World Grain - April 2007 - 44

BIOFUELS QUARTERLY

Settingthe
barhigh
Report from the Energy Information
Administration foresees the U.S. falling
short of the Bush Administration's
ambitious biofuels production goals
by Arvin Donley

resident George Bush in March set the bar high for future
U.S. ethanol production, calling for 35 billion gallons of
renewable or alternative supplies blended into gasoline
by 2017. But a report released by the Energy Information Administration (EIA) in February foresees the U.S. falling short
of that goal, even in a favorable scenario for the biofuels industry that features low-cost ethanol and high-priced gasoline.
In its updated Annual Energy Outlook 2007 (AEO2007) reference case, which projects market conditions through 2030,
EIA said it expects ethanol output to reach about 11.5 billion
gallons in 2017. Unlike the Bush Administration, which believes cellulose will become a major ethanol feedstock during the next 10 years, EIA concluded that a relatively small
amount of ethanol (2%) will be produced using cellulosic
sources, such as switchgrass and wood chips, by that date. The
report said about 94% of ethanol produced in the U.S. during
the next decade will come from corn, with imported ethanol
accounting for the other 4%.
The EIA arrived at these projections by analyzing known
technological and demographic trends and assuming current
laws and regulations that impact the biofuels industry are
maintained throughout the projections.
In the AEO2007 reference case, real world crude oil prices
44

Soybean and corn fields in a valley. Photo courtesy of Michael West.

are expected to decline from their 2006 average level through
2015. After that point, real prices are expected to rise as demand continues to grow and higher cost supplies are brought
into the market. In 2030, EIA projects that the average real
price of crude oil will be above $59 per barrel in 2005 U.S.
dollars, or about $95 per barrel in nominal dollars.
As a result of these higher prices and recently enacted federal legislation that is considered biofuel-friendly, the use of
alternative fuels, such as ethanol and biodiesel, is projected
to increase substantially, growing from 4 billion gallons in
2005 to 14.6 billion gallons in 2030. At that time, according
to the reference case, the U.S. ethanol supply will be produced
from both corn and cellulose feedstocks, but domestic corn
is expected to account for 13.6 billion gallons, or 93% of that
total.
EIA notes that the high risks and capital outlays associated
with large-scale commercial cellulosic ethanol plants are the
main reason for the conservative production estimates. The
report said that capital costs for a first-of-a-kind 50-milliongallon-per-year cellusoic ethanol plant has been estimated at
$375 million, compared with $67 million for a similar-sized
corn-based plant. Other studies have provided lower cost estimates. A detailed study by the National Renewable Energy
April 2007 / World Grain / www.World-Grain.com

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World Grain - April 2007

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