MANY in the United States are counting on renewable fuels — such as ethanol and biodiesel — to help this country break its addiction to imported oil. However, achieving that goal means overcoming some steep hurdles.
Cost-effective feedstocks are a must, along with more efficient production operations. Major improvements also are needed in the distribution process for renewable fuels. Critical links in the distribution chain that need to be optimized include storage and terminaling operations.
A series of speakers addressed the outlook for renewable fuels during the Independent Liquid Terminals Association's 27th annual International Operating Conference & Trade Show June 11-13 in Houston, Texas. They took a close look at the logistics challenges that must be addressed by the renewable fuels industry and distribution chain participants.
Featured speaker Merrill Kramer with Chadbourne & Parke LLP pointed out renewable fuels must be cost competitive with petroleum-based fuels to succeed in the marketplace. “Most consumers will buy green fuels only so long as it doesn't cost them anything extra,” he said. “Biofuels currently are not a low-cost alternative to traditional energy sources. Without the current blending tax credits, US corn-based ethanol would break even at best, and biodiesel would lose 30 to 70 cents a gallon.”
Distribution issues
Factors affecting biofuels price include a transportation and distribution system that is less efficient than the process that has evolved for refined petroleum fuels. Barge, rail, and truck are the primary transport modes. Pipeline is the missing link.
“Pipelines will be a big factor for the long-term viability of biofuels,” Kramer said. “The potential for dedicated biofuel pipelines is being discussed. For instance, Sen Tom Harkin (D-IA) has proposed legislation that would award funds to study the feasibility of dedicated ethanol pipelines.
“These pipelines could link high-density ethanol areas such as Iowa and Minnesota with the large East Coast markets. These pipelines could be feasible if use of E85 becomes widespread, but they will be very expensive to build ($1 million to $2 million per mile). Investors are unwilling to put up that kind of money without an E85 mandate to support the effort.”
Broader, more aggressive mandates are a distinct possibility. The current federal mandate calls for 7.5 billion gallons of renewable fuels in the United States by 2012. However, proposed legislation would increase the mandate to 35 billion gallons by 2017. Ethanol would account for a majority of the renewable fuel under both mandates.
Interest in renewable fuels certainly is growing, but the market is still quite small. Global ethanol production currently equals approximately 0.6% of the world's crude oil consumption. Biodiesel accounts for less than 0.1% of global oil demand.
Brazil and the United States account for 90% of the global ethanol production and consumption. The primary ethanol feedstock is corn in the United States and sugar cane in Brazil.
Used as a gasoline blendstock or substitute, ethanol appears to have no noticeable impact on vehicle performance. It has a higher octane rating than gasoline but 20% to 25% lower energy content. Higher blend percentages require some engine modifications.
Kramer said that US ethanol production is growing at record levels. “Production capacity grew an impressive 109% from 2000 to 2004,” he said. “The industry currently produces 5.5 billion gallons of ethanol annually, and production capacity is projected to reach eight billion gallons a year by the end of the decade. Ethanol could represent the single most important source of additional US gasoline supply in the next four years.”
Biodiesel also has experienced impressive growth, but marketshare is still a small fraction of ethanol. Kramer pointed out that the biodiesel industry is still in its infancy. It is much smaller and more fragmented than the ethanol industry.
However, biodiesel has good potential for the future. Made from animal fats or vegetable oil, biodiesel generates lower overall emissions than petroleum diesel. Biodiesel also has similar energy content to petroleum diesel, and little or no engine modification is required.
Europe currently is well out in front of the United States when it comes to biodiesel. The European market accounts for 80% of the biodiesel supply and demand, and 60% of all new cars sold in Europe have diesel engines. Biodiesel demand also is expected to grow briskly in China and India over the next few years.
Strong inroads
Biodiesel has made strong inroads in the United States, and demand has grown dramatically, according to Paul J Nazzaro, director of petroleum outreach for the National Biodiesel Board. Demand should reach approximately 400 million gallons by the end of this year, up from 250 million gallons in 2006.
Biodiesel demand is being driven by several factors, especially a growing desire in the United States for energy independence. Environmental benefits also play a big role. Emissions — especially carbon dioxide — are reduced, and biodiesel is less toxic and more biodegradable than petroleum diesel.
Distribution chain challenges may pose the biggest negatives for biodiesel, Nazzaro said. Truck transportation costs around 20 cents a gallon, and rail rates average 10 cents a gallon. Barges get the cost down to about four cents a gallons, but barges can't serve many parts of the United States.
Pipeline shipments would cost slightly more than two cents a gallons, but the pipeline companies won't accept any petroleum shipment containing biodiesel. Nazarro said successful pipeline test shipments have been made with a B5 blend, and he believes pipeline shipments will be the make or break factor for biodiesel.
Terminal role
Petroleum terminals will be another critical factor in the success of biodiesel. Nazzaro said 37 major petroleum terminals in the United States have the infrastructure in place to guarantee success in the distribution of biodiesel blends. Other terminals serving the petroleum sector need to come up to speed.
Terminal managers must make a careful evaluation of existing facility assets. They need to ensure that tanks and piping are made of materials that are compatible with biodiesel. For instance, biodiesel forms high sediment levels when it comes in contact with brass, bronze, copper, lead, tin, and zinc. Pure biodiesel can damage seals and hoses made of elastomers manufactured from natural or nitrile rubbers.
Materials that are compatible with biodiesel include stainless steel, aluminum, fluorinated polyethylene, fluorinated polypropylene, Teflon, and most fiberglass. Seals and hoses made of Teflon, Viton, fluorinated plastics, and Nylon work best with pure biodiesel.
Preparing storage tanks for biodiesel and biodiesel blends includes proper placement of the water draw-off system and development of a procedure for detecting water accumulation in the fuel. Maintenance personnel need to be aware that the solvent properties of biodiesel can cause tank sediments to plug filters when a tank is shifted to biodiesel service.
At smaller terminals, biodiesel should be blended with petroleum diesel even during storage, Nazzaro said. Blended product should be stored at temperatures at least 15 degrees above the cloud point. Stabilizers, cold flow improvers, and biocides may be needed to protect the biodiesel blends.
Blending is a critical step in the biodiesel handling process at the terminal. Nazzaro urged the storage terminal industry to transition from splash blending to electronic metered systems for biodiesel. Automated systems make it possible to optimize blend ratios and ensure the quality of the finished fuel.
Storage terminals also must be configured properly for ethanol and ethanol/gasoline blends, according to Kristin Moore, director of technical services at the Renewable Fuels Association. Among other considerations, terminals may need the flexibility to receive inbound shipments of ethanol by truck, single railcars and unit trains, and ship or barge.
Storage tanks should be constructed with a closed roof, bottom sampling, and vapor recovery. Moore recommended epoxy linings to prevent stress corrosion cracking in steel tanks. Carbon steel and stainless steel tanks and hardware are acceptable for ethanol, but soft metals such as brass and bronze must be avoided.
Terminals also must avoid using natural rubber seals and hoses around ethanol and ethanol blends. The best materials are Viton, Teflon, fluorinated plastics, polypropylene, and neoprene.
Moore stressed that greater thought must be given to emergency response. Ethanol fires pose some serious challenges for firefighters and emergency responders. She reviewed steps being taken to raise awareness of ethanol risks.
The Ethanol Emergency Response Coalition was established. Participants include the National Fire Protection Association, ILTA, International Association of Fire Chiefs, Ansul Inc, Industrial Fire World, VaDem, and the Fire Fighting Foam Coalition.
The Renewable Fuels Foundation funded a fire safety video to teach first responders how to fight an ethanol fire. Additional emergency response training materials also are being provided to ethanol manufacturers and fire departments.