By Patrick Gruber | Renewable Energy World
In 2015, we see low oil prices, at least for a time. Corn production at or near record levels. Animal feed demand increasing and price rising. At the global level we believe energy consumption will continue to rise driven by consumer demand, the expanding “middle” classes in China and India. So demand increases across markets globally. That is good for business.
On many minds currently is the impact of low oil on the development of renewable fuels and chemicals. The proper way to think about renewable resource based chemicals and fuels is to look at the differential of cost between oil and renewable carbon such as corn. The cost of oil at $50/bbl on a pound basis is roughly $0.165/lb in a crude state. How long will oil stay this inexpensive? Weeks, months, certainly not years. If oil goes back to $100/bbl, the cost would be $0.33/lb.
In comparison, carbohydrate from corn, the raw material for isobutanol and ethanol, is currently $0.07 per pound assuming $4.00/bu corn price. How can this be? With corn, virtually all of the protein and nutritional value is captured and sold for animal feed, and the carbohydrate is a “by product”. Animal feed made from corn is 120% of the value of the corn itself! Improvements in production all point to lower costs, combined with more corn produced per acre. Sustainability combined with common sense and desire for profit. Farmers are learning to lower costs of production while reducing their environmental footprint.
Renewable resource-based products need to win on total cost for customers. We don’t believe in “green premiums” as a rule. Instead we see customers paying for functionality or properties for a price. Isobutanol for fuels can deliver superior properties: more miles driven, lower emissions, more stable performance after storage when blended with gasoline. Isobutanol addresses unmet market needs given its properties and price. We expect isobutanol to demonstrate these applications on a commercial basis in 2015.