Turmoil highlights need to invest in fuel alternatives

Timing: Advocates worry that oil imports will ruin the chances of new options being embraced.

April 27, 2003|By Adam Speigel | Adam Speigel,SPECIAL TO THE SUN

The drop in oil prices since Saddam Hussein's regime was beaten in Iraq may arouse cheer in some quarters. But not in the land of alternative energy advocates, whose goal is to replace petroleum with a renewable energy source from crop-grown supplies.

Department of Energy (DOE) economists fear that the infusion of overseas oil will spur imports to surge past its forecast of 68 percent by 2025.

Environmentalists and economists alike see that as a devastating blow to their hopes for the development of biomass energy and a sad reminder of federal indifference in times past.

Biomass energy crops need all the help they can get. Of the green energy sources other than corn - switchgrass, soybeans, wood wastes (bark, sawdust, forest deadwood) bagesse and rice straw - none has yet produced a drop of liquid fuel.

By contrast, ethanol derived from corn is well established. Last year it supplied almost .3 percent of all liquid fuel consumed in the United States. By 2015, that number is projected to quadruple.

A staple at gas pumps throughout the corn belt from Nebraska to Iowa, corn ethanol has pushed its way into gasoline formulations for racy, high-octane performance and for lower carbon monoxide emissions.

Switchgrass, a sturdy native of the American prairie, has claimed the bulk of the DOE's biomass energy funding. The ethanol it produces burns cleaner than corn-derived ethanol and takes less energy to manufacture. The Department of Energy's biomass energy feedstock of choice throughout the 90's, its portfolio of life-enhancing benefits is hard to ignore.

Within twelve years, agronomists predict, switchgrass could provide:

Low-cost transportation fuel that produces fewer unwanted carbon residues than gasoline.

Inexpensive polymers and medicines derived from its cellulosic fibers.

Carbon-enriched soil, owing to its sequestration of carbons drawn from the air and stored in its tubers.

Erosion-resistant cropland held in place by seven-foot deep roots which anchor the soil against runoff and gullying.

Exploitation of marginal farmland, a consequence of its ability to grow in soil that doesn't support standard crops.

The biggest economic benefit may be its effect on rural communities, where struggling farmers, long strapped for ready cash, badly need a dependable revenue source.

For growers, truckers, crop-hands, and small businesses teetering on the brink of insolvency, the prospect of a long-term income stream to pay down debt and stimulate capital investment represents a way to redeem rural economies.

So tantalizing is the prospect of energy independence, so keen the anticipation of rural renewal, that DOE in 2000 sunk $30 million into switchgrass-to-ethanol conversion research.

At the same time, it announced an ambitious new goal for the nation's ethanol producers: By 2015, ethanol derived principally from corn products and switchgrass would supply an eye-popping 40 percent of all liquid fuel.

Given that the ethanol baseline in 2002 was less than one percent of all liquid fuel, the enormous ramp-up costs for both corn and switchgrass would require heavy commitments from the investment-banking industry.

In the case of corn-derived ethanol, a product well understood both in its performance characteristics and manufacturing technologies, the capital costs probably could be financed without federal support.

Switchgrass faces a trickier lending environment. After 15 years of research costing more than $60 million, scientists still are grappling with the problem of converting switchgrass to ethanol at a competitive price.

At the top of the list is harvesting and storing switchgrass, a long-legged assortment of stalks and leaves whose bulk takes up costly storage space. One low-tech solution that cuts costs by 30 per cent: palletizing square switchgrass bales.

Another bottleneck is the cost of transporting switchgrass from the farmgate to the conversion plant. Each bale weighs about 1,000 pounds. Trucking prices range from $10 to $15 per ton based on mileage. For producers living more than 50 miles from the ethanol plant, hauling fees might make the crop unaffordable.

Financing is a tough sell. The capital cost of conversion plants is estimated today at $50 million to $100 million and climbing. Once built, they'll need a fail-safe feedstock supply that is invulnerable to the financial vagaries of crop farming.

Wary lenders are insisting on long-term delivery agreements that lock growers into single-source sales commitments. Farmers have misgivings about any multi-year contract that cannot be renegotiated.

If they could wave a magic wand, farmers would establish a government-funded safety-net program every bit as remunerative as the one for corn. They argue that a domestic energy crop will more than pay for itself if only in balance of trade offsets.

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