Industrial Scale Ethanol

After my recent posting on resurgent food vs. fuel competition from expanding corn ethanol production, one of my contacts called to ask if I was familiar with an industrial process developed by Celanese Corporation for producing ethanol from a variety of feedstocks, including natural gas, coal, and potentially cellulosic biomass. My initial reaction to him was based on my knowledge that such processes have been around for decades, and that until the policy-inspired growth of the corn ethanol industry, much of the ethanol for industrial use was produced in that fashion. However, I was unaware of plans to deploy this technology on a truly massive scale, in the form of a pair of 400,000 ton-per-year coal-to-ethanol plants in China. I consider this a really interesting development on several levels.

The attraction of producing ethanol for industrial or fuel use from indigenous non-food raw materials in China seems obvious. It enhances the country's food and energy security by avoiding imports of both. As I delved into the technology involved, I realized it starts with gasification, a process that my former employer, Texaco Inc., licensed to numerous facilities in China, going back to the 1980s. So China has deep experience with gasification as an effective and reliable way to turn feedstocks as diverse as waste oil, petroleum coke, low-value coal, and even natural gas into syngas, or synthesis gas, a mixture of carbon monoxide and hydrogen from which all sorts of useful organic chemicals can be produced. One of those is acetic acid (the acid in vinegar.) It turns out that Celanese's new ethanol process is an offshoot of the company's well-established "acetyl platform" for making acetic acid in plants like this one in Singapore.

It's noteworthy that the first ethanol plants Celanese is building are so large. 400,000 metric tons per year equates to 134 million gallons per year, larger than all but a couple of the corn-based ethanol plants in the US. I've also seen hints that these facilities could be expanded to 1 million tons/yr, which would put their output in the same league as the gasoline yield of the smallest oil refineries. That would be truly industrial scale fuel production that conventional or advanced biofuels can't yet match and may never do, because of their much more complex supply chain considerations. That also explains why Celanese could consider building a 40,000 ton ethanol plant in Texas based on natural gas. The supply chain isn't an issue when it's just an existing pipeline. In any case, large scale and low feedstock cost should result in ethanol output that's more than competitive with ethanol from biomass. US biofuel producers eyeing export markets ought to be concerned about the potential competition from Celanese, even if the federal Renewable Fuels Standard (RFS) guarantees them a market here.

My other instant reaction when I heard about this process focused on the potential environmental consequences of producing ethanol from coal. However, as I thought about it more carefully, it occurred to me that processing coal into ethanol using the extremely clean gasification process, which allows for sulfur and other contaminants to be easily and safely collected and disposed of, is probably a lot more benign than burning the same coal to produce electricity, particularly in power plants without state-of-the-art pollution equipment. Assessing the greenhouse gas impact of coal-to-ethanol requires a thorough lifecycle analysis that I have not yet found.

At the same time, it's clear that the environmental comparison to biofuels like corn-based ethanol isn't nearly as bad as suggested by an erroneous comment in a Business Week article on the subject last November, which stated that corn ethanol production "doesn't use a fossil fuel as a raw material." In fact, analysis by the Argonne National Laboratory of the US Department of Energy found that 78% of the energy in a typical gallon of corn ethanol comes from fossil fuels, including coal, diesel fuel, and natural gas. That's why the emissions from corn ethanol aren't much lower than from gasoline, after factoring in the natural-gas derived fertilizer used in growing the corn, the diesel fuel required for cultivation, harvesting and transportation, and the coal and natural gas used to generate electricity and process heat for the fermentation and distillations steps. Ethanol from coal might emit incrementally more greenhouse gases than food-crop based ethanol, but not orders of magnitude more. And I'd bet that a gas-to-ethanol plant would match or beat the emissions from a standard corn-based biorefinery, based on avoiding the need to separate the alcohol product from water. Distillation requires lots of energy.

It's getting harder to draw meaningful distinctions between conventional fuels and alternatives when we can make ethanol efficiently from fossil fuels and produce "drop-in" fuels--synthetic gasoline, diesel or jet fuel--from biomass like sugar cane or algae. I haven't seen how the detailed economics and energy balance of the Celanese ethanol process compare to traditional and advanced processes for producing ethanol from biomass, but I think we're going to be hearing a lot more about this option in the future. I was surprised to see that it even garnered a mention in the White House press release for the President's visit to China earlier this year.

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Conference Highlights

I spent the last three days at the annual energy investment conference held by the sponsor of this blog, John S. Herold, Inc. Many of the panels I attended were overshadowed by the enormous uncertainty about the US financial system and pending bailout proposals, along with the Presidential election, the dynamics of which appear to have shifted again. However, the sessions provided some very interesting insights into an important unfolding natural resource play, along with showcasing some nifty applications of existing technology that could help to narrow the gap between growing global energy demand and the stagnating supply of conventional oil.

The two words that I heard most frequently this week were “shale gas”, the development of which just might facilitate achieving some of Mr. Pickens’s ideas about energy security. This is not the kind of shale that has been touted as a nearly unlimited source of unconventional oil, but rather a layer of natural gas-bearing rock that until recently was very difficult to tap. But as several panelists explained, companies have “cracked the code” for drilling into these deposits and producing flows that compete favorably with conventional gas fields in both output and cost. The result could be a modest gas bubble—a period of relatively abundant US natural gas supplies—though it comes with an inherent price floor not far below current levels. So while it is unlikely to rejuvenate struggling gas-based industries such as fertilizer production, for which $7/MMBTU is still quite dear, it could support expanded natural gas use in both transportation and power generation, where it could yield significant environmental and cost benefits.

One of the two technologies that impressed me was featured on the Alternative Energy panel I moderated. One of the founders of DKRW Advanced Fuels described a clever application of off-the-shelf technology that turns Wyoming coal into unleaded gasoline without releasing the vast quantities of CO2 that have made coal liquefaction look unpalatable. This trick is accomplished by marrying GE’s gasification technology (the old Texaco Coal Gasification Process on which I worked briefly as a young engineer) with ExxonMobil’s methanol-to-gasoline process that operated for 10 years in New Zealand, until the natural gas field feeding it was depleted. The output is 87 Octane unleaded gasoline and a pure CO2 stream that will supply the region’s extensive enhanced oil recovery projects, which will effectively sequester it. This scheme creates a double energy benefit: mainstream liquid fuel from America’s most abundant energy resource, and increased output at some of our aging oil fields. Even better, it looks like this can be accomplished with lifecycle greenhouse gas emissions no worse than from conventional oil.

The other technology that caught my attention was presented by an old friend and former Texaco colleague, who is now the CEO of Compact GTL. Instead of using proven gas-to-liquids technology to unlock “stranded” natural gas reserves—non-associated gas deposits far from infrastructure or markets—he aims to apply it to the problem of “distressed gas.” He defines that as natural gas produced in conjunction with oil in projects for which the cost and logistics of traditional methods for handling the gas have become an obstacle to developing the oil field. Previously, such gas would be flared, but that practice is being phased out on environmental grounds. Turning it into synthetic oil could prove cheaper than re-injecting it into the ground, while also shortening the development cycle of some large oil fields. Another double win, if it proves practical.

With the country still debating the merits of expanded oil drilling and looking to renewable energy sources that have not yet achieved the scale necessary to wean us off imported oil and slash our greenhouse gas emissions, the approaches described above can provide a valuable bridge. They could also be real money-spinners, at a time when other parts of the economy are looking pretty sick.

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