The U.S. pinned a big part of its hopes for future transport fuel on cellulosic ethanol, something that doesn’t even exist commercially today

How feasible is the idea of producing 90 billion gallons of ethanol per year in 2030—enough to displace well over one-third of U.S. gasoline consumption—and keep it affordable? That’s what Sandia National Laboratories set out to answer.

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The upshot? There are no theoretical barriers, but a host of practical ones, the laboratory found in a study soon to be published in Bioresource Technology.

Basically, cellulosic ethanol can’t compete with gasoline unless oil stays above $90 a barrel. Even then, the industry has a lot of work to do in order to produce large volumes and do so affordably.

The good news is that vastly increasing cellulosic ethanol production would be good for the environment, saving the equivalent of 25% of today’s emissions from gasoline, or the equivalent emissions from 87 coal-fired power plants.

To make 75 billion gallons of cellulosic ethanol a year (on top of the 15 billion gallons of corn ethanol, which will still be around) two things are paramount: Producers have to get better at squeezing more juice out of the same amount of biomass, and they have to make sure they’ll have all those plants available in the first place.

Improving yields is particulary crucial—the Sandia study generously figures average cellulosic ethanol yields will surpass anything that’s been demonstrated today, which “assumes significant technical advances over time.” Without such progress, the industry won’t ever be able to produce anything like 75 billion gallons.

But to do so affordably depends on the cost of oil, the cost of capital, and the cost of the agricultural feedstocks in the first place. The report concludes that, to be feasible, such a large-scale target means cellulosic ethanol producers must be insulated from volatile or falling oil prices; must have cheap and abundant feedstocks; and must have “manageable” capital costs. That should keep Washington busy.

Here are some of Sandia’s recommendations: “Potential policy options that warrant further investigation include well-planned market incentives and carbon pricing as well as federal investment in research and development and commercialization, especially when oil prices are low.”