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I have come across a couple of interesting news items recently that point towards continued viability and growth for the U.S. ethanol industry. As I have written in the past, I believe the U.S. corn based ethanol industry will grow as a viable part of the country’s vehicle fuel structure. The current environment of high corn prices is pushing these companies towards efficiency and innovation. The ground work they are laying now will lead to increased profitability as ethanol becomes a larger portion of total fuel consumption.

The first item is this article about ethanol producer POET expanding into cellulosic ethanol. POET is a privately held ethanol producer that is one of the nations largest, producing over 1 billion gallons per year from 23 plants. The company has announced it has developed the technology to process the corn cobs for additional sugars to refine into ethanol. According to the press release, using the corn cob along with the corn will increase ethanol production by 11% per bushel and 27% per acre of corn. It will be a simple process for farmers to harvest the cobs along with the corn and transport the crops to POET’s ethanol facilities.

Construction of the company’s pilot cellulose processing plant should be completed in the 4th quarter of 2008. POET and the Dept. of Energy are investing $200 million in the new technology. To me it makes a lot of sense for the corn ethanol producers to expand into cellulosic production than to try to start up a whole new industry from scratch.

The second item I found of interest was several articles on the use of ethanol blender pumps. Blender pumps allow the buyer to select the blend of ethanol he desires at the pump. These types of pumps now offer the different combinations of E10, E20, E30, E40, E50 or E85 with the corresponding higher octane rating as the percentage of ethanol increases. Prices also decrease as the percentage of ethanol increases. Recent studies show that blends of up to E30 work well in modern cars with positive effects on mileage. From a press release on one study:

These studies show that moderate 20-30 percent ethanol blends can reduce air pollution, improve gas mileage, and save drivers money in the most popular cars on the road today,” said Brett Hulsey, president of Better Environmental Solutions, an environmental health consulting firm. “Moderate ethanol blends are homegrown in America, can be delivered with existing pumps to current vehicles, and cost less than gasoline. Ethanol lowers CO2 emissions 20 percent from gasoline, making it one of our most effective greenhouse gas reduction programs currently in place.

Fuel retailers in corn states noticed when they installed E85 pumps many of their customers were blending the E85 and regular gas by hand to achieve optimum performance. Blender pumps had long been used in northern states to blend diesel fuel during cold weather, so the solution to offer ethanol blender pumps made sense. From a happy customer courtesy of DakotaFarmer:

“I found E30 was best. It costs less than unleaded or E10 and didn’t reduce my mileage,” says Al Kasperson. He is a former instructor at the Lake Area Technical Institute in Watertown.

By the end of 2009 ethanol producers will be producing enough ethanol to replace 10% of the 140 million gallons of gasoline consumed in the U.S. each year. As E10 is the standard for regular gas in many parts of the country, the ethanol industry needs to find ways to increase demand for their product. At this point there are only a handful of blender pumps installed in states like Iowa, Minnesota, Kansas and South Dakota, but their spread will definitely increase the demand for ethanol.

I have been making the point here that corn ethanol is an integral component of this country’s fuel structure. Those that are calling for an end to grain based fuels will not succeed and the ethanol companies will have a major (and profitable) role on reducing our dependence on foreign oil. I will close with this quote from the website of Senator Barack Obama:

"Twenty years from now our nation’s transportation fuels sector will be powered primarily by domestically produced biofuels, if we have the vision and the will to make that happen,” Obama said. “Just as we sent a man to the moon, we can harness our technological skills and entrepreneurial spirit to end our dangerous reliance on foreign sources of oil. In doing so, we will not only protect our national security, we will also protect our public health, create quality jobs for the next generations, and keep billions of dollars here at home, rather than sending them to nations that want to do us harm.”

Disclosure: None

Source: Ethanol: Our Answer to Reducing U.S. Dependence on Foreign Oil