1. Southeastern Regional Center Tennessee Agricultural Experiment Station U.S. Energy Situation & Outlook April 3-4, 2007 Jackson, TN Cookeville, TN Dr. Kelly Tiller UT Extension Agent Training Bioenergy Production in Agriculture Agricultural Policy Analysis Center - The University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996-4519 www.agpolicy.org - phone: (865) 974-7407 - fax: (865) 974-7298 APCA

2. Southeastern Regional Center Tennessee Agricultural Experiment Station Motivators of Change High and volatile energy prices –Relatively stable, but at a much higher equilibrium –Subject to rapid spikes Photo: iStockPhoto.com

3. Southeastern Regional Center Tennessee Agricultural Experiment Station Rate of Use 0%10%15%20%5%25% Oil Reserves Updated July 2005. Source: International Energy Annual 2003 (EIA), Tables 1.2 and 8.1-O&GJ. Canada’s reserves include tar sands. The United States uses more oil than the next five highest-consuming nations combined. 3% 7% 25 % 7% 3% U.S. Dependence on Foreign Oil

4. Southeastern Regional Center Tennessee Agricultural Experiment Station 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 world’s oil reserves are in unstable regions Economic well being Environmental sustainability

5. Southeastern Regional Center Tennessee Agricultural Experiment Station Energy Use Projections Source: 25x’25 Report, 2006 Total energy production and consumption, 1980-2030 (quadrillion Btu)

6. Southeastern Regional Center Tennessee Agricultural Experiment Station 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 18 6 190 Source: Energy Information Administration (EIA), 2006

7. Southeastern Regional Center Tennessee Agricultural Experiment Station Increasing Foreign Oil Dependence Source: Energy Information Administration (EIA), 2006

8. Southeastern Regional Center Tennessee Agricultural Experiment Station Transportation Fuel Focus Today, 97% of our transportation fuel comes from petroleum sources

9. Southeastern Regional Center Tennessee Agricultural Experiment Station Current Biofuels Production The US consumes 385 million gallons 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. Southeastern Regional Center Tennessee Agricultural Experiment Station U.S. Corn Ethanol Production Source: Renewable Fuels Association 2012 RFS: 7.5 B gallons Total Capacity (as of 11/27/06) = existing + under construction + under expansion

11. Southeastern Regional Center Tennessee Agricultural Experiment Station U.S. Ethanol Production Source: Renewable Fuels Association, 1/29/07 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

12. Southeastern Regional Center Tennessee Agricultural Experiment Station 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. Southeastern Regional Center Tennessee Agricultural Experiment Station 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. Southeastern Regional Center Tennessee Agricultural Experiment Station Biofuels Production in TN Source: TN Dept. of Environment & Conservation Presentation, 12/06

15. Southeastern Regional Center Tennessee Agricultural Experiment Station Biodiesel: From 0 to 75 mgy Source: TN Dept. of Environment & Conservation Presentation, 12/06

16. Southeastern Regional Center Tennessee Agricultural Experiment Station Biofuel Use in Tennessee > 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. Southeastern Regional Center Tennessee Agricultural Experiment Station Proposed Biofuel Corridor Source: TN Dept. of Environment & Conservation Presentation, 12/06

18. Southeastern Regional Center Tennessee Agricultural Experiment Station Visioning the Energy Future 25x’25 –By 2025, America’s farms, ranches and forests will provide 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 President’s 2007 State of the Union Address to replace 20% of our transportation fuels with renewable sources by 2017 30 by ’30 –DOE’s 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. Southeastern Regional Center Tennessee Agricultural Experiment Station U.S. Corn Ethanol Production Source: Renewable Fuels Association 2012 RFS: 7.5 B gallons Total Capacity (as of 11/27/06) = existing + under construction + under expansion There’s a limit to the amount of corn-based ethanol we can sustainably produce without disrupting the ag sector Could potentially double corn-ethanol capacity Tennessee crop farmers benefit from corn-ethanol, wherever plants are located Increases livestock feed prices

20. Southeastern Regional Center Tennessee Agricultural Experiment Station Energy In vs. Energy Out Source: J. Sheehan & M. Wang (2003) The road to petroleum displacement is paved with cellulosic biomass * Some newer estimates of cellulosic FER >10 *

21. Southeastern Regional Center Tennessee Agricultural Experiment Station 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 Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply.

22. Southeastern Regional Center Tennessee Agricultural Experiment Station 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