Researchers at Purdue University announced early this month that a new process for creating biofuels could soon get scaled up to actual production if oil prices stay at their current levels.

Extensive engineering research and development has gone into designing efficient ways to create biofuels recently. As highlighted by the effect of the ongoing sanctions against oil-rich Iran over its nuclear program, the global economy remains largely at the mercy of oil production, relying on a steady flow of the fossil fuel.

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The biofuels industry, despite some fairly dramatic growth over the past decade, has still drawn significant opposition because of high prices.

When the U.S. Senate Armed Services Committee put forward its latest defense spending bill, the panel included language that would prevent the military from investing in biofuels unless they offered some cost advantages, effectively shutting down a major Department of Defense project to support their development.

But Purdue professor of chemical engineering Rakesh Agrawal believes that the new production process could bring biofuels into direct competition with traditional fossil fuels.

Cooking up biofuels

The process, named H2Bioil, quickly heats up the biofuel feedstock to as high as 500 degrees Celsius, while also exposing the material to pressurized hydrogen. The addition of certain other catalysts can can help create fuels with especially high energy density and offers much higher yields than traditional approaches to producing biofuels.

“The process is quite fast and converts entire biomass to liquid fuel,” said Agrawal. “As a result, the yields are substantially higher. Once the process is fully developed, due to the use of external hydrogen, the yield is expected to be two to three times that of the current competing technologies.”

Until recently, Agarwal had estimated that this process would require crude oil prices in the range of $120 per barrel in order to be competitive on the international stage. But as the conversion has become more efficient and some of the key costs have fallen, new analyses suggest the process could start to challenge oil at prices as low as $100 per barrel.

Meeting the competition

The key to making these new biofuels more competitive lies with producing the necessary amounts of hydrogen at low enough costs. While the hydrogen itself would be produced using electrolysis, the cost of this process can vary based on how the electricity being used is generated.

Coal and natural gas allow for more competitive prices, while nuclear, wind and solar power generally prove more expensive.

While it seems unlikely in the near future, Agarwal’s analysis shows a nationwide carbon tax would quickly make the process even more competitive, even using nuclear power to produce hydrogen.

“This economic analysis shows us that the process is viable on a commercial scale,” Agrawal noted. “We can now go back to the lab and focus on refining and improving the process with confidence.”

Falling market poses challenge

Brent Crude Oil prices have lingered above $100 per barrel since early October of last year, in part thanks part to concerns about the Iranian sanctions.

But prices have not been as high everywhere.

West Texas Intermediate crude oil traded above $100 per barrel for nearly four months from February to May, but disappointing economic news out of the U.S. and China combined with rising concerns about Europe sent prices below $85 per barrel.

Nevertheless, enthusiasm for these new fuels is still strong in some areas. Bloomberg reports that a new $19 million fueling station opened up near Anaheim, California, designed to allow drivers to make use of a wide variety of different fuels, from traditional gasoline to biodiesel.