Will Alternative Fuels Rock the Fuels Market?

By Elizabeth Hilbourn

Alternative rock is a genre of rock music that refers specifically to the punk/new wave-rooted style that emerged in the 1980s and became widely popular in the early-mid 1990s. The term “alternative” was coined in the 1980s to describe punk rock-inspired bands on independent record labels that did not fit into the mainstream genres of the time.  Perhaps similarly termed, alternative fuels are fuels that do not fit into the mainstream fuels, or vehicle fuels that are not entirely derived from petroleum.

Alternative fuel usage has increased over the years, fueled by political mandates. In 2016, alternative transportation fuels totaled 4 million BPD – over 4% of petroleum demand worldwide. Some countries have almost no alternative fuel usage, while others lead the way in one or more alternative fuel categories.

How does alternative usage affect petroleum supply and demand?  What are the major alternative fuels in the world today and how does their usage rank? What contribution does the U.S. have to each alternative fuel category?  All these are important questions and will be explored in the Alternative Fuels section of our upcoming release of Crude and Refined Products Outlook.

By far, the two major renewable alternative fuels are ethanol and biodiesel.  The chart below details the Organization for Economic Cooperation and Development’s (OECD) assessment of worldwide past and forecast ethanol and biodiesel production and price.  In 2007, ethanol and biodiesel production were 1,150 and 190 MGPD, respectively.  In contrast, ethanol and biodiesel production increased almost two- and three-fold, respectively in 2016 from 2007, at 2,060 and 570 MBPD.  By 2025, ethanol and biodiesel is anticipated to increase another 7% and 24%, respectively, from 2016 levels.

WorldBiofuelsThere are also several emerging fuels that are currently under development or already in use in the U.S.  Some are considered alternative fuels under the Energy Policy Act of 1992 and may qualify for federal and state incentives.  A few of these emerging fuels include renewable hydrocarbon biofuels, butanol, dimethyl ether and methanol.

Renewable Hydrocarbon Biofuels

Renewable hydrocarbon biofuels are sometimes called “drop-in biofuels” since they are similar to petroleum gasoline, diesel and jet fuel.  They can be used in vehicles without engine modifications and can utilize existing petroleum distribution systems.  Most of this category is called renewable diesel and is produced from hydrogenated esters and fatty acids (HEFA) fuels derived from used cooking oil, animal fats and vegetable oils.  This fuel category comprises 20% of the biomass-based diesel RINs made to date with the majority imported from Singapore from the renewable fuel producer Neste.  Neste also has production plants in the Netherlands and Finland; however, those plants supply Europe with their demand of renewable diesel.

Renewable diesel can be produced from various production processes including Axens IFP Vegan, Honeywell UOP Green Diesel, Neste NEXBTLTM, Haldor Topsoe Hydroflex, and ENI Ecofining. Renewable diesel has excellent cetane, stability and cold flow properties (see table below). Due to the paraffinic nature and the low final boiling point, the density of renewable diesel is lower than that of fossil diesel fuels.

DieselFuelPropertiesButanol

Butanol produced from biomass is called biobutanol. Though there are four isomers of butanol, isobutanol is the most prevalent.  There is one EPA registered isobutanol registered producer, Agri-Energy, a wholly owned subsidiary of Gevo which has a plant in Luverne, Minnesota. The plant is the world’s first commercial isobutanol plant and was started in May 2012.  There are two Clean Air Act provisions that allow for blending of up to 12.5% biobutanol with gasoline. The fuel quality standard for Biobutanol, ASTM D7862, also allows for a biobutanol blend of up to 12.5% with gasoline. Isobutanol is not (yet) registered under 40 CFR Part 79 for on-road use.  Human health effects testing for the fuel is ongoing.  In 2016, a small amount of RINs was generated from biobutanol production from AgriEnergy (subsidiary of Gevo) which had a small business provision such that they could to sell to a terminal to be blended without health effects testing.  Butamax is currently in the process of registering with Section 79.  Once registration is complete (and health effects testing), Butamax is expected to license to refiners.

The first biobutanol plants were retrofits of existing corn ethanol plants. The fuel is produced through fermentation of corn feedstock and the process is nearly identical to fuel ethanol production from corn. The U.S. Department of Agriculture’s Agricultural Research Service is studying various aspects of biobutanol production. Biobutanol can be produced from cereal crops, sugar cane and sugar beet, etc, but can also be produced from cellulosic raw materials.

Late 2013, Butamax, a joint venture between BP and Dupont, began a butanol conversion project on Highwater’s Minnesota ethanol plant.  In December 2016, Green Biologics began commercial shipments of biobutanol from its Minnesota manufacturing facility, the prior Central MN Ethanol Cooperative LLC (CMEC). Cobalt Technologies is developing a demonstration plant in Brazil to convert sugarcane bagasse and other non-food feedstocks into biobutanol. Other companies developing butanol technology include Tetravitae Bioscience, and METabolic EXplorer France.

Dimethyl Ether

Dimethyl ether (DME) is a synthetically produced alternative to diesel for use in specially designed compression ignition diesel engines. Under normal atmospheric conditions, DME is a colorless gas. It is used extensively in the chemical industry as an aerosol propellant. DME requires about 75 pounds per square inch (psi) of pressure to be in liquid form. Because of this, DME’s handling requirements are similar to those of propane—both must be kept in pressurized storage tanks at ambient temperature. Though DME can be produced from biomass, methanol, and fossil fuels, the majority of U.S. production is from natural gas.

DME is a registered fuel through the EPA for either a cellulosic biofuel RIN or an advanced biofuel RIN through the Oberon process. No RINs have been generated to date from DMW since the feedstock used is natural gas.  Oberon was founded in 2010, and in 2013 opened its first commercial demonstration facility in Brawley, California.  In 2014, the first international consensus standard was published for DME, ASTM D7901.  In 2015, the state of California changed the state’s code of regulations to allow the legal sale of DME as a fuel.  In 2016, New York City’s Department of Sanitation became the world’s first customer to demonstrate a DME-powered truck.

Methanol

As an engine fuel, methanol has chemical and physical fuel properties similar to ethanol. Methanol was marketed in the 1990s as an alternative fuel for specially designed vehicles. At its peak in 1990, nearly 6 million gasoline gallon equivalents of 100% methanol and 85% methanol/15% gasoline blends were used annually in alternative fuel vehicles in the U.S.   Automakers no longer manufacture methanol vehicles in the U.S; however, it is used to some extent as an automobile fuel in China. It is used as racing fuel in many countries. In general, ethanol is less toxic and has higher energy density, although methanol is less expensive to produce.

Historically, methanol was first produced by destructive distillation of wood, resulting in its common name of wood alcohol. At present, methanol is usually produced using methane (the chief constituent of natural gas) as a raw material. In China, methanol is made for fuel from coal. Biomethanol is produced by gasification of organic materials to synthesis gas followed by conventional methanol synthesis. Carbon Recycling International, an Icelandic-American company, completed the first commercial scale renewable methanol plant in late 2012.  Worldwide, there are over 90 methanol plants with a production capacity of about 37 billion gallons; however, the far majority of the plants are not renewable (<0.01% biomethanol). About 80% of methanol production is based on natural gas, while the rest is based on coal (17%) and small amounts of oil.  At present, there are three commercial biomethanol plants in the world: Carbon Recycling International in Iceland, BioMCN in the Netherlands, and Enerkem in Canada.  The feedstocks are carbon dioxide from power generation, crude glycerin and biogas from municipal solid waste respectively. Unlike the prior mentioned emerging fuels, EPA has not yet approved a production pathway for methanol.

Renewable hydrocarbon biofuels have made significant contributions to the renewable fuel obligations in the U.S.; however, butanol, DME and methanol have not.  Just under one billion nonester renewable diesel RINs were generated in 2016. There are a couple of commercial biobutanol plants in the U.S. with one registered with the EPA.  Butanol has EPA registered renewable pathways with a 1.3 equivalence value for both advanced biofuel (D5) and for renewable fuel (D6).  126,000 D6 RINs were generated on biobutanol in 2016.  There is no commercial renewable DME plant in the U.S., though it is a registered renewable pathway.  DME is currently produced in U.S. from nonrenewable natural gas.  There is neither a commercial biomethanol plant in the U.S. nor is there a registered pathway.

Alternative fuels will be discussed and analyzed in greater detail in the upcoming release of our Crude and Refined Products Outlook.  This biannual publication evaluates the latest trends and drivers in the petroleum industry and will be published in February.  For more information on this and other TM&C products, call Shanda Thomas at 214-754-0898 or visit our website at turnermason.com.

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