Africa - November 03, 2008
The chemical industry is a crucial contributor to modern society, supplying raw materials for an incredible 70,000 diverse products ranging from chlorine used in water purification processes to lightweight materials used for manufacturing sporting goods. The industry in general uses significant amounts of fossil fuel as energy in facilitating various chemical transformations and separations, and as the source of basic carbon building blocks. Dow has taken a position to use alternative energy sources as part of its sustainability strategy.
Options include nuclear, hydrogen, solar, wind and biofuels. Biofuels such as ethanol and biodiesel have garnered the most interest worldwide and the sector has grown considerably in recent years. Biofuels do have negative attributes, owing to the reliance on croplands. It is for this reason that the UN has issued a policy statement calling for a five-year moratorium on the use of food crops for producing biofuels. In contrast, however American President, Bush has signed an energy bill calling for increased use of biofuels. This is testimony of the importance of the issue of biofuels and of the fact that it is poorly understood. Dow is committed to fully understanding the impact of using biofuels on the environment, the economy and on the chemical production process itself and adjusting its operations appropriately.
Biofuel and chemicals
The need for significant reduction of carbon emissions has lead to many auto makers turning to biofuels However the use of fuel for transportation returns carbon to the atmosphere in the form of CO2 and recent studies are suggesting that biofuels may be worse for global warming than traditional fossil fuels. Chemical production, in contrast, seeks to preserve the carbon atoms contained in the fuel by transforming them into products that are, mostly, durable goods - in effect, sequestering the carbon and resulting in a net reduction of atmospheric CO2 over time.
The use of biofuel as chemical feedstock then may eventually help to offset carbon emissions and could prove to be quite beneficial to the industry, should carbon emissions be taxed. On the other hand, Arable land is a finite resource, and converting the chemical industry toward biofuels is an ethical issue because of the resulting strain put on this valuable asset.
Croplands for Biofuel
Brazil presently utilizes approximately 66.6 million hectares of cultivated land for various crops and the U.S. uses about 178.8 million hectares in comparison. Therefore the replacement of the global ethylene chain alone would require as much as 60% of Brazilian, or 34% of U.S., cropland. Even the use of dedicated energy crops such as switchgrass would not be sufficient enough to ease the land requirements, as estimated yields are on the order of 5,600 L/ha, less than current ethanol yields in Brazil.
There is however, sufficient cropland to transition most of the global chemical feedstock base to agriculturally derived starting materials but there are questions over the likelihood of this conversion. Today's cropland is primarily reserved for supporting the global need for nutrition. As the world population increases, more food production will be required from existing land assets. It must be noted, however, that Global mandates for renewable fuel usage may also influence priority over chemicals, assuming they are enforced. Without new mandates for chemical production from renewables, it is unlikely that the required cropland will be made available. To top it off, using land other than preexisting cropland for these purposes may potentially present a net negative effect on global warming..
Replacement decision
In moving beyond incremental growth, production of bio- derived chemicals must offer significant advantages over the existing chemical facilities in order to justify the significant decision of "build new plants and shutting down the existing ones. A time value of money (net present value. NPV) analysis gives insight into the magnitude of the savings that would be required.
To give an example, if "a 1,000-Gg (per year) bio-derived-ethanol-to- ethylene plant costs $2 billion (roughly about R15 billion) to construct, the new plant needs to have a saving of around $370,000 cash cost per Gg of ethylene to achieve a breakeven return on the capital investment in 10 yrs (based on a 13% discount factor)."
According to a recent analysis, the global average cash cost for all ethylene facilities is less than $700,000/Gg. The majority of facilities in the Middle East have a total cash cost of less than $400,000/Gg . Thus, it is highly unlikely that bioethanol-to- ethylene plants can produce adequate savings to justify shutdown economics - even as hydrocarbon costs continue to rise rapidly.
Technology advancements
Technical innovations will continue to impact biofuels production which in turn influences, the impact that biofuels can have on the chemical industry. Today's generation of biofuels will in time be joined or replaced by second- and third-generation technologies. For instance, yield can be improved in conventional processing by increasing the relative amount of fermentable sugar or starch as a percentage of the total biomass. Crop yields have improved by moderating metabolic pathways, forcing the plant to devote more of its energy to creating sugars or seed.
Processing of lignocellulosic biomass which is commonly regarded as a second-generation fuel, may lead to further ethanol yield improvements. Cellulosic ethanol will likely be implemented in addition to current ethanol production, thus increasing yield per unit area. However, this will also require more expensive facilities, raising the bar on the cost savings required to justify building the new plants.
The chemical industry evolved to its current state for sound economic and thermodynamic reasons. Despite rapid and unprecedented increases in the price of fossil fuels, major change to the existing capital base (to support a widespread change from fossil-fuel-based to bio-based approaches) does not appear imminent. Although theoretically possible, the utilization of biofuels as a primary feedstock for production of commodity chemicals will most likely be constrained by a shortage of cropland, limited capital, and the availability of lower-cost alternatives. Absent unforeseen technological innovations or significant government mandates, this situation is unlikely to change on a wholesale basis in the coming decades.
BY WILLIAM F. BANHOLZER, KEITH J. WATSON AND MARK E. JONES - The Dow Chemical Co.
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