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Are We Ready To Play In Energy Markets?

The pursuit of biofuels business takes pulp and paper companies into a new industry sector: energy. There they will compete with the established big oil interests, new alternative energy resources such as wind, solar and tidal, and renewable energy sources, such as corn ethanol.

An article in the September issue of Air Water Land magazine introduced a new concept to me, that of EROEI (energy returned on energy invested, pronounced e-roy).

In the energy industry, it’s a measure of the efficiency of harnessing a particular energy source, a ratio of how much energy input is required to achieve a certain output.

Quoted in “Quest for a Better Biofuel” (Sept. 2009, Air Water Land), energy analyst Peter Tertzakian notes that the EROEI of oil has been dropping steadily, to the point where it now averages about 22:1 for conventional oil in North America. Extraction and conversion from oilsands has a much less desirable EROEI of only 3:1.

In comparison, Tertzakian says the EROEI of wind is an impressive 18:1. Corn ethanol is 1:1, and biodiesel only slightly better at 2:1.

The article does not specify the EROEI of biofuel from wood, but it’s a measure that our industry will need to consider if it hopes to make inroads into selling biomass as an energy source. We need to evaluate the energy expended to harvest, transport, and convert wood to fuel or electricity. Keep in mind that the concept of EROEI is distinct from the economics of energy production.

We also need to create a distinction — in the minds of consumers, legislators, investors — between biofuels from crops such as corn, and biofuels produced from woody biomass. The economics are not the same, nor are the conversion technologies or the business model.

David Layzell, in this same Air Water Land article, says Canada will need to create an economically viable biofuels sector if it wants to strengthen its position as an energy leader. Layzell is executive director of the Institute for Sustainable Energy, Environment and Economy.

He says straw and wood have much higher energy content per hectare than grain. In addition, wood and straw can be converted into a liquid fuel or synthetic natural gas, using technologies that are based on thermochemical conversion, rather than fermentation, as is the case for grain ethanol.

Thermal and chemical processes are something this industry understands. Energy markets, not so much. On this point, I agree with the cadre of biorefinery researchers who suggest that it would be wise for pulp and paper firms to partner with someone who is already a player in the energy field.