Saturday, February 2, 2008

Update on Iowa's Ethanol Economics

Just wanted to quickly do an update on a post I had this past Wednesday on the economics of ethanol to the Midwest. It seems as though the post was fortuitous since the very next day (Jan. 31st), at the Second Annual Renewable Fuels Summit in Des Moines Iowa, John Urbanchuk reported his findings on the impacts of ethanol to the Iowa economy. Urbanchuk, a respected economist out of Pennsylvania whose analysis on ethanol has gone all the way to the US capitol, reported that ethanol has added $12.7 billion to the Iowa economy. That's approximately 10% of our gross domestic product! These numbers back up the findings by Iowa State economist David Swenson and highlight the fact that, without ethanol, folks out here in the Midwest would definitely be in a much tighter squeeze than we are right now.

For the original article:

Thursday, January 31, 2008

Iowa's Wind

Although this blog is designed to concentrate on the impacts and realities of ethanol, taking one post to discuss something close to home in my case isn't all that bad. What I'm taking about is Iowa's wind power. Evidently the Northern Plains are ideal in many areas for the generation of power from wind. Below is a map generated by the Department of Energy showing wind speeds across the US. Although Iowa doesn't have the highest average wind speed, it is one of ten states in the nation (shaded by a dark black line) with the potential to generate wind power when factoring in environmental and land use problems.

Although there are plenty of factors that could be problematic with wind power including;

1) Its unreliability to supply a steady stream of power to the grid.

2) Land usage as many wind turbines go up in fields, preventing whole areas from being used in the production of corn or soybeans.

3) Possible water flow problems in the fields arising from wind-turbine placement.

But taken as a whole, I think that wind has the potential to be a complement to ethanol in the nation's push towards divorcing from fossil fuels. Although the argument that wind energy doesn't provide steady power has led some to claim that even with a large wind infrastructure, the necessity for the same capacity of coal power-plants would still exist, the potential for this problem to be solved in the future with sophisticated battery systems could eliminate this problem. The good news is that the Des Moines Register is reporting today that Iowa's largest utility, MidAmerican Energy is in the process of installing hundreds of wind turbines throughout the state this year with the goal of bringing 726 turbines online by year's end. This would add 1,124 megawatts of wind generated power, enough to power 390,000 homes -- close to the total number of people in the Greater Des Moines area (I have to say that because Des Moines won't annex their suburbs so the actual city of Des Moines only has 200,000 residents even though the urban sprall pushes the number up close to half a million).

With this added capacity, MidAmerican claims that 25% of its power will be generated from renewable sources (without drastic increases in utility costs), which will push Iowa even closer to being the renewable energy capital of the US. I for one am hoping that groups continue to work together to improve wind turbines to limit their encroachment into farming and to improve electrical storage methods in the future so that wind might be a more viable form of renewable energy. There, that's my venture into the world of wind energy. Let's hope it works out for Iowa, and for the rest of the United States.

For the article in the Des Moines Register:

Ethanol 'Glut'

The Energy Information Administration (EIA) is reporting that ethanol stocks in the United States fell 2% in November, a correction from the widely held position that refinery capacity coming online would result in too much ethanol being supplied to the market. The stocks fell 229,000 barrels to 11.1 million barrels of ethanol in the United States even though ethanol production has jumped 45% this year alone. Although not a huge change, it signifies the importance of ethanol and how refiners and blenders alike are beginning to use the fuel more pervasively. Analysts attribute the drop in ethanol to the huge increase in capacity that led to a large drop in ethanol prices. This in turn encouraged blenders to blend ethanol into their gasoline as a way to cut prices. With the fall in ethanol stocks, we should see the price of ethanol begin to steady, particularly since the cost of feedstocks such as corn have not dropped in recent weeks. Either way, it seems that the industry has proven the critics wrong, for the time being, as ethanol demand has kept up with the supply.

For the original article:

Wednesday, January 30, 2008

DOE Cellulosic Ethanol

The Department of Energy (DOE) is announcing today that they will invest $85 million in three pilot project plants to determine the success of early techniques in producing cellulosic ethanol. This project by the DOE is distinguished from their earlier investment in commercial-scale cellulosic ethanol trials that included Poet's Emmetsburg, Iowa plant. However, this latest round of DOE investment may allow for greater testing of cellulosic feedstocks found outside of the Midwest -- such as wood waste or other agricultural wastes. This would allow, if successful, for cellulosic ethanol to be the bed-rock of the ethanol industry in the South and Western parts of the United States much like corn has been for the nation's midsection. The three companies will have small scale plants in Boardman Oregon, Commerce City Colorado, and St. Joseph Missouri and will employ both chemical and thermochemical techniques to liberate the sugars that reside in the cellulosic material. Although this will be a good step forward in developing and encouraging data into cellulosic ethanol production, the technology remains very new and the technology to produce ethanol from cellulosic materials economically has yet to be proven.

For the original press release, follow the link below:

Tuesday, January 29, 2008

Ethanol Economics

With Bush's focus on the economy last night in the State of the Union address and Congress' moves to push through a stimulus package, I am already tired of hearing weak economic news day after day. Although finding a silver lining can be hard these days, it's not all bad right now in the Midwest. This could turn quickly, but Gov. Chet Culver (IA) has mentioned on several occasions that the Iowa economy is strong particularly compared to the rest of the nation. Of course, living in the Midwest, we won't be exposed to the extreme highs and extreme lows of a housing boom such as they experienced in Florida, but Iowa has maintained a relatively low jobless rate compared to several states in the Midwest in the past few years. About five years ago, when farm income was desperately low, rural people from all over flocked to the cities. Suburbs of Des Moines blossomed as small towns all over Iowa grew dark. However, while some states like Michigan have experienced record unemployment around 7%, Iowa has enjoyed relatively low unemployment near 4.8%. So why is Iowa's economy enjoying steady 2.6% growth these past few years?

There are simply too many numbers and factors that go in to the economy to point to one cause and say that is definitely the one factor involved, but a new report out of Nebraska is shedding some light on the possibility -- ethanol. The study, "The Economic Impacts of Ethanol Production," points out that state income taxes and property taxes from ethanol plants reached $2.2 billion in 2007 and are expected to reach $3 billion in 2008. That is for Nebraska alone! With Iowa and South Dakota sharing a sizable stake in the ethanol industry with Nebraska, this equates to a lot of money helping the Midwest economy. United States Senator Ben Nelson, a Democrat from Nebraska and ethanol proponent said that the full economic effects of ethanol are factored in (from increased trucking, rail, and construction jobs), the full benefit to the United States approached $40 billion annually! Furthermore, the ethanol produced is able to displace enough oil imports to reduce the federal trade deficit by $13 billion annually -- a pretty sizable sum.

Finally, the USDA reports that, (through the positive pressure on corn and soybean prices), have been able to reduce federal farm subsidies by $12 billion over the last two years -- from $24 billion in 2005, $16 billion in 2006, to $12 billion in 2007. All of these factors together make a clean, homegrown renewable fuel just that much more appealing. Although there are several hurtles to overcome that our scientists are hard at work on right now, ethanol is benefiting the United States, and it will definitely help the state of Iowa reach a 'soft-landing' in this period of economic uncertainty.
The ethanol world is currently centered around Iowa, but with cellulosic ethanol being developed don't count out the importance of the plants that you see in California, Louisiana, and coming soon -- Florida.

For the original report from Nebraska's NTV news:

Monday, January 28, 2008

Illinois Ethanol Blends

Moving off of a recent study by the University of North Dakota, Illinois state senators are considering increasing the amount of ethanol blended into their gasoline from 10% up to 20%. This would be a huge benefit for the ethanol industry by virtually doubling the demand for the fuel where ever these mandates are created. Illinois representative Aaron Schock referenced the fact that this measure would insure competitively high prices for farmer's products while at the same time reducing America's dependence on foreign oil, in pushing the bill towards debate. Coming at a cross-roads between corn-derived ethanol and the move towards cellulosic feedstocks, there may be some moves to slow the passage of this bill in the Illinois legislature. Corn acreage and prices have been in large flux over the past month or so and creating this kind of instability in the market could be a problem. Furthermore, until the study results from the University of North Dakota's fuel economy studies can be verified by the Department of Energy, it might be unwise for a legislature to push consumers to accept blends higher than E10 in non flex-fuel cars.

For the original article, follow the link below: