- Summary: An innovative use of excess heat from coal-fired energy plants to power ethanol facilities is lowering the costs of ethanol production in the Midwest. Blue Flint Ethanol, a joint venture of Great River Energy and Headwaters Inc., has pioneered the practice, and others are now following suit in the use of coal - as opposed to natural gas, the leading fuel - to power ethanol production. Further advantages of coal include low cost (prices can be locked in for 20 years), but environmentalists are concerned that the benefits of using ethanol would be offset by the CO2 emissions from the coal. The ethanol industry counters that 'clean coal' is not much more of a pollutant than natural gas. Legislation passed in Washington last year requires refiners to blend 7.5 billion gallons of ethanol or biodiesel annually into the U.S. gasoline supply by 2012.
- Comment on related stocks/ETFs: One of the big questions challenging the emerging ethanol industry is how to build out the necessary infrastructure to bring overall costs down, since in an all-in cost basis, it's still cheaper for ExxonMobil (NYSE:XOM) to make ethanol than it is for the ethanol companies to brew it from corn. This may be part of the answer. Note also options are now trading on the alternative energy ETFs Powershares Wilderhill Clean Energy (NYSEARCA:PBW) and Powershares Water Resources Portfolio (NYSEARCA:PHO).
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