Future ethanol production to grapple with economical aspects

Dec. 1, 2008
There are 170 plants in the United States producing 10.1 billion gallons of ethanol annually with US farmers providing 335 million more bushels of corn

There are 170 plants in the United States producing 10.1 billion gallons of ethanol annually with US farmers providing 335 million more bushels of corn than the projected use, said John Kilduff of MF Global Ltd.

Kilduff presented the data while discussing the economies involving biofuels at the Platts Refined Products Storage and Transportation conference October 16-17 in Houston, Texas. Joining him were Chad Zamarin of Colonial Pipeline Company, Barry Schaps of VeraSun Energy, William Wells of Global Ethanol, and Joan Glickman of the Department of Energy (DOE).

While there may be a surplus of corn for ethanol production, Kilduff pointed out that the cost of building new plants has doubled within the last 18 months. He predicted a number of company filing for bankruptcy and/or mergers in the near future for the industry. Meanwhile, the US government is committed to biofuels, which means the industry is here to stay.

Zamarin noted that cellulosic ethanol production is currently small and localized, but the Southeast may be ideal for this type of production. He said he believes corn processing plants will be the likely first cellulosic facilities, which means logistics will remain an issue because the majority of them are in the Midwest.

At the same time, industry economics are heavily dependent on government and price subsidies. “Advanced technologies likely will require even heavier subsidies,” Zamarin said.

Corn- and sugarcane-based ethanol as a fuel has a proven track record, having been produced for over 30 years in the United States. However, next generation fuels are yet unproven at a commercial scale. “An industry-led roadmap may help, but the market and the development must be aligned,” he said.

As for the consumer side of the issue, Schaps said a study by Iowa State University indicates that biofuels lower the price of gasoline to consumers between 29 cents and 40 cents per gallon, which would mean an estimated savings to consumers of $42 billion to $88 billion dollars annually, assuming a 145-billion-gallon US gasoline market.

Wells pointed out that octane is an important benefit of ethanol. “Octane is overlooked by the showier hype of supply extensions, clean air, greenhouse gases, agricultural price support, domestic feedstock, and domestic jobs,” he said.

Glickman said: “Biofuels are going to be part of the transportation sector in this country — and in the rest of the world.” She predicted that those who look forward during this time will be in the best position for the future.

She pointed out that the federal renewable fuel mandate expands use of renewable fuels to 36 billion gallons annually by 2022 and specifies contributions from advanced biofuels, including cellulosic biofuels. Ethanol production from corn is capped at 15 billion gallons per year and studies are required on the environmental impacts.

DOE strategy for expanding ethanol use includes expanding E85 and determining feasibility of using intermediate ethanol blends in conventional vehicles (non-flex fuel vehicles). The Environmental Protection Agency (EPA) has authority to issue a “substantially similar” waiver to allow alternative fuels to be used in place of gasoline and to evaluate effects on durability, driveability, materials, and emissions, she said.

In addition, studies scheduled for 2009 will include vehicle fuel system materials compatibility to look at a wider range of materials. On-board diagnostics testing will include repetitive cold starts and short drives with no warm up.