The NRDC suggested in a recent blog post (Far from a Moonshot) that the technology challenges of producing cellulosic transportation fuels should have been easily resolved by now because these challenges are obviously not as difficult to conquer as the technology challenges of putting a man on the moon. But it’s not that obvious. Let’s look at some of the differences between the moonshot and the development of cellulosic fuels.

Starting Point

In 1961, President Kennedy promised that the United States would put a man on the moon by the end of the decade.  In fact, it took just over 8 years to accomplish that task. But what was the state of space exploration in 1961?  Was the United States starting from zero?

By the time President Kennedy made his promise, both the United States and the Soviet Union had already put a man in earth’s orbit and the United States had been firing rockets into space since the 1940s. The promise came 35 years after Robert Goddard launched the first liquid-fueled rocket.  The United States still had to manage the problem of a soft lunar landing, but getting into space was already solved.

In contrast, when Governor Schwarzenegger signed California’s AB 32 in September 2006 there was no comparable technology development for cellulosic fuels. At the time, the technology to make ethanol from sugars had been around for centuries and was well known (hence the rise of microbreweries) and this sugar-based technology had been used or proposed for fueling internal combustion engines for decades. However, making ethanol from sugars is still too carbon-intense to accomplish the objective of AB 32 – and it is cellulosic fuels that are expected to fill the gap.  Technologies to convert cellulose to liquid transportation fuels did not exist in 2006 (and the same may be said for fuels from algae, etc.).  AB 32 was based more on a concept and a desire than on any visible technology platform.

Economics – Part A: Funding Technology Development

In 1961, President Kennedy only needed a majority in Congress to agree with him in order to fund the space program as part of the federal budget.  Back in the 1960s the space program enjoyed popular support in the United States and the amounts of money being spent on the moon landing objective (over $170 billion in 2014 dollars) raised few concerns among the public or politicians, and the only competition came from the Soviet Union (and they were not economic competitors). The general concepts of economics apply only loosely to federal government programs.

AB 32, on the other hand, requires for-profit fuels producers to modify their products to meet the state’s carbon reduction objective. While biotechnology companies might invest in research and development with the hope of gaining market share in the fuels business, the fuel manufacturers would be investing in cellulosic fuels that would replace the economic fuels that they are already making (and that consumers want). For refiners, the economics of cellulosic fuels are more likely to be lose-lose (i.e. significant research and development costs to make an unprofitable product) and it looks like the best they could hope for would be win-lose (i.e. develop a technically feasible cellulosic technology, but cellulosic fuel volume gains reduce petroleum fuel volumes without providing an investment return sufficient to keep the refiner whole).

The fuel manufacturers face a number of financial risks that would have been completely foreign to NASA. Since the development of cellulosic fuels technology is essentially a biotechnology problem, the refiners have the disadvantage (and financial risk) of working in an area unrelated to their core technologies. It is not surprising that refiners have declined to accept the financial risks of investing in the development of cellulosic fuels. The difficulties in starting up the INEOS Bio-New Planet Energy joint venture in Florida and the KiOR facility in Mississippi have demonstrated that there are substantial financial risks in new technology development.

Economics – Part B: You get what you pay for

It is estimated that the Apollo program alone cost $25 billion ($175 billion in current dollars) and the Mercury and Gemini programs a combined $10 billion (in 2014 dollars). In 1965, NASA’s budget was 5.3% of the federal budget which is about 10 times its current portion of the federal budget.   Wow!

There are presently four cellulosic fuels plants that are preparing to start up in the near future. Combined, their nameplate capacity is 84 million gallons per year or 5,465 barrels per day (bpd) of ethanol (3,661 bpd of petroleum gasoline on an equivalent energy basis) and their combined capital cost is reported to be $960 MM. Suppose California needs 125,000 bpd of cellulosic ethanol to reduce the carbon intensity of just gasoline by 10% then the capital costs for enough cellulosic ethanol to satisfy California would be on the order of $33 billion (excludes technology development costs). This level of spending is far less than what NASA spent to put men on the moon so it is not surprising that we are still waiting for cellulosic fuels to appear. The NRDC blog post implies that if you drip enough time onto a technology development challenge then success is assured, but time alone is clearly not the significant factor.

Focus

NASA enjoyed the luxury of a single, clearly stated goal, alignment within the organization and the funding to accomplish the goal.

In contrast, the refiners whose principal objectives are the satisfaction of their customers and shareholders were handed an objective (in the form of AB 32) that was not aligned with their own objectives, and with no funding to accomplish it.

In Conclusion

We don’t have cellulosic fuels in 2014 because the development of the necessary technologies has been more about moonbeams than moonshots.

Jeff Hazle

Posted by Jeff Hazle

Jeff Hazle is the former Senior Director of Refining Technology for AFPM. To learn more about AFPM, visit AFPM.org.