1. Southeastern Regional Center Tennessee Agricultural Experiment Station Agricultural Policy Analysis Center ● The University of Tennessee ● 310 Morgan Hall ● Knoxville, TN 37996-4519 www.agpolicy.org ● phone: (865) 974-7407 ● fax: (865) 974-7298 Tennessee Biofuels Initiative March 26, 2007 Dr. Kelly Tiller Agricultural Policy Analysis Center The University of Tennessee University of Tennessee … leading the Southeast in biomass research, education, and outreach APCA

2. Southeastern Regional Center Tennessee Agricultural Experiment Station Motivators of Change High and volatile energy prices –Relatively stable, but at a much higher equilibrium –Subject to rapid spikes National security, energy independence –America accounts for 25% of global oil consumption, holds 3% of known oil reserves –60% of world’s oil reserves are in unstable regions Economic well being Environmental sustainability

3. Southeastern Regional Center Tennessee Agricultural Experiment Station U.S. Energy Consumption Biomass Consumption Million dry tons/year Forest products industry Wood residues Pulping liquors Urban wood & food & other process residues Fuelwood (residential/commercial & electric utilities Biofuels Bioproducts TOTAL 44 52 35 18 6 190 Source: Energy Information Administration (EIA), 2006

4. Southeastern Regional Center Tennessee Agricultural Experiment Station Transportation Fuel Focus Today, 97% of our transportation fuel comes from petroleum sources

5. Southeastern Regional Center Tennessee Agricultural Experiment Station U.S. Corn Ethanol Production Source: Renewable Fuels Association 2012 RFS: 7.5 B gallons Total Capacity (as of 11/27/06) = existing + under construction + under expansion There’s a limit to the amount of corn-based ethanol we can sustainably produce without disrupting the ag sector Could potentially double corn-ethanol capacity Tennessee crop farmers benefit from corn-ethanol, wherever plants are located Increases livestock feed prices

6. Southeastern Regional Center Tennessee Agricultural Experiment Station Energy In vs. Energy Out Source: J. Sheehan & M. Wang (2003) The road to petroleum displacement is paved with cellulosic biomass * Some newer estimates of cellulosic FER >10 *

7. Southeastern Regional Center Tennessee Agricultural Experiment Station Our Comparative Advantage Logging & Residues Switchgrass Switchgrass (2014, at $50/dt) Ugarte, et al. 2006 (forthcoming). Economic Implications to the Agricultural Sector of Increasing the Production of Biomass Feedstocks to Meet Biopower, Biofuels and Bioproduct Demands. Perlack, R.D., et al. 2005. Biomass as Feedstock for a Bioenergy and Bioproducts Industry: Technical Feasibility of a Billion-Ton Annual Supply.

8. Southeastern Regional Center Tennessee Agricultural Experiment Station TN Bioeconomy Vision Produce & consume at least 1 billion gallons of cellulosic ethanol, at $1.20 per gallon wholesale 10+ new biorefineries operating in Tennessee, employing 4,000 and supporting 12,000 rural jobs –At least 4 of the biorefineries owned and operated by local farmer cooperatives, retaining an additional $40 million in local communities Satellite co-product plants creating an additional 3,000 jobs and $2 billion in revenue More than 20 thousand farmers growing dedicated energy crops, adding $100 million in new farm revenue

9. Southeastern Regional Center Tennessee Agricultural Experiment Station Cellulosic Ethanol: Good to Go We can make lignocellulosic ethanol today –Proven at a laboratory scale –For $3.00/gallon or more (> double corn-to-ethanol cost) There are no commercial facilities operating in the U.S. today –Abengoa facility near completion in Spain, expected to produce 54 MGY from wheat straw –Small Iogen test plant running on wheat straw in Canada –DOE announced $385 million to fund 6 commercial cellulosic ethanol plants Abengoa, Colwich KS, ag residues & switchgrass, 11.4 mgy ($76m) ALICO, LaBelle FL, yard & wood waste, energycane, 13.9 mgy ($33m) BlueFire Ethanol, Corona CA, landfill green & wood waste, 24 mgy ($40m) Broin, Emmetsburg IA, corn stover, 26.4 mgy ($80m) Iogen, Idaho Falls ID, primarily wheat straw, 18 mgy ($80m) Range Fuels, Soperton GA, wood residues & woody biomass crops, 40 mgy ($76m) Making cellulosic ethanol economically feasible is a major part of the President’s Biofuels Initiative –DOE projects cellulosic ethanol at $1.07/gallon by 2012

10. Southeastern Regional Center Tennessee Agricultural Experiment Station Chicken-or-egg-first problem Sufficient, economical, sustainable sources of cellulose material Efficient, profitable, low-risk fuel production capacity Stable, sufficient, local demand for renewable biofuels

11. Southeastern Regional Center Tennessee Agricultural Experiment Station The Issue At Hand Sufficient, economical, sustainable supply of cellulosic raw material (biomass) Efficient, profitable, low-risk fuel production capacity Sufficient, stable, local demand for alternative liquid fuels Simultaneous Development

12. Southeastern Regional Center Tennessee Agricultural Experiment Station Building the Bioeconomy A key driver in propelling the biofuels industry forward is the successful construction and operation of cellulosic biorefineries to demonstrate the technology and improve the economics

13. Southeastern Regional Center Tennessee Agricultural Experiment Station The Tennessee Biofuels Initiative Construct a demonstration-scale cellulosic ethanol facility in Tennessee –Utilize 170 tons per day of locally produced switchgrass and wood –Work with partner industries to generate 5 million gallons of ethanol annually for local distribution –Refine the process for local resources to reduce costs, improve process, scale up to commercial –Deploy the model throughout the state

14. Southeastern Regional Center Tennessee Agricultural Experiment Station Facility Siting Proximity to researchers (UT and ORNL) Availability of feedstock Transportation infrastructure Proximity to distributors Local cooperation & incentives

15. Southeastern Regional Center Tennessee Agricultural Experiment Station The Cellulosic Ethanol Process 1. Preprocessing: Wood chips and switchgrass are delivered for storage, grinding, drying, and classification. 2. Pretreatment: A solvent fractionation process is used to separate the chemical components of the biomass (this step is specific to lignocellulosics). 3. Hydrolysis: Enzymes are used to break down the carbohydrates to their fermentable sugars (5C & 6C) 4. Fermentation & Distillation: Yeast converts the sugars to ethanol (or related alcohols), and water is removed to further concentrate the product.

16. Southeastern Regional Center Tennessee Agricultural Experiment Station Lignin and solid residue will initially provide heat and energy for the process Product diversification is considered important to economic viability of the biorefinery Research will address development of chemical building blocks and novel, value-added products Coproduct utilization

17. Southeastern Regional Center Tennessee Agricultural Experiment Station Grassoline™ Feedstock Needs Requires 62,000 tons of biomass annually Feed plant 170 tons per day Could be supplied with 8,000 acres of switchgrass Grown by about 200-400 farmers within a 30-50 mile radius of plant Easily supplied by a few surrounding counties From land currently idle or in hay or pasture Without reducing other crop or livestock production Abundant forest biomass readily available within transport range, important for smoothing seasonality of feedstock

18. Southeastern Regional Center Tennessee Agricultural Experiment Station Switchgrass Suitability Well suited to the Southeast –Currently, ~6 tons/acre in TN –Potential for 12+ tons/acre Warm season, native, perennial grass Highly resistant to many pests and plant diseases –Low use of chemicals or fertilizers Tolerates poor soils, flooding, drought 1-2 year establishment, replant year 11 Production/harvest practices similar to hay –Working toward multiple harvests per year UT has long history of switchgrass production and market research

19. Southeastern Regional Center Tennessee Agricultural Experiment Station TN Switchgrass Potential by 2012 by 2025 Dry tons of switchgrass Assuming $40 dt at the farm gate Assuming yields around 6 dt/acre Without disrupting sector balance Tennessee could produce enough switchgrass by 2025 to produce more than a billion gallons of ethanol annually

20. Southeastern Regional Center Tennessee Agricultural Experiment Station A Profitable Alternative At current yields (6 tons/ac) and $40/ton, competes with corn, cotton, soybeans for acreage Significantly higher returns than hay, on similar acreage With yield improvements, returns potentially more than double traditional row crops Specialty crops can return $1,000+/acre, with significantly higher risk, limited opportunities Returns above variable costs, Tennessee, 2006 (2): 6 dt/ac, $55/dt (3): 10 dt/ac, $40/dt (1): 6 dt/ac, $40/dt Source: UT Extension Crop Budgets, 2006

21. Southeastern Regional Center Tennessee Agricultural Experiment Station Economic Benefits Each commercial facility: – Directly employs 200 – Supports 1,400 jobs indirectly – Increases Gross State Product by $223 million – Generates $40 million in new tax revenue Ownership of a facility by a local cooperative retains an additional $10 million per year in the local economy For a billion gallons of ethanol production, TN gets: –10,000 to 20,000 new jobs –$400 million dollars in new state & local taxes Cellulosic bioeconomy is an opportunity to: –Create rural jobs, development, and wealth –Keep money in the state that is spent today but currently flows out-of-state

22. Southeastern Regional Center Tennessee Agricultural Experiment Station Project Cost Summary One-time costs include pre-construction, construction, and equipment Plant operates on product sales year 6 and beyond (incl. R&D) Plant reaches 5 mgy capacity in year 3 Year 1 Year 2 Year 3 Year 4 Year 5 Construction Operating Costs Total Annual $40.69 $1.25 $45.69 $ - $2.25 $6.00 $ - $3.50 $7.25 $ - $3.50 $7.25 $ - $3.50 $7.25 Project Total$73 million Farmer Incentives $1.75 Research $2.00 Million $

23. Southeastern Regional Center Tennessee Agricultural Experiment Station A Synergistic Fit Builds on the UT/ORNL partnership Unparalleled capacity for discovery and implementation through science, engineering, and outreach Improves competitiveness of GTL Bioenergy Center Proposal Southeastern Sun Grant Center is hub for regional biofuels/bioproducts research Significant UTIA internal redirecting and expansion in this arena State investments in “green corridors” for ethanol distribution

24. Southeastern Regional Center Tennessee Agricultural Experiment Station A concept to solve America's energy needs and revitalize rural communities with Land Grant University Research, Education, and Extension programs on renewable energy and biobased, non-food industries

25. Southeastern Regional Center Tennessee Agricultural Experiment Station SE Sun Grant Programs Awarding grant funding throughout the Southeast for biomass R&D&E Strengthening our ties with National Labs through faculty fellowships Developing bioenergy curriculum Developing online educational resources Advancing our core research in biomass and bioenergy

26. Southeastern Regional Center Tennessee Agricultural Experiment Station Bioeconomy Considerations 1.Plants must play an important role –Biomass is easily transformable –Plants are stores of chemical energy –Biomass can substitute for petrochemical products 2.Agriculture-centered 3.Potential for significant environmental consequences –Requires sustainable production systems 4.Requires balancing agriculture uses –Food, feed, fuel, clothing, construction, paper, chemicals

27. Southeastern Regional Center Tennessee Agricultural Experiment Station Bioeconomy Considerations (cont’d) 5.Biomass is not the energy silver bullet –But it likely can reduce dependence on oil –Focus on displacing transportation fuels from oil 6.Biomass will be the minor partner in a dual- fueled transportation energy strategy –Electric powered transportation system more efficient and environmentally benign 7.Profound impacts on agriculture, rural economies, and word trade

28. Southeastern Regional Center Tennessee Agricultural Experiment Station Bioeconomy Challenges Proof of science Improving the economics Optimizing systems Environmental sustainability Developing protocols, regulations Consumer acceptance and use

29. Southeastern Regional Center Tennessee Agricultural Experiment Station Scope of UT Biomass Program … farm to feedstock … … to fuels, power, products … … to consumers

30. Southeastern Regional Center Tennessee Agricultural Experiment Station UT Biomass Research Core Biomass conversion technologies Biotechnology & plant genomics Feedstock production systems, pretreatment Biobased materials Economic analysis, policy, logistics

31. Southeastern Regional Center Tennessee Agricultural Experiment Station The opportunity is today! Cellulosic ethanol represents the foundation for a new industry sector with value-added processing of Tennessee raw materials The pilot-scale facility will: –Address the nuances of the feedstock and optimize the process –Enable research to expand the biorefinery products and markets –Resolve regulatory and logistical concerns –Streamline the processing system –Lead the commercial deployment of Tennessee’s bio-based economy