When will cellulosic ethanol be competitive with corn ethanol?

When it can be made for about a dollar per gallon, according to the National Renewable Energy Laboratory (NREL). Or, when corn prices climb high enough, says Doug Tiffany, a U of M ag economist.

Figuring in credits for coproducts, the cost to convert $50-per-ton biomass into ethanol is about $1.65 per gallon, while converting $3-per-bushel corn into ethanol costs about $1.59 per gallon, Tiffany says. “With higher corn prices, cellulosic ethanol becomes more competitive,” Tiffany says. At corn prices of $3.50 to $4.00 per bushel, plus current incentives, cellulosic ethanol could compete using today’s technology, he says.

Production costs will come down as cellulosic ethanol technology improves, says AURI biofuels expert Ed Wene. In the last five years, for example, the cost of the special enzymes that break down cellulose has dropped by about 95 percent, and scientists expect to cut the cost even more within a few years.

Researchers are also working to squeeze more ethanol out of biomass. Current yields stand at less than 70 gallons of fuel per ton of biomass. The federal energy agency hopes to bump that up to 75 gallons per ton by 2012 and 90 gallons per ton by 2020. These and other technical advances could push the cost of cellulosic ethanol as low as 60 cents a gallon within 20 years, according to the NREL.

Competitive factors
Other factors will also affect the competitive picture for cellulosic ethanol, Tiffany says. High oil prices make renewables more competitive. But “if we have a period of low energy prices, that could hold back innovations,” and investments in improving biofuels technologies, Tiffany says. Capital
requirements are another factor. The cost to build a 40-million-gallon corn dry mill is about $1.80 per gallon of capacity, Tiffany says. But cellulosic ethanol plants could cost three times that, making them less attractive to investors and riskier to finance, compared to corn dry mills.

Ethanol mandates, government incentives and public policies also enter into the competitive equation. Today’s corn ethanol industry was spurred by federal and state policies that created a market for ethanol, and reduced its cost to consumers. In the coming years, Tiffany expects to see “a very vigorous policy debate over how much government encouragement there should be for corn ethanol.”

Meanwhile, Minnesota — the nation’s leading biofuels state — is taking a prominent role in cellulosic ethanol’s development. U of M scientists are tackling many of the problems associated with biomass fuels, says Todd Reubold of the Initiative for Renewable Energy and the Environment. Recently, for example, U of M scientists engineered new enzymes that can more efficiently break
down plant waste. Work is also being done on pretreatment and fermentation technologies, feedstock collection, and energy crop breeding and production, he says.