[PPT] - in the Annual Energy Outlook (AEO) Michael Cole, PhD, PE Office of PowerPoint Presentation

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www.eia.gov

U.S. Energy Information Administration

Independent Statistics & Analysis

Michael Cole, PhD, PE Office of Petroleum, Natural Gas & Biofuels Analysis March 20, 2013 | Washington, DC

Modeling of Biofuels in the Annual Energy Outlook (AEO)

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Overview

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Modeling the total energy market in AEO
Modeling liquid fuels markets in AEO
Modeling biofuels in AEO

– Biofuel categories – Three main drivers

Conclusion

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A general model of the entire U.S. energy economy

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Macro Economy Energy Demand Primary Energy Supply Energy Conversion

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Today’s presentations

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Macro Economy Energy Demand Primary Energy Supply Energy Conversion

Light Duty Vehicle Markets and E85 Ethanol (E85) Deployment Expansion Cellulosic Biofuels in the FAPRI Baseline of 2012 U.S. Biofuels Supply Analysis Sugars, Fuels, and Chemicals Drop-in Biofuels in AEO Applications of Biomass Scenario Model Modeling of Biofuels in AEO Brazilian Biofuels Supply

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EIA models the entire U.S. energy economy for the AEO

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Macro Economy Energy Demand Primary Energy Supply Energy Conversion

Demand for: * Liquid Fuels * Electricity * Natural Gas Supply of: * Crude Oil * Renewables * Natural Gas * Coal * etc. Liquid Fuels Production Electricity Generation

AEO uses NEMS, a market equilibrium model

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Liquid fuels energy market

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Macro Economy Liquid Fuels Demand Primary Energy Supply Liquid Fuels Production

Demand for: * Gasoline-like * Diesel-like * Jet Fuel, LPG, etc * Petroleum Refining * Biofuels Production * CTL * GTL Supply of: * Crude Oil * Renewables * Natural Gas * Coal * etc.

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Liquid fuels energy market: LFMM is a new NEM module

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Macro Economy Liquid Fuels Demand Primary Energy Supply Liquid Fuels Production

Demand: * Gasoline-like * Diesel-like * Jet Fuel, LPG, etc * Petroleum Refining * Biofuels Production * CTL * GTL Supply of: * Crude Oil * Renewables * Natural Gas * Coal * etc.

LFMM: Liquid Fuels Market Module

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LFMM’s main component is a Linear Program

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Input

Demands for liquid products (gasoline, diesel, jet fuel, etc.)
Statutory and Regulatory requirements (RFS2, for example)
Prices of primary energy (crude oil, etc.)

LP

Minimize cost to meet fuel demands and legal requirements
Cost categories include capital costs and operating costs

Output

Prices of end-use products
Production plan (how much each type of crude to use, how much
f each type of ethanol to produce, where to produce, etc.)

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A variety of biofuels are modeled in LFMM

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Liquid Fuels Gasoline-like Ethanol Cellulosic Advanced sugarcane Corn & Grain Cellulosic Drop-in Diesel-like Biomass- based diesel FAME biodiesel Green Diesel Cellulosic Drop-in

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For use as motor fuel, ethanol must be blended with gasoline blendstock to make end-use products E10, E15, or E85

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Ethanol

E10 E15 E85

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Main drivers of AEO results for biofuels

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Potential Market Size (Demand) Government Laws and Regulations Competition with Other Fuels and Other (non-fuel) Uses

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EIA projects declining gasoline use and slowly increasing diesel use through 2040

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2 4 6 8 10 12 14 16 18 2010 2015 2020 2025 2030 2035 2040 Gasoline Diesel

Transportation fuel demand Quad Btu per year

Source: AEO2013 Early Release, Energy used in transportation

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Market size: NEMS models total consumer demand for E85 v. E10 using a mathematical function with three inputs

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Mathematical function of consumer demand for E85 v. E10

Number of flex-fuel vehicles E85 station availability (infrastructure) Price of E85 relative to E10

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EIA projections assume current Laws and Regulations

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Nested yearly volume targets for biofuels (total, advanced, cellulosic,

biomass-based diesel)

Subject to yearly adjustment by EPA
Under certain circumstances, the EPA is required to issue cellulosic

biofuel waivers RFS2

Yearly carbon-intensity targets for California motor gasoline and diesel

California LCFS

Ethanol tariffs have expired
Most ethanol tax breaks have expired, except some related to cellulosic

ethanol production

Biodiesel tax credits have been renewed for another year

Federal Taxes and Tariffs

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Laws and Regulations: The four RFS2 volume targets are expressed as nested constraints in the LFMM LP

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Total Renewable Fuels

Advanced

Biomass-based diesel Cellulosic biofuel Other advanced biofuel (including sugarcane ethanol)

Non- advanced

Corn ethanol

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Laws and Regulations: EPA has flexibility in administering RFS2

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In any given year, the EPA has broad authority to decrease one or more
f the applicable volumes for the following year. The EPA also has the

authority to increase the biomass-based diesel mandate.

If the EPA changes a sub-category’s applicable volume, it is not

required to change the nesting category’s volume.

If, after 2015, the EPA reduces an applicable volume by 50% in a single

year, or by 20% in two consecutive years, then it is required to reduce that applicable volume in the following years.

If EPA reduces the applicable volume for cellulosic biofuels for a given

year, then it must make available cellulosic waivers at a price specified in the RFS statute.

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Biofuels compete with other fuels. Cellulosic biofuels also compete against biochemicals, electricity

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Classified as both RFS Cellulosic and RFS Advanced.
Cellulosic ethanol competes for a limited gasoline blend pool.
Ramp-up of cellulosic biofuel production could be delayed due to

production of higher-margin biochemicals (not explicitly modeled in AEO)

Biomass can be burned to generate electricity

Cellulosic biofuels, biochemicals, electricity

Currently, most ethanol blended into E10 is (inexpensive) corn ethanol

Corn ethanol

RFS Advanced biofuel
Competes for a limited gasoline blend pool

Sugarcane ethanol (mainly from Brazil)

RFS Advanced biofuel

Biomass-based diesel

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0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 2010 2015 2020 2025 2030 2035 2040

U. S. domestic biofuels production is steady through 2030, and

then increases, particularly cellulosic drop-in biofuels

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million barrels per day

Source: AEO2013 Early Release

Cellulosic drop-in fuels Biomass-based diesel Conventional ethanol (mostly corn) Cellulosic & other advanced ethanol

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Today’s presentations

19 Michael Cole, Biofuels Projections in the AEO, March 20, 2013

Macro Economy Energy Demand Primary Energy Supply Energy Conversion

Light Duty Vehicle Markets and E85 Ethanol (E85) Deployment Expansion Cellulosic Biofuels in the FAPRI Baseline of 2012 U.S. Biofuels Supply Analysis Sugars, Fuels, and Chemicals Drop-in Biofuels in AEO Applications of Biomass Scenario Model Modeling of Biofuels in AEO Brazilian Biofuels Supply

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For more information

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