Can biofuels reach "petroleum parity"?

During November and December 2009, I wrote five posts about producing biofuel from algae. My initial interest and optimism faded as I read more about problems being encountered with costs and scaling. In my last two posts on the subject, I did hold out the possibilities that algae fuel could become a niche renewable (about 10% of our current usage) if Big Oil brought their money, experience and infrastructure to bear on the problem and/or if a strain of algae could be genetically "manufactured" that would secrete oil and thus eliminate a great many of the costs of production. Credit for the first possibility goes to Katie Fehrenbacher of Earth2Tech and for the second possibility to Robert Rapier.

Now comes a new report from Lux Research which seems to essentially confirm what I had reported. I have not read the report, only a press release put out by the company and distributed by Marketwire. Nevertheless, the release claims that in order for biofuels to replace the 30 billion barrels of oil consumed annually, biofuel producers "would need to cultivate an area the size of Russia." The report's lead author, Mark Bunger, acknowledges the strong interest in biofuels because they are renewable and can reduce the amount of CO2 entering the atmosphere. But, if they can't match petroleum in terms of costs, then they "will remain little more than a novelty," he concludes.

The report also concludes that waste biomass is the "best option" as a renewable fuel source in the near-term. The primary reason is cost -- gathering and processing the waste biomass has fallen to $40 per barrel of oil equivalent, according to the Lux report. With 316 million dry tons of waste biomass from forestlands and another 534 million dry tons from crop residues, there are more barrels of oil equivalent than competitors such as crop feedstocks (e.g., corn for ethanol), algae and CO2.

To this pile of waste, I would add cow manure being turned into methane by companies like Green Mountain Power of Vermont and municipal waste being converted into biofuels by companies like W2Engergy. I describe both activities in my post on distributed generation. As I said in my last post on smart people, it seems to make more sense to go for the low-hanging fruit first. The Lux Research report apparently comes to a similar conclusion. But, that's not to say that we should stop innovating for the promise and surprises of technology.