Comments for the 2009 Energy Security Roundtable

Good afternoon, thank you for inviting me to speak to you today.

I always like to start with a bit of background. I'm a biologist and environmental scientist by training, a policy analyst by occupation, and an economist by avocation, as well as contamination from working in economic policy institutions for 15 years.

I've long had an interest in renewable fuels. In fact, I wanted to distill my own in 1975, using surplus oranges and a solar still, but the BATF wouldn't license a 14 year old to distill his own hooch.

I think that any discussion of using government policy to dictate fuel composition has to start by acknowledging that such interventions have largely been disastrous.

To meet the Bush administration's target of 35 billion gallons ofrenewable and alternative fuels production in the United States by 2017with cellulosic ethanol would require as much water as flows in theColorado River every year.

In order to fulfill air pollution reduction plans in states and localities across the country, gasoline sold in the United States has been fractionated into about seventeen different boutique fuels sold in dozens of discrete markets. With three grades of gasoline per fuel, refiners are producing over fifty separate blends. This market fractionation has raised the cost of fuels, made them more volatile, and has made our transportation fuel infrastructure more brittle: a breakdown in a refinery in one area can not be easily repaired by getting fuel from another area, as the local blending requirements can be different.

But that's trivial when compared to the absolute fiasco of corn ethanol, which has caused increases in air pollution, water pollution, freshwater consumption, coastal pollution, greenhouse gas emissions, and food prices.

In 1997, the U.S. GAO found that the ethanol production process produces more nitrous oxide and other powerful greenhouse gases than does gasoline production. A decade later, Colorado scientists Jan Kreider and Peter Curtiss concluded that carbon dioxide emissions in the production cycle are about 50 percent higher for ethanol than for traditional fossil fuels.

Making ethanol from cellulosic plants such as switch grass won't help. In fact, researcher Timothy Searchinger and colleagues calculated that ethanol from switch grass, if grown on U.S. corn lands, would increase greenhouse gas emissions by 50 percent compared to using regular gasoline.

Then there's local air pollution. The EPA says using more ethanol fuel would increase ozone-producing chemicals. Mark Jacobson, a researcher at Stanford University, recently estimated that widespread switching to a blend of 85 percent ethanol and 15 percent gasoline might increase ozone-related mortality, hospitalization and asthma by about 9 percent in Los Angeles and 4 percent in the United States as a whole.

Now, let's talk about water consumption. Messrs. Kreider and Curtiss estimate that growing and refining corn for a gallon of corn ethanol today requires about 140 gallons of water. That would mean the 5.4 million gallons of corn ethanol used in America in 2006 required the use of 756 million gallons of fresh water.

Things do not look much better for ethanol made from cellulose crops, which require between 146 and 149 gallons of water per gallon of ethanol fuel, depending on the scale of production. To meet the Bush administration's target of 35 billion gallons of renewable and alternative fuels production in the United States by 2017 with cellulosic ethanol would require as much water as flows in the Colorado River every year.

There's a water pollution issue, as well. The National Academy of Sciences points out that expanding corn-based ethanol production without new environmental protection policies would pose a "considerable" threat to water quality. Corn requires more fertilizers and pesticides than other food or biofuel crops. Pesticide contamination is already highest in the Corn Belt, and nitrogen fertilizer runoff from corn already produces the most serious agricultural impact on the Mississippi River.

Fertilizer runoff does not just pollute local waters. Each summer, the nitrogen fertilizers in the Mississippi hit the Gulf of Mexico, creating a large dead zone--a region of oxygen-deprived waters unable to support sea life that extends for more than 10,000 square kilometers. The same phenomenon occurs in Chesapeake Bay.

A recent study by researchers at the University of British Columbia shows that if the United States were to meet its proposed ethanol production goals of 15 billion to 36 billion gallons of corn and cellulosic ethanol by 2022, nitrogen flows to the Gulf of Mexico would increase by 10 percent to 34 percent.

Finally, there's land consumption and food prices to consider. In a February Science article, researchers calculated that projected corn ethanol production in 2016 would require 43 percent of the land harvested for corn in 2004 that otherwise was used to feed livestock. This represents an enormous change in land use--to either replace the grain lost to food production by vastly expanding corn fields--or a significant increase in food prices of the sort we've already seen due to scarcity of grain raised for human and livestock consumption.

There is little question that high gasoline and oil prices damage the national economy and the personal economies of individual Americans. But putting our hope in ethanol (whether from corn, switch grass or other cellulosic crops) or other crop-based fuels is not a rational policy response, however attractive it might be to the corn lobby.

There is one technology that I'm somewhat optimistic about, but it's not about electricity, it is liquid fuel made from algae. I'm optimistic about algae fuels because they have some really good attributes other renewables can't match, the challenges are mostly engineering at this point, or relatively simple science, and importantly, there's a lot of private money flowing in, from companies with a good track record for commercializing technology.

So why am I bullish on algae fuels?

First, algae fuels are less diffuse: the National Renewable Energy Laboratory estimates that algae can produce up to 10,000 times more oil per acre than other biofuel crops, such as soybeans. That means, we can produce a significant amount of liquid fuel in a relatively small area. The Carbon Trust estimates that algae biofuels could displace 12% of annual global fuel consumption by 2030, if aggressively developed.

Second, they're less remote: you grow algae in long, oval race-track-like ponds or in enclosed growth systems, which can be sited just about anywhere there is a combination of flat land (non-arable land is fine) warmth, sunlight and surplus carbon dioxide.

Finally, algae fuels are estimated to be less pricey, estimated prices for algae fuels compare to oil at around $70 to $100 per barrel.

Additional benefits are numerous. Unlike ethanol (either corn or cellulosic), algae don't need to consume fresh water. They can grow on salty water, or even waste water, which they clean up as they grow.

The stuff left over after you squeeze all the oil out of algae is a mixture of protein and sugars that can be used in many different ways including animal feed, bio-plastics, and pharmaceuticals, or you can just chuck it into a furnace and generate electricity from steam.

Since algae-fuels are more akin to gasoline than to alcohols, there's no need to change the existing infrastructure that transports liquid fuels to our many millions of vehicles, nor is there a need to change the vehicles themselves. A jet has already flown using algae-based jet fuel.

Finally, there's the greenhouse gas connection. Algae fed on the carbon dioxide in regular air are carbon-neutral. They pull carbon dioxide out of the air when they grow, and it's released back into the air when they're used as a fuel. Even better, if they're fed on carbon dioxide from coal power plants, or other combustion sources, and they displace the use of a given volume of oil-based fuel, they're carbon negative, that is, they reduce the flow of greenhouse gases that would otherwise have been emitted.

Of course, there are plenty of challenges to be overcome before algae biofuels reach the pump. The best strains have to be identified for different growing conditions, and optimized for growth rate and fat content. Genetic engineering is out, as the algae-fuel industry feels it would just complicate the process of getting public and regulatory approvals. Algae grown in open ponds are susceptible to the weather, predation, and disease. If freshwater is used, evaporation becomes a significant problem, increasing freshwater use significantly. Algae grown in bio-reactors are more stable, but that technology is still considerably more expensive than open-pond systems. Harvesting and drying the algae prior to processing are energy intensive, unless you're in the desert where the problem is too much evaporation. Co-locating algae farms with greenhouse emitters may be challenging, and the oil extraction and chemical conversion processes have to be made more efficient.

The US military has already shown strong interest in algae fuels, and could contribute significantly to its development. Right now, the US military uses 130 million barrels of oil each year, which is about how much the entire country of Sweden uses. You can imagine how much energy the military could save if they could set up their own algae biofuel systems on US bases, foreign bases, and even in the field.

Now that's energy security!

Kenneth P. Green is a resident scholar at AEI.

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