Ethanol From Lignocellulosics Feasibility Study

8/4/2019 Ethanol From Lignocellulosics Feasibility Study

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ETHANOL-FROM-LIGNOCELLULOSICS

THE FEASIBILITY OF

AN INDUSTRIAL-SCALE DEMONSTRATION

OF AN

INTEGRATED CONVERSION PROCESS

GORTON TIMBER COMPANY PTY. LIMITED

DECEMBER 1994


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TABLE OF CONTENTS

Chapter 1 Overview and Summary

1.1 Background 1

1.2 The Utility of Lignocellulosics 21.3 The Fuel Economy 31.4 The Conversion of Lignocellulosics to Liquid Fuels 41.5 Ethanol and Lignin from Lignocellulosics 51.6 The Potential for Commercial Development 61.7 The Proposed Demonstration of Conversion Technologies 71.8 The Feasibility of the Proposed Demonstration 81.9 Summary 10

Chapter 2 Rationale for Development of an Economic Utility for SurplusLignocellulosics

2.1 Introduction 132.2 The Ecological Framework 132.3 The Emergent Ecological Dysfunction 142.4 The Emergent Diseconomies of Biomass Utility 152.5 The Economic Implications of Surplus Lignocellulosics 16

2.5.1. Cotton 162.5.2. Grain 172.5.3 Other Agricultural Crops 172.5.4 Forestry 172.5.5 Pastoral Activities 18

2.5.6 Summary 182.6 The Economic Viability of Biomass as Fuel 182.7 The Potential for Cost-Effective Conversion 202.8 The Case for Conversion to Ethanol and Lignin Co-products 222.9 Summary 24

Chapter 3 Review of the Feasibility of Commercialising a Cost-EffectiveProcess of Conversion Lignocellulosic Resources

3.1 Introduction 253.2 Nominal Price and Other Factors of Effective Cost 26

3.2.1 Nominal Price 263.2.2 Moisture Content 273.2.3 Cellulosics and Lignin Content 283.2.4 Feedstock Preparation 293.2.5 Storage and Seasonal Availability 293.2.6 Summary of Effective Cost Factors 31

3.3 The Occurrence of Surplus Lignocellulosics and their Availability asFeedstocks 32


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Chapter 3 - continued

3.3.1 Agricultural Crop Stubbles 323.3.2 Agricultural Crop Processing Residue - whole plant harvest 333.3.3 Forest Crop Management Residues - silvicultural thinnings

and harvest residues 333.3.4 Pastoral Industry Management Residues 353.3.5 Summary 36

3.4 Preliminary Conclusion as to Feedstock Availability 373.5 The Components of Nominal Price Further Reviewed 38

3.5.1 Freight 393.5.2 Harvest and Preparation for Loading 393.5.3 Production 403.5.4 Conclusion 41

3.6 A Brief Review of Prospective Regional Benefits 423.6.1 Feedstock Supply 423.6.2 The Conversion Process 43

3.6.3 Feedstock Production 433.6.4 Summary 44

3.7 Chapter Summary and Conclusion 45

Chapter 4 Review of the Feasibility of Commercialising a Cost-Effective Processof Conversion Fuel Demand

4.1 Introduction 484.2 Issues Confronting Fuel Demand 514.3 The Liquid Fuel Demand Sector 51

4.3.1 Australian Crude Oil Resources 514.3.2 Refinery Balance 524.4 A Perspective on the Demand for Liquid Fuels 524.5 The Quality of Liquid Fuel Supplies 55

4.5.1 Crude Oil Resources 564.5.2 Processing Cost/Refinery Balance 564.5.3 Infrastructure Compatibility 574.5.4 Consumption Quality 584.5.5 Alternative or Substitute Resources 59

4.5.5.1 Substitute Gaseous Fuels 594.5.5.2 Alternative Liquid Fuels 60

4.6 Conclusion re. Liquid fuels 61

4.7 The Role for Ethanol-from-Lignocellulosics 614.7.1 Ethanol as a Liquid Fuel 62

4.7.1.1 The Circumstances of Supply 624.7.1.2 Methods of Incorporation 63

4.7.2 Lignin as a Solid Fuel 654.7.2.1 Co-generating Capacity 664.7.2.2 The Potential for an Associated Co-generation

Facility 674.8 Summary and Conclusion 68


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Chapter 5 The Design of a Cost-Effective Conversion Process The Technical Considerations

5.1 Introduction 705.2 A Broad Perspective of Conversion Processes 70

5.2.1 A Superficial Review of the Chemistry 71

5.2.2 Yields from Potential Feedstocks 725.2.3 Conversion Processes and Issues of Cost-Efficiency 735.2.4 Objectives for the Attainment of a Cost-Effective Conversion 76

5.3 A Review of the Status of Conversion Technologies 785.3.1 A Perspective on Process Costings 795.3.2 A Current review of the State of the Art 825.3.3 The View from NREL 825.3.4 Conclusions 85

5.4 The Integrated Process Proposed for Demonstration 875.4.1 The Process Design 895.4.2 Expert Review of the Process 905.4.3 Research and Development 92

5.5 Conclusion 93

Chapter 6 The Feasibility of an Industrial-Scale Demonstrationof the Conversion of Lignocellulosics to Ethanol andLignin Co-products

6.1 Introduction 946.2 Site Selection 946.3 Process design and Expert Review 98

6.3.1 Brief for Expert Review 996.3.2 Report for Expert Review 99

6.4 Proposals Invited 1066.5 Site Evaluation 108

6.5.1 Evaluation in the Negative 1096.5.2 Positive Evaluation 110

6.6 Demonstration Program 1116.6.1 Pre-treatment and Hydrolysis 1116.6.2 Fermentation 1126.6.3 Ethanol Recovery and Waste Treatment 1126.6.4 Lignin 1126.6.5 By-products 1136.6.6 Processing Consumables 113

6.6.7

Co-generation 1146.6.8 Summary 1146.7 Project Personnel 115

6.7.1 Operational Personnel 1156.7.2 Technical and Scientific Personnel 1166.7.3 Summary of Personnel Requirements 117

6.8 Project Costs 1186.8.1 The Plant 1196.8.2 Intellectual Property 1216.8.3 Personnel 124


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Chapter 6 - cont inued

6.8.4 Process Revenue and Expenses 1266.8.5 Residual Value 1296.8.6 Summary of Project Costs 130

6.9 Economic Viability 130

6.9.1 A 50 Megalitre Plant 1326.9.2 Personnel for a 50 Megalitre Plant 1346.9.3 Processing Consumables at 50 Megalitre Output 1346.9.4 Overheads 1356.9.5 Viability According to the IFP Formula 1366.9.6 An Alternative View of Economic Viability 1376.9.7 Conclusion as to Economic Viability 139

6.10 Conclusion as to Project Feasibility 139

Appendix 1- Terms of Reference and Study Proposal

Appendix 11 - Invitation for Proposals [IFP] by Industry to Undertake a DemonstrationProject


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CHAPTER 1

Overview and Summary

1.1 Background

The origin of this feasibility study can be identified as the 1990 tabling in the NSW Parliamentof the Select Committee Report entitled "Investigation into Ethanol and Alternative Fuels inNew South Wales". In consequence of that report the NSW Department of Minerals andEnergy, in 1991, issued a public call for proposals to demonstrate an integrated process for theconversion of lignocellulosics to ethanol. An important requirement was that proposals shouldexhibit substantial support from industry.

In response to that 1991 call, a proposal was jointly submitted by Apace Research Ltd and TheUniversity of New South Wales Biotechnology Department. They proposed for demonstrationessentially that process recommended in a 1990 report by Unisearch Ltd to the NSW SelectCommittee. Substantial support for that proposal was elicited from industry, including partiesrepresentative of lignocellulosics production and processing. Those parties were the New SouthWales Sugar Milling Co-operative Ltd, Boral Ltd and the Forestry Commission of NSW.

Eventually it was decided, in late 1991, not to proceed with a demonstration. Funding wasinstead provided for further R & D on the hydrolysis component of the process proposed byUNSW/Apace, together with an evaluation of the ethanol yields likely from a range ofprospective lignocellulosic feedstocks. In addition, NSW Agriculture was engaged to review thelikely availability of surplus lignocellulosics. Both of these projects have recently beenconcluded.

Although the demonstration proposed in 1991 was not undertaken, the industry support for the

UNSW/Apace proposal was sufficiently keen for both Boral Ltd and the Forestry Commissionof NSW to provide financial assistance for the subsequent evaluation of ethanol yields fromvarious lignocellulosic materials. Additional assistance in this matter was provided by CSR Ltdmaking available the use of test-scale feedstock treatment facilities and operating personnel. Inthe meantime, Boral Ltd broadened the scope of its interest in the matter to include theprospective use of ethanol as a transport fuel.

In January 1992 Boral's Aztec Transport successfully competed in the Energy Challenge. TheAztec entry was a substantially unmodified Mack truck grossing 42 1/2 tonnes and fuelled byDiesohol E15, an emulsified ethanol/diesel blend containing 15 per cent hydrated ethanol. Theemulsifier was that developed by Apace Research Ltd. By 1992 Apace's diesohols had anextensive background of field trials outside Australia but had not previously been publicly

demonstrated in their country of origin.

The use of Diesohol E15 in the 1992 Energy Challenge attracted the attention of theCommonwealth Department of Arts, Sport, the Environment and Territories. Initially, theattraction of the ethanol/diesel blend was seen in the context of issues related to urban air qualityand Greenhouse emissions. The prospects for ethanol-from-lignocellulosics generally having abroader impact subsequently came to be appreciated.


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In August 1992 a workshop was conducted jointly by the Land and Water Resources R & DCorporation (LWRRDC) and the Rural Industries R & D Corporation (RIRDC) to consider theimpediments upon dry land agroforestry as an avenue for the remediation of degradedrangelands. It is understood that the workshop recognised that the major disincentiveconfronting landholders in respect of agroforestry generally is the lack of any intermediatefinancial return with which to meet management costs incurred during the long period prior to

harvest of the mature crop. In that light the LWRRDC/RIRDC workshop concluded that theprospects for such as ethanol-from-lignocellulosics to remedy that disincentive should bepursued.

Despite the 1991 decision not to proceed with the then proposed demonstration, the industrysupport for that proposal remained. Each of Boral and CSR independently expressed interest inan alternative proposition whereby a demonstration project might be undertaken on alignocellulosic processing site having a waste-stream which could be applied as conversionfeedstock. The advantages envisaged were two-fold. In utilising the waste-stream it would bedisposed of with an added value to be credited against project costs. These costs would befurther reduced by virtue of the plant having a residual value for continued waste disposal on thehost site.

By late 1992 that concept for a demonstration project had attracted the support of theCommonwealth. In December 1992, the Minister for Resources agreed to fund a study directedto the feasibility of industry demonstrating a conversion process based on an existinglignocellulosic waste-stream. Later in December 1992 the Prime Minister announced, within aStatement on the Environment and subject to the outcome of the earlier proposed feasibilitystudy, the provision of up to $2 million to assist industry with a demonstration project.

The administration of the feasibility study and, hence, of the proposed Commonwealthassistance to any eventual project was assumed by the Department of Primary Industries andEnergy. Early in 1993 Terms of Reference for the study were issued in conjunction with apublic call for proposals. A copy of the Terms of Reference and of the proposal submitted for

this study comprise Appendix 1 of this report.

1.2 The Utility of Lignocellulosics

Lignocellulosic material comprises the fibrous structural component of plants - the roots, stemand branches. Lignocellulosics consist of some two-thirds carbohydrate and one-third lignin.The lignin supplies the majority of the structural rigidity of the plant. In annual plants lignin isless abundant than in perennials. The carbohydrate component is mostly cellulose buthemicellulose is a substantial constituent.

Vegetative biomass managed for the dominant purposes of food and fibre production usuallyalso produces lignocellulosic material surplus to those dominant purposes. Even when thedominant purpose is the production of lignocellulosic fibre much of the total of lignocelluloseproduction is of insufficient quality and so is surplus to that purpose. Some of thelignocellulosic material, although directly surplus to either food or fibre production,nevertheless has an agronomic or ecological value at the site of its production. Lignocellulosicshaving such indirect values are not surplus to the management of the overall resource. Afterproviding for those less immediate environmental values, it is the lesser quantity oflignocellulosics remaining which comprises the surplus potential source of fuel.


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The incidence of lignocellulosics produced surplus to the dominant purposes of food and fibreproduction imposes a burden on resource management. As the relative economic value ofprimary production declines, the pressure increases for landholders to either avoid or offset thatburden. On the evidence now available with respect to environmental degradation it is acceptedthat avoidance is not ecologically sustainable. The alternative, that of offsetting the managementburden, requires that those surplus lignocellulosics be invested with an economic value

presently lacking.

Being surplus to the production of either food or fibre it may be assumed that only fuel remainsas a potential utility for such lignocellulosics. Fuel is the use to which surplus lignocellulosicshave traditionally been put. Nevertheless, the fuel economy over the past century has come tobe dominated by fossil hydrocarbons. The application of lignocellulosics as fuel thus must beconsonant with the economic parameters dictated by those dominant fossil fuels. If they are tobe used as liquid fuels, lignocellulosics must be converted from their solid form.

The conversion of surplus lignocellulosics for the purpose of their application as a liquid fuelhas the potential to also create for that surplus an utility as either food or fibre. As wholematerials the surplus is unusable as food or fibre but its deconstruction to the separate lignin and

carbohydrate fractions results in new opportunities for the utilisation of lignocellulosics. Thereis a range of widely recognised fibre utilities for each of cellulose and lignin. Considerablepotential also exists for the further processing of those components to foods.

The imperative for the management of surplus lignocellulosics is the development of avenueswhereby their economic value may be increased sufficient to at least offset the cost of theirmanagement. In the event of realising that objective, the burgeoning diseconomies of primaryproduction would be attenuated and the benefits would extend to a facilitation of ecologicallysustainable development.

1.3 The Fuel Economy

The incidence of lignocellulosics surplus to the production of food and fibre is not novel. Suchsurplus material was traditionally applied as fuel. The novelty is the loss by that surplus of itseconomic utility. That loss has arisen in consequence of the displacement of lignocellulosics byhydrocarbons as components of fuel supply. Although that displacement is itself relativelyrecent - it may not be a century since its occurrence - the effects of that displacement havebecome apparent only during the past 25 years.

Of the hydrocarbon fuels it is almost certainly the liquid petroleums which have had the greatesteconomic impact. With respect to the fuel consumption infrastructure, that which has beendeveloped for the utilisation of liquid petroleums is least amenable to the use of unconvertedlignocellulosics. Nevertheless, it is the liquid fuel sector which offers the greatest scope for theutilisation of surplus lignocellulosics as a component of fuel supply.

As raw fuels, the energy content of crude oils is some 50% more expensive than that of thecoals which dominate the solid fuel sector. Furthermore, by comparison with coals toelectricity, the crude oils require a greater degree of conversion processing before yielding theproducts demanded by the liquid fuels sector. Finally, of the two classes of hydrocarbon fuels, itis crude oils which are least abundant relative to demand. Each of these factors has the effect offacilitating the prospective conversion of lignocellulosics to some form of alternative liquid fuel.

The issue of greatest importance to the near-term outlook for liquid fuels is the maintenance ofrefinery balance. Refinery balance is the extent to which the demand for the various products of


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crude oil refining is matched by refinery output. The maintenance of that balance is of greatsignificance to both the cost and the quality of the various petroleum fuels.

The economic viability of an alternative liquid fuel will be enhanced to the extent that its usecontributes to the maintenance of refinery balance. Other avenues whereby an alternative liquidfuel may present advantages to the liquid fuel sector include resource security and consumption

quality.

The consumption quality referred to is that of the level and toxicity of emissions from fuelcombustion. The broader issue of Greenhouse emissions might generally favour any fuelsourced from biomass in preference to fossil hydrocarbons. A narrower and somewhat moreimmediate issue is that of urban air quality. Oxygenation is one of the more important meansfor improving the consumption quality of liquid fuels. The source of that oxygenation will bealcohols. With respect to the Greenhouse issues, it would be preferable that those alcohols beproduced from biomass.

Although there is anticipated to be no near-term global shortage of crude oil, its availability isnot well matched to the incidence of national demand. The economies exhibiting greatestdemand are generally not self-sufficient. The near-term outlook for Australian crude oilresources is a decline from the present 80% self-sufficiency to only 50% by the year 2000. Thatdecline is forecast to result in an increased trade deficiency amounting to double the current$1,500 million incurred annually for imported crude oil.

1.4 The Conversion of Lignocellulosics to Liquid Fuels

With respect to fuel demand it is apparent that surplus lignocellulosics might mostadvantageously be directed to the supply of liquid fuels. In that event the conversion would beto one or other of methanol and ethanol. Either may be employed neat or as a blend with liquidpetroleum fuels and both alcohols effect fuel oxygenation.

The imperative for lignocellulosics surplus to the production of food or fibre is that they be

invested with an enhanced economic value. That such an enhancement may result from theirapplication as fuels is proposed only on the basis that, in their unconverted form, surpluslignocellulosics enjoy no prospect of an alternative utility. Of the three forms of energy - food,fibre and fuel - that of fuel is the least valuable.

The prospective application of lignocellulosics as liquid fuels requires their conversion fromsolid form. Such conversion creates the opportunity to separately capture the lignin and thecarbohydrate components. As separated components, each has then acquired the potential to beused as one of food or fibre. Both food and fibre being more valuable than fuel, that newlyacquired potential should maximise the prospects for value-adding.

Only the conversion of lignocellulosics to ethanol and lignin co-products is consistent with

preserving that wider potential. Although the lignin may be utilised as a solid fuel, the optionfor its use as one of food or fibre is maintained. Similarly, although the carbohydrate fractionsmay both be converted to ethanol, it also is widely utilised as a component of foods and fibres.That fuel is of less value than either food or fibre virtually guarantees that ethanol and ligninproduced at a cost acceptable to the fuel economy will have maintained the option

for their alternative application to higher value end uses. No such options are retained by thealternative conversion of lignocellulosics to methanol.


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As a liquid fuel, ethanol enjoys a number of advantages over methanol. The more importantadvantages are ethanol's greater energy density and its lesser toxicity and corrosivity. Each ofthese advantages, both separately and in combination, result in ethanol's greater compatibilitywith the existing liquid fuel infrastructure. Despite these advantages the cost of ethanolproduction - particularly from lignocellulosics - has thus far proven excessive. Nevertheless, theadvantages of ethanol as an alternative liquid fuel are so well accepted that, internationally, very

little attention is directed to the alternative conversion of lignocellulosics to methanol.

1.5 Ethanol and Lignin from Lignocellulosics

Despite the attractions of a conversion of surplus lignocellulosics to ethanol and lignin co-products their realisation remains prospective. The technical difficulties of cost-effectiveconversion are magnified by the constraints imposed by the fuel economy upon the definition ofcost efficiency.

The cost structure of the fuel economy imposes a low ceiling on the acceptable price forconversion outputs. Relative to that ceiling, the cost of feedstocks for conversion is high.Lignocellulosics surplus to the production of food and fibre may be supplied at the marginal

cost of their production. That marginal cost is, however, generally equivalent on an energy basisto the cost of crude oil. Although crude oil itself requires an expensive conversion to thevarious liquid petroleum fuels, the process of oil refining is undertaken on a scale far exceedingthat possible for lignocellulosics conversion.

Whilst surplus lignocellulosics may be made available at a marginal cost, the elements of thetotal cost of supply are least marginal in the case of transport and only slightly more so in mostinstances of harvest. It is only the actual production cost prior to their harvest which, for surpluswhole lignocellulosics, is totally marginal. The lesser scale to which the conversion oflignocellulosics is limited results from their extensive but energy-sparse occurrence. Thisaccentuates the greater significance of transport as a factor in their cost of supply.

Combined with the necessarily limited scale of a conversion facility, the also limited margin

between the cost of feedstocks and the acceptable price of outputs demands that product yieldbe maximised. It is in the maximisation of product yield that the technical difficulties ofconversion are most evident. The objectives critical to the achievement of maximal ethanolyield are:

an efficient hydrolysis of cellulose

an effective fermentation of hemicellulosic sugars.

For minimising the nett cost of ethanol production, maximising the credits to be had from theco-production of lignin is also an important consideration.

The nature of the lignin yielded varies according to feedstock. In some instances the molecularweight of the lignin will render it unsuitable for a fibre or other end-use having a value higher

than that of solid fuel. In other instances the method employed for lignin extraction will bedetrimental to its potential value. The cost-efficiency of maximising the end-use value of ligninwill determine the net co-product credit available to a conversion process.

The optimum scale of commercial conversion is anticipated to be an ethanol output of between50 and 100 million litres annually. For the production of 50 megalitres of ethanol fermentationrequires - irrespective of the substrate - a gross consumption of 500 million litres water. Theconventional processes for ethanol recovery and waste treatment generally do not effect the re-cycling of that water to the conversion facility. Even where water supplies are not themselves alimiting factor, the treatment and disposal of that waste-stream is a substantial cost to the


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process. In the event of its widespread commercialisation, that process cost is of lessimportance than the underlying issue of water consumption.

1.6 The Potential for Commercial Development

Anticipating the eventual demonstration of a cost-effective conversion, the potential for itscommercial implementation was reviewed. That review of feasibility considered both theavailability of potential feedstocks and the capacity of the fuel economy to absorb the outputs.

The availability of feedstocks was reviewed in terms of the occurrence in New South Wales oflignocellulosics surplus to the existing production of food and fibre. The near-term potential forcommercialisation will depend upon currently available materials rather than those which mayin future become available in consequence of an initial commercialisation. The review wasrestricted to New South Wales because of the greater availability of relevant data. The resourcesituation in NSW may be readily translated to other States or regions by reference to theincidence elsewhere of the respective food and fibre production activities underlying the NSWdata.

Factors determining the availability of surplus lignocellulosics as feedstocks are numerous. The

relative importance of each factor varies according to the particular material. The ultimatelimitation of availability was assumed to be a price for delivered feedstock not exceeding theequivalent of $50 per dry tonne. In addition to harvest and freight costs, the factors includedmoisture content, materials composition, seasonality of supply and, hence, storagerequirements. The combined effect of each of these factors was concluded as generallyindicating a potential availability in the order of half the existing occurrence of surpluslignocellulosics. Nevertheless, of the fourteen identified regions of NSW, nine were assessed aseach being capable of supporting a 50 megalitre facility drawing 250,000 tonnes of feedstockfrom within a radius of 100 kilometres. Five of those nine regions exhibit the capacity tosupport two or more such facilities. It was concluded that the feasibility of commercialisation inthe near term would not be limited with respect to feedstock availability.

The capacity of the fuel economy to absorb the respective ethanol and lignin co-products wasreviewed in terms of the outlook for liquid fuels supply and demand. Subject to there being acapacity to absorb fuel-grade ethanol there was envisaged no likelihood of an insufficientcapacity to utilise the lignin co-product. The energy requirements of the conversion processwould itself absorb much of that co-product as a solid fuel. Any surplus not having a highervalue end-use would be applied to generate electricity for public sale using a co-generationfacility to be incorporated with the conversion plant.

The potential market for fuel-grade ethanol was assessed to exceed by a large margin the supplywhich could be anticipated from commercial development in the near term. Having regard tothe exigencies of refinery balance and the emergence of issues of urban air quality, the capacityto absorb fuel-grade ethanol during the period up to 2004/05 is in the order of two thousand

megalitres annually. That potential demand is additional to any contributions to fuel supplywhich are proposed for such as "Natural Gas". The optimum scale of a single commercialfacility for the conversion of lignocellulosics to ethanol and lignin co-products is anticipated tonot exceed 100 megalitres annual ethanol output. Even though more than one such plant isrequired to justify commercial development it is evident that demand for their outputs isunlikely to be a limitation.

In reviewing the capacity of the liquid fuels sector to accommodate the supply of fuel-gradeethanol, the means for its delivery and incorporation with fuel supplies were considered. In thenear term, the use of ethanol as a component of blended petroleum fuels is regarded as the


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avenue of greatest utility to the existing consumption infrastructure. Appropriate methods forsuch an incorporation are well-established. The existing consumption infrastructure is highlycompatible with petroleum fuels incorporating ethanol. Although the likely sites of conversionfacilities are in most cases distant from those of the majority of liquid fuels consumption,backloading of ethanol within the existing distribution system will facilitate the necessarytransfer between those sites. Depending on the method employed, the incorporation of ethanol

can be effected at one of a number of points in the distribution system.

1.7 The Proposed Demonstration of Conversion Technologies

The impetus for the proposeddemonstration arose from the combination of a number of factorsincluding:

The past investment in the development of Australian technologies which languish forwant of opportunities for their demonstration as a pre-requisite to commercialdevelopment.

The growing urgency for the development of an utility for lignocellulosics surplus tofood and fibre production.

The increasing evidence of a deterioration in self-sufficiency of liquid fuels coupledwith burgeoning pressures on refinery balance.

The mounting interest in the prospect that ethanol could contribute to the achievementof environmental objectives in the event of its sufficient availability as a liquid fuel.

The maintained interest by industry following its earlier support for the 1991demonstration proposal.

The concept for the demonstration was that it should be of sufficient scale to yield commerciallyvalid results. That would require a plant which, at the conclusion of the project, would have aresidual value to the host site for value-adding an existing lignocellulosic processing waste-stream.

The proposed project is characterised as an "industrial-scale" demonstration because thequantities of inputs and outputs will be in units (e.g. truckloads) employed in commercialcircumstances. At that scale, the demonstration should result in a valid commercial evaluationof the process. The enlistment of participation by industry in the project is principally directedto the timely commercial development of the demonstrated process.

With respect to the issues identified as critical to the commercial prospects of a conversionprocess, the Australian technologies warranting demonstration address all except that of anefficient hydrolysis of cellulose. In designing an integrated conversion process specification itwas necessary to select a system of pre-treatment and hydrolysis to integrate with the respectiveAustralian technologies for fermentation and ethanol recovery. That selection was resolved inthe light of the international status of conversion technologies, reviewed during the TenthInternational Symposium on Alcohol Fuels convened in late 1993.

Prior to their submission to industry participants, the process specifications were independentlyreviewed for an assurance that they exhibited technical viability. The subsequent independentevaluation by participants was then directed to the feasibility of the project.

The essential elements of project feasibility were suggested to participants as being:

The prospects for commercialising the process as specified.

The capacity of the prospective host site to accommodate the project.

The cost of the project, nett of benefits to accrue from value-adding the existing


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lignocellulosic waste-stream.

The extent to which technical viability may be further assured by the specificationhaving retained the capacity for either the adoption of emerging alternative technologiesor retreating to conventional processes.

In undertaking their evaluation, participants were to be at liberty to pursue any alternative

technologies or other amendments to the specified process which might be revealed aspreferable on either technical or economic grounds. These variations to specification couldvalidly encompass proposals to stage the introduction of process complexity or to vary the scaleof the demonstration plant.

A detailed Invitation for Proposals (IFP) was submitted to the various industry participants. Theresponses invited were:

firstly, a general appreciation of the feasibility of the proposed project and, in the eventof that evaluation being positive;

secondly, a subsequent and detailed proposal seeking the financial assistance offered bythe Commonwealth for the conduct of the project.

Any such a proposal would then be subject to negotiation with the Commonwealth as to theavailability of the financial assistance sought by the proponent. The IFP is set out at AppendixII of this report.

1.8 The Feasibility of the Proposed Demonstration

Those surplus lignocellulosics most readily available as prospective feedstocks on a commercialscale are:

cotton stubbles,

forestry residues,

sugar cane bagasse.

In each case associated with an existing processing industry, an excess of these or relatedmaterials is accumulated and disposed of at some cost to the processor. In proposing ademonstration of technologies for the conversion of lignocellulosics to ethanol and lignin co-products it was envisaged that the plant would effect a value-added disposal of an existingwaste-stream. That value-adding during the project would, together with the residual value ofthe plant to the host site, result in a net credit against project costs.

The various lignocellulosic processors who had previously expressed an interest in thatproposition were invited to participate. In each case, the prospective host site has a waste-stream sufficient to supply the feedstock required for an annual output of 2 million litresethanol. Each site is also proximate with a resource of surplus lignocellulosics adequate forincreasing the scale of conversion should such prove warranted. The capacity of prospectiveindustry participants to effect the commercialisation of a cost-effective conversion was alsotaken into account in the course of site selection.

The financial and other commitment necessary on the part of site-owners for the conduct of theproject dictated that they should independently assess its feasibility. Factors unique to each siteand its waste-stream also operated to make that process of independent evaluation the mostpracticable for the purpose of this study.

Prior to their submission to industry participants the process specifications were independentlyassessed for viability by Raphael Katzen Associates International Inc (RKAII) of Ohio, USA.


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RKAII reported that the specification is technically viable and firmly concluded that theproposed demonstration is warranted. Nevertheless, despite that assurance, technical feasibilityremained a site-specific issue to be assessed by participants.

Technical feasibility largely depends upon the integrity of the conversion process with thedominant commercial activity of the host site. The process of conversion is continuous whereas

the existing commercial operations may occur with daily or seasonal shutdowns. A system offeedstock preparation and delivery appropriate to each site and its waste-stream was necessarilyexcluded from the universal process specification submitted to participants. The suitability ofthe various waste-streams as conversion feedstocks was beyond the scope of the preliminaryRKAII review. These and other site-specific factors of technical feasibility would bear directlyupon an evaluation of project costs. However, rather than the likely cost of the demonstrationproject, economic feasibility was the matter of prime importance to participants.

With respect to economic feasibility, the first consideration would be the commercial potentialfor a cost-effective conversion and whether that potential is consonant with a participant'sbusiness strategy. The next issue would be to establish the order of project costs justifiablehaving regard to the assessment of commercial potential. Only then, given its relevance to

project costs, would the matter of technical feasibility be closely addressed. This order ofpriority is consistent with the commercial focus sought by the enlistment of industryparticipation.

The imputation of a commercial focus commenced with obtaining industry support for ademonstration project. Those who had expressed interest in participating and who subsequentlynominated a prospective host site were understood to have predicated their interest on afavourable view of the commercial potential for a conversion process. The likely quantum ofproject costs and of the input required from participants was indicated by our study proposal. Itwas therefore anticipated that the issue of economic feasibility would not forestall participationby those invited to evaluate project feasibility. That expectation proved to be ill-founded.

Of the six parties invited to participate as prospective project proponents, five accepted. AuscottLtd declined, having concluded that the likely cost of a project exceeded the resources availablefor its prosecution. Whilst regrettable, Auscott's decision was not so disappointing as the laterwithdrawal by four of those five who had accepted the invitation to participate. In each case, thegrounds for withdrawing participation were so basic as to preclude the submission of any usefulevaluation of project feasibility.

Other than CSR, no participant withdrew on the grounds of either the commercial prospects fora cost-effective conversion or of the technical feasibility of the process specification. Boral Ltddecided that, despite its previous support, the commercial prospects did not accord with itsbusiness strategy. The conclusion by NSW Sugar Milling Cooperative Ltd was that thenecessary commitment exceeded its available resources.

T. Bowring and Associates was unfortunately forced to withdraw after losing access to itsproposed site. None of these responses constitutes a valid contribution to this study of projectfeasibility.

Until shortly before completing this report there remained two industry participants - CSR Ltdand Morwell Enterprise Centre. CSR's withdrawal of participation followed the undertaking of abrief technical and commercial evaluation in November 1994. Details of that evaluation were notsupplied. It is understood, however, that the negative conclusion was based on reservations as tothe commercial outlook for ethanol as a liquid fuel in Australia.


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The Morwell Enterprise Centre (MEC) has submitted a favourable evaluation. A demonstrationproject is proposed on the former BCLV site at Morwell, Victoria. That site, adjacent to a largetimber mill, is proximate with other substantial forest processing activities. Feedstock for theplant will largely be comprised of the waste-stream from the adjacent mill. The MEC hasestimated a cost of $5.5 million for the project. That cost is nett of revenues from value-addingbut does not account for any residual value of the plant. The MEC's project proposal is

submitted as a confidential appendix to this report.

The general appreciations of project feasibility sought from industry participants were to havebeen incorporated with this report. In the event, only that from the MEC is available as a validand independent evaluation. To compensate for the lack of other evaluations we have preparedan estimate of costs on the assumption that the universal process specifications are adoptedwithout modification. Our estimate is not site-specific and assumes only a moderate degree ofintegration with the host site. On those bases we would anticipate project proposals to cost inthe order of $4.5 million after crediting both value-adding revenues and a residual value to thehost site.

Economic viability cannot be reliably evaluated without the results from a demonstration

project. Nevertheless, a preliminary estimate, sufficient for an assessment of project feasibility,is possible. With reference to project costings the capital and operating costs of a 50 megalitreplant were evaluated on the assumption of a 30 year life. The operating costs includedfeedstocks at $50 per dry tonne. Provision was made for working capital and for all ancillaryinfrastructure including feedstock preparation and the co-generation of process energy. Basedon the only moderate conversion efficiencies specified, a form of break-even analysis wasapplied to derive a nominal selling price for the ethanol output. That analysis, incorporatingfactors for both capital redemption and a return on investment, yielded a selling price of 44cents per litre of hydrated ethanol.

A conventional financial analysis of the estimated capital and operating costs for a 50 megalitreplant yielded an internal rate of return (IRR) exceeding 10 percent on an ethanol price of 44

cents per litre. At 50 cents per litre the IRR is 15 percent. These returns are to be considered inthe context of returns available from commercially mature processes. It is not appropriate toapply a premium for risk. The risk factor is carried by the demonstration project. Underpinnedby the assessed commercial potential for a cost-effective conversion, the preliminary estimate ofeconomic viability supports a positive conclusion as to project feasibility.

Following its independent commercial evaluation, the Morwell Enterprise Centre has submitteda project proposal. As of December 1994 that proposal has yet to be fully funded.Nevertheless, and in the absence of clear evidence to the contrary from other participants, wereport that an industrial-scale demonstration of an integrated conversion process is feasible asproposed.

1.9 SummaryThe conversion of surplus lignocellulosics to ethanol lignin co-product represents a mutuallyadvantageous response to many of the issues presently confronting fuel demand and renewableresources. Adopting that response would be both economically desirable and ecologicallysound. This proposition has received a growing and widening appreciation since 1990. Thecommercial prospects for a cost-effective conversion are enhanced by the outputs beingconsonant with the existing fuel consumption infrastructure. These factors are at once both pre-conditions for project feasibility and the impetus for its undertaking.


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Canvassed in Chapter 2 is the rationale for applying surplus lignocellulosics to the supply offuel. The availability of conversion feedstocks in NSW is reviewed in Chapter 3. Relative tothe underlying resources elsewhere, comparable availabilities are anticipated throughoutAustralia. The cost structures of both prospective feedstocks and hydrocarbon fuels indicatethat only a conversion to liquid fuel is likely to be cost-effective. Feedstock availabilityassessed in NSW is sufficient to yield ethanol in the order of 2500 megalitres per annum.

Lignocellulosics may be converted to either ethanol or methanol. Only alcohols can effect theoxygenation of liquid fuels which results in an improved urban air quality. As a fuel, ethanol'sadvantages over methanol are several and its disadvantages nil. The value-adding oflignocellulosics is greater by their conversion to ethanol. That conversion creates theopportunity for the deconstructed lignocellulosics to be applied to end-uses of a value higherthan fuel.

The commercial prospects for lignocellulosics as a source of fuel are reviewed in Chapter 4.The principal consideration is that of ethanol as a liquid fuel. The advantages for the liquid fueleconomy relate to both the quantity and quality of supplies. Over the near and medium termsthose advantages would be maximised by blending ethanol with liquid petroleum fuels. A

range of blending methods is available to facilitate the maintenance of refinery balance. Lowlevel blends are wholly compatible with the existing consumption infrastructure. Withhydrocarbon fuels maintaining their pre-eminence, the forecast demand for liquid fuels in2004/05 could nevertheless absorb in the order of 4000 megalitres ethanol blended at an averageof 10 percent.

It is a measure of how elusive has been a cost-effective conversion that the commercialprospects are yet to be realised. The various issues and the status of conversion technologies arereviewed in Chapter 5. Intense efforts during the past decade have isolated those conversionroutes offering greatest cost-efficiency. The process specification prepared for this study isconsistent with those recent findings. In that light the specification was favourably evaluated byRaphael Katzen Associates International Inc of the USA.

Project feasibility consists of both economic and technical elements. The commercial focussought from industry participants was expected to impart an emphasis on the economicelements. In the event, however, that emphasis resulted in three participants withdrawingwithout undertaking a valid evaluation of feasibility. Also due to that emphasis a fourthparticipant withdrew, largely on the basis of reservations as to the commercial outlook for fuelethanol. Only one participant, Morwell Enterprise Centre (MEC), has so far completed a site-specific evaluation. That evaluation was favourable and MEC has submitted a project proposal.

The enlistment of industry participants and their various responses to the invitation for anevaluation of project feasibility is reported at Chapter 6. The site-specific evaluation providedby MEC is included but was not sufficiently detailed to inform this report. That detail is,however, contained in the project proposal which comprises a confidential appendix hereto.

To compensate for the lack of detailed site-specific evaluations from participants, Chapter 6 setsout an estimation of costings against which project proposals may be considered. Thosecostings assume projects conforming with the conversion process submitted for evaluation byparticipants. Subject to its being not site-specific, the estimated project cost is $4.5 million, nettof credits for conversion outputs and a residual value.

A project costing a nett $4.5 million would be consistent with the original expectations for thisstudy. It was also expected that the demonstrated process, at commercial scale, couldreasonably be anticipated to yield ethanol at a cost consistent with its being used as a


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liquid fuel. The estimated capital and operating costs of a 50 megalitre plant conforming withthe process specifications are set out at Chapter 6. At 50 cents per litre of ethanol the estimatesyield an internal rate of return of 15 percent. That yield is indicative of a commercial viabilitysufficient to justify a demonstration project.

This report concludes that a demonstration as proposed is feasible. However, industry support

has so far been found difficult to muster. It is apparent that the issues underlying thecommercial prospects for ethanol-from-lignocellulosics are not yet widely appreciated inAustralia.

A cost-effective conversion would facilitate the timely development of an ecologicallysustainable economy consistent with maintaining current living standards. That outcome ishighly desirable with respect to a number of pressing issues ranging from the management ofrenewable resources through regional development to the quality of fuel supplies. The urgencyof these various issues commends the proposed demonstration as not only feasible butwarranted.


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CHAPTER 2

Rationale for the Development of an Economic Utility for Surplus

Lignocellulosics

2.1 Introduction

Before 1991, any consideration in Australia of the production of ethanol as a fuel was limited tothe perception of benefits in respect of fuel demand, and to the prospect that sufficient quantitiesmight be produced to render ethanol a viable alternative source of liquid fuel.

Attention paid to improving lignocellulosics conversion processes was predicated only upontheir greater availability as a feedstock source. That attention has owed little to consideration ofthe benefits which might result from the creation of a demand for those lignocellulosics.

In stark contrast to that fuel demand focus, much of the current interest in the production ofethanol from lignocellulosics relates to the benefits that would accrue from an economicutilisation of surplus lignocellulosics.

In many respects the conversion of lignocellulosic feedstocks to ethanol and lignin co-productsis the means to an end, rather than the end in itself. The fact that the means has its own meritswith regard to fuel demand is a fortunate conjunction whereby both the resource and itsapplication following conversion would confer benefits mutual to both the supply and thedemand sectors of the fuel economy.

2.2 The Ecological Framework

The interest that has developed since the 1940s in issues characterised as 'environmental

matters' has led to the recent enunciation of the concept of Ecologically SustainableDevelopment (ESD). At its core, the concept of ESD is to acknowledge that the humaneconomy is a component of the total ecology and that economic development must beconsistent with ecological processes. Those processes depend on having access to solar energythrough the photosynthesis mechanism employed by vegetative biomass - itself a component ofthe ecology. By their subsequent utilisation of vegetative biomass, every other component ofthe ecology - the human economy being no exception - is thus dependent on vegetation for itsenergy requirements. In its turn, vegetative biomass is dependent upon other components of theecology during its life cycle. Ecological processes are thus characterised by their mutualdependence.

The interface between the ecology as a whole and its component, the human economy, is most

clearly defined at the point where vegetative biomass is economically utilised. It is that point atwhich, for the attainment of its broader objectives, ESD must be implemented.

The utilisation of vegetative biomass by the human economy has been, in effect, a process ofthe energy consumption, perhaps more readily appreciable by reference to the various forms ofenergy in terms of their end-uses - food, fibre and fuel. Of these three forms of energy, it isprobably fuel that is consumed in greatest quantity. The traditional source of fuel has been thelignocellulosic component of vegetative biomass. Lignocellulosic materials - volumetricallyand as measurable energy - coincidentally comprise the majority of that biomass.


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The human economy is ecologically unique in its demand for energy in the form of fuel. Inecological terms, the demand by that economy for energy as fibre is, relative to population, alsovery high. Despite these unusual features of the human economy, the application of vegetativebiomass to the full range of its potential end-uses is ecologically benign.

The demand for energy in the form of fibre merely represents a sequestration of the biomass and

essentially constitutes a temporary suspension of the life cycle. By comparison with that offibre, the consumption of vegetative biomass as either food or fuel constitutes, within theecological life cycle, an active function of decay.

The decay process inherent in the life cycle represents the decomposition of carbohydrates totheir constituents, including carbon dioxide. Whether by the respiration of food or by directcombustion, the mechanism of decay is oxidation. The combustion of lignocellulosics as fuelresults in no greater emission of carbon dioxide than that which arises from its decay byrespiration when consumed as food.

Accordingly, applying vegetative biomass to the full range of its potential triple utility - food,fibre and fuel - is ecologically sound and is thus consistent with the concept of ESD.

2.3 The Emergent Ecological Dysfunction

The ecological dysfunction that has emerged since the post-18th Century development of anindustrial economy is primarily the result of the displacement of lignocellulosic fuels byhydrocarbon fuels. That dysfunction is evident at three levels within the system of ecologicalprocesses:

(A) the accumulation of atmospheric carbon dioxide affecting the transfer of solar energy;

(B) the increased domination of its host ecology by the economy; and

(C) the domination of the human economy by the fuel consumption factor.

The symptoms of that primary dysfunction at each of these three levels are described below.

1 Referred to as the Greenhouse Effect, the accumulation of atmospheric carbondioxide is not the result merely of the use of hydrocarbon fuels but, rather, is thecumulative result of that combustion in addition to the continuing emissions ofcarbon dioxide through the process of biomass decay.

2 Without initial resort to the use of energy-dense hydrocarbon fuels for the subsequentevolution of combustion technologies, the development of the modern economywould have been impossible. Nevertheless, the powering of mechanical aids madepossible by modern combustion technologies has enhanced the ecologicalpredominance of the human economy so much as to threaten its host ecology.

3 Its ecological status being derived from fuel consumption, the human economy hasbecome dominated by fuel - to the relative economic disadvantage of food and fibreproduction. The economic predominance of fuel serves to diminish, to the extent ofits displacement by hydrocarbon fuels, the economic value of vegetative biomassutilised only for the production of food and fibre. Given the relatively greaterdemand by the economy for energy as fuel, the supply of that fuel other than by theconsumption of biomass produced surplus to food and fibre demand, is ecologicallyunbalanced.


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To remedy the ecological dysfunction occurring through the economically incompleteutilisation of vegetative biomass requires only that the energy value inherent in biomassproduced surplus to food and fibre demand be used to meet fuel demand. To the extent that theuse of hydrocarbon fuels is thus reduced and the economic value of vegetative biomassaccordingly enhanced, the ecological sustainability of the human economy will be increased.

The restoration to vegetative biomass of the fuel component of its triple utility - food, fibre andfuel - will increase its economic value and, in so doing, will address the above-describedprimary ecological dysfunction by virtue of its:

reducing the accumulation of atmospheric carbon dioxide;

encouraging the preservation of the ecology by enhancing its economic value; and

balancing the ecological supply of energy with the economic demands for food, fibreand fuel.

2.4 The Emergent Diseconomies of Biomass Utility

Relative to the value of food and fibre production, fuel has emerged as the predominant energy

demand factor of the modern economy. Combustion technologies based on hydrocarbon fuelshave rendered uneconomic as a fuel source the unconverted lignocellulosics produced surplus tothe production of food and fibre. These events have combined to inflict a double blow to theeconomic value of vegetative biomass

In the first instance, the management of vegetative biomass for the production of food and fibrehas seen, especially since the 1930's, an enormous increase in the proportion of fuel used as aninput to that production. To the greater extent, the fuel input is represented by the indirect fuelcomponent intrinsic to the capital infrastructure supporting that production. Nevertheless, directfuel inputs are also substantial as increasing reliance is placed on machinery in the quest forgreater labour productivity.

In the second instance, the capital infrastructure of production is universally powered bycombustion technologies developed to utilise hydrocarbon fuels. Without its being converted tosuit those combustion technologies, the energy value of vegetative biomass is not amenable toeconomic utilisation as a fuel for that infrastructure.

As fuel increases in its importance as an input to the production of food and fibre, so does theneed to balance that importance by enhancing the fuel utility of the vegetative biomassproduced surplus to its supply of food and fibre. The continued reliance of the human economyupon vegetative biomass for food and fibre is in itself ecologically sound, but the denial ofaccess by that biomass to the demand for fuel applied to its production is both ecologicallydysfunctional and economically disadvantageous.

The relative economic value of food and fibre production has declined in response to the

increased predominance of fuel as a factor in the cost of production. The arrest and reversal ofthat decline requires that vegetative biomass produced surplus to the demand for food and fibrebe invested with the capacity to be utilised as the fuel required for its modern management.

Whole lignocellulosic materials comprise the vast majority of that surplus biomass production.


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2.5 The Economic Implications of Surplus Lignocellulosics

Rather than their having been displaced by hydrocarbon fuels, it is instead the cost of their beingsurplus to the production of food and fibre that imputes to surplus lignocellulosics their negativeimpact upon the economics of food and fibre production.

Were those lignocellulosics amenable - either directly or following their conversion toeconomic utilisation as either food or fibre, the cost of their management would be recovered inthe form of a higher gross value of food and fibre produced from vegetative biomass. By thesame token, the ecological dysfunction arising from the failure to use those lignocellulosics toproduce fuel would equally be avoided if they were used to produce either food or fibre or both.

The fundamental problem is, both ecologically and economically, that they are surplus.

The increasing predominance of fuel as a factor of economic value has resulted in the measureof economic utility generally having become skewed in favour of the fuel input required toproduce any item of economic value. Despite that predominance, the economic value of a unitof fuel energy remains less than that of either food or fibre energies. As the energy input for theproduction of food and fibre increasingly becomes one of fuel energy, so the value of that food

or fibre tends to decline to the value of fuel. It is thus that the increased predominance of fuel asa factor of economic value has resulted in the relative decline in the economic value of food andfibre production.

The economic value of that decline in the value of food and fibre production is that it hasenhanced the negative impact of the unrecovered cost of managing lignocellulosics surplus tofood and fibre production.

Being surplus, the lack of a sufficient economic utility for lignocellulosics might be addressedonly by restoring their potential as a source of fuel. In so doing, the energy inherent in surpluslignocellulosics would be applied to offset and thus recover the fuel-denominated cost of theirmanagement in conjunction with food and fibre production.

The enhanced negative impact of unrecovered costs associated with the management of surpluslignocellulosics is made evident to primary production enterprises by the combined operationof:

the relative decline in the primary economic value of the food and fibre utility ofvegetative biomass; and

the increase, relative to its reduced economic value, of the fuel-denominated cost

of managing lignocellulosics surplus to food and fibre production.

The circumstances whereby costs are incurred in the management of lignocellulosics surplus tofood and fibre production are canvassed below with regard to various examples of primary

production. In each instance, the exogenous cost of hydrocarbon fuels applied to thatmanagement is potentially amenable to recovery by the application of those surpluslignocellulosics as an endogenous source of that fuel requirement.

2.5.1 Cotton

Cotton is a fibre crop with a high primary economic value (ie giving a better than averagefinancial return to the primary producer). Its production generates a substantial lignocellulosicresidue from a moderately woody perennial plant which is managed as an annual. Thelignocellulosic residue is the dead plant left standing in the field after the cotton harvest.


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Currently, the process of plant removal is by mowing, raking, windrowing and burning - orsome variation on that theme. The use of labour and machinery in that process and the energyvalue of the burned cotton stubble would suggest that a means whereby that energy might beapplied and so pay for the cost of stubble removal (up to $70/hectare) would enhance theprimary economic value of the total operation. There are a number of agronomic reasons whythe cotton stubbles have a low or negative economic value as soil mulch.

2.5.1 Grain

Grains embrace an extensive range of food crops, usually of only moderate primary economicvalue. The production of grains generates a substantial lignocellulosic residue from annualplants. The woodiness of grain-producing plants is generally low, and consequently their post-harvest utility as livestock fodder or soil mulch is greater than that of cotton plants. Theagronomic value of grain crop stubbles is nonetheless limited, and in some instances it isdesirable to remove a large proportion of the stubbles to reduce their capacity to harbour diseasecarry-over within the cropping cycle.

It is the need to remove some stubbles from the field that leads to a surplus of lignocellulosicsfrom grain cropping. As with cotton stubbles, the removal and disposal of grain crop stubbles isa cost borne without recompense by the primary producer. The prospect of recovering that costby realising the inherent energy value of those surplus lignocellulosics would enhance thepresently moderate primary economic value of grain production.

2.5.3 Other agricultural crops

The revenue-negative production of lignocellulosic material in association with food and fibreproduction is not limited to cotton and grains. Most agricultural crops and their various post-harvest processing generate surplus lignocellulosics which give rise to costs unrecouped by theirprimary producers. The prospect of recovering those costs, by capturing the inherent energyvalue of the surplus material, is desirable in all instances.

2.5.4 Forestry

A primary production activity specifically directed to the harvest of lignocellulosic materials,forestry is nevertheless heavily burdened by large quantities of surplus lignocellulosic materialunsuited to the market for forest-sourced fibre.

Of all the various instances of vegetative biomass utilisation, forests have been mostdisadvantaged by the displacement of lignocellulosics by hydrocarbon fuels.

Although that substitution effectively occurred well over a century ago, its negative economiceffect on forest management has yet to be widely appreciated. Indeed the incidence of thatnegative effect is ironic given that the early development - circa.1700 - of formalised forest

management was largely directed at restricting the demand for forest materials as fuels. Nodoubt the subsequent emergence of fossil fuels as a substitute was then regarded by foresters asa blessing It could now be regarded as a curse. The reason for it having yet to be widelyrecognised as such is probably due to the length of the forest crop cycle.

The present surplus of unmarketable lignocellulosic material is a major source of expense tocurrent forest management. The removal of surplus stems from the forest is a managementobjective arising from their constriction of the growth of surrounding fibre-quality stems. Theprospect of recouping that expense by regaining a role for forests as a supplier of fuel as well as


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fibre is extremely important for the sake of achieving an acceptable primary economic value forforestry production.

2.5.5 Pastoral act ivi t ies

Whether for food or for fibre production, the husbandry of livestock grazing upon vegetative

biomass is a form of cropping and harvesting based on the management of that biomass. Invarious instances, that management incurs costs arising from the incidental production ofsurplus lignocellulosics.

Woody weed infestation of the rangelands of western NSW is probably the most readilyapparent example. That infestation is of negative value to the dominant purposes for whichthose lands are managed. Being largely unsuitable for the economic production of food andfibre, it is only the prospective use of these surplus lignocellulosics for fuel which may recoupthe expenses associated with their management. Without such a means of expense recovery, theprimary economic value of managing rangelands will remain unacceptable.

2.5.6 Summary

The foregoing are instances of primary production activities whereby the relative decline in theeconomic value of food and fibre production has accentuated the negative economic value ofmanaging surplus lignocellulosics.

In all cases of food and fibre production from the management of vegetative biomass, there is aconcomitant production of lignocellulosics surplus to that dominant purpose. Volumetrically,that surplus is of the order of 40% of the dominant food and fibre production within a stableproduction cycle.

Being surplus to food and fibre production and their management cost being denominatedincreasingly in terms of fuel input, it is thus implicit that the economic viability of primaryproduction would be enhanced by using those surplus lignocellulosics to produce fuel.

2.6 The Economic Viability of Biomass as Fuel

Restoring the third component of the potential triple utility of vegetative biomass - food, fibreand fuel - will help to:

remediate the emergent ecological dysfunction and

reverse the decline in economic viability

associated, in each case, with the production of food and fibre energies from vegetative biomassfollowing its displacement a century ago as a source of fuel energy. Were lignocellulosics notsurplus to the production of food and fibre it would be unnecessary in either case to propose thatthey be utilised as fuel.

The economic viability of the proposition to use surplus lignocellulosics as a source of fuel isconstrained by the fuel market being dominated by hydrocarbon fuels. The parameters ofconstraint are defined by the fuel consumption infrastructure having evolved from theapplication of combustion technologies which themselves were developed for the utilisation ofcoals and crude oils. The existing infrastructure, being essentially monolithic, demands that anyalternative source of fuel be accommodated substantially in conformity with the status quo.

The practicality of using surplus lignocellulosics as a fuel source depends on their beingconverted to a form amenable to consumption by the existing infrastructure. That conversion


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will be radical in the case of infrastructure that consumes liquid fuels but, for infrastructure thatconsumes solid fuels, the conversion need only be mild.

The effective cost of fuel derived from lignocellulosics and rendered amenable to consumptionby the existing demand infrastructure will comprise its cost delivered for pre-consumptionprocessing, plus the cost of that processing. The economic viability of that effective cost will

depend on its relationship with the effective cost of processed hydrocarbon fuels.

The necessary preliminary conversion of an alternative fuel prior to its consumption need notimpute an economic disadvantage to that fuel. Hydrocarbon fuels themselves require a highdegree of pre-consumption processing. For example, most of the energy supplied bycombusting coals is consumed as electricity after its generation and reticulation to the point ofconsumption. And liquid petroleum fuels, although supplied as pre-combustion energy,nevertheless require the preliminary refinement of crude oils.

Since the parameters of economic viability are those imposed by conventional hydrocarbonfuels, a review of the composition of their effective cost is warranted to establish a frame ofreference for considering lignocellulosics as a potential alternative. Such a review issummarised in the following table.

Composition of effective cost Black coal toelectricity

Crude oilsto liquidpetroleums

Raw fuel delivered for processing:-

Nominal cost $50/tonne $18/barrel

Nominal energy content 24 GJ/tonne 6GJ/barrel

Energy cost (cents/MJ) 0.21 0.31

Cost per unit of sale (cents) 0.75/kwh 11.0/litre

Range of selling prices ex-processing (cents) 6-18/kwh 25-30/litreLess: Component applicable to reticulation 3-15/kwh nil

Equals: Effective cost per unit of sale (cents) 3/kwh 25-30/litre

Inferred processing cost (cents) 2.25/kwh 14-19/litre

Less: Component referable to

processing combustion 1.50/kwh nil

Equals: Processing cost exclusive of combustion

losses (X-CP) (cents) 0.75/kwh 14-19/litre

X-CP cost/raw fuel cost (by unit of sale) 100% 135%

The above review should be regarded as no more than a fair illustration of two points germaneto the prospective economic viability of lignocellulosics as an alternative fuel. The first is toestablish that in each case there is a substantial proportion of processing cost relative to effectivecosts. The second point is to indicate in each case a likely competitive price for raw fueldirected to either the electricity or the liquid petroleum markets.

Irrespective of the price available for raw fuel, the economic viability of surplus lignocellulosicswill require that the cost of their pre-consumption processing be accommodated within the


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totality of a competitive effective cost. Technologies for the conversion of lignocellulosics toelectricity are essentially those utilised for coals, and thus the price for raw fuel applied toelectricity is effectively capped at that of coals. With that price representing a floor, the higherprice for raw fuel applied to liquid petroleum fuels and the also greater processing cost incurredwith respect to crude oils together offer the greater scope needed to accommodate the radicalconversion of lignocellulosics to liquid fuels.

The economic value of energy consumed as a fuel is very much less than that of food or fibrewhen considered on the comparable basis of their respective energy content. Any component ofvegetative biomass is potentially combustible as fuel - whether sugars, starches or celluloses.By comparison with the energy value of hydrocarbons reflected in the foregoing review andranging from 0.21-0.31 cent per megajoule of raw fuel delivered for processing, the harvestedvalue of food and fibre ranges upwards from that of the lowest 0.38 cent/MJ applicable to somepulpwoods and would most commonly exceed 1.00 cent/MJ.

Thus it is only the material surplus to a dominant purpose of food and fibre production which ispotentially available as an economic source of fuel. Other than some food or fibre processingwastestreams comprised of sugars and starches, the vast majority of that surplus material is

cellulosic.With the potential availability of vegetative biomass for fuel production being limited to thatwhich is surplus to a dominant purpose, that biomass can be supplied at only the marginal costof its collection and delivery for processing before consumption. It is by virtue only of thatmarginal pricing that surplus biomass has the capacity to accept the low price of energy in theform of fuel which is otherwise supplied by hydrocarbons.

It is not at this stage envisaged that the proportion of biomass surplus to food and fibreproduction would be sufficient to displace hydrocarbons as the predominant source of fuelsupply. Nevertheless, if sufficient surplus biomass were available to make a significantcontribution to meeting fuel demand, that availability would be an important factor determiningthe economic viability of biomass energy production. Quality as well as the quantity of thefeedstock would be another significant factor.

The economic viability of biomass as a source of fuel may thus be summarised as comprising:

the potential for its cost-effective conversion to a form amenable to consumption by theexisting demand infrastructure;

its availability in sufficient quantity at a price for raw fuel dictated by that of thepredominant hydrocarbon fuels; and

the potential for its use as fuel to significantly enhance the supply of fuel in terms ofeither quantity or quality.

The importance of these various issues, while great in themselves, rank as secondary to the

larger issues of the economic implications for food and fibre production and the associatedecological dysfunction, which arise from biomass surpluses not being utilised.

2.7 The Potential for Cost-effective Conversion

The majority of vegetative biomass potentially available for fuel are those lignocellulosicssurplus to food and fibre production and remaining at the point of harvest. Lesser surplusesaccumulate as lignocellulosic processing residues, and relatively minor surpluses of non-lignocellulosics are also found to accumulate as processing residues.


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Of all of the biomass potentially available to become fuel supplies, it is only those surpluslignocellulosics remaining at the point of harvest which occur in quantities sufficient to offer asignificant contribution to the supply of fuel in terms of the quantity currently demanded.

The occurrence of lignocellulosic surpluses at the point of harvest is commonly less than 10tonnes per hectare and usually less than half that in the case of a stabilised harvest cycle such as

that of annual crops. Whether at the point of harvest or accumulated as processing residues, thelignocellulosics would have a moisture content commonly in the range of 30-60% on a dryweight basis (dwb). Collection costs associated with the spatial rarity of harvest-point surplusesand the inherent moisture content of those and any other surpluses are important factors indetermining a competitive price for raw fuel.

Lignocellulosics generally exhibit an energy content of 16-22 GJ per dry tonne. At the lowerend of that range and given a raw fuel price of coal for electricity generation of 0.21 cent/MJ, acompetitive price for lignocellulosics applied to electricity would be some $34/tonne (dry).Similarly, given crude oil costing 0.31 cent/MJ, a competitive price would be $50/tonne (dry)for lignocellulosics directed to the liquid petroleum fuel market. The significance of themoisture content factor may now be considered.

Applying a moisture content factor of 50% (dwb) to the raw fuel prices as inferred above wouldrequire those prices to be deflated by one-third to derive a competitive real price for materialsdelivered for conversion. At a lower real price of either $22 or $33 per tonne (wet or green), theneed to cover collection costs of harvest-point materials suggests that the higher of the twoprices would be needed to effect supply. Lignocellulosics already accumulated as processingresidues, while subject to the same moisture content factor of price deflation, are not similarlyconstrained by collection costs in their capacity to accept the lower price dictated by coals.

In the preceding review of economic viability, it was concluded that the cost structure of theliquid petroleum fuel market, allied with the effective floor price resulting from the lower costof coal as a raw fuel, offered considerable scope to accommodate the cost of the radicalconversion necessary to direct lignocellulosics to the liquid fuel market. By comparison, thecost structure of the electricity market and the similarity of conversion processes together act toimpose upon lignocellulosics the cost of coal as a ceiling price rather than as a floor price.

Acknowledging the likely higher cost of the radical conversion of lignocellulosics needed togain access to the liquid fuel market, the prospect of doing so while achieving a price for rawfuel higher than that imposed by coals is not only attractive but, on evidence to date, necessary.Were that not so, other lignocellulosics as well as those accumulated as processing residues (egbagasse) would also currently be useable as, in effect, alternatives to hydrocarbon fuels.

In considering the potential availability of a cost-effective process for the conversion oflignocellulosics to electricity, it should be noted that not only is the existing technologyessentially the same as for coal but that also there is scope for improving the efficiency of coal

combustion technologies. Were such improvements to be realised, they may act to furtherdeflate the competitive price of lignocellulosics. That would occur in the event that suchimprovements were not equally effective in respect of lignocellulosic combustion efficiencies.

The production of electricity is a radical conversion of raw fuel. That process includescombustion and results in losses of the raw fuel energy content. The cost of those combustionlosses is incurred by the electricity producer. By comparison, the conversion of crude oils toliquid petroleum fuels, whilst also radical, does not encompass combustion. In that case, theconsumer incurs the cost of combustion losses.


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For consumers, the cost of the radical conversion to produce liquid fuels supplied on a pre-combustion basis is a measure of the lesser constraints on the cost-efficiency of theirproduction. That measure indicates the technical scope for the also radical conversion needed toproduce liquid fuels from lignocellulosics. In the event that they can, as solid raw fuel, besupplied at an energy cost on par with that of crude oils, the economic viability oflignocellulosics as an alternative source of liquid fuels requires only that the cost-efficiency of

their subsequent conversion is also similar to that relatively expensive conversion required forcrude oils.

Given the issues canvassed above, it is concluded that the greater potential for cost-effectiveconversion exists with respect to the use of biomass as an alternative source ofliquidfuel.

2.8 The Case for Conversion to Ethanol and Lignin Co-products

The incentive for the development of a cost-effective means for using lignocellulosics as asource of fuel is, essentially, that the lignocellulosics are surplus. However, in seeking to utilisethat surplus to remedy both the ecological dysfunction and the economic disadvantage it givesrise to, the underlying causes of that surplus should first be appreciated.

Lignocellulosics are comprised of carbohydrates and their organic derivatives. It is theindigestibility of whole-lignocellulosics which causes them to be unsuited to food supply.Those lignocellulosics surplus to the demand for fibre are the unconverted materials unsuited tothat market. Thus it is the nature of lignocellulosics as unconverted whole materials whichrenders them surplus to the production of food or fibre in the various forms demanded forconsumption. The same is not necessarily the case in respect of the various components ofthose surplus lignocellulosics.

The deconstruction of lignocellulosics to separate their constituent sugars and lignin creates theopportunity to use lignocellulosics as food and fibre. The same opportunity is not enjoyed bythe unconverted surplus. The potential food and fibre utility of deconstructed lignocellulosics isillustrated as follows with regard to its various components, viz:

Lignin - a binder for the pelletisation of coals, minerals and animal feeds; a constituentof adhesives; a rubber reinforcement c.f. carbon black; a water-shedding soil binder-cum-stabiliser; an extender of artificial masonry.

Hemicellulose - the production of the sweetener, xylitol; as furfural, a solvent ofpetroleum refining and a constituent of industrial resins; as acetone and butanol co-solvents; as acetic acid applicable to the food (eg vinegar) and plastics industries.

Cellulose - as a strengthener for enhancing the quality of re-cycled paper; fodder forlivestock; a thickener of foods, detergents and cosmetics.

Although this exemplifies the potential utility of deconstructed lignocellulosics as food or fibre,it is acknowledged that there appears to be no obvious demand for such utility. Less obvious,however, is the fact that such uses are presently made of the various constituents when thoseconstituents are made available as by-products of food and fibreprocessing eg lignins surplusto paper manufacture, cellulose waste ex textile manufacture.

Although demonstrably not the sole potential utility remaining to those whole-lignocellulosicsthat, as unconverted materials, are surplus to food and fibre production, the great demand forfuel energy remains the most substantial potential utility for that surplus.


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The cost-effective use of lignocellulosics as fuel is acknowledged to depend on their conversionto a form amenable to consumption by the existing energy demand infrastructure, which hasevolved from the development of hydrocarbon combustion technologies. The cost structure ofthe liquid fuel consumption sector has been identified as offering the greater potential for thecost-effective conversion of lignocellulosics.

In considering options for converting lignocellulosics to a liquid fuel, it would be preferable toeffect a choice whereby lignocellulosics were rendered useable not only as fuel but also, to anextent, as a source of food or fibre. The conversion of lignocellulosics to ethanol and lignin is aprocess that has that greater merit.

The deconstruction of lignocellulosics to separate their constituent cellulosic sugars and lignin isa necessary preliminary to the fermentation of those sugars to ethanol. In separating the lignin,the conversion process immediately creates for lignocellulosics a potential non-fuel utility, bothin respect of that lignin and of the cellulosic sugars fraction of the feedstock. Naturally,proposing the subsequent fermentation of the sugars precludes the previously instancedalternatives for their utilisation. Such is not the case in respect of the lignin.

The previous examples of the utility of non-fuel lignin are not applicable to the entire range oflignins yielded by various lignocellulosic materials. But those not suited are applicable to itsuse as a solid fuel and, as such, enjoy an important cost advantage over whole-lignocellulosicsdirected to solid fuel supply. The separated lignin comprises that component of thelignocellulosic feedstock which is most cost-effectively priced as an alternative raw fuelcompetitive with coals.

Concurrent with the separation of the lignin component, the fermentation of cellulosic sugarsitself gives surplus lignocellulosics a prospective utility greater than that of fuel alone. Despitethe large and increasing quantities of ethanol directed to fuel consumption, even largerquantities are currently consumed as food and fibre. As 'fibre', we refer to the use of ethanol asan industrial solvent and as a component of industrial products. The conversion oflignocellulosics to ethanol at a cost whereby it may be economically utilised as fuel would offerthe opportunity of penetrating that industrial market.

Conversion to ethanol and lignin is the only process for converting lignocellulosics to fuel thatcan at the same time create the potential for their deconstructed components to also be applied,at least in part, to the supply of food and fibre. To retain that potential is an importantconsideration in seeking to maximise the utility of lignocellulosics which, in unconverted form,are presently surplus to the production of food and fibre energies.

Irrespective of those considerations of potential food and fibre utility, the prospectiveconversion of lignocellulosics to ethanol and lignin for consumption as fuel offers importantbenefits, by comparison with the alternatives. Of those alternatives, the cost structure of thesolid fuel market serviced by coals has been shown to be less attractive than that of the liquid

fuel market serviced by crude oils. Within the liquid fuel market, the alternative forlignocellulosics conversion is the production of methanol.

As an alternative liquid fuel, ethanol exhibits a greater compatibility than methanol with theexisting fuel infrastructure. That greater compatibility ranges from ethanol's greater efficacy asan alcohol/petroleum blend, its lesser corrosivity and its lesser toxicity - both before and aftercombustion.


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In the final analysis the case for the proposed conversion of surplus lignocellulosics to ethanoland lignin co-product is, by comparison with prospective alternatives, favourable on thefollowing grounds:

the acquisition of a degree of utility as either food or fibre in addition to that of fuel;

the application of the outputs to one or other of both sectors of fuel consumption; and

the greater compatibility of ethanol with the liquid fuel consumption sector.

Standing against the above grounds is the unresolved doubt as to whether the conversion oflignocellulosics to ethanol and lignin co-products can be done at a cost consistent with theirutilisation by the existing fuel consumption infrastructure. The proposed demonstration of newconversion technologies is directed to the resolution of that doubt.

2.9 Summary

The benefits to accrue from the economic utilisation of lignocellulosics produced surplus to themanagement of vegetative biomass for food and fibre production have been reviewed in termsof:

the ecological framework whereby biomass exhibits the potential triple utility of food,fibre and fuel supply;

the ecological dysfunction arising from the displacement of lignocellulosics as a sourceof fuel supply; and

the diseconomies experienced in consequence of lignocellulosics being surplus tobiomass utility.

The utilisation of lignocellulosics for the supply of fuel has been proposed as the necessarilysole option for those produced surplus to food and fibre supply. That prospect has beenconsidered in terms of:

the economic viability of biomass as a source of fuel;

the potential for cost-effective conversion; and

the case for conversion to ethanol and lignin co-products.

In proposing that the conversion of lignocellulosics to ethanol and lignin would substantiallyaddress the need to remedy both the ecologic

Ethanol From Lignocellulosics Feasibility Study

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