Replacing all Crude Oil with Drop-in Biofuels Enabled by Massive Heat and Hydrogen Inputs

In the United States we could replace all crude oil with low-carbon cellulosic biofuels in less than 20 years. Because oil in the United States provides 48% of the energy to the final customer (transportation, industry, commercial and residential); we have the option to decarbonize about half the U.S. economy by such actions. That is possible because we modify but do not replace most of the required industrial infrastructure.

We use existing refineries with modifications to accept cellulosic feed stocks with massive external heat and hydrogen inputs to convert those feed stocks into hydrocarbon products (gasoline, diesel, jet fuel, etc.). The near-term hydrogen source is natural gas that is converted into hydrogen and carbon dioxide with sequestration of the carbon dioxide underground---each process currently existing at industrial scale. Over the longer term, hydrogen will come from nuclear reactors and other sources. Today natural gas is used to provide much of the heat in most refineries in the United States. This is replaced with heat from nuclear reactors over time.

The cellulosic biomass from farms and forests are sent to local depots that convert them into dense economically-shippable commodities to the refineries. It is not economic to ship low-density biomass more than 30 to 50 miles; thus, depots are required to preprocess the biomass into an economically shippable form. Several of the depot technologies are currently used for other purposes—such as shipping pelletized biomass long distances to power plants to be burnt. American agriculture created the entire ethanol industry in about 10 years—it has the capability to create a depot system for biofuels production. As our report discusses, we have the biomass to do this without major impacts on food and fiber prices.

There are two key features of the system. First, there are many ways to achieve each step from farm/forest through the refinery—there are one or more commercial options for each step today. The strategy is not dependent upon the development of any single technology. Second, the strategy is evolutionary where we do not attempt to replace half the energy infrastructure with new technologies that take decades to develop. Refineries evolve over time from 100% crude oil inputs to 100% biomass inputs in a series of steps—in most cases blending different inputs over time.

What are required are incentives? The most useful incentive would be a guaranteed price for cellulosic hydrocarbon drop-in biofuels—so many dollars per barrel. If the competition (crude oil) was above this price, the government would not pay anything. If the price was below this price, the government would pay the difference between the guaranteed price and crude oil prices. Our estimates are that the guaranteed price would be significantly below current crude oil prices. The price guarantee is to address the volatility of oil prices that have varied from less than $40/barrel to over $120/barrel in a decade. It is financially risky to commercialize any new technology to replace crude oil because the company will go broke if the new technology comes on-line at times of low oil prices. We ultimately expect biofuels at the equivalent of $70-80/barrel of crude oil.

The new biofuels industry will be centered in North America, parts of Africa, Brazil, eastern Europe and Russia. Because of the efficiency of American agriculture and forest industries, we will likely be the low-cost producers with major increases in farm and rural American incomes.