2016 Bioenergy Industry Status Report

The 2016 Bioenergy Industry Status Report compiles and integrates information to provide a snapshot of the current state and historical trends influencing the development of bioenergy markets as of the end of 2016. The information is intended for technology developers, policymakers, and other bioenergy stakeholders interested in bioenergy industry development. The bioenergy economy engages multiple industrial sectors across the biomass-to-bioenergy supply chain—from agricultural- and forestry-based industries that produce biomass materials, to manufacturers and distributors of biomass-based fuels, products, and power, to the ultimate enduser markets. It also highlights some of the key energy and existing regulatory drivers that have impacted the bioenergy industry as it develops. The breadth of this report focuses on activities that occur after the production of biomass.

At the end of 2016, the U.S. bioenergy market (shown in Figure ES-1) was dominated by conventional starch ethanol production, which accounts for 72% of total U.S. bioenergy production. Biodiesel and biopower make up nearly all the remaining production, while other advanced biofuels contribute a relatively small but increasing amount. 1 Biofuels make up the largest portion (approximately 88%) of the current bioenergy market.

Figure ES-2 shows the development of the biofuels industry from 2007 through 2016. Policy combined with favorable market conditions during this time led to growth in the number and capacity of biofuels plants, as well as production. The build-out of starch-based ethanol plants and production was significant between 2006 and 2011, but since then, production has not grown as rapidly due to the E10 blend wall. Driven by advanced biofuels requirements under the Renewable Fuel Standard (RFS) (EPA 2017b), biodiesel production grew between 2011 and 2016. Advanced biofuels—which encompass a wide variety of fuels meeting RFS requirements for feedstocks, conversion pathways, and at least a 50% reduction in greenhouse gas emissions— continue to make increases in market penetration, accounting for just over 5% of the bioenergy market in 2016

Ethanol serves as a substitute for gasoline and as an octane enhancer. At the end of 2016, nearly all commercial ethanol biofuel production was from conventional corn starch-based feedstock. The cost of conventional ethanol is driven by the price of corn grain, production costs, and the sale of coproducts such as distillers grains, and it is influenced by gasoline prices. At current levels of use, the nation is essentially at a blend wall—where the entire market for E10 (a blend of 10 volume percent ethanol into a gallon of gasoline) is met with conventional ethanol. While there are nearly 20 million flexible-fuel vehicles on the road today that can use higher ethanol blends up to E85, a majority of those vehicles are refueling with E10 gasoline.

Demand for ethanol could increase in future years because of the U.S. Environmental Protection Agency’s (EPA) approval in 2011 of the use of E15 (a blend of 10.5% to 15% ethanol with gasoline) in existing vehicles model year 2001 and newer. The availability of E15 increased in 2016 as retail stations installed E15 and/or E85 equipment with funding from the U.S. Department of Agriculture, states, and private industry.

Cellulosic ethanol production increased from 2.2 million gallons in 2015 to 3.8 million gallons in 2016 (EPA 2017a). To accommodate increased production from cellulosic ethanol biorefineries, the domestic ethanol market would need to grow or exports would need to increase. The RFS requirement for cellulosic biofuels alone may not be enough to encourage investors, given current market conditions, such as reduced oil prices and more fuel-efficient vehicles.

Economic impact analysis by industry estimates that ethanol’s contribution to the U.S. gross domestic product increased from $17.7 billion annually in 2005 to $42 billion in 2016 (Urbanchuk 2017). The number of direct jobs has decreased, with 87,883 during the rapid buildout of plants in 2005 to 70,911 in 2016.4 The contribution of federal tax revenue from corn ethanol grew from $1.9 billion in 2005 to $4.9 billion in 2016.

Biodiesel production has generally increased during the past 10 years, primarily driven by two policies—the RFS and the biodiesel production tax credit. Economic impact analysis by industry (NBB 2016) estimates the biodiesel industry economic impact increased from $1.4 billion annually in 2006 to $8.4 billion in 2015.5 The number of direct jobs biodiesel supported increased from just fewer than 7,000 in 2006 to more than 47,400 in 2015.4 Wage impacts increased from $260 million in 2005 to $1.9 billion in 2015, implying that the average job supported by the biodiesel sector paid a wage of approximately $39,300/year in 2015.

Renewable hydrocarbon biofuels, sometimes referred to as “drop-in fuels,” meet ASTM International (ASTM) fuel quality specifications for gasoline, diesel, and other petroleum fuels that allow them to be used in existing engines and infrastructure (AFDC 2017a). Biojet fuel contributed to the RFS advanced biofuel category for the first time in 2016. Renewable hydrocarbons are produced from biomass sources through a variety of biological, chemical, and thermal processes. At the end of 2016, there were four commercial facilities with a combined capacity of 280 million gallons per year (MMGY) (Warner, Schwab, and Bacovsky 2017).6 These plants include AltAir Fuels, focusing on renewable jet fuel, and Cetane Energy, Diamond Green Diesel, and Renewable Energy Group, producing renewable diesel. Diamond Green Diesel is expanding capacity of its existing facility by 115 MMGY and East Kansas Agri-Energy is adding a 3-MMGY renewable diesel facility to their existing ethanol plant using corn oil as a feedstock. Emerald Biofuels, Fulcrum BioEnergy, Red Rock Biofuels, and SG Preston each have planned commercial plants with announced combined capacity of 448 MMGY. In 2016, 5 demonstration and 14 pilot projects were operating with 1 demonstration and 1 pilot project scheduled to become operational sometime after the end of 2016.

In 2016, biopower accounted for 10% of all renewable energy produced in the United States and about 1.5% of total electricity generation. While the installed biopower capacity has been increasing over the past 10 years, biopower generation has remained almost flat during that period. In 2016, the top five states with the largest biopower generation were California, Florida, Georgia, Virginia, and Maine. Today, most of the biopower is generated from woody biomass, including byproducts (e.g., black liquor) and solids (e.g., railroad ties and utility poles) and residues such as pulp and paper mills or sawmills (EIA 2017c). Economic impact analysis estimates that a 50-megawatt (MW) dedicated biomass power plant utilizing direct combustion and using corn stover as feedstock could support about 25 direct on-site jobs during its operation (NREL 2014). A typical 3-MW landfill gas electricity project can directly create 5 jobs and indirectly create another 20 to 26 jobs during the construction year (Pierson 2013). Over their life, landfill gas projects are expected to add more than $1.5 million in new project expenditures and increase the statewide economic output by $4.1 million (Pierson 2013).

Renewable natural gas (RNG), or biomethane, is a pipeline-quality gas that is interchangeable with conventional natural gas and thus can be used in natural gas vehicles in compressed or liquefied form. RNG qualifies as a cellulosic biofuel under the RFS and is currently the main contributor to this fuel category (cellulosic ethanol provides a minor input). EPA reports that about 189 million ethanol gallon equivalents, or roughly 14.3 TBtu of compressed and liquefied RNG, were produced under the RFS program in 2016. This volume accounts for only 3.3% of the estimated RNG potential in the United States (NREL 2013).

Conventional bioproducts and emerging bioproducts are two broad categories used to classify products produced from biomass feedstocks. Examples of conventional bioproducts include building materials, pulp and paper, and forest products. Examples of emerging bioproducts include bioadhesives, biopolymers, and biochemicals. Emerging bioproducts are active subjects of research and development, and these development efforts have been driven by the price of traditionally petroleum-based products, the environmental impact of petroleum use, and an interest in becoming more independent from foreign oil. Bioproducts derived from bioresources can replace (either directly or indirectly) some of the fuels, chemicals, plastics, etc., that are currently derived from petroleum. Bioproducts can enable the production of bioenergy, either as coproducts to improve the economics of the primary fuel product in an integrated biorefinery, or as enablers in developing technologies and processes essential to the long-term production of biofuels and bioenergy. This report considers four types of bioproducts: (1) platform and intermediate chemicals (emerging bioproducts), as well as the conventional bioproducts (2) lignin, (3) biochar, and (4) wood pellets.