Best stock to invest in
Where are butanol and other substitutes for gasoline?
A reader writes:
I’d hoped that the biofuels crowd
would have gotten beyond ethanol by now.
The industry has made progress
creating all kinds of specialty chemicals from renewable sources
and more or less successfully brought them to market. There’s
jet and diesel in commercial use whether or not they’re yet
However they have made zero
commercial progress on anything other than ethanol for gasoline.
All the major advances have involved better and better ways to
crank out ethanol. I don’t see the auto industry co-operating by
switching to E85 or E100 technologies, particularly when we’re
in the midst of a very long term bear market for oil.
Is there some fundamental reason
that the automotive biofuels people haven’t shifted to butanol
or iso-butanol or some other compound that would be more
compatible with gasoline and the present highly evolved gasoline
engines? Is there some fundamental thermodynamic barrier that
makes conversion of biomass to butanol impossible?
So, what happened?
For sure, the quick answer is “new fuels are on the way” — Gevo
is producing in small quantities, but it is producing at a
commercial-scale facility and selling fuels. Butamax has been less
visible in terms of timelines, but they also produce isobutanol
from corn sugars. And Global Bioenergies is making progress with a
renewable gasoline made from isobutene.
Why so few technologies, why so little commercial progress on
gasoline substitution, excepting ethanol?
The chemistry of value
The answer lies to some extent in what we might term “the
chemistry of value”. Theoretical yields for making isobutanol from
sugars, for example, hover in the 41 percent range, while
theoretical ethanol yields are in the 51 percent range. Yields for
making isoalkanes and aromatics from sugar— typical components of
gasoline — are in the low 40s, too.
Right now, the September ethanol contract at CBOT is pricing at
$1.46 while the RBOB gasoline price is pricing at $1.49.
So, there’s a 2 percent gain in the price to compensate for a 20
percent drop in the yield.
Now, you probably at this stage would mention the higher RIN
values associated with advanced biofuels. Right now, D5 advanced
biofuel RINs are selling for roughly the same price as D6 corn
ethanol RINs. Absolutely, you get 1.3 RINs for a gallon if
isobutanol vs 1.0 RINs for a gallon of ethanol, because of the
higher energy density of butanol, but it washes out when you take
into account the lower yield in gallons.
So, right now, the market is not rewarding isobutanol makers with
a premium price in the road transport market. Sadly, not in the
jet fuel market, either.
The two bright spots
Areas of opportunity?
One is the cellulosic fuel market. There is a substantial set of
premiums relating to carbon incentives available for cellulosic
feedstocks. But, the processes to produce substitutes for
gasoline, besides ethanol, from cellulose are still in the R&D
Another is the marine market. There, boat owners, for a variety
of reasons generally going back to boat construction materials,
prefer an ethanol-free product. In this case, isobutanol is not
competing against E10 ethanol-gasoline blends. Rather, they are
competing against straight gasoline.
The marine opportunity for isobutanol
We have direct evidence that isobutanol is selling in 12.5
percent blends for a “more than 50% premium” compared to E10 fuel
reported on this here).
Right now, that’s around $3.23 per gallon.
Now, one of the attractive uses of an isobutanol fuel in the
marine sector is that marinas are not obligated parties under the
Renewable Fuel Standard, but isobutanol is a qualifying fuel.
Hence, a marina owner can blend a gallon of renewable fuel and
detach the RIN that comes with every gallon of renewable fuel, and
sell it into the marketplace.
Those RINs are
selling today at $0.89 each, and you get 1.3 of them for
every gallon, as we mentioned above. That’s another $1.16 in
Total value created, $4.39 per gallon. That’s
excluding value created from a bushel of corn with the distiller’s
grains — that’s just the fuel fraction.
Gevo’s production price?
affirmed that they remain on track to reach a production
cost of $3.00-$3.50 per gallon for isobutanol by the end of the
year — as long as corn doesn’t get more expensive.
How much of that retail value goes to the producer?
Now, remember that the ExpressLube value we mentioned is the
retail value, and the retailer gets that RIN, as well, although
its value contributes to the price a wholesaler will pay for the
product. Gevo says that it a net market price of $3.50-$4.00 per
gallon for isobutanol, so long as distiller’s grains do not lose
The Bottom Line
The marine market is where its at, for isobutanol, in the
near-term. The economics on road transport furls have to improve a
bit before we are going to see more substitutes for gasoline,
Jim Lane is editor and
publisher of Biofuels Digest where this
was originally published.
Biofuels Digest is the most widely read Biofuels daily read
by 14,000+ organizations. Subscribe
– Best stock to invest in