McKinsey has a report on second generation (2G) biofuel production - The future of second-generation biomass.

The promise of the second-generation (2G) bioconversion industry is that it will transform cellulose-based, nonedible biomass and agricultural waste into clean and affordable high-value fuels or chemicals. (The first-generation, or 1G, technology converts edible biomass.) In this way, 2G could offer an alternative source both of energy and of chemical-industry inputs, which other renewable technologies cannot provide.

That is 2G’s potential, but the industry failed to deliver on this promise for almost a decade. However, there has been progress in recent years. Since the inauguration of the first commercial-scale 2G plant, in 2013, eight more have opened around the world, of which some, not surprisingly, are failing, while others are progressing. Most are in North America, two are in Brazil, and one is in Europe—all markets with mature 1G biomass industries and governments that support cellulosic ethanol.

Second-generation projects have also begun attracting interest in China, India, Indonesia, and Malaysia in the form of government initiatives to coordinate action and to facilitate the establishment of a 2G ethanol market. As these trends suggest, the technology could be approaching the acceleration phase that marked the development trajectory of other industries, such as wind power, solar energy, and shale gas. In each case, growth was modest at first and then took off

At feedstock costs of $30 to $50 a ton and validated levels of technology performance, 2G production economics can compete on cost with 1G bioethanol and certain more expensive oil sources,2 particularly at locations where 2G operations can piggyback on existing 1G infrastructure, such as sugarcane bagasse feedstock or corn stover at 1G plants that already process sugarcane and corn, respectively. On a marginal-cost basis, 2G is already structurally more attractive than 1G because its running costs3 are lower.

However, there are two important risks: feedstock security (which can be addressed through forward contracts) and technology. Building new commercial-scale plants will encourage simplification and standardization, while also leading to scale efficiencies that reduce capital expenditures. As with the development of wind farms, leading players should eventually be able to offer investors turnkey operations. Government support could improve the business case substantially for some 2G plants, and there are precedents for this: Germany helped build initial capacity for solar power, as the United States did for the 1G industry.

ReNew Economy reports that a ethanol and cogeneration plant is to be built in Queensland that will almost double biofuel production in Australia - Huge, $800m bio-energy project in Queensland gets boost from ARENA grant.

Global biofuel production is still increasing at a reasonable clip (in the the 5% to 10% per annum range - well under the growth rate for solar and wind power but respectable nevertheless).

Robert Rapier has an article on biofuels drawing on the recent Renewables 2014 Global Status Report (the BP for this year is also out) - Global Biofuels Status Update.

Global biofuel production falls primarily into three categories; ethanol, biodiesel, and hydrotreated vegetable oil (HVO), also known as “green diesel.” Of the 30.8 billion gallons (116.6 liters) of biofuel produced globally in 2013, 23 billion gallons (75%) were ethanol. ...

Biodiesel is the second largest category of global biofuel, accounting for 6.9 billion gallons globally in 2013 — 22.6% of total biofuel production. Biodiesel is derived from reacting fats like vegetable oil with an alcohol like methanol. The products of the reaction are biodiesel and glycerin. The chemical structure of biodiesel is distinctly different from that of petroleum diesel. Petroleum diesel is composed of only hydrogen and carbon (hydrocarbons), but biodiesel also contains oxygen. This gives biodiesel somewhat inferior physical and chemical properties compared with petroleum diesel. ...

Global biofuel production continues to be dominated by ethanol, and the US is the world’s dominant biofuel producer — leading in both ethanol and biodiesel. HVO is the world’s third largest volume biofuel and its production is growing at a faster pace than the more mature ethanol and biodiesel industries.

The US DOE's Pacific Northwest National Laboratory has an article on a new process for creating biofuel from algae - Algae to crude oil: Million-year natural process takes minutes in the lab.

Engineers have created a continuous chemical process that produces useful crude oil minutes after they pour in harvested algae — a verdant green paste with the consistency of pea soup.

The research by engineers at the Department of Energy's Pacific Northwest National Laboratory was reported recently in the journal Algal Research. A biofuels company, Utah-based Genifuel Corp., has licensed the technology and is working with an industrial partner to build a pilot plant using the technology.

In the PNNL process, a slurry of wet algae is pumped into the front end of a chemical reactor. Once the system is up and running, out comes crude oil in less than an hour, along with water and a byproduct stream of material containing phosphorus that can be recycled to grow more algae.

With additional conventional refining, the crude algae oil is converted into aviation fuel, gasoline or diesel fuel. And the waste water is processed further, yielding burnable gas and substances like potassium and nitrogen, which, along with the cleansed water, can also be recycled to grow more algae. ...

PNNL scientists and engineers simplified the production of crude oil from algae by combining several chemical steps into one continuous process. The most important cost-saving step is that the process works with wet algae. Most current processes require the algae to be dried — a process that takes a lot of energy and is expensive. The new process works with an algae slurry that contains as much as 80 to 90 percent water.

Climate Progress has an update on advanced biofuels - How A 75-Million-Gallon Plant In Italy Heralds The Rise Of A More Efficient Kind Of Biofuel.

The world’s first plant able to produce cellulosic biofuel at commercial scale using enzymatic conversion recently opened in Crescentino, Italy. When it’s fully up and running, the plant is expected to deliver 75 million liters (just shy of 20 million gallons) of ethanol to the European market.

Admittedly, the “world’s first” title rests on narrow grounds. The plant uses a particular process developed by its owner, Beta Renewables, that first breaks raw materials down into sugars using enzymes, and then converts those sugars into ethanol through fermentation by bacteria.

Another commercial-scale cellulosic ethanol plant is already up and running in Florida, but it uses a different process in which gasification — exposure to high heat — transforms the raw materials into a mix of carbon monoxide, carbon dioxide, and hydrogen called syngas. The same fermentation process then converts the syngas into ethanol.

The Florida plant is anticipated to produce 8 million gallons of biofuel a year when it’s fully up and running. A plant in Emmetsburg, Iowa with a capacity of 25 million gallons is in the works, as is a 30 million gallon facility in Nevada, Iowa, and a 23 million gallon set up in Hugoton, Kansas. The current conventional wisdom says that large-scale commercial production of cellulosic biofuel remains out of reach, and the target set by the federal government’s renewable fuel mandate is too high. But that may not be the case much longer.

While pondering what happened to advanced biofuels I found myself wondering what happened to another widely touted biofuel option - bio-butanol.

Bio-butanol was heavily promoted back in 2007 and 2008 as a biofuel option that had many advantages over ethanol.

The key way [butanol is better than ethanol] is higher energy density. Whereas ethanol is around about two-thirds the energy density [of gasoline], with butanol we’re in the high eighties [in terms of percent].

It’s less volatile [than ethanol]. It isn’t as corrosive, so we don’t have issues with it at higher concentrations beginning to eat at aluminum or polymer components in fuel systems and dispensing systems. And it’s not as hydroscopic–it doesn’t pick up water, which is what ethanol can do if you put it in relatively low concentrations. So we can put it through pipelines.

A range of companies are still pursuing the bio-butanol dream, with one (Optinol) recently declaring it had achieved "energy cost parity" with ethanol for its for (sugar derived) bio-butanol. Another company (Cobalt) is now producing reasonably large volumes of fuel at a pilot plant. BP and Dupont also have a joint venture that they hope will produce butanol at a price competitive with petrol.

There are also attempts underway to produce jet fuel using butanol produced at a converted ethanol facility.

As with ethanol, a number of organisations are looking at producing butanol from cellulosic material, with the University of Michigan and UCLA leading research in the area.

In my recent post on renewable energy I noted that production of biofuels had stalled, with production declining by 0.4% in 2012. Interesting ethanol production is declining while biodiesel production has doubled over the past 5 years and now accounts for 31% of the total.

Despite the recent plateau of production, the FAO is predicting ethanol production will increase by 67% over the next ten years with biodiesel increasing even faster but from a smaller base. By 2022, they project biofuel production will consume a significant amount of the total world production of sugar cane (28%), vegetable oils (15%) and coarse grains (12%).

The Economist recently had an article wondering "What happened to biofuels?", noting that production of first generation biofuels has stalled due to costs and the food vs fuel debate while advanced biofuels (such as cellulosic ethanol) have failed to appear in meaningful quantities so far - though commercial plants have started to appear - and that "flora vs fuel" may be the next battleground if they are produced successfully.

But instead of roaring into life, the biofuels industry stalled. Start-ups went bust, surviving companies scaled back their plans and, as prices of first-generation biofuels rose, consumer interest waned. The spread of fracking, meanwhile, unlocked new oil and gas reserves and provided an alternative path to energy independence. By 2012 America’s Environmental Protection Agency (EPA) had slashed the 2013 target for cellulosic biofuels to just 53m litres. What went wrong?

Making a second-generation biofuel means overcoming three challenges. The first is to break down woody cellulose and lignin polymers into simple plant sugars. The second is to convert those sugars into drop-in fuels to suit existing vehicles, via a thermochemical process (using catalysts, extreme temperatures and high pressures) or a biochemical process (using enzymes, natural or synthetic bacteria, or algae). The third and largest challenge is to find ways to do all this cheaply and on a large scale.

In 2008 Shell, an energy giant, was working on ten advanced biofuels projects. It has now shut most of them down, and none of those that remain is ready for commercialisation. “All the technologies we looked at worked,” says Matthew Tipper, Shell’s vice-president for alternative energy. “We could get each to produce fuels at a lab scale and a demonstration scale.” But bringing biofuels to market proved to be slower and more costly than expected.

The optimism of five years ago may have waned, but efforts to develop second-generation biofuels continue. Half a dozen companies are now putting the final touches to industrial-scale plants and several are already producing small quantities of second-generation biofuels. Some even claim to be making money doing so.

Consider Shell. Raizen, its joint venture with Cosan of Brazil, produces more than 2,000m litres of first-generation ethanol annually from sugarcane juice. Usually the fibrous stalks left over are burned for power or turned into paper, but next year Raizen will start turning them into second-generation bioethanol, using a cocktail of designer enzymes from Iogen, a Canadian biotechnology firm. Raizen hopes to produce 40m litres of cellulosic ethanol a year, cutting costs and boosting yield by co-locating its cellulosic operation with a traditional ethanol plant. Under this model, second-generation biofuels complement and enhance first-generation processes, rather than replacing them outright.

Three plants in America are expected to start producing cellulosic ethanol from waste corn cobs, leaves and husks in 2014: POET-DSM Advanced Biofuels (75m litres) and Dupont (110m litres), both in Iowa, and Abengoa (95m litres) in Kansas. But the first company to produce ethanol using enzymes on an industrial scale is Beta Renewables, a spin-off from Chemtex, an Italian chemical giant. An 80m-litre cellulosic ethanol plant in Crescentino, near Turin, has been running at half capacity over the summer, using straw from nearby farms. It will run on corn waste in the autumn, rice straw in the winter and then perennial eucalyptus in the spring. Beta Renewables has already licensed its technology for use in Brazil and Malaysia, and expects to sell several more licences by the end of the year. All Beta’s plants can already make biofuels at a profit, albeit only in areas with very cheap feedstocks, says the firm’s boss, Guido Ghisolfi. ...

Amyris, based in California, genetically engineers yeasts and other microbes to ferment sugar into a long-chain hydrocarbon molecule called farnesene. This can then be processed into a range of chemicals and fuels. After a few rocky years when it over-promised and under-delivered, Amyris is now producing limited quantities of renewable diesel for public buses in Brazil and is trying to get its renewable jet fuel certified for commercial use.

Solazyme, another firm based in California, is also focusing on renewable diesel and jet fuels, in its case derived from algae. Microscopic algae in open-air ponds can use natural sunlight and atmospheric or industrial-waste carbon dioxide to produce oils. But harvesting the fuel, which is present in only very small proportions, is expensive and difficult. Solazyme instead grows algae in sealed fermenting vessels with sugar as an energy source. The US Navy has used tens of thousands of litres of its algal fuels in exercises, and Propel, an American chain of filling stations, recently became the first to offer algal diesel. But although its technology clearly works, Solazyme remains cagey about the economics. A 110m-litre algae plant in Brazil, due to be up and running by the end of the year, may clarify Solazyme’s commercial potential. ...

Even if second-generation processes can be economically scaled up, however, that might in turn highlight a further problem. To make a significant dent in the 2,500m litres of conventional oil that American refineries churn through each day, biofuel factories would have to be able to get hold of a staggering quantity of feedstock. Mr Ghisolfi of Beta Renewables points out that a factory with an annual output of 140m litres needs 350,000 tonnes of biomass a year to operate. “There are only certain areas, in Brazil and some parts of the US and Asia, where you can locate this much biomass within a close radius,” says Mr Ghisolfi. “I am sceptical of scaling to ten times that size, because getting 3.5m tonnes of biomass to a single collection point is going to be a very big undertaking.”

Billions of tonnes of agricultural waste are produced worldwide each year, but such material is thinly spread, making it expensive to collect and transport. Moreover, farms use such waste to condition the soil, feed animals or burn for power. Diverting existing sources of wood to make biofuels will annoy builders and paper-makers, and planting fuel crops on undeveloped land is hardly without controversy: one man’s wasteland is another’s pristine ecosystem. Dozens of environmental groups have protested against the EPA’s recent decision to permit plantations of fast-growing giant reed for biofuels, calling it a noxious and highly invasive weed. Just as the food-versus-fuel argument has proved controversial for today’s biofuels, flora-versus-fuel could be an equally tough struggle for tomorrow’s.

On Earth magazine also has a look at the advanced biofuels story - Turning Grass into Gas, noting that the military, airlines and the bioplastic industry are all motivated customers.

When they failed to hit their mark, vultures circled the industry. In late 2011 a Wall Street Journal editorial branded it “The Cellulosic Ethanol Debacle.” Two early cellulosic companies, Calysta and Coskata, switched to making gasoline from natural gas. BP and Shell abandoned their cellulosic projects. Congress began reconsidering the value of the RFS, using the unmet cellulosic targets as Exhibit A. Stock prices of cellulosic companies tanked. Investment capital fled.

But then a funny thing happened: in early 2013, cellulosic ethanol refineries finally began producing biofuel. Texas-based KiOR, the nation’s leading independent cellulosic company, began shipping cellulosic diesel and gasoline from its refinery in Columbus, Mississippi. INEOS Bio’s Florida refinery began producing cellulosic ethanol from yard and wood waste in early summer. By 2014 the Spanish energy giant Abengoa, the chemical conglomerate DuPont, the ethanol maker Poet, and five other cellulosic refiners are expected to begin producing next-generation biofuel.

That production comes none too soon. Cellulosic refineries are expensive to build. A commercial-scale plant (producing about 20 million gallons a year) can cost $100 million to $200 million. Months of testing and tweaking are required before full production starts. The burn rate at cellulosic start-ups can be astronomical. Prior to its first fuel shipments this year, KiOR went through roughly $10 million a month on R&D; revenues were about $1,000 a day.

After six years of struggle, the cellulosic biofuel industry is finally taking its first steps toward self-sufficiency. “The good news,” Advanced Ethanol Council executive director Brooke Coleman told me, “is that in 2013 we’re expecting our production number for the first time to not be zero.”

If Coleman’s quote seems a little cockeyed, then you haven’t spent much time in the cellulosic biofuel space. When it comes to hope, mystery, controversy, and drama, no green energy sector can match it. Over the past six years, the industry has seen IPO jackpots and shocking failures, breakthrough discoveries and maddening delays. Some early believers have lost the faith in cellulosic. Others have found hope in the ability of cellulosic refineries to produce not just ethanol but also gasoline, diesel, jet fuel, and bio-based industrial chemicals, opening up new markets that might include the U.S. military, the global airline industry, and chemical manufacturers.

“Is cellulosic still worth it?” asks Mackinnon Lawrence, a renewable energy analyst and consultant for Navigant Research, in Colorado. “How much money do you throw at cellulosic to commercialize it? What’s its purpose now?”

These are fair questions. In a world of limited resources, it doesn’t make sense to pour money into failed technologies. It’s tough to know how the cellulosic story will end, or whether the grand ambitions of 2007 will ever be realized. Yet it’s clear that predictions of cellulosic’s demise have proved to be premature. ...

The companies that survive long enough to produce fuel may be the ones wealthy enough to give their chemists and engineers the time they need to work the bugs out of a technically demanding process. Of the four companies at or near commercial-scale production, three are sustained by deep-pocketed parents with revenue streams in other industries. What that money buys is time. Abengoa’s cellulosic plant in Hugoton, Kansas, a small town just north of the Oklahoma panhandle, is the company’s first commercial-scale biorefinery. “Frankly, we’ve been working on this process for 10 years,” said Chris Standlee, executive vice president of Abengoa Bioenergy, the company’s renewable fuel subsidiary. Abengoa started with “lab and pilot scale” facilities in Spain in 2003, he said, and the company has been working steadily on scaling up to larger plants ever since.

The curious thing about cellulosic biofuel is that even when production was zero, demand for the stuff continued to climb. It wasn’t all driven by the RFS mandate. Over the past few years, a number of companies and industries have set carbon reduction goals. It’s easy to become cynical about these announcements. But when they’re taken seriously they move markets—and provide critical demand for emerging green-fuel industries.

The American military is a huge future buyer. The U.S. Navy has announced that it wants to source half its non-nuclear fuel from renewables by 2020. That’s an ambitious goal, and the Navy is aggressively encouraging American biorefiners to build the plants necessary to produce upward of three billion gallons per year. Because the military is leery of the food-versus-fuel controversy, Navy fuel buyers are especially interested in advanced biofuels.

Pleasanton, California–based Fulcrum BioEnergy, which converts municipal solid waste into biofuel, has already signed development deals with both the Air Force and the Navy. Like most refiners, though, Fulcrum has yet to produce fuel: its Reno, Nevada, waste-to-fuel facility is still under construction.

Commercial airlines want cellulosic too. When officials from United, British Air, Lufthansa, and Qantas appeared before the advanced biofuels conference in Washington, the ballroom positively buzzed. The airline industry has a goal of becoming carbon neutral by 2020, and major carriers want cellulosic to be a big part of the fuel mix.

That market is massive. Worldwide, commercial airlines spend more than $200 billion a year on jet fuel, $50 billion in the United States alone. Airlines see carbon reduction as a key to their growth, because conventional fuels are expected to rise in cost as they become subject to carbon taxes and regulatory systems outside the United States.

“We expect to buy 100 million tons of biofuel by the year 2050,” Jonathan Counsell, head of environment for British Airways, told the conference.

No company is seeking biofuels more urgently than Qantas. Australia’s carbon tax has the airline paying more than $20 per emitted ton of carbon, so bringing more biofuel into their fuel mix isn’t merely a future concern. It’s a bottom line issue right now. And Australian companies are especially keen to find nonfood biofuels in light of the decade-long drought the continent suffered in the 2000s.

Another emerging market might prove nearly as valuable as marine diesel and aviation gas: renewable chemicals. The same process that turns switchgrass into ethanol can be tweaked to produce industrial chemicals such as BDO (1,4-butanediol) and butadiene, used in running shoes, cosmetics, tires, and other products. Earlier this year the German company BASF, the world’s largest chemical maker, signed a deal with San Diego–based Genomatica to produce renewable BDO using cellulosic technology. For BASF cellulosic chemicals could provide value at both ends of the factory: relief from the fluctuations of global petroleum prices and extra benefit to buyers. In competitive markets such as cosmetics and running shoes, bio-based ingredients could be the next wave of “organic” products.

Biofuels Digest has an article on a new biochar / pyrolysis project being proposed for Louisiana - Cool Planet to invest $168M in Louisiana – stealthy biotechnology heads for scale. The updated program looks to be using wood waste rather than miscanthus.

In Louisiana, Cool Planet Energy Systems CEO Howard Janzen, flanked by Louisiana Gov. Bobby Jindal, announced the company will build three bio-refineries in Louisiana with a capital investment of $168 million. The project will consist of modular biomass-to-gasoline refineries in Alexandria, Natchitoches and a site to be determined. ...

Its not hard to see why everyone has been excited — sometimes laced with skepticism — about Cool Planet. With claimed operating costs of $1.00 to $1.15 per gallon, and adding another 13 cents or so for the capital costs (amortized over 15 years) – well, you get the picture. It’s drop-in, renewable gasoline, in prospect, for about half the price of the incumbent fossil fuels.

Now those claims were built around – to some extent, an emerging feedstock, miscanthus. That was the secret sauce in reports of 4,000 gallons per acre yields for production of renewable gasoline, Ahem, there’s been a change.

Now, Cool Planet will harvest wood waste and forest byproducts to make gasoline at its initial commercial-scale facilities in Louisiana. Each bio-refinery will be capable of producing 10 million gallons of high-octane, low-vapor pressure gasoline for strategic distribution through existing market channels and for blending at Louisiana refineries.

The NYT reports on the continuing search for commercial production of cellulosic ethanol - Milestone Claimed in Creating Fuel From Waste.

After months of frustrating delays, a chemical company announced Wednesday that it had produced commercial quantities of ethanol from wood waste and other nonfood vegetative matter, a long-sought goal that, if it can be expanded economically, has major implications for providing vehicle fuel and limiting greenhouse gas emissions.

The company, INEOS Bio, a subsidiary of the European oil and chemical company INEOS, said it had produced the fuel at its $130 million Indian River BioEnergy Center in Vero Beach, Fla., which it had hoped to open by the end of last year. The company said it was the first commercial-scale production of ethanol from cellulosic feedstock, but it did not say how much it had produced. Shipments will begin in August, the company said.

The process begins with wastes — wood and vegetative matter for now, municipal garbage later — and cooks it into a gas of carbon monoxide and hydrogen. Bacteria eat the gas and excrete alcohol, which is then distilled. Successful production would eliminate some of the “food versus fuel” debate in the manufacturing of ethanol, which comes from corn. “Biomass gasification has not been done like this before, nor has the fermentation,” said Peter Williams, chief executive of INEOS Bio.

The plant, which uses methane gas from a nearby landfill, has faced a variety of problems. One was getting the methane, which is a greenhouse gas if released unburned, to the plant’s boilers. (The plan is to eventually run the plant on garbage that now goes to landfills.) Another problem was its reliance on the electrical grid.

The plant usually generates more power than it needs — selling the surplus to the local utility — and is supposed to be able to operate independently. But when thunderstorms knocked out the power grid, the plant unexpectedly shut down and it took weeks to get it running again, said Mark Niederschulte, the chief operating officer of INEOS Bio. “We’ve had some painful do/undo loops,” he said.

The plant has produced “truckloads” of ethanol, said Mr. Williams, but still has work to do to improve its yield. Mr. Niederschulte said, “Now we want to produce more ethanol from a ton of wood, rather than just making ethanol from a ton of wood.”

The SMH reports that Virgin Australia, looking to escape the squeeze from scarcer fossil fuels, is partnering with a consortium including GE to produce biofuel for aviation from eucalypts - Plane biofuel to be made from eucalypt.

A consortium of companies is taking action by using eucalypt trees to develop a commercial biofuel for the Australian aviation industry.

"Innovation and creativity will play enormous roles as part of the transition to a low carbon future," said Ben Waters, director of ecomagination, GE Australia and New Zealand.

GE on Thursday announced it was joining Virgin Australia and other partners to research and develop the commercial biofuel.

The focus will be on using a thermochemical decomposition of organic material - at elevated temperatures in the absence of oxygen - to covert mallee eucalypt trees to the biofuel.

Mr Waters said a pilot biofuel production unit would be opened in Australia next year. ...

A recent CSIRO report estimated the aviation industry could cut greenhouse gas emissions by 17 per cent, generate more than 12,000 jobs and reduce Australia's reliance on aviation fuel imports by $2 billion per annum over the next 20 years through the adoption of biofuels.

Other members of the consortium include Renewable Oil Corporation, the Future Farm Industries CRC, and Canadian biofuels company, Dynamotive Energy Systems Corporation.

Michael Pascoe has an interesting rant in The Age about the G20 and American corn ethanol policies and their impact on global food prices ("willfully burning food is a particular form of obscenity") - US the blind policy giant puts farmers before food.

For a little while there, in the eye of the global financial crisis, it looked like necessity would force the world's leaders into genuine international policy advances. The further we have retreated from the precipice of immediate disaster, the more useless the G20 becomes.

The platitude of the weekend was concern about food prices. For some governments, it's a very genuine concern. For all the nice talk about the appeal of democracy, the escalating price of basic foodstuffs was a bigger factor in Egyptian regime change.

So there was plenty of talk about food prices, with G20 types from the French to the Indians wanting to do something about evil speculators who must be behind the jump in soft commodities. Nice to have a convenient and simple scapegoat for a very complex problem.

The American scapegoat of choice though is China's foreign exchange policy. While the United States' dipsy and inefficient biofuels policy means it is literally burning somewhere between a third and 40 per cent of its massive corn crop as a gift to its farm lobby, Washington wants everyone to focus on the renminbi. ...

The US Treasury Secretary, little Timmy Geithner, used the Paris meeting to demonstrate again that he's as bad as his predecessors. He would have us believe that the cheap RMB means China is growing too fast and that's what's causing food inflation.

Economic growth, a nation of more than 1.3 billion people forging a way out of poverty, does result in increased food consumption, among other things. Effectively, if only more people ate less, were happy to starve for the greater good, food would be cheaper. And this sort of suggestion from the Treasury Secretary of the world's most obese nation.

The US trashing its own dollar has had a much bigger impact on prices as the greenback happens to be the world's currency of trade. And then there's the ethanol policy.

Everyone knows the US has a real estate problem with crashing house prices and shopping centre and office block owners in Chapter 11. What the US also has is a boom in farm prices that's in danger of becoming a bubble. ...

The big driver for US grain farmers has been biofuels policy that effectively links the price of corn to the price of oil while absorbing $US7.7 billion a year in government subsidies.

And the bad news is that it's early days yet. As told in a Goldman Sachs report the current US production of more than 10 billion gallons a year (nearly 9 per cent of America's gasoline supply) is slated to increase to 36 billion gallons by 2022 under the Renewable Fuels Standard of the Energy Independence and Security Act introduced in 2007. And it could get worse:

“Lately there has been a push for raising the ethanol-gasoline blending requirements from 10 per cent all the way to 15 per cent and we would not be surprised if the EPA agrees to something closer to 11-12 per cent. Each percentage increase in ethanol blending is equal to 550 million bushels of corn or approximately the equivalent of 4.5 per cent of total US production.”

There's a lot more to higher global grain prices than just the US preoccupation with gas-guzzling cars and subsidising farmers. Drought in China, floods in Australia, fires in Russia, more people wanting more food, they all play a role. But while natural disasters and human hunger happen, willfully burning food is a particular form of obscenity.

What's more, American corn isn't even an efficient source of ethanol. The scale and productivity of Brazilian sugar cane plantations perhaps makes a case for turning that sweet giant grass into fuel – but tariffs and tax subsidies for the locals keep it out of the US. American corn farmers can't begin to compete with it.

With oil prices back up around $US100 a barrel, there's increased incentive to grow more corn and thus more is being planted at the expense of other crops. Such is the totally interrelated nature of the world economy that dumb US agricultural policy plays a roll in changing third-world governments and improving the lot of Australian wheat farmers as they face less competition from the US.

Meanwhile, China is getting on with it. China has lent more money than the World Bank to developing nations over the past two years – no doubt for its own pragmatic reasons. For all the concentration on China's surplus with the US, it trades much more with its fellow developing nations. On the food front, the very necessary main growth in global food production has to come from developing nations.

And India, in a very different way, also is getting on with it. According to figures included in the latest Australian Bureau of Statistics demographics report, India's population will increase from 1173 million people in 2010 to 1657 million in 2050 – roughly half a billion extra mouths to feed in 40 years.

I somehow doubt that problem is going to be solved by a more expensive renminbi.

From the "bad idea of the day" file comes this report from The Des Moines Register looking at corn that has been genetically modified to make it more suitable for biofuel production (and less suitable for human consumption) - Vilsack OKs industrial corn.

Agriculture Secretary Tom Vilsack has approved a biotech corn variety that was engineered solely for producing fuel ethanol. Companies that mill corn for breakfast cereals and other foods have been fighting the move for fear the grain will contaminate their supplies.

The corn, a product of Syngenta, contains an enzyme that reduces the cost of turning the grain into the biofuel. That same enzyme can make the corn unsuitable for some food products, including cereals and coatings on corn dogs, according to millers. But Syngenta insists that the corn will be kept away from food channels through the use of grower contracts and financial incentives and by growing it only in areas where food companies don’t procure their grain supplies.

The corn, which will go by the trade name Enogen, is to be grown this year only in western parts of Kansas and Nebraska, but Syngenta hopes to eventually offer it to areas around ethanol plants in Iowa and other states.

The Climate Spectator has an article on Qantas' interest in jet fuel derived from algae - Oil and water.

Qantas last week announced the launch of its sustainable fuel strategy, a collaboration with San Francisco-based renewable energy group, Solazyme, to explore opportunities for algae-based sustainable aviation fuel. Qantas and Solazyme will work together over the next year to pursue potential for commercial production of Solazyme’s microbial derived aviation fuel, Solajet, in Australia. This latest move is part of the airline's long-term strategy to accelerate the commercialisation of 'drop-in' alternative jet fuels to help cut greenhouse gas emissions. Qantas already has a similar arrangement with the Solena Group for waste-based sustainable fuel.

In Australia, demand for aviation fuel is currently at about six billion litres a year, and Qantas’ Peter Broschofsky, who is coordinating the biofuels initiative as well as chairing the environment committee of the International Air Transport Association (IATA), says that $180 per gallon fuel in 2008 helped move the concept of lower cost, lower emission biofuels out of the too-hard basket. He also described how Boeing galvanised the industry behind the development of the Bio-SPK jet fuel specification, which most are predicting will be approved in the first half of 2011 and possibly late in the first quarter, says BiofuelsDigest. “Watch the flood,” Broschofsky predicted, “after the fuel is certified, interest will be at a fever pitch, and we want to get in ahead.”

As for the technology, according to Solazyme, it "allows algae to produce oil and biomaterials in standard fermentation facilities quickly, efficiently and at large scale." These can then be tailored for biofuel production, as well for the replacement for fossil fuels and plant oils. According to the company's website, a study undertaken in 2009 concluded that full lifecycle greenhouse gas emissions from field-to-wheels for Solazyme's algal biofuel, Soladiesel, are 85 to 93 per cent lower than standard petroleum-based ultra-low sulfur diesel (ULSD).

Robert Rapier has a post on cellulosic ethanol hopeful Range Fuels - Range Fuels Out of Money?.

It is no secret that I have been a critic of Range Fuels — not necessarily of their technology but of their approach. I won’t rehash all of the issues I have had with the company; in a nutshell I felt they like were making claims that were very unreasonable, and taking in a lot of taxpayer money based on those claims. As a taxpayer and someone very concerned about energy policy, I spoke out on what I felt were serious deficiencies in the way projects get funded; namely that the companies that make the most outrageous claims are too often the ones that get funded.

I also had my critics who insisted that I didn’t know what I was talking about; that Range was doing something unique and remarkable, and that I didn’t understand that some of the money they were spending was for future expansions. An engineer at NREL called my criticisms unfair. The CEO of Range Fuels stated that my information was “disappointing to say the least and clearly misleading and inaccurate.” One of the engineers involved in the Range project said that my essays demonstrated a “lack of knowledge or understanding of the Range Fuels project.”

Only time will tell if current events mark the beginning of the end for Range, but something appears to be afoot. A few days ago a story in Biofuels Digest indicated that Range Fuels had begun to lay people off. That story was later denounced by Range CEO David Aldous:

David Aldous, CEO of Range Fuels, responded Monday afternoon that “the statement ‘the people who work in Broomfield were told not to come to work (Thursday).’ is not correct,” and said that he was traveling and in meetings during the 76 hours between the Digest’s query and his response. He did not elaborate on the status at Broomfield, but described the initial Digest report as “irresponsible reporting” and added “I planned to give you an update on Soperton but now I have no further comments for you.”

Today comes another story that says that Range is “laying off most of its employees.” This story contains quotes from a key Range advisor (and inventor of the gasifier Range was using) suggesting that in fact all is not well in Georgia.

Science Daily has a look at the impact of biofuel production on water quality in the Mississippi river - Biofuels Production Has Unintended Consequences on Water Quality and Quantity in Mississippi.

More water is required to produce corn than to produce cotton in the Mississippi Delta requiring increased withdrawals of groundwater from the Mississippi River Valley alluvial (MRVA) aquifer for irrigation. This is contributing to already declining water levels in the aquifer. In addition, increased use of nitrogen fertilizer for corn in comparison to cotton could contribute to low dissolved oxygen conditions in the Gulf of Mexico.

These are some of the key findings from a study conducted by the U.S. Geological Survey (USGS) to assess water quality and quantity in the Mississippi Delta, in relationship to biofuels production.

"Because corn uses 80 percent more water for irrigation than cotton, exchanging corn for cotton will decrease water-levels," according to Heather Welch, USGS Hydrologist and author of this USGS Report. Declining water levels in the MRVA aquifer are particularly significant in the Mississippi Delta, where the infiltration of rainfall to replenish the aquifer is low. "This is a low flat area. When it does rain, much of the precipitation is lost through evapotranspiration and to streamflow, so the rainwater never reaches the aquifer," explains Welch.

In 2006, the U.S. Department of Energy Biomass Program implemented the Biofuels Initiative. The initiative calls for the replacement of 30 percent of gasoline levels by ethanol by 2030 and the reduction of ethanol costs to prices competitive with gasoline by 2012. In the Mississippi Delta, implementation of this initiative resulted in a 47-percent decrease in the number of acres dedicated to producing cotton, which resulted in a corresponding 288-percent increase in corn acreage in the region from 2006 to 2007.

Reuters has an article on a report that "Biofuel demand is driving a new "land grab" in Africa, with at least 5 million hectares acquired by foreign firms to grow crops in 11 countries" - Biofuel demand driving "land grab" in Africa: report.

The contracts by European and Asian companies for land to grow sugar cane, jatropha and palm oil to be turned into fuel will involve clearing forests and vegetation, taking land that could be used for food and creating conflicts with local communities, Friends of the Earth said in the study. ...

Critics say there is a risk of the crops infringing on land that could be used for growing food and that destruction of rainforests to make way for palm oil and sugar outweighs any carbon benefits gained from the use of such fuels. "The expansion of biofuels ... is transforming forests and natural vegetation into fuel crops, taking away food-growing farmland from communities, and creating conflicts with local people over land ownership," Mariann Bassey, a Friends of the Earth Nigeria activist, said in a statement.

EUObserver has an article on debate about European biofuel policy in Africa - NGOs slam EU-Brazil plans to develop biofuels in Africa.

EU and Brazilian leaders are set to announce a new "triangular co-operation" initiative, under which they will aim to work together in some of the world's poorest countries, but NGOs say the duo's scheme is self-centred and will simply make conditions worse.

At a bilateral summit in Brasilia on Wednesday (14 July), European Council President Herman Van Rompuy, European Commission chief Jose Manuel Barroso and Brazilian President Luiz Inácio Lula da Silva are to agree to co-operate on a range of different projects in Portuguese speaking parts of Africa, Haiti and East Timor in the coming years.

The development of renewable energy is likely to be a central theme, and a first step will see the EU and Brazil sign an agreement with Mozambique this week to develop bioelectricity and biofuels projects, EU sources have indicated.

Brazilian companies are world leaders in the production of biofuels and are looking to expand their operations both internally and abroad, while the EU is looking to increase its biofuel use at home in order to meet its target of sourcing 20 percent of its energy needs from renewable sources by 2020.

But as EU and Brazilian officials prepare to start studies on how best to develop bioethanol, biodiesel and bioelectricity projects in Mozambique - already a leading African producer of biofuels - environmental groups say the initiative will simply serve to displace people from their land and exacerbate food shortages.

"In a country that suffers persistent hunger, using millions of hectares of agricultural land to grow crops to power European cars is immoral and perverse," Adrian Bebb, a biofuels expert with Friends of the Earth, told this website.

"European biofuels targets are what is driving this global expansion," he added. "Instead of doing deals to grab more land in the South, the EU should be scrapping its biofuel policy."

UPI reports that Indian efforts to produce biofuel from Jatropha aren't working out as well as hoped - Indian biofuel efforts falter.

Jatropha has long been promoted as a promising biofuel substitute to ease the global energy crisis. One hectare is capable of yielding 390-456 gallons of jatropha oil, equivalent to 433.7 gallons of diesel. ...

Jatropha's growing conditions proved to be more complex than originally thought. Jatropha requires close care. Chhattisgarh Renewable Energy Development Agency analyst Preeti Kaur noted that while initially specialists assumed that jatropha could flourish on wasteland, without irrigation it in fact requires moderate irrigation. As a result, nationwide investments in jatropha of more than $5 billion are at risk.

Kaur added, "The plans have almost failed and our investments are stuck due to the poor quality of jatropha seeds. Other than this, small land holdings are a major reason for the failure of jatropha plantations."

Tom Konrad has the latest of his "peak oil investments" series out, this time peering into the murky pond of algae-to-biofuel companies - The Best Peak Oil Investments, Part V: Algae.

If you need to own your own feedstock to be a profitable biofuel company, you can either grow it, or make use of the waste from some other economic activity. The potential of biofuel from waste is inherently limited by the waste currently produced, and the amount of available waste is likely to fall over time as the economy becomes more resource-efficient because of rising commodity prices. While I think compaines that control waste streams care good investment opportunities, waste is inherently limited when it comes to replacing oil. It's the very limitation of waste as a resource that makes it a good investment.

If you grow your feedstock on good agricultural land, you will be giving up the opportunity to produce valuable food. If you grow hardy non-food crops on marginal land, you will probably have very low yields. For instance, Jatropha has long been heralded as a non-food crop that can produce oil for biodiesel on marginal land, but the best Jatropha yeilds are produced on well-drained soil with ample fertilizer and rainfall or irrigation. Since most arable land and available water are already in use, the potential for additional biofuel production from conventional crops is limited.

Many observers herald biofuel from algae as a way to thread this needle. Algae grown in open ponds is likely to produce 5,000-10,000 gallons of oil per acre per year, while companies using bioreactors have made claims approaching 10 million gallons per acre. The higher-end claims for algae in bioreactors are either pure fantasy, or would require vertical farms with artificial light, but a 100,000 gallons per acre per year (1/100th of the high-end claims) is generally considered achievable. For comparison, Zeachem is aiming for 2,000 gallons of ethanol per acre of sugarcane per year, one of the most productive conventional biofuel crops. Corn produces less than 500 gallons of ethanol per acre per year.

The potential of a hundred times improvement in fuel yields over conventional crops keeps people excited about algae. On paper, such yeilds would allow algae to replace oil in our economy. Actually achieving these yields is tricky. Open ponds have problems with contamination by wild algae, and evaporate enormous amounts of water into the atmosphere. They also need to be fed with carbon dioxide and nutrients to achieve good yields, without so much stirring that the algae (which prefer still water) are disturbed. Bioreactors help solve the contamination and water evaporation problems, and can allow more surface area for light absorption and algal growth. But bioreactors cost much more than open ponds, and require more maintainance and attention to keep them at the proper temperatures and light levels. Like open ponds, they need to be fed CO2 and micronutrients to achieve optimal growth without creating too much turbulence for the algae to grow. ...

Here's a quick list of the publicly traded companies I know of that are working on algae, and what they do:

Green Star Products, Inc. (GSPI.PK). Green Star's primary business seems to be selling continuous flow biodiesel reactor technology. This is not a great business because it's currently hard to sell biodiesel for more than the cost of the inputs needed to make it. They have also developed a formulation of micronutrients that they think are excellent for increasing the productivity of certain algae strains.

OriginOil, Inc. (OOIL.OB). Origin has developed a process using electromagnetic fields to extract oil from living algae without killing the cell. If they can make it work at reasonable cost, this technology should be a real boon to the industry. Unfortunately, the company is losing money hand over fist, and does not have revenues or cash to speak of. Since the company will have to keep raising new money from investors for the foreseeable future, the stock will almost certainly continue to fall until it can begin to fund its operations internally.

PetroAlgae, (PALG.OB). PetroAlgae is attempting to commercialize an open pond "microcrop" technology (they are working with other small aquatic plants such as duckweed as well as algae.) Yields will likely be relatively low for algae because they do not add carbon dioxide to the process, and they will have to cope with large water losses from evaporation. Like OriginOil, PetroAlgae has no revenues and will need to raise money soon to continue operations. On March 5, the company privately sold stock at $8 per share, despite the fact that its shares are currently trading for around $22 on the open market. I can't imagine why the stock has climbed since it went public in 2008 at around $3. If you can find shares to borrow, this looks like a stock to short.

PetroSun Inc. (PSUD.PK). Back in September 2007, PetroSun made a splash as the first public company to try to commercialize algae for biofuel. I was skeptical at the time, and said so in March 2008. My skepticism now seems justified, since now their website has a couple mentions of algae, but the catfish farms they converted into algae farms in 2009 are not mentioned, and their only projects and prospects are traditional oil and gas projects. The stock is down to $0.045 from $0.16 since I panned it in 2008.

Conclusion

Algae has great promise for producing liquid fuels in sufficient quantity to replace petroleum, and it can do so without using excessive water or farmland. That potential, however, is fairly far off. The technology is capital intensive and far from commercialization, a combination almost certain to make investors in the public stocks poorer rather than richer. If and when fuel made from algae is available in significant quantity to make a dent in our thirst for fossil fuels, it will probably have been developed by companies that public investors cannot currently buy. Stock market investors should wait until this industry matures from its current infancy to something closer to adolescence. Buyers of the current batch of infant companies are likely to suffer the fate of other new parents: many sleepless nights.

The Guardian has a report on efforts by the US military to promote the development of algae based fuel (and some very optimistic timeframes being claimed for production) - Algae to solve the Pentagon's jet fuel problem.

The brains trust of the Pentagon says it is just months away from producing a jet fuel from algae for the same cost as its fossil-fuel equivalent.

The claim, which comes from the Defense Advanced Research Projects Agency (Darpa) that helped to develop the internet and satellite navigation systems, has taken industry insiders by surprise. A cheap, low-carbon fuel would not only help the US military, the nation's single largest consumer of energy, to wean itself off its oil addiction, but would also hold the promise of low-carbon driving and flying for all.

Darpa's research projects have already extracted oil from algal ponds at a cost of $2 per gallon. It is now on track to begin large-scale refining of that oil into jet fuel, at a cost of less than $3 a gallon, according to Barbara McQuiston, special assistant for energy at Darpa. That could turn a promising technology into a ­market-ready one. Researchers have cracked the problem of turning pond scum and seaweed into fuel, but finding a cost-effective method of mass production could be a game-changer. "Everyone is well aware that a lot of things were started in the military," McQuiston said.

The work is part of a broader Pentagon effort to reduce the military's thirst for oil, which runs at between 60 and 75 million barrels of oil a year. Much of that is used to keep the US Air Force in flight. Commercial airlines – such as Continental and Virgin Atlantic – have also been looking at the viability of an algae-based jet fuel, as has the Chinese government.

"Darpa has achieved the base goal to date," she said. "Oil from algae is projected at $2 per gallon, headed towards $1 per gallon."

McQuiston said a larger-scale refining operation, producing 50 million gallons a year, would come on line in 2011 and she was hopeful the costs would drop still further – ensuring that the algae-based fuel would be competitive with fossil fuels. She said the projects, run by private firms SAIC and General Atomics, expected to yield 1,000 gallons of oil per acre from the algal farm.