This is a series of briefs on the most widely adopted renewable energy technologies. This brief deals with liquid biofuels production, primarily bioethanol and biodiesel. It touches on the economic policy implications and provides insights on Canada’s role in methanol production. The information is adapted from the International Renewable Energy Agency (IRENA) Technology Briefs for the year 2013.
A simplified overview of the steps involved in methanol production is given in Figure 1 below.
Methanol is an important basic chemical. It is produced from fossil fuels, such as natural gas, coal and oil products, and used in the production of a wide range of products. In 2010, about 70% of methanol was used in the chemical and petrochemical industry to produce chemicals. More recently, methanol has also been used for biodiesel production from fats and oils, and it is increasingly being investigated as a clean-burning transportation fuel.
The increasing oil and natural gas prices in recent years, as well as concerns about GHG emissions, have sparked growing interest in alternative processes for methanol production based on renewable sources. Alternative feedstock includes biomass, waste and by-products from various sectors, such as biogas from landfill, sewage, solid waste treatment, glycerol from biodiesel production, and black liquor from the pulp & paper industry. Bio-methanol from renewable sources and processes is chemically identical to fossil fuel-based methanol but involves significantly lower GHG emissions during the entire lifecycle.
Performance of bio-methanol plants depends on many factors, such as the plant set-up (e.g. feedstock, co-products, technology) and local conditions (e.g. availability of feedstock or renewable electricity). Assessing real life performance is difficult as only a limited number of commercial plants are currently in operation.
Production costs of bio-methanol are also highly sensitive to local conditions. Key factors that influence the currently available estimates are feedstock types and prices, electricity generation fuel mix and prices, scale of production capacity, technology choice and investment costs, and the desired grade of the final product. For example, the electricity cost can make up between 23-65% of the production cost of bio-methanol, depending on the plant setup. The high end of this range refers to plants utilizing carbon dioxide as feedstock along with electrolysis. Figure 2 provides an overview of such estimates for production cost from various feedstocks as found in the literature.
The capital cost per unit of capacity is at least 3.4 times higher than the capital cost of plants based on natural gas. A bio-methanol production facility based on carbon dioxide is estimated to be about 15 times as expensive as the most economical natural gas-based facility.
Policy Making Implication
The cost comparison between petrochemical- and biomass-based production will determine to what extent bio-methanol can substitute for the petrochemical route. Removing subsidies on fossil fuels, as recently recommended by the OECD (2011), could help close the price gap between methanol from natural gas and bio-methanol. However, it should be noted that methanol is increasingly produced in very large plants (over 1 Mt/yr), which offer substantial economies of scale and low production costs.
Policies to promote the use of bio-based chemicals and materials need to look at the entire life cycle of CO2 emissions. Present policies only take the direct emissions from chemical production processes into account. Therefore, a policy framework which fully credits the environmental advantages of bio-based materials needs to be established. Such a system could make carbon tax systems more effective in promoting the production of bio-based materials. Policies could also include eco-labeling of bio-based chemicals, information campaigns and subsidies for producers.
Between 2001 and 2006, the world’s largest methanol producer; Vancouver-based Methanex Corp. shut four plants in Canada. Since then, Methanex has reopened its methanol plant in Medicine Hat, which is again producing 560,000 tonnes of methanol per year. The company is not the only Canadian methanol producer looking to expand its operations in North America. Improved economics and growing demand for the fuel have also led Montreal-based Enerkem and Sidney, B.C.-based Blue Fuel Energy Corp. to ramp up methanol production domestically. For the first time in years, methanol production in Canada is on the rise.
Methanex partnered with Carbon Recycling International to build the world’s first commercial-scale carbon recycling plant in Iceland. The plant, completed in 2011, captures carbon dioxide emissions from the nearby geothermal HS Orka plant and hydrogen from an electrolytic process to produce renewable methanol. In June 2014, Quebec-based Enerkem opened the world’s first waste-to-biofuels project in Edmonton, which will convert biomass from municipal waste into methanol. The plant will take 100,000 tonnes of municipal waste, which cannot be recycled or composted, and convert it into gas using Enerkem’s thermochemical process, and then into liquid methanol. A similar plant is under construction in Varennes, Quebec. Whether the methanol produced from Enerkem’s plants, Blue Fuels’ plants or Methanex’s plants ever make it into the Canadian vehicle fuel mix remains to be seen.
Basel Ismaiel holds an MBA from the Sprott School of Business in Carleton University in Ottawa, and has worked in environmental engineering and policy making in businesses and not-for-profit organizations, including RWDI, The Natural Step Canada, Prasino Group, and Dubai Carbon. Connect with Basel at firstname.lastname@example.org
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