A Good Corn Crop, Despite Floods

Earlier this year, flooding in the Midwest kept farmers from planting their crops on time, which caused the United States Department of Agriculture (USDA) to predict lower yields, and had some experts worried that a bad season could lead to high food prices and threaten the ethanol industry.

But farmers seem to have recovered. The latest crop production statistics from the USDA, released this morning, predict that this year will boast the second best corn crop on record. That could be good news for biofuels. This year, biofuels, which had enjoyed large popularity, were linked to rising food prices and hence were widely criticized. A bad year for corn, the source of ethanol in the United States, could have led to higher food prices and exacerbated the backlash against biofuels.

Al Gore's Inconvenient Plan

Yesterday, Al Gore said that the United States should produce all of its electricity from carbon-free, renewable energy within 10 years. Although he didn't lay out specifics, he seems to want to do it with wind, solar, and geothermal, although it's not clear from his speech whether nuclear would be acceptable. Can it be done? It isn't likely.

To get a sense of the scale of the problem, consider: last year, wind, solar, and geothermal power accounted for an impressive-sounding 48 million megawatt-hours of electricity. (I rounded up. If I had rounded down, it would have obliterated the contribution from solar, since it is such a small part of the total.)

But in 2006, the most recent year with complete figures, four billion megawatt-hours of electricity were produced in the United States. Eventually, wind, solar, and geothermal power could cover this. But right now, they account for a little more than 1 percent of the total. Going from 1 to 100 percent will require not only building the wind turbines and solar panels and steam turbines for harvesting geothermal energy: it will also require massive new transmission infrastructure for distributing this power, from the deserts or windy plains, where much of this energy can be found, to the coasts, where people actually live. And it will require massive amounts of energy storage, since solar power doesn't work well at night, and wind power is erratic.

In light of this scale, even some truly ambitious schemes seem like a drop in the bucket. Over the past couple of weeks, T. Boone Pickens, an oil tycoon, has been using some of his billions to run television ads supporting his personal energy plan for the United States. Part of that plan is his project to build what seems to be the biggest wind farm in the country. It would nearly double the amount of wind produced in the state of Texas, the state with by far the most wind power. But that project will only produce 4,000 megawatts of power. (Total electricity generating capacity in the United States is about 1 million megawatts.) And it won't be cheap. To cover transmission-line costs alone for that and other proposed wind projects, the state of Texas plans to spend about $5 billion.

Al Gore is right, of course, that the country needs to turn to renewable energy. And it's frustrating how slowly the change is coming. But as we've recently seen with biofuels and food prices, scaling up a new source of energy can bring unanticipated consequences. Careful planning is required. We need some realistic plans for making the switch to renewable electricity, not empty rhetoric with unachievable goals.

U.S. Biofuel Startup Turns to Brazil

High corn prices are driving next-generation biofuel startups out of the country, and that could be a good thing. Today, Amyris, a company that's genetically engineering microorganisms to convert sugar into hydrocarbons such as diesel, announced partnerships that will pave the way for it to use sugar that's derived from sugarcane grown in Brazil rather than sugar derived from corn. Recently, corn prices have skyrocketed, reaching record levels of over $6 a bushel. That's made it very difficult for ethanol producers to make money. Sugarcane provides a cheaper alternative to corn, and that's one of the reasons that Amyris is turning to Brazil, says Jeryl Hilleman, the company's chief financial officer.

The move to Brazil could be a good thing for the environment, because sugarcane requires less energy to process than corn, resulting in less carbon dioxide emissions. But ultimately, neither sugarcane nor corn is an ideal feedstock. What's needed are nonfood cellulosic sources, such as grass and wood chips, especially given the abrupt rise in food prices worldwide that have recently prompted riots in Haiti and elsewhere. (See "Battling Ethanol-Propelled Food Prices.") But so far, processes for turning such sources into sugar have been too expensive.

More Biofuels Woes

That strong wind you might have felt earlier this week was just more air rushing out of the biofuel bubble. Monday's statistics from the U.S. Department of Agriculture--that farmers expect to plant 8 percent fewer acres of corn in 2008, compared with 2007--is very bad news for the already struggling ethanol industry. It takes a lot of corn to make ethanol, and the feedstock is a major cost of creating the biofuel. U.S. farmers' plan to plant less corn this year means that record-high corn prices, which are already above $5 a bushel, will likely stay high. It doesn't take an economist to figure out what the grim numbers portend for ethanol manufacturers. Higher feedstock costs, at the same time that yet more ethanol production capacity is coming online, could mean another very tough year for the ethanol market.

Beyond being a pain for ethanol producers, the high corn prices will further exasperate the tensions between using the crop for fuel rather than for food. In a New York Times article, one expert issues a frightening warning:

"We're hoping for good yields," said David Orden, a senior research fellow at the International Food Policy Research Institute in Washington. "If we get bad yields and tight commodity markets are pushed even tighter, we'll get food prices skyrocketing, inflationary pressures and food riots in developing countries, and countries cutting off their exports."

No one knows, of course, whether it will be a good year or not for growing corn in the United States. If it is a bad year, look for even more criticism of ethanol biofuel and, in particular, the Renewable Fuel Standards that mandate that petroleum suppliers use nine billion gallons of ethanol this year. But even if it's a good year for growing corn, expect the poor profit margins for ethanol producers to continue and more grumbling about the economics of biofuels.

Less Money for Evaluating Biofuels

The EPA is slated to get less money than in previous years to analyze the effects of biofuels use. The proposed cut comes at a time when that money may be needed more than ever.

Energy Washington Week reports that President Bush's proposed 2009 budget for an EPA program related to analyzing biofuels would cut funds by almost 10 percent compared with this year. If anything, the funding should be going up. Congress recently passed, and President Bush signed into law, legislation that would dramatically increase the amount of biofuels used in the United States. At the same time, researchers have published work in the journal Science suggesting that producing biofuels could increase rather than decrease greenhouse-gas emissions. Biofuels, in other words, could make worse the very problem that they are supposed to help solve.

The results are not definitive, and much depends on how the biofuels are produced. (See this Science article.) But before biofuels production ramps up too much, it would be good to know whether they are making things better or worse.

Biofuel Bonanza

In case you were a bit busy this week and didn't have time to examine the 822 pages of the Energy Independence and Security Act of 2007, it is a big deal. And in particular, it is a big deal for biofuels.

The numbers speak for themselves. The legislation, which was signed by President Bush on Wednesday, creates an enormously ambitious Renewable Fuel Standard (RFS) that mandates the production of 36 billion gallons of renewable fuels by 2022; included in that is 21 billion gallons of advanced biofuels (most of which will be cellulosic biofuels). At such levels, biofuels will account for more than 20 percent of total road-transportation fuels in the United States by 2022. To give a sense of the ambition of such a mandate, it is worth noting that total biofuel production in 2007 was only 4.7 billion gallons, and almost all of that was corn-derived ethanol. There is still no commercial production of cellulosic ethanol.

The biofuel industry is, of course, thrilled. Bio, the biotechnology trade association that counts among its members numerous companies involved in various aspects of biofuels, predicts that the new mandates will mean nearly 300 new biofuel plants, including 75 new corn ethanol plants and 210 new cellulosic ethanol plants. Bio estimates that the RFS could mean $170 billion invested in advanced technology development, biofuel production, and new infrastructure to handle biofuels.

Overall, the federal mandate for biofuels appears to be a good thing. It will finally give industry and academic researchers confidence that biofuels are really going to play an important role in the country's energy future. But it is worth keeping in mind that there are still huge technology challenges in ramping up production of advanced biofuels. Achieving the ambitious standards of the new energy law will require an equally ambitious effort in researching and developing advanced biofuel technologies. (See "The Price of Biofuels.")