Biofuels Bouncing Back

It didn’t take long for the liquid biofuels industry to go from alternative energy darlings to agricultural villains.  Not long ago, North American governments were creating biofuels-friendly policies and pouring subsidies into the rapid expansion of ethanol and biodiesel facilities across Canada.  Then global food prices soared early this year, and suddenly the biofuels industry was fingered as a primary culprit in driving up the price of feedstock crops like wheat, corn and other agricultural commodities.  Indeed, it was accused of virtually taking food off the plates of hungry consumers in Third World countries.

Fortunately for ethanol and biodiesel companies that, in Canada, rely on wheat, corn and canola feedstocks, the global food-versus-fuel debate has subsided somewhat as commodity prices eased.  The intervening time has also allowed a more sober analysis of the issue and the broader role of biofuels as an environmentally-helpful alternative fuel.

“There was a lot of negative publicity, spread by a poorly-informed media, that made the biofuels industry out to be scapegoats," says Doug Hooper, CEO of Vancouver-based clean fuels and energy developer Canadian Bioenergy and a board member of the Canadian Renewable Fuels Association. “In fact, biofuels were by no means a leading cause of the global food crisis.”

The real culprits, says Hooper, were soaring energy costs, a move to higher-protein diets in developing countries, speculative commodity trading and a long legacy of agricultural tariffs and other trade barriers.  While biofuel companies competing for food crops may have played a small role in driving up prices, it has given hard-pressed Canadian farmers another market for their products.

“Our position is that Canada has to have a responsible biofuels policy while still meeting its traditional role as a world bread basket,” says Ian Thomson, president of both Canadian Bioenergy and the Alberta Biodiesel Association.  “I am confident that in the long term, the agricultural system, both here and in the developing world, will respond and greatly increase supply.”

Governments reaffirm biofuels support

After analyzing the food-versus-fuel debate, governments in Europe, the United States and Canada reaffirmed their support for expanding the biofuels industry, although for different reasons (for example, the United States primarily wants to reduce its dependency on foreign oil imports, while Canada wants to reduce greenhouse gas emissions).  Nonetheless, the industry realizes it must prove its long-term sustainability, which includes adopting carbon reduction standards that can be scientifically verified.

“We’re dealing with a complex global issue,” says John Rilett, Vice President of Climate Change Central.  “Not all biofuels are created equally.  They use different feedstocks, are grown in different locations, and they don’t all have the same environmental impacts.  There is a huge potential for biofuels in the future, especially in western Canada.  We don’t want to prematurely cut off that opportunity without a thorough evaluation of it.  It is possible, through good policy and reasonable targets, to control for unintended consequences.”

Canadian industry continues rapid growth

Meanwhile, Canada’s biofuels industry continues its rapid expansion.  The country’s ethanol production capacity, nearing one billion litres a year now, should exceed 1.8 billion litres once half a dozen plants now under construction are completed.  The construction of Canadian Bioenergy’s canola-based biodiesel plant near Edmonton will soon add 225 million litres of capacity to an existing national supply of 75 million litres. By 2011, national biodiesel production is expected to reach 750 million litres, a tenfold increase in just a few years.

Alberta’s first biodiesel plant, Western Biodiesel Inc’s facility near High River, began production earlier this summer, with an initial capacity of 19 million litres per year, from a feedstock primarily of rendered animal fats.  “The Calgary region is the hub of cattle country, which is the base of our feedstock supply,” says Brian Harmes, Western Biodiesel’s vice-president of marketing.  Still, he says, the company could well include canola in its feedstock supply when it expands its operations in a few years.

The expansion of Canada’s biofuels industry has been fuelled by federal and provincial programs to accelerate the use of ethanol and biodiesel.  In 2006, the federal government announced it would invest $2.2 billion toward the goal of reaching an average five-per-cent renewable content (ethanol) in gasoline by 2010 and two-per-cent renewable content in biodiesel by 2012.  Reaching these renewable fuel standards is expected to reduce greenhouse gas emissions by 4.2 megatonnes per year.  The policy was backed by a $200-million, four-year funding program for building or expanding biofuels plants.

Several provinces have been even more aggressive, with announced ethanol standards of 8.5 per cent in Manitoba, 7.5 per cent in Saskatchewan and five per cent in Ontario.  Meanwhile, British Columbia has set a five per cent renewable content target for diesel by 2010.  Alberta’s Bioenergy Strategy – which includes a $239-million investment to help biofuels enter the market – aligns the province’s biofuels targets with the federal renewable fuels standards.

Western Biodiesel’s initial sales have focused on U.S. markets, where biodiesel blending mandates are already in effect.  “The U.S. market is much more advanced in terms of fuel standards and acceptance and use of biodiesel,” says Harmes.  “We’d love to sell to Canadians once the Canadian market develops, but it’s not there yet.”

There are a number of initiatives underway to help promote the use of biofuels in Canada’s transportation system.  For example, the recent Alberta Renewable Diesel Demonstration project helped show that biodiesel blends (particularly B2) perform well during cold winter temperatures.  Another program, Biofleet, is helping raise awareness and expand the use of biodiesel in western Canada.

Second-generation technologies not far away

The longer term will see the biofuels industry develop second-generation technologies, using agricultural and forestry wastes and municipal solids as feedstocks instead of grain-based crops.  This will further quell the food-versus-fuel debate and also continue to improve the energy balance of and reduce greenhouse gas emissions from biofuels.  Indeed, the first commercial scale facility in North America using such second-generation technologies is expected to be completed in Georgia next year, with at least two Canadian facilities not far behind.

At the same time, researchers are looking at ways of producing biofuels more efficiently.  In a closed-loop system, for example, cellulosic matter from corn could be used to produce both ethanol and methane (via an anaerobic digester), with the methane replacing natural gas in the operation of the ethanol plant.  Similarly, triticale, a wheat-hybrid crop, could be grown on marginal agricultural lands and fed into a biorefinery that would produce not just biofuels but also advanced materials and chemicals.

Despite all these promising advances, the current crop-based industry will continue to play an important role in biofuels for the foreseeable future. “There’s an implication that there’s something wrong with first-generation technologies,” says Canadian Bioenergy’s Doug Hooper.  “But first-generation biofuels do a good job of reducing carbon, cleaning up the air and providing a good rate of conversion to energy.”