extent by higher other operating costs of around USD 0.04/litre. However the greater opportunity for electricity exports is estimated to reduce this gap to just USD 0.02/litre of biodiesel in the United States. For fast pyrolysis and upgrading of the biocrude to biodiesel, fixed costs are the largest share of other operating costs when biomass is used for hydrogen production.

The other operating costs for algae are estimated to be significant at around USD 1.3/litre of biodiesel for ponds and USD 1.69/litre of biodiesel for photobiore-actors (Davis, 2009 and Davis, 2012). Cost reductions will have to be very large if algae are to compete with other advanced options for biodiesel production, given the large difference in starting points for the estimated commercial deployment costs. On the other hand, the cost reduction potential is good given that this route is still at the early R&D phase. More experience will be required to determine if, or how quickly, costs can become competitive with other advanced biodiesel production routes.

Total production costs for advanced biodiesel

The monthly average crude oil acquisition cost for refin-ers in the United States in 2012 varied from USD 92 to USD 107/bbl. Meanwhile, the average ex-refinery price in 2012 for resale by month in the United States for diesel fuels ranged from around USD 0.72 to USD 0.97/ litre.34 The selling price required by fully commercialised and debottlenecked biodiesel BTL plants based on gasification and FT synthesis falls within this range. This assumes feedstock costs of USD 65/dry tonne, a cost of capital of 10% and the cost and performance parameters outlined for feedstock and other operating costs in this section. However, it is unlikely that these cost levels will be reached before 2020, unless significant acceleration in deployment occurs in the near future.

Figure 5.9: Advanced biodiesel other operating costs for BTL with FT synthesis and fast pyrolysis for fully commercialised future plant

Sources: Swanson, 2010 and Jones, 2009.

By contrast, the fully commercialised and debottle-necked fast pyrolysis and biocrude refining to bio-diesel and other drop-in fuels could ultimately have significantly lower costs. Deployment looks likely to be faster than for BTL routes. Based on KiOR's first-of-a kind plant in Columbus, Ohio, capital costs for their small-scale (50 Ml/year) commercial plant are around USD 4.4/litre/year of capacity. Assuming a feedstock cost of USD 65/dry tonne, that operating costs are one and a half times the long-term potential (Swanson, 2010), and that process debottlenecking restricts output to 80% of planned capacity; then this would imply production costs of USD 1.08/litre. However, KiOR's second commercial plant has three times the capacity and capital costs of USD 2.5/litre/year of capacity. Assuming the same feedstock and other operating costs, successful debottlenecking and that the plant meets scheduled availability predictions, these plants could yield costs of USD 0.76/litre of biodiesel (Figure 5.10).

If these plants can prove the stability of the process and meet the design availabilities, their biofuels will be very close to competitive with the average diesel resale prices in the United States seen in 2012. Fast pyrolysis of biomass into biocrude, then refining this biocrude into biodiesel and other drop-in fuels, appears, therefore, to be a very attractive near-term solution leading to competitive biodiesel production. Two critical questions remain: can these first commercial-scale projects be proved to work reliably and are they capable of being scaled up to levels that make economic sense? If the answer is yes, fast pyrolysis to biocrude and then refin-ing to biodiesel or gasoline could prove to be the first competitive route for second-generation biofuels.

The contribution of feedstock cost to the total cost of advanced biodiesel is significantly lower than for conventional feedstocks and technologies. However, the advanced routes are much more capital intensive and have higher "other operating costs". Even when fully commercialised, the fixed costs of the gasification and FT synthesis route remain the largest share of total bio-diesel production costs, accounting for 43-47% of total biodiesel production costs (USD 0.37 to USD 0.40/litre). The fast pyrolysis route is much less capital-intensive and even today's first-of-a-kind commercial plants are estimated to have lower capital costs in absolute and percentage terms than future gasification and FT synthesis BTL plants.

Figure 5.10: Total biodiesel production cost breakdown for fully commercialised future BTL with FT synthesis and fast pyrolysis plants, and today's fast pyrolysis plant

Note: The capital cost data and annual production capacity for the KiOR plants are from publically available data. The non-feedstock costs are an indicative assumption, while feedstock costs may be higher than assumed here. As such, these are order of magnitude estimates of the production costs given these assumptions.

Sources: Based on IRENA analysis and Figures 5.6, 5.7nd 5.8 and 5.9.

Figure 5.11 highlights the sensitivity of the total production costs for biodiesel to the average biomass feed- stock price. The higher operating and capital costs of advanced biodiesel production routes means they are significantly less sensitive than conventional biodiesel. However, securing low cost feedstocks still has a large impact on total production costs.

Figure 5.11: Total advanced biodiesel production cost ranges by technology for biomass costs of USD 30-100/dry tonne

Sources: Based on IRENA analysis and Figures 5.6, 5.7, 5.8 and 5.9.

27 The direct use of biogas as a transportation fuel is discussed in section 6.

28 See Jones, 2009 and NREL, 2013 for a more detailed discussion of these processes.

29 KiOR's 50 million litre/year facility in Mississippi, United States came on-stream in 2012, but will not be running at capacity until near the end of 2013 at the earliest.

30 This concept is not exact in specifying how many plants are required. Humbird (2011) states "the key assumption implied by nth-plant economics is that our analysis does not describe a pioneer plant; instead, several plants using the same technology have already been built and are operating. In other words, it reflects a mature future in which a successful industry of n plants has been established".

31 This is the ratio to be able to scale the known costs for a given plant size, to a hypothetical plant size. Due to economies of scale, this is typically less than one. That is to say larger plants are proportionately less costly and smaller ones proportionately more expensive.

32 This value is consistent with information that has been obtained about feedstock costs for at least one of the near-term commercial projects in the United States (NREL,2011).

33 If the hydrogen is produced from natural gas, operating costs rise to around between USD 0.20 and USD 0.22/litre of diesel, assuming a gas price of between USD 5 and USD 7/GJ. However, this increase in costs is offset by a higher yield of final product per tonne of feedstock, 380 litres/dry tonne instead of 250 litres/dry tonne (USD DOE, 2013). Another possibility is the co-location of the fast pyrolysis plant at a refinery, as cheaper hydrogen could be purchased from the refinery and some ofgases sold to the refinery. The economics of these options depends on the relative prices of natural gas, biomass feedstock and incremental capital costs. For the co-location with a refinery, they also depend on the available land, costs of the purchased hydrogen and sales value of the offgases.

34 This is from the U.S. EIA's monthly reporting of Petroleum product retail and wholesale prices by U.S. PAD District and State for No. 1 and No. 2 Distillate and No. 2 Diesel. See www.eia.gov for more details.