biofuels

Despite recent claims to the contrary, plant-based fuels developed in economically and environmentally sensible ways can contribute significantly to the nation’s— indeed, the world’s—energy security while providing a host of benefits for many people worldwide.

ORNL Report ORNL/TM-2010-120.
The purpose of this study is to summarize the various barriers to more widespread distribution of biofuels through our common carrier fuel distribution system, which includes pipelines, barges and rail, fuel tankage, and distribution terminals, and with a special focus on biofuels, which may come into increased usage in the future. Addressing these barriers is necessary to allow the more widespread utilization and distribution of biofuels, in support of a renewable fuels standard and possible future low-carbon fuel standards. By identifying these barriers early, for fuels not currently in widespread use, they can be addressed in related research and development. These barriers can be classified into several categories, including operating practice, regulatory, technical, and acceptability barriers. Possible solutions to these issues are discussed, including compatibility evaluation, changes to biofuels, regulatory changes, and changes in the distribution system or distribution practices. No actual experimental research has been conducted in the writing of this report, but results are used to develop recommendations for future research and additional study as appropriate.

Agricultural markets often feature significant transport costs and spatially distributed production and processing which causes spatial imperfect competition. Spatial economics considers the firms’ decisions regarding location and spatial price strategy separately, usually on the demand side, and under restrictive assumptions. Therefore, alternative approaches are needed to explain, e.g., the location of new ethanol plants in the U.S. at peripheral as well as at central locations and the observation of different spatial price strategies in the market. We use an agent-based simulation model to analyze location and spatial pricing in a general model under multi-firm competition, two-dimensional space, and a continuum of potential price strategies. The results show, e.g., that depending on the location of a processor, different price strategies can be observed, spatial price discrimination can increase with the number of competitors, and elasticity in the producers’ supply functions can be identified as stabilizing factor of processor’s location.

USDA Agricultural Projections for 2011-20, released in February 2011, provide longrun projections for the farm sector for the next 10 years. These annual projections cover agricultural commodities, agricultural trade, and aggregate indicators of the sector, such as farm income and food prices.

Important assumptions for the projections include:

* U.S. and world economic growth move back toward longrun steady increases in the aftermath of the global financial crisis and economic recession.
* Although global population gains continue to slow, growth in most developing countries remains above that in the rest of the world.
* Population gains in developing countries, along with higher incomes, increased urbanization, and expansion of the middle class, are particularly important for growth in global food demand.
* Continued expansion of biofuels further adds to world demand for agricultural products.

Key results in the projections include:

* Recent price increases for many farm commodities underlie record projected levels of U.S. agricultural exports and U.S. net farm income in 2011.
* Prices for major crops decrease in the early years of the projections as global production responds to current high prices.
* World economic growth and demand for biofuels combine to support longer run increases in consumption, trade, and prices for agricultural products.
* Thus, following the near-term declines, prices for corn, wheat, oilseeds, and many other crops remain historically high.
* After near-term reductions from projected 2011 records, the value of U.S. agricultural exports and net farm income each rise through the rest of the decade.

PEATSim (Partial Equilibrium Agricultural Trade Simulation) is a dynamic, partial equilibrium, mathematical-based model that enables users to reach analytical solutions to problems, given a set of parameters, data, and initial
conditions. This theoretical tool developed by ERS incorporates a wide range of domestic and border policies that enables it to estimate the market and trade effects of policy changes on agricultural markets. PEATSim captures
the economic behavior of agricultural producers, consumers, and markets in a global framework. It includes variables for production of crops and livestock activities, consumption, exports, imports, stocks, world prices, and domestic producer and consumer prices.

The Energy Independence and Security Act (EISA) of 2007 established specific targets for the production of biofuel in the United States. Until advanced technologies become commercially viable, meeting these targets will increase demand for traditional agricultural commodities used to produce ethanol, resulting in land-use, production, and price changes throughout the farm sector. This report summarizes the estimated effects of meeting the EISA targets for 2015 on regional agricultural production and the environment. Meeting EISA targets for ethanol production is estimated to expand U.S. cropped acreage by nearly 5 million acres by 2015, an increase of 1.6 percent over what would otherwise be expected. Much of the growth comes from corn acreage, which increases by 3.5 percent over baseline projections. Water quality and soil carbon will also be affected, in some cases by greater percentages than suggested by changes in the amount of cropped land. The economic and environmental implications of displacing a portion of corn ethanol production with ethanol produced from crop residues are also estimated.

This paper examines the impact of declining energy prices on biofuels production and use and its implications to agricultural commodity markets. It uses PEATSim, a dynamic partial equilibrium, multi-commodity, multi-country global trade model of the agriculture sector to analyze the interaction between biofuel, crop and livestock sectors. The ability of countries to achieve their energy goals will be affected by future direction of petroleum prices. A 50 percent decline in petroleum prices (absent of mandates) would result in rapid decline in biofuel use worldwide accompanied by a decline in feedstock and biofuel prices. About a 21 percent decline in U.S. cost of ethanol production is needed to make ethanol competitive with gasoline and to offset the effect of lower energy prices.

When the lignocellulosic biofuels industry reaches maturity and many types of biomass sources become economically viable, management of multiple feedstock supplies – that vary in their yields, density (tons per unit area), harvest window, storage and seasonal costs, storage losses, transport distance to the production plant – will become increasingly important for the success of individual enterprises. The manager’s feedstock procurement problem is modeled as a multi-period sequence problem to account for dynamic management over time. The case is illustrated with a hypothetical 53 million annual US gallon cellulosic ethanol plant located in south west Kansas that requires approximately 700,000 metric dry tons of biomass. The problem is framed over 40 quarters (10 years), where the production manager minimizes cumulative costs by choosing the land acreage that has to be contracted with for corn stover collection, or dedicated energy production and the amount of biomass stored for off-season. The sensitivity of feedstock costs to changes in yield patterns, harvesting and transport costs, seasonal costs and the extent of area available for feedstock procurement are studied. The outputs of the model include expected feedstock cost and optimal mix of feedstocks used by the cellulosic ethanol plant every year. The problem is coded and solved using GAMS software. The analysis demonstrates how the feedstock choice affects the resulting raw material cost for cellulosic ethanol production, and how the optimal combination varies with two types of feedstocks (annual and perennial).

Energy security and environmental concerns about global climate change have lead to recent growth in the use of bio-fuels in the U.S. Brazil currently exports a substantial share of its sugarcane based ethanol to the U.S. to support the growing demand for bio-fuels. However, U.S. policies that exogenously affect the bio-fuel sector confound the understanding of the multi-market impacts of a growing bio-fuel demand. Moreover, the various forms of government intervention in the bio-fuel economy leave researchers with unclear conclusions about the prospects for bio-fuels. The indirect effects on related agricultural markets from increased bio-fuels consumption and the subsequent land use changes driven by expanded feedstock production also require more attention. To improve the understanding of these issues, we examine the market implications in the international ethanol sector by analyzing the equilibrium effects of bio-fuels policies. Additionally, we investigate land use change implications of an expanding Brazilian ethanol sector. In particular, the potential for livestock intensification of Brazilian pasture land grazing systems is considered as a prospective pathway for releasing new land for expanding sugarcane cultivation. We consider the related trade-offs in the Brazilian agricultural sector and their implications for trade with the U.S.

Using System Dynamics to Model the Transition to Biofuels in the United States Preprint, B. Bush, M. Duffy, and D. Sandor, National Renewable Energy Laboratory S. Peterson, Peterson Group To be presented at the Third International Conference on Systems of Systems Engineering Monterey, California June 2-4, 2008 Conference Paper NREL/CP-150-43153 June 2008

Today, the U.S. consumes almost 21 million barrels of crude oil per day; approximately 60% of the U.S. demand is supplied by imports. The transportation sector alone accounts for two-thirds of U.S. petroleum use. Biofuels, liquid fuels produced from domestically-grown biomass, have the potential to displace about 30% of current U.S. gasoline consumption. Transitioning to a biofuels industry on this scale will require the creation of a robust biomass-to-biofuels system-of-systems that operates in concert with the existing agriculture, forestry, energy, and transportation markets. The U.S. Department of Energy is employing a system dynamics approach to investigate potential market penetration scenarios for cellulosic ethanol, and to aid decision makers in focusing government actions on the areas with greatest potential to accelerate the deployment of biofuels and ultimately
reduce the nation’s dependence on imported oil.