Biofuels: Are they worth the energy?

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This article was first published in XL Magazine, volume 3, issue 10, October 2007.

Now the Bush administration has woken up to the fact it has to reduce its dependence on oil – probably due to the geopolitical scene in the Middle East rather than a concern for climate change – it has become very gung ho about biofuel generated from corn. Unfortunately, however, this ‘solution’ creates new problems. While corn has been grown in the Midwest for generations, the farmers are currently rubbing their hands together with glee as corn prices have doubled over the last year or so on account of the heightened demand for ethanol. Naturally enough, they are planting more corn to take advantage of the new market conditions but this means less land to grow other crops. In short, switching to biofuels is likely to raise the price of agricultural produce. This is likely to be a challenge for local politicians as their constituents protest about food prices. More worrying is the impact the new enthusiasm for producing biofuels will have in countries outside of the US – particularly less developed countries – if the competition for land leads to more rapid deforestation and a greater strain on dwindling water supplies. This has been the chief concern of environmentalists who point to countries like Indonesia where rain forest is being felled for palm oil plantations to produce biodiesel.


There is also a lot of scepticism (both inside and outside of the environmental movement) as to whether biofuels actually reduce CO2 emissions, with some studies showing that production methods are so inefficient that it takes the equivalent of nearly a litre of fossil fuel to produce a litre of biofuel. So does biofuel provide a genuine alternative to fossil fuel or does it create as many problems as it solves? The answer to this question is that biofuel can, indeed, be viewed as a viable substitute so long as biofuel production proceeds along sustainable lines. This is where so-called ‘second generation’ biofuels come in. Mention biofuels and one immediately thinks of ethanol and biodiesel, made from crops like corn, sugarcane and palm oil, but now things have moved on, and energy can be generated from an increasingly long and diverse list of organic waste products such as straw, scrap lumber, and even human sewage, rather than the virgin product.

The beauty of this arrangement is that biofuel production has a much smaller ‘ecological footprint’, and actually assists other industries in reducing theirs because waste that might otherwise have been dumped, can now be sold as input to the biofuel production process. This shifting of the industrial process from a linear (open loop) system, in which resources move through the system to become waste, to a closed loop system where wastes become inputs for new processes is referred to as ‘industrial ecology’ and it offers an abundance of business opportunities for environmentally-oriented entrepreneurs.

Take, for example, the Belgian biomass company Thenergo which partners with producers of fuel – be they farmers, forests or facilities producing large quantities organic waste – to ensure not just a steady supply of the fuel but also a reliable market for its products. Thenergo charges farmers a gate fee for unwanted manure (effectively being paid for its raw materials!) from which it extracts methane to produce power, before selling the residue back to the farmers as fertiliser. Meanwhile, scientists at Canadian biofuel company Dynamotive having already opened a commercial-scale plant in Ontario that produces 22,000 tonnes of bio-oil each year from waste wood chips, have now managed to turn human sewage into bio-oil using a different technique. The company is looking at ways to scale up the process to commercial quantities – a plentiful supply of raw material should not be a problem!

In the UK, Vegetable Oil Management Ltd provides a unique service in that it arranges supply of cooking oil from the processors to caterers anywhere in the country. It is also expanding rapidly on account of its ‘cradle-to-grave’ policy on cooking oils which ensures that the oil is collected after use for recycling. Like Thenergo, it receives payment for taking its own raw materials (10 pence per litre), before filtering the waste oil so it can be turned into biodiesel. The company also supplies kits to manufacture biodiesel and has a network of ‘oil refinery’ customers. In Singapore, a similar entrepreneurial spirit is displayed by Kom Mam Sun who set up Biofuel Research Ltd in June 2003. After running his truck on biodiesel fuel for two years to test his business idea of turning used cooking oil from restaurants into fuel for vehicles, he was successful in opening a biodiesel plant in 2006 with the helping hand of Spring Singapore. Mr Kom is doing okay but the challenge is a limited supply of waste cooking oil. Biofuel has the capacity to produce 1500 tonnes of biodiesel each month but produces only around one-third of this. There is a sense of resignation about the Biofuel website with comments like: “… the venture has proven more difficult than our expectation … Singapore is a pragmatic place which emphasises … bread and butter issues [rather] than the environment or health”. Kom would likely be more upbeat if he were operating in the UK where, from January 2006, changes to European food law affected all businesses in the UK such that waste cooking oil could no longer be disposed of down the drain. The law states that it must be collected and used for the production of biodiesel or electricity. In the absence of such incentives in Singapore, the competitive environment facing Biofuel is quite different to that enjoyed by Vegetable Oil Management. Indeed, Biofuel must pay for its waste oil, whereas Vegetable Oil Management is paid to take it away.