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biofuel economics
biofuelsdigest.com/bdigest/2016/11/21/biointermediates-and-u-a-potential-step-change-in-advanced-biofuel-economics/
Jim Lane
11/22/2016
Biointermediates
The EPA has proposed to allow for the transfer of biointermediates from one registered facility to another. Currently
this is not allowed due to restrictions contained within the facility registration requirements. Facility registration
requires that the entire pathway be completed on a single site. For a biomass-fed facility, this effectively limits the
size of a processing facility due to the economics of feedstock aggregation.
The radius around a facility that is considered economical to aggregate biomass is roughly 30 miles. Biomass
transported further than that distance begins to incur prohibitively large transportation costs making the feedstock
uneconomic to process. Glossing over a bit of analysis, a biomass-fed facility is practically limited to about 10% of
the size of an average refinery in the United States. So if a biomass-fed process and a petroleum-fed process have
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equal production economics, then the petroleum-fed process will prevail based on economy of scale. Thus the
importance of biointermediates and their role in the expansion of advanced biofuel production and an economic step
change.
Two obvious biointermediates are industrial sugars and bio-crude.
Industrial Sugars
There are a wealth of hydrolysis technologies available today. A hydrolysis technology generally converts cellulosic
biomass into industrial sugars. There are a number of variants of the technology, but they all aim to accomplish this
basic task. Intuitively, the liquid sugar product is far more energy dense than the biomass it was created from.
If the proposed rules are adopted, a more economical supply chain can be developed; one where many distributed
hydrolysis plants are installed, each with a reasonable radius of biomass collection. Then multiple batches of liquid
sugars would be trucked to a more centralized fermentation center. This allows for the fermentation center to be
larger, now that it is less constrained by biomass aggregation issues, and to have greater efficiency through
economy of scale.
Bio-Crudes
Bio-Crude, as used here, is a crude-like substance that can be fractionated and processed into traditional
transportation fuels using established upgrading technologies employed in a typical refinery.
For bio-crude to be RFS2 complaint, it must be made from an eligible feedstock as laid out in the various pathways:
agricultural oils (ag-oils), algae, waste greases, crop residue, tree residue, short-rotation trees (if that portion of the
NPRM is adopted), switchgrass, separated food waste. For a complete feedstock listing, consult the regulations.
Similar to sugars, the final upgrading of bio-crude into finished transportation fuels can be limited in size by the
facility registration requirements and the economic collection radius of waste greases, tree or crop residues. In this
case, the raw materials can be converted into an energy-dense liquid bio-crude that is economic to transport to a
central processing facility. Depending on the intricacies of specific technologies, some bio-crudes are even eligible
for pipeline transport.
All of which leads to the question, if my bio-crude is similar enough to petro-crude, then why wouldnt I simply
process it in an existing refinery? That leads us to the proposed Pathway U.
Pathway U (A new co-processing route)
For a number of solid reasons, the EPA has been very specific about what technology conversion routes and
feedstocks are eligible for RIN-generation. Not only is the EPA required to determine if you are a genuine RIN
generator, it must also discern what type of RIN generator you are: D3, D4, D5, and/or D6. Further details on the
various D-codes can be found from a myriad of sources. D3 is the cellulosic biofuel RIN and one of the most
desirable to generate.
Under current rules, a refiner could make gasoline from cellulosic biomass that was co-processed with petroleum
and generate a D3 RIN by following pathway M. Co-processing basically means that the bio-based substances are
processed in the same equipment as the petroleum analogs.
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However, a refiner is currently prohibited from producing cellulosic diesel, jet fuel, or heating oil and generating a
corresponding RIN. This is due the statutory definition of these products prohibiting them from being co-processed
with petroleum.
Under the greenhouse gas (GHG) reduction targets of the program, there should be no resistance to flowing biobased fuels through an existing refinery. The same reduction in GHG is achieved whether the materials are
processed in a stand-alone bio-only facility or whether they were processed in a comingled fashion. One might
argue that greater GHG reductions are achieved in the latter due to efficiency gains stemming from economy of
scale. The proposed rules recognize this incongruity and seeks to remedy it through the creation of Pathway U.
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Pathway U encompasses a myriad of technologies with the most prevalent being the pyrolysis of cellulosic
feedstocks and the production of Fischer-Tropsch crude from gasified biomass or municipal solid waste (MSW). A
notable exclusion is ag-oil and algae-oil feedstocks.
Co-Processing of Ag-Oils & Algae-Oils Remains Prohibited: The persistence of pathways F &
H
Two common feedstocks in the biofuels industry are ag-oils and algae-oils. The former are harvested from crops
and the latter are lipids harvested from algae. Each of these oils lend themselves to hydrotreating technology as
noted in pathways F & H, see below. Pathways F & H are differentiated only in terms of co-processing.
If soybean oil is hydrotreated at a stand-alone facility, it generates a D4 RIN. If the same material is hydrotreated
within a refinery, it generates a D5 RIN despite possibly having a greater GHG reduction. With the breakdown of the
co-processing barrier proposed in new pathway U, it is vexing why the artificial barrier remains for selected
feedstocks.
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also becoming a D3 RIN producer. While a refiner has always had the ability to generate D5 RINs by co-processing
ag-oils in their hydrotreaters, there has been little commercial reason to do so since D5 and D6 RINs have
historically been inexpensive. Also, there are characteristics of ag-oil that require modification of most refinery
hydrotreaters to process. A hopeful outcome of a refiner would be for the elimination of the co-processing penalty
which degrades a RIN from a more valuable D4 status to D5 status. However, this is not currently embedded in this
set of proposed rules.
What is embedded in this rule set is the new ability to introduce pyrolysis oil (py-oil) or biomass-based FT-crude into
the refinery and generate valuable D3 RINs.
While the refiner could follow existing pathway M, there are two challenging restrictions. One, the chemical make-up
of these biointermediates lend themselves to distillate production (diesel, jet fuel, and heating oil) and second, the
entire pathway has to be conducted at the refinery. In the instance of either pyrolysis or biomass gasification, that
means that a new supply chain of renewable biomass would have to be entered into the refinery asset and owned by
the refinery operator.
Most refiners view this as too much distraction for too little benefit. Combining pathway U with the allowance of
biointermediates makes the proposition far more palatable for the refinery operator. Now, a refiner simply has to
register the existing refinery as a renewable fuels producer, purchase a qualified biointermediate from a separate
producer, and upgrade the biointermediate to finished fuel.
That does leave the refinery with the traditional technical work of modeling the new flow into the system and
potentially making equipment or operating adjustments to accommodate the physical properties of the new
materials. Refiners routinely perform this type of analysis as it surveys various potential petroleum feedstocks.
The refiner also retains the burden of proof about the portion of finished fuels that were generated from RIN-eligible
feedstocks. In the past this has been an exercise in mass balances and biogenic carbon testing. The accounting
rules contemplate and seek comment upon the continued viability of a mass balance approach.
This may incent a number of refiners to seek out biointermediates producers for offtake contracts.
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However, the proposed rules allow for the transfer of biointermediates. Thus, syngas transferred from the
gasification company to the refinery, under pathways M, N, and U, could become RIN-eligible transportation fuel
products. The same holds true for the over-the-fence transfer of a Fischer-Tropsch crude.
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