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BIOENERGY TECHNOLOGIES OFFICE2015 BioenergyMarket ReportFebruary 2017Prepared for the U.S. Department of Energy Bioenergy Technologies OfficePrepared by the National Renewable Energy Laboratory, Golden, CO 80401

2015 BIOENERGY MARKET REPORTAuthorsThis report was compiled and written by Ethan Warner, Kristi Moriarty, John Lewis, Anelia Milbrandt, andAmy Schwab of the National Renewable Energy Laboratory in Golden, Colorado.iiAuthors

2015 BIOENERGY MARKET REPORTAcknowledgmentsFunding for this report came from the U.S. Department of Energy Office of Energy Efficiency and RenewableEnergy’s Bioenergy Technologies Office. The authors relied upon the hard work and valuable contributions ofmany professional reviewers, including Chris Ramig (U.S. Environmental Protection Agency), Mary Biddy(National Renewable Energy Laboratory), Chris Cassidy (U.S. Department of Agriculture), Harry Baumes(U.S. Department of Agriculture), Patrick Lamers (Idaho National Laboratory), and Sara Ohrel (U.S.Environmental Protection Agency).Acknowledgementsiii

2015 BIOENERGY MARKET REPORTNoticeThis report is being disseminated by the U.S. Department of Energy (DOE). As such, this document wasprepared in compliance with Section 515 of the Treasury and General Government Appropriations Act forFiscal Year 2001 (Public Law 106-554) and information quality guidelines issued by DOE. Though this reportdoes not constitute “influential” information, as that term is defined in DOE’s information quality guidelines orthe Office of Management and Budget’s Information Quality Bulletin for Peer Review, the report wasreviewed both internally and externally prior to publication.Neither the U.S. government nor any agency thereof, nor any of their employees, makes any warranty, expressor implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of anyinformation, apparatus, product, or process disclosed, or represents that its use would not infringe privatelyowned rights. Reference herein to any specific commercial product, process, or service by trade name,trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement,recommendation, or favoring by the U.S. government or any agency thereof.ivNotice

2015 BIOENERGY MARKET REPORTPrefaceThis report provides a status of the markets and technology development involved in growing a domesticbioenergy economy. It compiles and integrates information to provide a snapshot of the current state andhistorical trends influencing the development of bioenergy markets. This information is intended for policymakers as well as technology developers and investors tracking bioenergy developments. It also highlightssome of the key energy and regulatory drivers of bioenergy markets. This report is supported by the U.S.Department of Energy’s (DOE’s) Bioenergy Technologies Office (BETO), and, in accordance with its mission,pays special attention to the progress and development of advanced liquid transportation fuels from cellulosicand algal biomass.The bioenergy economy engages multiple industrial sectors across the biomass-to-bioenergy supply chain—from agricultural- and forestry-based industries that produce biomass materials, to manufacturers anddistributors of biomass-based fuels, products, and power, to the ultimate end-user markets. The breadth of thisreport focuses on activities that occur after the production of biomass.After opening with a discussion of the overall size and composition of the bioenergy market, this reportfeatures two major areas: one detailing the two major bioenergy markets—biofuels and biopower—andanother giving an overview of bioproducts that have the potential to enable bioenergy production.The biofuels section is broken out by fuel type with sections on ethanol, biodiesel, and hydrocarbon fuels(gasoline, diesel, and jet fuel). Ethanol includes both conventional starch ethanol and cellulosic ethanol. Thisreport covers the development of the conventional ethanol industry as a backdrop for emerging cellulosicethanol production, and discusses challenges with absorbing new production into the market. Hydrocarbonfuels include the developing renewable hydrocarbon biofuels market. Finally, the report offers an overview ofthe renewable natural gas, biopower, and bioproducts markets.In total, the information contained in this report is intended to communicate an understanding of portions ofthe U.S. bioenergy market. On behalf of the DOE and BETO, I hope that you explore and find value in thisreport.Sincerely,Jonathan L. MaleDirector, Bioenergy Technologies OfficeOffice of Energy Efficiency and Renewable EnergyU.S. Department of EnergyPrefacev

2015 BIOENERGY MARKET REPORTAcronyms and AbbreviationsADanaerobic digestionFFVflexible-fuel vehicleADMArcher Daniels MidlandFTFischer-TropschAEOAnnual Energy Outlookggegasoline gallon equivalentAFDCAlternative Fuels Data CenterGHGgreenhouse gasASTMASTM hydrogenated esters and fatty acidsB55% biodiesel, 95% petroleum dieselblendkWhkilowatt-hourB2020% biodiesel, 80% petroleum dieselblendLCOElevelized cost of electricityLFGlandfill gasB100pure biodieselMSWmunicipal solid wasteBETOBioenergy Technologies OfficeMTBEmethyl tertiary-butyl etherBtuBritish thermal unitMWmegawattCAFECorporate Average Fuel EconomyMYmodel yearCFRCode of Federal RegulationsNORANational Oilheat Research AllianceCHPcombined heat and powerNRELDOEU.S. Department of EnergyNational Renewable EnergyLaboratoryE1010% ethanol, 90% gasoline blendRFSRenewable Fuel StandardE1510.5%–15% ethanol and gasolineblend (approved for use in MY2001and newer vehicles)RINRenewable Identification NumberRNGrenewable natural gasRVOrenewable volume obligationE85high ethanol blend between 51% and83% ethanol, depending on seasonand geographySIPsynthetic iso-paraffinSKAsynthetic kerosene with aromaticsE100neat ethanolSPKsynthetic paraffinic keroseneegeethanol gallon equivalentsyngassynthesis gasTBtuU.S. Energy Information Administration tonEnergy Independence and SecurityULAct of 2007USDAU.S. Environmental ms and Abbreviationstrillion Btushort tonUnderwriters LaboratoriesU.S. Department of Agriculturevolumetric ethanol excise taxcredit

2015 BIOENERGY MARKET REPORTExecutive SummaryThis report provides a status of the markets and technology development involved in growing a domesticbioenergy economy. The report compiles and integrates information to provide a snapshot of the current stateand historical trends influencing the development of bioenergy markets. This information is intended forpolicy-makers as well as technology developers and investors tracking bioenergy developments. It alsohighlights some of the key energy and regulatory drivers of bioenergy markets. The bioenergy economyengages multiple industrial sectors across the biomass-to-bioenergy supply chain—from agricultural- andforestry-based industries that produce biomass materials, to manufacturers and distributors of biomass-basedfuels, products, and power, to the ultimate end-user markets. The breadth of this report focuses on activitiesthat occur after the production of biomass.At the end of 2015, the U.S. bioenergy market (shown in Figure ES-1) was dominated by conventional starchethanol production, which accounts for three-quarters of total U.S. bioenergy production. Biodiesel andbiopower make up nearly all the remaining production, while other advanced biofuels contribute a relativelysmall amount. 1 Biofuels make up the largest portion (approximately 87%) of the current bioenergy market, andthis bioenergy market report focuses on documenting the biofuels market in the United States as it existed atthe end of 2015.0FFigure ES-1. U.S. bioenergy market (1,400 trillion British thermal units [TBtu] 2 total in 2010 and1,700 TBtu total in 2015)1FSources: Conventional Ethanol and Biodiesel: EIA 2016a, Tables 10.3 and 10.4; Biopower: EIA 2016b; Other AdvancedBiofuels: EPA 2016a. Advanced biofuels include renewable diesel, heating oil, and naphtha, as well as small volumes of importsused to meet federal requirements for advanced biofuels. Note: This figure only includes the energy content of the product fuelsand power, and not the associated co-products.Figure ES-2 shows the development of the biofuels industry from 2006 through 2015. Policy combined withfavorable market conditions during this time led to growth in the number and capacity of biofuels plants aswell as production. The build-out of starch-based ethanol plants and production was significant between 2006and 2011 and since then production has not grown as much, reflecting the E10 blend wall. Driven by advancedData for other advanced biofuels were obtained from the U.S. Environmental Protection Agency’s (EPA’s) Renewable FuelStandard (RFS) data and based on volume generation. Other advanced biofuels include biogas, cellulosic ethanol, ethanol fromother advanced feedstocks (including imported sugarcane ethanol), naphtha, renewable diesel, renewable gasoline, renewableheating oil, and renewable natural and liquefied gas. This data set includes small volumes of imported biofuels.12One trillion British thermal units is equivalent to 0.001 quads.Executive Summaryvii

2015 BIOENERGY MARKET REPORTbiofuels requirements under the Renewable Fuel Standard (RFS) (EPA 2016b), biodiesel production grewbetween 2011 and 2015. Advanced biofuels, which encompass a wide variety of fuels meeting RFSrequirements for feedstocks, conversion pathways, and at least a 50% reduction in greenhouse gas (GHG)emissions, continue to make increases in market penetration.Figure ES-2. U.S. renewable liquid fuels marketsSources: Ethanol and Biodiesel: EIA 2016a, Tables 10.3 and 10.4; Other Advanced Biofuels: EPA 2016a. 3 Other advancedbiofuels include biogas, cellulosic ethanol, imported sugarcane ethanol, naphtha, renewable diesel, renewable gasoline,renewable heating oil, renewable compressed natural gas, and renewable liquefied natural gas.2FEthanol serves as a substitute for gasoline and as an octane enhancer. At the end of 2015, nearly allcommercial ethanol biofuel production was from conventional corn starch–based feedstock. The cost ofconventional ethanol is driven by the price of corn grain, production costs, and the sale of co-products such asdistillers grains, and it is influenced by gasoline prices. At current levels of use, the nation is essentially at ablend wall—where the entire market for E10 (a blend of 10 volume percent ethanol into a gallon of gasoline) ismet with conventional ethanol. While there are nearly 20 million flexible-fuel vehicles (FFVs) on the roadtoday that can use higher ethanol blends up to E85, a majority of those vehicles are refueling with E10gasoline.Demand for ethanol could increase in future years due to U.S. Environmental Protection Agency (EPA)approval in 2011 of the use of E15 (a blend of 10.5% to 15% ethanol with gasoline) in existing vehicles withmodel years 2001 and newer. In 2015, less than 1% of stations offered E15 fuel, although more stations areexpected to offer E15 fuel in future years due to a U.S. Department of Agriculture (USDA) funding programand industry funding of station infrastructure that can handle higher-level blends.Conventional ethanol is commercially successful using starch-based feedstock. In 2015, the largest researchand development push in the biofuels arena is for biofuels made from cellulosic biomass and algae. Toaccommodate increased production from cellulosic ethanol biorefineries, the domestic ethanol market wouldneed to grow or exports would need to increase. The RFS requirement for cellulosic biofuels alone may not beenough to encourage investors given current market conditions, such as reduced oil prices and more fuelData for advanced biofuels were obtained from the U.S. Environmental Protection Agency’s (EPA’s) RFS data and were basedon volume generation. Other advanced biofuels include biogas, cellulosic ethanol, ethanol from other advanced feedstocks(including imported sugarcane ethanol), naphtha, renewable diesel, renewable gasoline, renewable heating oil, and renewablenatural and liquefied gas. This data set includes small volumes of imported advanced biofuels.3viiiExecutive Summary

2015 BIOENERGY MARKET REPORTefficient vehicles. In 2015, cellulosic ethanol production increased to about 2.2 million gallons from about 0.73million gallons in 2014 (EPA 2016a).Economic impact analysis by industry (Urbanchuk 2016) estimates that ethanol contribution to U.S. grossdomestic product increased from 17.7 billion annually in 2005 to 44 billion in 2015. The number of directjobs has remained somewhat level, with 87,883 during the rapid build-out of plants in 2005 and 85,967 in2015. The contribution of federal tax revenue from corn ethanol grew from 1.9 billion in 2005 to 4.8 billionin 2015.Biodiesel production has generally increased during the past 10 years, primarily driven by two policies—theRFS and the biodiesel production tax credit. 2013 was the first year that biodiesel production and consumptionexceeded the RFS requirement for biomass-based diesel due to favorable market conditions and a productiontax credit. Economic impact analysis by industry (NBB 2016) estimates biodiesel industry economic impactincreased from 1.4 billion annually in 2006 to 8.4 billion in 2015. The number of direct jobs biodieselsupported increased from just fewer than 7,000 in 2006 to more than 47,400 in 2015. Wage impacts increasedfrom 260 million in 2005 to 1.9 billion in 2015, implying that the average job supported by the biodieselsector paid a wage of approximately 39,300/year in 2015.Renewable hydrocarbon biofuels, sometimes referred to as “drop-in fuels,” meet ASTM International fuelquality specifications for gasoline, diesel, and other petroleum fuels that allow them to be used in existingengines and infrastructure (AFDC 2016a). Renewable hydrocarbons are produced from biomass sourcesthrough a variety of biological, chemical, and thermal processes. At the end of 2015, there were twocommercial facilities (the Diamond Green Diesel and AltAir Fuels facilities in Louisiana and California,respectively) producing renewable hydrocarbon biofuels. Two other facilities (the Renewable Energy GroupInc. [formerly Dynamic Fuels] and KiOR facilities in Louisiana and Mississippi, respectively) were fullyconstructed, but idled during 2015 due to market conditions or mechanical issues. Despite mixed commercialsuccess during 2014 and 2015 for renewable hydrocarbon biofuels, development continues for biofuel productsthat can directly replace petroleum-based liquid transportation fuels.In 2015, biopower accounted for 12% of all renewable energy produced in the United States and about 1.6% oftotal electricity generation. While the installed biopower capacity has been increasing over the past 10 years,biopower generation has remained almost flat during that period. In 2015, the top five states with the largestbiopower generation were California, Florida, Georgia, Virginia, and Maine. Today, most of the biopower isgenerated from woody biomass—including byproducts (e.g., black liquor) and solids, such as low-qualitywood (e.g., railroad ties and utility poles) and residues—in dedicated or co-generation plants—such as pulp andpaper mills or sawmills (EIA 2016c). Economic impact analysis estimates that a 50-megawatt (MW) dedicatedbiomass power plant utilizing direct combustion and using corn stover as feedstock could support about 25direct onsite jobs during its operation (NREL 2014). A typical 3-MW landfill gas (LFG) electricity project candirectly create 5 construction jobs and indirectly create another 20 to 26 direct jobs during the constructionyear (Pierson 2013). Over their life, LFG projects are expected to add more than 1.5 million in new projectexpenditures and increase the statewide economic output by 4.1 million (Pierson 2013).Renewable natural gas (RNG), or biomethane, is a pipeline-quality gas that is interchangeable withconventional natural gas and thus can be used in natural gas vehicles in compressed or liquefied form. RNGqualifies as a cellulosic biofuel under the RFS and is currently the main contributor to this fuel category(cellulosic ethanol provides a minor input). EPA reports that about 93 million gasoline gallon equivalents(gge), or roughly 10.8 trillion British thermal units (TBtu) of compressed and liquefied RNG, were producedunder the RFS2 program in 2015. This volume accounts for only 2.7 % of the estimated RNG potential in theUnited States (NREL 2013).Conventional bioproducts and emerging bioproducts are two broad categories used to categorize productsproduced from biomass feedstocks. Examples of conventional bioproducts include building materials, pulp andpaper, and forest products. Examples of emerging bioproducts include bioadhesives, biopolymers, andExecutive Summaryix

2015 BIOENERGY MARKET REPORTbiochemicals. Emerging bioproducts are active subjects of research and development, and these developmentefforts have been driven by the price of traditionally petroleum-based products, the environmental impact ofpetroleum use, and an interest in becoming more independent from foreign oil. Bioproducts derived frombioresources can replace (either directly or indirectly) some of the fuels, chemicals, plastics, etc., that arecurrently derived from petroleum. Bioproducts can enable the production of bioenergy, either as co-products toimprove the economics of the primary fuel product in an integrated biorefinery, or as enablers in developingtechnologies and processes essential to the long-term production of biofuels and bioenergy. This reportconsiders four types of bioproducts: platform and intermediate chemicals (emerging bioproducts), along withlignin, biochar, and wood pellets (conventional bioproducts).xExecutive Summary

2015 BIOENERGY MARKET REPORTTable of ContentsExecutive Summary .viiList of Figures . xiiiList of Tables . xv1Biomass-to-Bioenergy Overview . 12Biofuels Markets . 32.1Ethanol . 52.1.12.1.2Conventional Ethanol . 72.1.1.1Feedstocks . 72.1.1.2Historical Production, Consumption, and Capacity . 72.1.1.3Production Cost . 92.1.1.4Co-Product Overview . 102.1.1.5Economic Impacts of Conventional Ethanol . 11Cellulosic Ethanol Production . 122.1.2.1Feedstocks . 122.1.2.2Commercialization of Cellulosic Ethanol . 122.1.2.3Production Costs and Economic Impacts . 152.1.2.4Co-Products Overview . 172.1.3Policies That Affect the Ethanol Market. 172.1.4Ethanol Trade . 182.1.5Infrastructure . 192.1.6End Use . 212.1.7Outlook and Trends . 212.2Biobutanol . 222.3Biodiesel . 222.3.1Biodiesel Overview . 222.3.1.1Feedstocks . 242.3.1.2Historical Production, Consumption, and Capacity . 252.3.1.3Production Cost . 272.3.1.4Co-Products Overview . 27Table of Contentsxi

2015 BIOENERGY MARKET REPORT2.3.1.52.3.2Policies That Affect This Market . 282.3.3Biodiesel Trade . 282.3.4Infrastructure . 292.3.4.12.3.52.4Outlook and Trends . 30Commercialization of Renewable Hydrocarbon Biofuels . 322.4.1.12.4.25Production Costs . 35Outlook and Trends . 352.5Renewable Natural Gas . 352.6Biofuels Market Outlook . 36Biopower . 383.14End Use . 30Renewable Hydrocarbon Biofuels . 312.4.13Economic Impacts of Biodiesel. 27Biopower Outlook . 40Bioproducts and Co-Products . 414.1Platform and Intermediate Chemicals . 414.2Lignin . 424.3Biochar . 434.4Wood Pellets . 43Future Work . 45Appendix A . 46References . 48xiiTable of Contents

2015 BIOENERGY MARKET REPORTList of FiguresFigure ES-1. U.S. bioenergy market (1,400 trillion British thermal units [TBtu] total in 2010 and 1,700 TBtutotal in 2015) .viiFigure ES-2. U.S. renewable liquid fuels markets . viiiFigure 1. U.S. bioenergy market (1,400 trillion Btu [TBtu] total in 2010 and 1,700 TBtu total in 2015) . 2Figure 2. Nested annual RFS volumes from 2008 to 2015. 3Figure 3. Nesting of biofuel categories under the RFS . 4Figure 4. RFS comparison of EISA, annual RVO Requirements, and RIN generation . 5Figure 5. U.S. renewable liquid fuels market . 5Figure 6. Historic ethanol and gasoline futures prices and corn grain prices . 7Figure 7. U.S. historical ethanol production and consumption . 8Figure 8. U.S. historical ethanol plants and capacity . 8Figure 9. Ethanol plants by state (as of January 2016) . 9Figure 10. U.S. corn grain ethanol production cost trends . 10Figure 11. U.S. starch ethanol distillers grains production, trade, and price . 11Figure 12. U.S. historical cellulosic ethanol production . 12Figure 13. Characteristics of U.S. non-starch ethanol facilities at the end of 2015 . 14Figure 14. Biochemical cellulosic ethanol modeled production costs over time . 16Figure 15. Thermochemical cellulosic ethanol modeled production costs over time. 16Figure 16. U.S. ethanol imports and exports . 19Figure 17. U.S. historical E85 stations . 20Figure 18. E85 stations and FFV locations by county . 20Figure 19. U.S. historical FFVs stock . 21Figure 20. U.S. retail biodiesel prices . 23Figure 21. U.S. inputs to biodiesel production . 24Figure 22. U.S. biodiesel production and consumption . 25Figure 23. Biodiesel plants by state (as of December 2015) . 26Figure 24. U.S. historical biodiesel plant capacity . 26Figure 25. U.S. soybean-based biodiesel production cost trends . 27Figure 26. Estimated federal investment in the biodiesel tax credit. 28List of Figuresxiii

2015 BIOENERGY MARKET REPORTFigure 27. U.S. historical biodiesel exports . 29Figure 28. U.S. historical biodiesel (B20) refueling stations . 30Figure 29. Renewable diesel imports . 33Figure 30. Characteristics of U.S. renewable hydrocarbon biofuel facilities at the end of 2015 . 34Figure 31. U.S. historical renewable gas production for transportation under the RFS . 36Figure 32. U.S. biopower capacity and generation . 39Figure 33. U.S. biopower generation sources. 39Figure 34. U.S. import, export, consumption, and production of wood pellets . 44xivList of Figures

2015 BIOENERGY MARKET REPORTList of TablesTable 1. Status of U.S. Commercial-Scale Cellulosic Ethanol Capacity at the End of 2015 . 13Table 2. Historica

historical trends influencing the development of bioenergy markets. This information is intended for policy-makers as well as technology developers and investors tracking bioenergy developments. It also highlights some of the key energy and regulatory drivers of bioenergy markets. This report is supported by the U.S.

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