Key words :
High Oil Prices = High Biofuel Prices
6 Nov, 2007 11:47 am
You know that forever I have beaten the drum that high fossil fuel prices would make biofuels more expensive due to their poor EROEI..
Biofuel Costs Hurt Effort To Curb Oil Price
"Rising costs of biofuels and other alternative energies are making them less viable as substitutes for crude oil, a development that could frustrate efforts to bring oil prices down in the years ahead.
"A few years ago, many energy economists predicted that higher oil prices would ensure the success of alternative energies such as biodiesel or wind power by making them more financially attractive. In many cases, though, the opposite has occurred: Even as crude-oil prices approach $100 a barrel, some alternatives look less attractive than in the past."
Many energy economists predicted that, did they? I guess that's why I am not an energy economist. That this would happen is a no-brainer, again because of the energy inputs. How they could get it so wrong is beyond me.
"One reason: Energy demand is now so intense that supplies of just about every kind of fuel are in short supply, driving up prices of the raw materials involved in making many alternative energies."
It is the same across the energy industry. That's why projects keep coming in over budget. That's why GTL projects have been abandoned, and CTL can't get off the ground. And that's why I think Shell's oil shale efforts are doomed. (I know that ethanol prices lately have collapsed, but with high energy and corn prices, their margins are getting crushed and a shakeout is inevitable).
"The problem is most acute for crop-based alternative fuels, like ethanol and biodiesel, though it has also proved true to some degree for solar power, nuclear power and other competing energy sources. Biodiesel, a fuel made from farm crops like soybean oil and palm oil, was in some cases supposed to be economically competitive with crude-oil prices as low as $50 a barrel, according to analysts who studied the industry."
What a surprise. Who could have predicted that?
Originally published at: R-Squared Energy Blog
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The goal of alternative fuels is to increase total supply which will tend to drive down prices, or at least keep them from rising as quickly. It doesn't mean that alternative producers will earn less.
Obviously for exothermic processes the argument in the article fails completely. The following link takes you to a rational analysis of the economics.
[Response] I am well aware of hydrothermal processes, having several patents in that space. Surely you know that hydrothermal processes are heavily dependent upon capital; capital with high energy inputs. That's why so many hydrothermal processes such as GTL are having horrendous cost overruns - energy became more expensive, and so did all of the process inputs. The biomass processes also have fossil fuel inputs in harvesting and getting the biomass to the reactor. But, having said that, I do favor hydrothermal processes. They have a much brighter future than do wet bioconversion processes. I have a number of close contacts in this area, including personnel at Choren, one of the leaders in biomass gasification to diesel. Cheers, Robert Rapier
And if one does produce biodiesel, then clearly harvesting and moving the biomass to the reactor can be done using biofuels. Another possiblity for the latter is via a pipeline.
This link is suggestive:
[Response] David, It depends on whether you are talking traditional biodiesel, or 2nd generation green diesel. Traditional biodiesel reacts oils with methanol (derived from fossil fuels) to produce the methyl ester that is biodiesel. That process has 2 significant fossil fuel inputs: Natural gas into methanol, and natural gas into growing the feedstock (rapeseed is especially bad). The green diesel process uses fats and oils and hydrocracks them. Overall operating costs are lower, but you still have fossil fuel inputs into producing the hydrogen and into producing the significant equipment involved. The 3rd process is biomass gasification followed by FT to diesel. This is a very capital intensive process, even though the reaction is exothermic. So, you have fossil fuels embedded in transport and in the equipment. The bottom line is that all 3 processes will be highly sensitive to fossil fuel prices. You need something like a 10 to 1 energy return before you really start to divorce biofuels from extreme sensitivity to the fossil fuel inputs. We don't have that at the moment, although sugarcane ethanol comes closest.