There's a heated debate going on in the chemicals industry centering on whether or not the biofuels boom will produce a dramatic increase in the supply of some specialty chemicals. The processes that transform biomass into ethanol or biodiesel can produce byproducts used to develop specialty chemicals—chemicals that now are only derived through the use of petroleum.

But chemicals market experts are debating the timing and the impact of this trend and some, in fact, say expansion of the biofuels industry could lead to tighter and more expensive specialty chemicals, as recently happened with citric acid.

"We see the ethanol industry unleashing a whole biorefinery industrial revolution," says Corinne Young, director of government affairs at BioEnergy International, a small Lowell, Mass. firm that is developing technologies to convert biomass into fuels and specialty chemicals. She envisions a stream of textiles, auto parts, perfumes, cosmetics and other products all using chemicals that originate in biomass. There will be a "significant market" for specialty chemicals as byproducts of biofuels, and one that will have "definite benefits on the procurement side," says John Urbanchuk, a chemical economist at the Wayne, Pa. office of consultants LECG. He cautions, however, that this industry could take "a number of years" to fully blossom.

"I'd be surprised to see any immediate windfalls" for buyers and users of specialty chemicals as a result of the burgeoning biofuels programs, says Roger Shamel, president of chemical market experts Consulting Resources Corp. in Lexington, Mass. But as biofuels mature over the next few decades, prices of some specialties derived from them could drift downward, he adds.

Right now, the most promising biofuels sources of specialty chemicals are biodiesel plants, which convert soybean and rapeseed oils, or animal fats such as tallow, into transportation fuels. These facilities also produce glycerin as a byproduct, and this glycerin is piling up in quantities far beyond the ability of the chemical industry to absorb it. (Some of it is now being burned for fuel.) According to a recent U.S. Dept. of Agriculture estimate, 600 million gallons of expected new biodiesel fuel capacity in the U.S. will churn out about 315,000 tons of glycerin.

The chemical industry has already begun to tap some of this biodiesel glycerin, especially for the manufacture of propylene glycol, a low-toxicity antifreeze and starting point for many resins, lubricants, paints, cosmetics and detergents. Another biodiesel glycerin derivative is epichlorohydrin, a monomer for epoxy plastics. Recent research at Washington State University has found processes to make other specialty chemicals from glycerin, including omega-3-fatty acids, succinic acid and succinate salts. And a USDA lab is looking at ways to combine biodiesel-based glycerin with citric acid to produce biodegradable polymers.

But for biodiesel glycerin to replace petroleum as a source of specialty chemicals, manufacturers will have to overcome some initial skepticism, notes Urbanchuk. Right now, he says, "there's still some questions in people's minds about how fast the biodiesel industry is likely to expand, and the security of supply of raw glycerin." He believes that major investments in plants that use biodiesel feedstocks will eventually occur, but not until some of these crucial supply chain questions are answered over the next 5–10 years.

Another fertile source of specialty chemicals could turn out to be biofuels processes that convert cellulosic wastes (such as wood chips, corn stover, and sugarcane bagasse) into ethanol. Unlike bioconversion of corn starch to ethanol, cellulose-to-ethanol is in its infancy, with no commercial plants operating in North America. But as a recent Rohm and Haas/Ceres effort shows, the chemicals market sees potential in cellulosic feedstocks for chemicals. The companies say it may be possible to genetically engineer crop plants used in cellulosic ethanol to co-produce large amounts of methacrylate monomers, which can be converted downstream into a host of products, including paints and coatings, building materials, and acrylic sheets and resins. Other potential specialty chemical products of cellulose biofuels projects include lactic acid, succinic acid, levulinic acid, and 1,3-propanediol.

A thriving cellulose-to-ethanol industry will emerge, and a new source of specialty chemicals along with it, Urbanchuk believes, but it's going to take some time. In his view, production of ethanol biofuels from corn starch should peak in about 10 years. After that, an increasingly larger fraction of bio-ethanol will be made from cellulosic feedstocks. All told, Urbanchuk estimates that a cellulose-based ethanol industry won't reach commercial maturity for at least 20 years. But when it does, he says it will offer "an exciting opportunity" for sourcing chemicals now derived from petroleum.

For now, however, starch-to-ethanol is still dominant on the biofuels scene. This increasing diversion of starch for fermentation ethanol production has actually constrained supply and raised prices of at least one competing chemical that is also made by fermentation of starch: citric acid. Will the same thing happen with other chemicals now made by corn starch fermentation, such as acetic acid, lactic acid and 1,3-butanediol? Not likely, says Urbanchuk. Because of the biofuels boom, he says, "we're going to see continued growth in the fermentation business," and that will create an ever-expanding source of chemical feedstocks, whether they be starch or cellulose. "Of course, that doesn't mean there won't be [price and supply] setbacks for some chemicals in certain years due to the vagaries of agricultural markets," Urbanchuk adds. Shamel too sees "minimal" price impact for specialty chemical buyers as biofuels gather steam over the next few years.