The Real Promise Of Advanced Biofuels

Advanced biofuels production does face challenges, but they are far from insurmountable.

As the United States seeks national energy security and more environmentally friendly fuel sources, the opportunity for the nation's advanced biofuels industry is clearly extraordinary. The U.S. has the scientific lead in this industry; it has experience with processes, technologies and various nonconsumable feedstock to convert biomass to fuels and energy.

Indeed it already has more than 100 companies at work in the field--pioneering the conversion of algae, municipal solid waste and widely available biomass such as wood waste and crop residues into renewable fuels. It also has a useful federal mandate: In accordance with the 2007 Energy Independence and Security Act, the country must triple its use of biofuels to 36 billion gallons by 2022.

Meeting one part of this challenge is clearly not going to be difficult.

In establishing the overall 36 billion gallon goal, the government assigned subtotals to ethanol on the one hand and all advanced biofuels on the other. The ethanol goal--15 billion gallons--already appears within reach.

But how feasible is the advanced biofuels goal of 21 billion gallons by 2022? Especially when the government estimates that to meet this goal, the U.S. will need more than 500 bio-refineries at a cost of some $168 billion? Today we have just a handful.

Many observers are skeptical. Let's look at some of their arguments:

With the price of oil hovering at about $80 a barrel, biofuels just aren't price competitive.

The price of oil won't stay at $80 a barrel. It will rise.

Meanwhile, the price of biofuels will drop as technologies mature. A recent report by GTM Research, a market research and consulting firm, predicts that at the current rate of commercialization, the advanced biofuels market will achieve cost parity with petroleum in 2017 or 2018. Several companies, such as Coskata of Warrenville, Ill., and Dynamic Fuels of Geismar, La., (a joint venture between Tyson Foods ( TSN - news - people ) and Syntroleum Corp. ( SYNM - news - people )), are projecting next-generation biofuel production costs of $1 to -$2 a gallon--very competitive with traditional fossil fuels. These companies rely on technology and high-efficiency processes that increase production, reduce operating costs and minimize manufacturing downtime.

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