1. Southeastern Regional Center Tennessee Agricultural Experiment Station University of Tennessee … leading the Southeast in biomass research, education, and outreach Tennessee Farm Bureau Federation Annual Convention Franklin, TN December 4, 2006 Dr. Joe DiPietro V.P., Institute of Agriculture University of Tennessee Dr. Kelly Tiller Agricultural Policy Analysis Center University of Tennessee Tennessee’s Bioenergy Future: Opportunities to Advance the Bioeconomy

2. 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

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

4. 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 *

5. 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.

6. 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

7. 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 –Iogen test plant running on wheat straw in Canada, commercial facility planned in Idaho –Broin corn stover & grain facility near groundbreaking (Iowa) –Several planned or under consideration e.g., DuPont, Mascoma, Potlatch, Xethanol 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

8. 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

9. 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

10. 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

11. 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

12. 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.

13. 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

14. 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 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 Forest biomass (up to 100 M tons) readily available within transport range, important for smoothing seasonality of feedstock

15. 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

16. 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

17. 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

18. 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

19. Southeastern Regional Center Tennessee Agricultural Experiment Station Capital Investment Estimate Estimates derived from corn stover model (National Renewable Energy Laboratory, 2002) Scaling factor of 0.6 used to adjust for plant volume (70M gal/yr commercial to 5M gal/yr Grassoline™ pilot) Added cost is factor adjusted, may require less (ca. $10M) Total Installed Equipment + Added Cost (@ 42%) = Total Capital Investment $23.45M $17.24M$40.69M

20. Southeastern Regional Center Tennessee Agricultural Experiment Station Annual Operating Cost Estimates derived from corn stover model (National Renewable Energy Laboratory, 2002) Linear scaling was used to adjust for plant volume (70M gal/yr conventional to 5M gal/yr Grassoline™ pilot) Assumes recoveries from product sales are reinvested in R&D Annual Operating Estimate - $5.31M

21. Southeastern Regional Center Tennessee Agricultural Experiment Station Feedstock Incentives Incentive is the difference between “operational” feedstock cost and initial farm price required to establish supply, years 1-5 Assumes farmers initially need $55/ton to establish, requiring $28/ton initial subsidy The average farmer growing about 20 acres of switchgrass would receive about $3,500 in incentive payments in years 1-5 Switchgrass Incentive - $1.75M Paid in years 1 through 5 totaling - $8.75 M By year 6, switchgrass supplied by farmers at - $27/ton

22. Southeastern Regional Center Tennessee Agricultural Experiment Station Project Cost Summary One-time costs include pre-construction, construction, and equipment Recurring costs include operating, switchgrass incentive and R&D, net of ethanol market recoveries Plant operates on product sales year 6 and beyond (incl. R&D) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 One-Time Costs Recurring Costs Total Annual $40.69 $8.57 $49.26 $ - $5.31 $ - $5.31 $ - $5.31 $ - $5.31 $ - Project Total$70.5

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 Scope of UT Biomass Program … farm to feedstock … … to fuels, power, products … … to consumers

27. Southeastern Regional Center Tennessee Agricultural Experiment Station UT Biomass Research Core Economic analysis & policy Feedstock pretreatment & separation Biotechnology & plant genomics Biobased materials Biomass conversion technologies

28. 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