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Wednesday, June 06, 2007 Building Better BiofuelsStartup LS9 is developing microbes that produce hydrocarbons. By Neil Savage
The U.S. Department of Energy has set a goal of replacing 30 percent of gasoline used in the United States with fuels from renewable biological sources by 2030, and President Bush has made ethanol production a priority. So it is hardly surprising that some biotech startup companies are positioning themselves to take advantage of an anticipated booming market for biofuels. While much of the focus is on ethanol, LS9, of San Carlos, CA, is using the relatively new field of synthetic biology to engineer bacteria that can make hydrocarbons for gasoline, diesel, and jet fuel. Hydrocarbon fuels are better suited than ethanol to existing delivery infrastructure and engines, and their manufacture would require less energy. To make biological production of hydrocarbons a reality, the company is bringing together leaders in synthetic biology and industrial biotechnology. LS9 is at a very early stage: the company was formed in 2005, but its existence was announced only this winter. It plans to engineer microbes to incorporate gene pathways that other microbes, plants, and even animals use to store energy. Other startups, such as Amyris, of Emeryville, CA, and SunEthanol, of Amherst, MA, are also trying to use synthetic biology to develop microorganisms that produce biofuels. Stephen del Cardayre, a biochemist and LS9's vice president for research and development, says LS9 microbes produce and excrete hydrocarbons that are useful as fuels. Now the company is working to customize the rate of production and the products themselves. e certainly have gone beyond what we think anybody else was even thinking of doing" in terms of producing hydrocarbons from microbes, says George Church, a geneticist at Harvard Medical School and one of LS9's two founders. The other is Chris Somerville, professor of plant biology at Stanford University. The company has $5 million in funding from Khosla Ventures, of Menlo Park, CA, and Flagship Ventures, of Cambridge, MA. Its acting CEO, Douglas Cameron, is former director of biotechnology research at Cargill and chief scientific officer at Khosla Ventures. Flagship CEO Noubar Afeyan cautions that no one can tell the extent to which any biofuel will displace fossil fuels. "That is a subject of great debate and great prognostication," he says. "The opportunity is so large that I don't have to believe in much more than a few percentage points of market penetration for it to be worth our investment." The company is looking for areas where synthetic biology's potential to produce specific types of molecules will pay off. This could mean making high-performance jet fuel, Afeyan says, or it could mean creating gasoline that has no pollution-causing sulfur content. Beyond custom-developing hydrocarbons, LS9 foresees licensing its technology. In particular, the company might someday forge agreements with ethanol producers, whose manufacturing plants could be put to more profitable and efficient use making hydrocarbon fuels. LS9 is counting on the fact that ethanol is not really the best biofuel. Del Cardayre notes that ethanol can't be delivered through existing pipelines. It also contains 30 percent less energy than gasoline, and it must be mixed with gasoline before being burned in conventional engines. LS9's fuels would have none of these disadvantages. What's more, LS9's fuels might be produced more efficiently than ethanol. For example, at the end of ethanol fermentation, the mixture has to be distilled to separate ethanol from water. LS9's products would just float to the top of a fermentation tank to be skimmed off. Overall, the LS9 process consumes about 65 percent less energy than today's ethanol production, the company says. LS9 now needs to prove that its technology is economical and can produce fuels on a large scale, says Jim McMillan, principal biochemical engineer in the National Renewable Energy Laboratory's Bioenergy Center, based in Golden, CO. "I don't doubt that [making hydrocarbon fuel from microbes] can be done; the question is how quickly and at what cost," he says. LS9 says it hopes to bring its hydrocarbon biofuels to market in four or five years. |
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Synthesizing a Genome from Scratch
01/25/2008
Comments
colinnwn on 06/06/2007 at 8:49 PM
9
Creating ethanol with current technology drives up the price of food as whatever you make it out of displaces food crops. Corn is normally used, so the price of it and beef rise most.
For alternative energy sources you need something that can take waste feed stocks and convert it to a useable power source with minimal additional energy input. Here is hoping LS9, among other bioengineering firms, will be successful.
Brian H on 06/16/2007 at 4:53 AM
24
Sawgrass, anyone?
Boilerman on 06/29/2007 at 3:45 PM
3
Note: this is not the complete report with charts, however it will give you the true picture.
For more information and the full report,
Contact:
Kristin Brekke, Communications Director
kbrekke@ethanol.org / (605) 334-3381
Evidence indicates corn for ethanol not to blame for food prices
Today’s USDA report shows large corn crop in the ground, ample supply for food, feed and fuel
Sioux Falls, SD (June 29, 2007) – With the summer season beginning amid reports of price increases in the grocery store aisle, the American Coalition for Ethanol (ACE) urges consumers and the media to examine the role that energy prices play in food costs before joining the chorus of ethanol critics conveniently blaming higher grocery prices on corn.
New research, conducted recently by economist John Urbanchuk of LECG, LLC, found that rising energy prices have twice the impact on the Consumer Price Index (CPI) for food than does the price of corn. The full report, “The Relative Impact of Corn and Energy Prices in the Grocery Aisle,” is available at this link or on the ACE website, www.ethanol.org.
The study finds that “a 33 percent increase in crude oil prices results in a 0.6 percent to 0.9 percent increase in the CPI for food, while an equivalent increase in corn prices would cause the CPI for food to increase only 0.3 percent.”
This shows that increasing petroleum prices have at least twice the impact on consumer food prices as an equivalent increase in corn prices. Consumers might pay an additional $10 for groceries due to corn prices, but at the same time they pay an additional $20 to $30 due to escalating fuel prices.
“Critics of ethanol are stirring controversy where none exists, because higher food prices have more to do with $3.50 per gallon fuel than with $3.50 per bushel corn,” said Brian Jennings, ACE Executive Vice President. “While corn prices might add $10 per year to a person’s grocery bill, skyrocketing gasoline prices are taking an additional $10 a week out of peoples’ pocketbooks.”
While corn is an ingredient in only some grocery items – mainly livestock, dairy, and poultry – all grocery items are dependent upon energy for production, processing, packaging, and shipping.
These non-farm costs make up the majority of the real cost of food; according to the USDA, 81 cents of every food-cost dollar pays for expenses such as labor, packaging, advertising, transportation, and energy costs.
“If corn prices due to ethanol demand do indeed add a couple of cents per day to Americans’ food bills, this is a great value for creating thousands of new American jobs, breathing cleaner air, saving billions in farm program costs, and lessening our dependence upon expensive imported oil and gasoline,” Jennings said.
Since January of this year, the retail price of gasoline has gone up by more than a dollar. These record or near-record gas prices cost Americans an additional $500 a year just to fuel up their vehicles, not to mention the increased prices paid for all manner of consumer goods dependent upon transportation.
“Record high oil and gasoline costs are cutting deeply into American consumers, and the only way to shake off the heavy burden of fuel costs is to find alternatives,” Jennings said. “Ethanol is the most real, meaningful alternative fuel available today – a true bright spot in an otherwise bleak energy supply picture. Ethanol is part of the solution, and the farmers and entrepreneurs of the U.S. ethanol industry are taking action to help America get its energy situation in order.”
USDA reports largest corn crop in the ground since 1944
The U.S. ethanol industry’s brisk rate of growth has helped contribute to corn prices climbing from chronic below-two-dollar levels. U.S. corn producers are responding to these market signals and to the higher demand for corn, reporting in this springs USDA Prospective Plantings Report their intention to plant 15 percent more acres to corn than last year, the highest level since 1944.
This morning’s USDA acreage report shows that this corn crop planting did indeed materialize, with U.S. farmers today reporting an even larger 92.9 million acres planted to corn in 2007.
“Farmers base planting decisions upon market signals, and these 92 million acres planted to corn show that the supply and demand of the marketplace is functioning as intended. There will be an ample supply of corn this year to meet all important needs – food, feed, and fuel,” Jennings said. “Despite a clearly coordinated public relations attack by special interest groups trying to pin food price increases on the ethanol industry, the evidence doesn’t support the accusations. Recent votes on the pending Energy Bill, HR 6, adopted by the U.S. Senate by a margin of 65 to 27, reinforce this fact.”
The American Coalition for Ethanol (ACE) is the grassroots voice of the U.S. ethanol industry, a national trade association for the ethanol industry with nearly 2000 members nationwide, including farmers, ethanol producers, commodity organizations, businesses supplying goods and services to the ethanol industry, rural electric cooperatives, and individuals supportive of increased production and use of ethanol. For more information about ethanol or ACE, visit www.ethanol.org or call (605) 334-3381.
The Relative Impact of Corn and Energy Prices in the Grocery Aisle
By: John M. Urbanchuk
Director, LECG LLC
June 14, 2007
Retail food prices measured by the Consumer Price Index (CPI) for food have begun to accelerate
and are beginning to approach rates of increase last seen in mid2004.
Critics of renewable fuels are
blaming the recent increases on high prices for corn caused by increasing ethanol production.
They fail to point out that corn prices are only one of many factors that determine the CPI for food, and in fact, directly affect a small share of retail food prices.
Increases in energy prices for example exert a greater impact on food prices than does the price of corn.
A 33 percent increase in crude oil prices –
which translates into a $1.00 per gallon increase in the price of conventional regular gasoline –
results in a 0.6 percent to 0.9 percent increase in the CPI for food while an equivalent increase in corn prices ($1.00 per bushel) would cause the CPI for food to increase only 0.3 percent.
The purpose of this study is to examine and compare the impact on consumer food prices resulting from increases in petroleum and corn prices.
The ethanol and corn industries are under attack by a wide range of critics for causing everything
from sharply higher food prices for American consumers to shortages of and high prices for Mexican tortillas and even potentially higher tequila prices.
Expansion of the ethanol industry to meet clean
air standards and reduce dependence on imported petroleum has boosted demand for corn, the
primary feedstock for U.S. ethanol.
This increased demand has caused corn prices to rise to their highest levels since the drought of 1995.
Critics contend that the recent increase in retail food prices measured by the CPI for food is the direct result of higher corn prices caused by ethanol demand and that an even larger increase in food prices is in store for American consumers.
The actual record on the relationship between ethanol, corn, and retail food prices is less clear.
Over the past five years, ethanol production has more than doubled, increasing from 2.14 billion gallons in 2002 to 4.86 billion gallons in 2006.
Over this same period, the demand for corn to produce ethanol has grown from 996 million bushels to 2.2 billion bushels.
Over most of this period, cash market 2 corn prices were relatively stable.
From January 2002 through September 2006, corn prices averaged $2.18 per bushel.
However, between September 2006 and May 2007, corn prices jumped 61 percent to $3.56 per bushel in May 2007.
During this same period, the CPI for food averaged a year over year increase of 2.4 percent. In fact, the inflation rate for food declined from a five year peak of 4.1 percent in May 2004 to a 2.5 percent year over year rate in September 2006.
However, since September 2006 the CPI for food has
accelerated to a yearoveryear rate of 3.7 percent in April 2007, an increase of 1.2 percent.
During this same period, cash market corn prices increased $1.15 per bushel. While it is tempting to blame the entire increase in food price inflation over the past eight months on higher corn prices, most of the increase in food prices was the result of foods not impacted by corn such as fish, fruits and vegetables, sugar and sweeteners, and food away from home. Meat, poultry, eggs, and dairy products – the foods where corn is a major input and are most affected by rising corn prices – accounted for about 0.2 percent of the 1.2 percent acceleration in food price inflation between September 2006 and April 2007.
Rising energy prices had a more significant impact on food prices than did corn.
The shift in corn prices that occurred in late 2006 is 3 clearly evident and has been mirrored by soybean meal and Distiller’s grains. During this same period energy price also accelerated rapidly.
For example, the national average price of conventional regular gasoline increased 89 cents per gallon (39 percent) between October 2006 and May 2007.
Livestock and poultry producers are beginning to respond to higher feed costs by slowing the growth
in animal numbers and market prices are reflecting these changes.
However, corn prices are only one of several factors that impact livestock and meat production.
Heavy cow and calf slaughter and early placement of feeder cattle in feedlots have combined
with poor fall and winter pasture conditions and higher grain prices to set the stage for slower growth in cattle numbers through early 2008.
This will in turn slow growth in beef production in 2008 and support higher beef prices.
Growth in hog inventories are expected to be constrained by higher feed costs. However,
this will be offset by growth in domestic demand supported by a stronger consumer economy and increases in exports as China turns to the U.S. to offset sharply reduced domestic pork production.
Higher feed costs will dampen broiler producer’s zest to sharply expand production.
However, producers will respond to higher prices for red meat and growth in real disposable income that will support demand growth. This will moderate any potential sharp increases in broiler prices in 2008.
Analysis:
Retail food prices are not likely to accelerate significantly in 2008 and beyond, even as ethanol
production continues to expand.
In fact, consumers will be more severely affected by rising gasoline and energy prices than by increases in corn prices.
Increasing petroleum prices have about twice the impact on consumer food prices as equivalent
increases in corn prices.
A 33 percent increase in crude oil prices – the equivalent of $1.00 per gallon over current levels of retail gasoline prices – would increase retail food prices measured by the CPI for food by 0.6 to 0.9 percent.
An equivalent increase in corn prices – about $1.00 per bushel over current levels – would increase consumer food prices only 0.3 percent.
The reason for the larger impact on food prices from petroleum and energy prices stems from the
relative importance of energy in food production, packaging, and distribution compared to that of a
single ingredient.
While petroleum and energy prices affect virtually all aspects of agricultural raw material transportation, processing, and distribution of all finished consumer food products, corn prices affect only a segment of consumer foods – livestock, poultry and dairy.
Corn is an important feed ingredient for livestock and poultry producers and changes in corn prices can have significant impacts on profitability and production. However, meat, poultry, fish, eggs and dairy products
account for only a fifth of the CPI for food which, in turn, is only 15 percent of the overall CPI.
Crude oil and refined petroleum prices have increased sharply over the past several years and have put considerable pressure on consumers.
Energy plays a significant role in the production of raw agricultural commodities, transportation and processing, and distribution of finished consumer food products.
Several studies have looked at the impact of increased energy prices on food prices.
Reed, Hanson, Elitzak and Schluter utilized three different model structures to examine the
impact of a doubling of crude oil prices on the CPI for food.
They conclude that the short run impact of a doubling (e.g. 100 percent increase) in crude oil prices would cause a 1.82 percent rise in average food prices in the short run and 0.27 percent in the long run.
A more recent analysis published by Chinkook Lee examined the impact of energy price increases as an intermediate input for food processing and concluded that a 10 percent increase in energy prices results in a 0.2709 percent increase in the purchase (consumer) price of food and kindred products prices.
As pointed out, earlier corn prices also have increased significantly over the past year as the markets have recognized the impact of increasing ethanol production on corn demand.
The price of No. 2 Yellow corn at Central Illinois averaged $3.56 per bushel in May 2007, nearly 60 percent higher than year ago levels.
The USDA and many private sector forecasters project ethanol production to 1 A.J. Reed, Kenneth Hanson, Howard Elitzak, and Gerald Schluter.
“Changing Consumer Food Prices:
A User's Guide to ERS Analyses”. USDA Economic Research Service. Technical Bulletin 1862.
June 1997.
Lee, Chinkook. “The Impact of Intermediate
Input Price Changes on Food Prices:
An Analysis of “From the Ground Up”
Effects.” Journal of Agribusiness 20, 1 (Spring 2002).
Exceed 15 billion gallons by 2017, utilizing more than 4 billion bushels of corn and maintaining corn prices well above $3.00 per bushel for most of the decade.
We evaluated the impact of an increase in petroleum prices on consumer prices food prices by
applying the impact elasticities summarized above to an assumed 33 percent increase in crude oil
(the equivalent of a $1.00 increase in retail gasoline prices from current levels).
To determine the impact of an increase in corn prices on livestock, poultry, dairy and consumer food prices we imposed a 33 percent increase in corn prices (about $1.00 per bushel from current levels) on the current LECG agricultural sector baseline forecast over the five year period 2007 through 2012.
This is consistent with the increase in corn prices that has occurred over the past year.
The analyses by Reed and Lee indicate that a 33 percent increase in oil/energy prices would increase retail food prices by 0.6 percent and 0.9 percent. Reed indicates that a 100 percent increase in crude oil prices results in a short term increase of 1.82 percent in consumer food prices while Lee reports that a 10 percent increase in energy prices provides a 0.2709 percent increase in retail food prices.
Restating these on an equivalent 33 percent basis (1.82 percent times .33 and 0.2709 times 3.3)
provides the 0.6 to 0.9 percent range.
The equivalent 33 percent increase in corn prices over the five year period is expected to reduce beef, pork, and broiler production by 2.6 percent between 2008 and 2012 and increase prices by 2.4 percent. Combined with higher turkey, egg, and dairy prices, the CPI for food is projected to increase an additional 0.3 percent.
This result is consistent with the 0.2 percent
contribution to food price inflation between September 2006 and April 2007 from meat, poultry, fish and dairy and the $1.15 per bushel increase in cash market corn prices.
The days of cheap corn are more likely than not over.
Livestock and poultry producers who enjoyed
low and relatively stable corn (and other feed) prices over most of the past decade are now faced
with the challenge of adjusting to an environment of higher feed prices.
The new reality is that corn prices are likely to remain nearer to the $3.00 per bushel than the $2.00 per bushel mark for an extended period.
The good news is that prices may be more stable as corn production expands to meet ethanol requirements and new ethanol feed stocks and technologies emerge.
Livestock and poultry producers also will have an incentive to increase use of the ethanol co-product
Distiller’s grains in order to control feed costs.
This medium protein feed component can be used in place of corn in a substantial portion of the feed ration.
As ethanol production expands, so will production of Distiller’s grains and thus putting downward pressure on prices.
Corn and energy prices both affect consumer food prices. However, since increases in corn prices
are limited to a relatively small portion of the overall CPI for food, an increase in corn prices
resulting from higher ethanol demand or a supply disruption such as a major drought is expected to
have about half the impact of the same percentage increase in petroleum and energy prices.
Snake Oil Baron on 06/06/2007 at 10:27 PM
1
It is too bad that a way can not be found to use electrical energy to power the making of hydrocarbons of any desired length - maybe using mechanically mounted artificial enzymes - in the far future of course. If I ever get three wishes I will use that as my second one.
fredricw5 on 11/03/2007 at 9:37 AM
1
The main advantage and disadvantage of fuel ethanol is that it produces very little heat on combustion. The other main disadvantages are that it evaporates and is hygroscopic. It is likely that there will be catalytically converted variations that overcome some of these problems. Dimethylfuran is very exciting, but at the moment, dimethylfuran is an industrial fuel.
Fuel alcohol, biogas and possibly bio-butanol are exciting because they can be produced as low-tech rural fuels, which means income and fuel for family farmers, and also fuels that are essentially produced for free from wastes that can either be used to make fuels or are thrown away.
Home brew fuel ethanol produced lazily with a solar still is an easy vehicle fuel, especially for warm weather. It has 30% less energy density than gasoline, but higher octane. It’s a clean fuel, which means an engine will last at least twice as long or longer, and a really simple air-cooled or not-cooled engine will work, like a motorcycle engine or VW bug engine without pollution controls, cooling, and other paraphernalia that gasoline engines need.
There are major advantages to having low-tech fuels that can be on farms, ranches and Third World refugee settlements.
The advantage of the rush into ethanol production facilities is that they can be converted. The main biofuel future, will be in designer bacteria, and probably also in bio-butanol (a bacterial fermentation alcohol that blends with gasoline and can be transported with gasoline) and cellulosic bioconversion. Once a farmer can comfortably live on 20 acres, the face of rural America will dramatically change.