I went back a few years and looked for some companies that promised to be making biofuels by the year 2000-whatever.Algenol (pdf) claims to be producing ethanol from algae at $1.27 per gallon.
The cost of crude oil is about 68% of the cost of a gallon of gasoline at the pump, so at $3.25/gal. the crude oil cost is roughly $2.21/gal. Ethanol has about 2/3 the energy potential of gasoline, so the equivalent cost of Algenol’s fuel is about $1.91/gal.
The drawback is that the Algenol process produces 9,100 gallons per acre per year. The EPA is calling for refiners to use 14.2 billion gallons of ethanol in gasoline in 2014. Assuming I haven’t dropped a few zeros in my math (always a possibility, and I welcome being corrected), that calls for something more than 1.56 million acres of land to produce just the amount of ethanol already slated for use in 2014.
The problem doesn’t seem to be the cost per gallon, but the capacity limit. Biofuel production takes a certain amount of time – time to grow the base crop and then more time for the microorganisms to ferment it. No matter how much you genetically engineer the process, at some point you can only grow X amount of biomass per acre per year.
And that 1.56 million acres? That’s about twice the amount of agricultural land that’s taken out of production and diverted into residential uses each year (pdf.) Sooner or later there will be a tug of war over how we’re using our land.