pkamp

A Modest Proposal For the Future of Ethanol: Cellulosic Beef

I appreciate Tom's thoughtful and well researched article. There is a wild card here and it is corn yield developments. Tom suggests that if all the 2006 crop were used for ethanol it would be enough for 20 billion gallons of fuel ethanol. This would be about 14% of our total transportation fuel needs in the US.

In just one year, the 2007 anticipated crop (about 13 billion bushels) would be enough for over 35 billion gallons of fuel ethanol. Many in the ag community feel that with implementation of other seed varieties and crop technology, 20 billion bushels is not unreasonable. Without taking one kernel from established, stable markets for corn use (feed, food, industrial, and export), and without increasing total planted acres, fertilizer use or soil erosion runoff, producing 35% of our fuel needs from corn in just a couple years is not unreasonable. Numerous technology developments by ICM, Poet/Broin, and my company Delta-T are being proven and implemented which further reduce the water and energy requirements for corn ethanol plants, and lower operating costs. This points to the need for more corn to ethanol capacity, not less.

Put another way, this would displace the oil imports we currently receive from Saudi, Arabia, Iraq, and Venezuela. It points to a more energy independent United States.
Commodities are about logistics and with the tremendous increase in the demand for fuels in other parts of the world, it may not make sense for them to export to the U.S. in the future anyway.
Corn and corn to ethanol infrastructure is already in place and there are very positive outcomes in terms of the environment, tailpipe emissions and air quality, and economic development of domestic industries and agriculture. Not only does ethanol create direct jobs at plants, but for a huge number of people employed in materials, fabrication, construction, and agriculture.
I wholeheartedly agree with development of low cost cellulose to ethanol processes and plants. But this should not be looked at as something that will displace the corn to ethanol industry, rather to supplement it. Corn to ethanol is simply going to be way ahead of cellulose to ethanol for a long time, not just in terms of the technology, but also in feedstock infrastructure and logistics and agricultural methods, and in acceptance and non-disruption of existing animal feed methods and equipment.
The heavy lifting is in the hands of the pro-ethanol and renewable legislators. We talk about the E10 wall as blocking the ongoing development of ethanol production capacity and blending. Development of voluntary blending markets for ethanol (E20, E30, E50, E85 etc) and their acceptance by US Automakers, and breaking down the barriers that have been put in the way of convenience store operators and fuel retailers by the oil companies (which is a reality, not a slogan) is a necessary short term route to increased renewable fuels and ongoing development. Sen John Thune from South Dakota and others are leading the efforts here in Washington, with a lot of support, but its a hard fight.

Paul Kamp
Delta-T

The Ethanol Industry: An Insider's Take

An increased demand for corn that is used for fuel decreases subsidies to farmers. Farmers used to be paid to not grow corn - they no longer need that subsidy. So your comment and conclusions are inaccurate. The oil companies have managed to grab most of the "subsidy", which is a .51/gal blending credit. Many ethanol producers are looking to get this back, and many would be willing to eliminate to unlock ethanol prices from unleaded. development of E85 markets will help, and the emergence of new retailers will provide some competition to the existing fuel retailers.

There will be an "oversupply" of ethanol if you look at traditional ethanol markets, but there are a lot of smart folks finding non-traditional markets, like E85, which is growing rapidly in the midwest. We need to support our automakers in developing not only more flex fuel engines, but also the better fuel efficient engines they are already installing in many new models. An example is GM - they have the most fuel efficient fleet of all automakers currently and are making some great cars. Also Ford is replacing the 3.0L engine in the 500 (soon to be Taurus) with a 3.5L that has more HP and 5-9 more mpg than the old engine, due to dispacement on demand and other new technologies. Plus Ford recently was ranked higher than Toyota and Honda in overall new car quality, they are making some great vehicles.

There is a lot of very inaccurate information out there about the cost and energy balance of ethanol production. In the best plants it requires one sixth the fossil fuel input that is in a gallon of ethanol. It can be produced in an efficient plant at about $1 per gallon, and in a less efficient plant at around $1.30. There is a good margin for profitability if gas prices are above $2 / gallon. They will come down in late winter, rise in spring, etc. but ethanol production costs remain stable.

Oil companies / fuel blenders are already taking advantage of ethanol's higher octane by cutting lower octane fractions at the refinery and blending in ethanol as an octane enhancer and clean air oxygenate. So if gas costs $3 at the pump, and the price of ethanol is currently in the low $2 range, I would argue that ethanol is decreasing the cost at the pump. However I respect the quoted expert's opnion. There are some additional storage and blending costs involved.

New technology innovations are already in place that continue to use less energy, less water, and provide higher value feed products from a bushel of corn. 51% of all yellow No. 2 corn went to animal feed last year, so if one could make a case of "food vs fuel", you would have to look at the beef industry first, and with the high cost of transportation, gasoline fuels a close second. Using the high protein byproducts (DDGS and HPD distiller grains) can actually decrease the overall amount of feed cost per animal if a good ration program is implemented, and there are lots of livestock producers who are doing this. When you look at the bigger picture, feeding whole corn to animals is the most wasteful use of a bushel of corn - especially when you can make 2.8 gallons of fuel from the same bushel and still produce 16-20 lbs of high quality animal feed.

Plus, many communities are benefitting from the ethanol plants - there are new revenues begin generated, new local corn markets, good local jobs, and an ethanol plant has lower emmissions than a beverage alchohol or even soda pop plant. There are some exceptions, especially with older plants, but ethanol plants are generally regarded as good corporate citizens with a small environmental footprint. If we are using 10% ethanol in our fuel blends, that is 10% of 140bbg/yr we no longer need to import. That's a good thing.

PK

The Ethanol Boom's Unintended Consequences

The problem with ethanol driving up food prices is people with pulpits like Tate Dwinnell who don't know what they're talking about. It has nothing to do with supply and demand or planted acres. For every 800 bushels of corn that are traded bought or sold, 1 bushel is actually taken delivery of - meaning, the 799 others are speculators who, driven by fear, gut instinct, or jump-on-the-latest-pro... bandwagon, are controlling the price of ethanol far more than US farmers, polticians, or the big commodity meanie ADM. (By the way, it is the fuel blenders, i.e. oil and gas companies, who get most of the ethanol blending subsidy)

That's called capitalism. We could fix the price of corn at $2.30 or so, and it would be good for all the little people across Amerca buying fuel every day - but I dont' think we're going to propone regulated markets, right?

Asking the CATO Institute about the benefits of ethanol, or the reality of global warming, is akin to asking the tobacco institute about lung cancer. Is that the best 20/20 can do?

Listen again to all the politicians in the 20/20 report (except for Hilary, but listen closely to Evan Bayh). The reason they're behind it is that it is good for the US. Before politicians backed it, it was doing great things for rural areas across the midwest - revitalizing towns, creating new strong ag markets, burning cleaner, creating local jobs and local investment opportunities, and yes, reducing imports. Its now wonder all the poticians like it, but they are simply jumping on the bandwagon.

By the end of 2007, the amount of ethanol made in the US will approach gasoline made from oil imports from Iraq and Kuwait. And the oil companies will soon be shifting that production to the rapidly growing Chinese and Indian markets, because it will make more sense - they're buying lots of cars over in Asia.
So ethanol will never replace gasoline - but its a matter of doing the right things, one at a time, so that we can be more energy reliant. For now, corn makes perfectly good sense, and will always be cost and energy effective with all the good developments being made in the industry. The industry itself is closely following the use of corn and its impact on feed corn and export markets (both of which went up last year, in ethanol's biggest year ever!) and growth of ethanol production using other feedstocks. It's because our farmers and ethanol producers are good, smart, resourceful people and they are increasing the yields while lowering use of fertilizers and taking good measures on soil erosion.

At the current price, feeding cows whole corn costs about six cents a pound. So if "a farmer" wants to feed his livestock french fries, which would cost around eight dollars a pound, he's not too bright. What he should be doing is feeding his cows DDGS (a high protein byproduct of ethanol production), which when blended into animal feed, can lower feed cost per animal. This is the truth, and livestock producers with a little bit of vision are warmly embracing this.

Sounds like Tate Dwinnell might be pretty attached to his tequilla (I like it too!), but this article and the 20/20 piece are complete rubbish.