U.S. Energy Situation

1
U.S. Energy Situation Outlook
Dr. Kelly Tiller
UT Extension Agent TrainingBioenergy Production
in Agriculture
April 3-4, 2007 Jackson, TNCookeville, TN
A
P
C
A
Agricultural Policy Analysis Center - The
University of Tennessee - 310 Morgan Hall -
Knoxville, TN 37996-4519 www.agpolicy.org -
phone [phone] - fax [phone]
2
Motivators of Change

• High and volatile energy prices
• Relatively stable, but at a muchhigher
  equilibrium
• Subject to rapid spikes

Photo iStockPhoto.com
3
U.S. Dependence on Foreign Oil
Oil Reserves
Rate of Use
25
7
7
3
3
The United States uses more oil than the next
five highest-consuming nations combined.
3
3
3
3
3
3
Updated July 2005. Source International Energy
Annual 2003 (EIA), Tables 1.2 and 8.1-OGJ.
Canadas reserves include tar sands.
4
Motivators of Change

• High and volatile energy prices
• Relatively stable, but at a much higher
  equilibrium
• Subject to rapid spikes
• National security, energy independence
• America accounts for 25 of global oil
  consumption, holds 3 of known oil reserves
• 60 of worlds oil reserves are in unstable
  regions
• Economic well being
• Environmental sustainability

5
Energy Use Projections
Total energy production and consumption,
1980-2030 (quadrillion Btu)
Source 25x25 Report, 2006
6
U.S. Energy Consumption
Biomass Consumption Million dry
tons/year Forest products industry Wood
residues Pulping liquors Urban wood food
other process residues Fuelwood
(residential/commercial electric
utilities Biofuels Bioproducts TOTAL
44 52 35 35 18 6 190
Source Energy Information Administration (EIA),
2006
7
Increasing Foreign Oil Dependence
Source Energy Information Administration (EIA),
2006
8
Transportation Fuel Focus
Today, 97 of our transportation fuel comes from
petroleum sources
9
Current Biofuels Production

• The US consumes 385 milliongallons of gasoline
  per day
• US produced 4.9 billion gallons of ethanol in
  2006
• Primarily corn-based ethanol
• US produced 250 million gallons of biodiesel in
  2006
• Primarily from soybean oil and waste greases
• Other alternative transportation fuels include
  natural gas, propane, electric, hybrids, hydrogen

10
U.S. Corn Ethanol Production
Total Capacity (as of 11/27/06) existing
under construction under expansion
2012 RFS 7.5 B gallons
Source Renewable Fuels Association
11
U.S. Ethanol Production
Currently 5.6 bgy capacity at 114 biorefineries
(purple dots) Near Future Additional 6.9 bgy
capacity at 80 biorefineries under construction
and 7 under expansion (yellow) TOTAL More than
12.5 bgy capacity
Source Renewable Fuels Association, 1/29/07
12
The Push Toward Ethanol

• 51 per gallon excise tax credit
• 5.1 per gallon up to 10 blended gasoline
• In place through 2010
• Several states have banned additive MTBE
• Renewable fuels standard (RFS) is 7.5 billion
  gallons by 2012
• Included in 2005 Energy Policy Act
• Some efforts to push RFS higher
• Oil prices higher

13
The (recent) Ethanol Story

• Major oil (energy) companies stopped producing
  MTBE in May 2005
• 3 to 3.5 billion gallons of ethanol needed to
  replace MTBE as an oxygenate
• 54 per gallon tariff on imported ethanol
• Summer 2006 Ethanol prices jumped sharply to
  3.50 to 4.00 per gallon
• Ethanol industry profit margins soared, leading
  to huge industry expansion

14
Biofuels Production in TN
Source TN Dept. of Environment Conservation
Presentation, 12/06
15
Biodiesel From 0 to 75 mgy
Source TN Dept. of Environment Conservation
Presentation, 12/06
16
Biofuel Use in Tennessee

• gt 60,000 flexible fuel vehicles (FFVs) in
  Tennessee
• Only 2 public E85 fueling stations in TN
• Nashville and Clarksville
• Some additional fleet supply
• Significant portion of gasoline blended with 10
  ethanol, widely available
• Biodiesel much more widely available to the
  public
• Significant fleet use of biofuels, especially
  biodiesel

17
Proposed Biofuel Corridor
Source TN Dept. of Environment Conservation
Presentation, 12/06
18
Visioning the Energy Future

• 25x25
• By 2025, Americas farms, ranches and forests
  willprovide 25 of the total energy consumed in
  the U.S.while continuing to produce safe,
  abundant and affordable food, feed and fiber
• 20 in 10
• Goal in Presidents 2007 State of the Union
  Address to replace 20 of our transportation
  fuels with renewable sources by 2017
• 30 by 30
• DOEs 2002 Vision goal of replacing 30 of our
  energy use with renewable sources in 30 years
• 36 bgy RFS by 2022
• New legislation proposed to increase the RFS from
  7.5 bgy in 2012 to 36 bgy in 10 more years, 21
  bgy from advanced ethanol sources

19
U.S. Corn Ethanol Production
Total Capacity (as of 11/27/06) existing
under construction under expansion
2012 RFS 7.5 B gallons

• Could potentially double corn-ethanol capacity
• Tennessee crop farmers benefit from corn-ethanol,
  wherever plants are located
• Increases livestock feed prices

Theres a limit to the amount of corn-based
ethanol we can sustainably produce without
disrupting the ag sector
Source Renewable Fuels Association
20
Energy In vs. Energy Out

The road to petroleum displacement is paved
with cellulosic biomass
Some newer estimates of cellulosic FER gt10
Source J. Sheehan M. Wang (2003)
21
A Billion Tons of Biomass

• Sustainable annual supply of 1.3 billion dry tons
• 932 M dry tons from agriculture
• Crop residues (446)
• Perennial crops (377)
• Grains to biofuels (87)
• Process residues (87)
• 368 M dry tons from forests (forest residue only)
• Manufacturing residue (145)
• Logging debris (64)
• Fuel reduction treatments (60)
• Fuelwood (54)
• Urban wood waste (47)

Perlack, R.D., et al. 2005. Biomass as
Feedstock for a Bioenergy and BioproductsIndustry
The Technical Feasibility of a Billion-Ton
Annual Supply.
22
Complex Balance

• Market demands and alternative uses
• Crop returns
• Feed (input) prices
• Impacts on land prices and rents
• Global trade impacts (developing countries)
• Environmental impacts
• Sustainability
• Risk