Farm Bill and Ethanol Subsidies

Just a quick note to update on the Farm Bill. The Des Moines Register is reporting that there has been substantial progress in the Federal Farm Bill because of compromises coming from both sides of the issues. The latest word is that the ethanol subsidies in the form of the blenders tax credit will be reduced from 51cents per gallon to 45 cent. The money saved will be diverted into a fund to encourage cellulosic ethanol production.
Although I don't think that it would be healthy to the United States to damage the extensive investment in the ethanol industry by totally throwing out the blenders credit, this is a very good step if it becomes law in the farm bill. The blenders tax credit mainly benefits the blenders who are rarely ethanol producers. It works well because it encourages blenders to use ethanol over gasoline, but reducing it by 6 cents per gallon probably won't diminish ethanol blending. Also, the government is taking the right steps in adjusting towards the future of ethanol, which is cellulosic.
Finally, I think it will be interesting to watch the outcome if this reduction in the blenders credit becomes law. The Bush administration has hinted at their willingness in recent months to lower the import tariff on ethanol designed to prevent overseas ethanol producers such as Brazil from enjoying the taxpayer funded subsidies such as the blenders credit. However, if the blenders credit is reduced, these tariffs could be reduced from the 53 cents per gallon currently seen to say, 48 cents per gallon. This would make Brazillian ethanol more attractive towards importing without seriously harming the domestic production and would possible take the pressure off the corn crop in the short term.

For more details or updates, check out the Des Moines Register at:
www.desmoinesregister.com

Gasifier Pilot Plant

GM's partner in turning lignocellulosic feedstocks into ethanol, Coskata, has announced the location of their pilot plant to test the feasibility of their process. The 40,000 gallon per year plant will be located 30 miles Southeast of Pittsburgh Pennsylvania and will showcase their gasification process to convert wood, agricultural waste, and industrial waste products into ethanol. The plant plans on producing ethanol by early 2009 and company reps have hinted that the process could cost as little as $1 per gallon of ethanol. This of course excludes any additional costs that might arise in terms of debt interest payments on building or materials. The good thing is that this plant will bypass any cereal grains and so will probably not be restricted by high feedstock prices, at least in the near term.
Some interesting stats on Coskata's production process as outlined in studies by Argonne National Laboratories. First is that the process will reduce GHG emissions by 84% compared to gasoline (corn-based ethanol reduces GHG emissions by 16%). Also, the ethanol can be produced in an efficient manner so that 7.7 energy units exist per energy unit of input (corn ethanol has a ratio of 1.6). And finally, the process uses less than a gallon of water to produce a gallon of ethanol as compared to corn ethanol where the process requires 3 gallons of water for every gallon of ethanol produced.
Although the main 50 million gallon per year ethanol plant is not scheduled for production until 2011, this is a major step in bring cellulosic ethanol into the mainstream and the numbers are encouraging that the process works.

Ethanol AND Hybrid Technologies

I've said this is previous posts but I will say it again. The only way that the United States and the rest of the world is going to come to a reasonable answer relating to the complex topics of environmental impact, foreign oil dependency, and others relating to transportation fuels is to combine several meaningful solutions. By doing a quick search of the major automakers in America, it becomes horrifyingly clear that there is absolutely no interest by these companies in helping the public solve any of these problems. To illustrate my point, think of all the flex-fuel vehicles on the road today. Save the Chevy Malibu I would have to say that every single one is an SUV. And the hybrid-dominated companies don't have clean hands either. I can say that there is not a single company that has the foresight and innovation to build a hybrid car and install components capable of running 85% ethanol. Think of how easy it would be for Toyota to equip their prius, for only $100 to $200 dollars, with ethanol capable components. They would be able to corner the entire market, particularly here in the Midwest. So why won't they do it? I honestly don't have an answer. Combining the two most promising emissions/cost reducing mechanisms that are available seems like the right way to go.
Thankfully, a company out of Stolkholm Sweden named Scania, has already made 14 hybrid-electric city buses. I know that this isn't the answer that I was looking for in personal car production but it is a good step. These buses are already running and the data indicates the the combination of the two technologies has reduced GHG emissions in the buses by 90%!! And the buses are able to extend their fuel economy by 25%. Incredible. Hopefully Scania's lead will help push automakers here in the US to start thinking about the big picture and not just about ethanol versus hybrid versus hydrogen versus fuel cell -- that kind of thinking will get us nowhere.

If any of you are interested in this combination of technologies, I encourage you to write a quick e-mail to your car-maker. I did and the more they hear from us the less they will be able to ignore the fact that we want a combination of solutions capable of solving all of the issues.

For more info. on the hybrid-electric bus:
http://www.greencarcongress.com/2008/04/scania-double-d.html#more

Ethanol Going Greener

In anticipation of Earth Day tomorrow, I think it is time to reflect on one of the key benefits that ethanol offers -- its earth-friendliness. This fuel is renewable and, although its water/energy usages have been questioned, it still reduces some GHG emissions over gasoline (even if it is only a small amount). And so during the debate about food prices and yes/no debates on ethanol usage, I think there is one thing that a lot of people have missed.

Argonne National Labs completed a study and found that even though the meteoric jump to cellulosic ethanol production has not occurred, CORN-based ethanol has actually gotten greener since 2001. They found that ethanol plants have gotten more efficient in how much ethanol they can derive from corn -- 2.81 gallons per bushel of corn used is now the average, a 6.4% increase from 2001. Also, the total energy used in an ethanol plant to convert this corn into ethanol including fossil energy and electricity declined by 21.8%!! Think about that. That's phenomenal that after only 5 years (the survey compares 2006 data with 2001 data), the industry was able to reduce its total energy needs by 1/5th! This means that the energy balances would have to be recalculated in order to reflect this new data.

The report goes on to say that electricity grid use is down 15%, and that many plants have switched from coal to natural gas as a source of power, which reduces the GHG emissions even further. The survey found that a lot of these benefits were available because of better Dried Distillers Grains (DDGS) handling as most plants ship wet grains to farmers for feed instead of using a lot of energy in drying the DDGS. (Which is also the step in the ethanol process when most of the Volatile Organic Compounds (VOCs) are released making ethanol's NOx (nitric oxide) reduction benefit questionable). NOx is a major contributor to urban smog.

Finally, the report found that water consumption decreased 26.6% in ethanol plants during this five year period. This is a 1/4 decrease in water usage!! And in just five years! Think about what innovations are just around the bend after the Department of Energy poured billions of dollars into biofuels research.

The point is, we don't have to wait for ethanol to get greener... it already is. Sure there are still some areas that need to be improved. But overall this domestic fuel is keeping money in America, providing a dependable and renewable resource, and is cutting the amount of pollution and waste that has become so prevalent in this country.

Just today the DOE (Department of Energy) announced additional funding for cellulosic ethanol startup companies whose locations you can see below. The age of cellulosic ethanol is closer than we may think.

For the original Argonne National Labs' study:

http://www.ethanolrfa.org/objects/documents/1652/2007_analysis_of_the_efficiency_of_the_us_ethanol_industry.pdf

Novozymes in Ames, Iowa

A prominent maker of enzymes designed to jump start the breakdown of plant materials into usable components for ethanol production is setting up shop in Ames, Iowa. The Danish biotech company Novozymes says that is plans to employ 4 people in the beginning in the Iowa State University Research Park and will open its doors to the facility April 22. The company says that the 4 employees will work in a lab and office/customer service setting and that the continued strong growth in the ethanol industry coupled with the potential for large technological advances from any potential partnerships with nearby Iowa State University is what brought the company to Ames. Worldwide, the company employs 4,500 people according the The Des Moines Register, and hopefully the company will benefit Ames and the ethanol industry with continued employment.

For the Des Moines Register article:
http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20080418/BUSINESS/80418032

April Showers

Rain continued today over much of the plains states and into Iowa. The importance of this is that prolonged rain that saturates the ground will move the planting season further back. This is turn will probably shift more acres away from corn and into soybeans, which have a more manageable growing season. This may exacerbate the situation created by what the USDA predicts to be a more normal distribution of corn/soybean plantings across the Midwest and could continue to drive up corn prices in the short term. This in turn could challenge ethanol plant profitability for the summer and continue to apply pressure to the industry, resulting in a gradual slowdown in increased production. With a brief break this weekend followed by the possibility of more heavy rain next week, the planting season continues to be pushed back as we creep closer to May.

Food Prices and Ethanol

For those of you looking for an unbiased and scientific source to back up claims that ethanol has little effect on rising food prices, Texas A&M University has the solution...
In the past few weeks it has been difficult not to see the reports of rising food prices around the world and the instability that it is creating. In fact, just the other day I watched a very interesting report on Iowa Public Television about rice problems in Southeast Asia. And TIME magazine and CNN have raised the possibility if not fully implicated biofuels and, in particular, ethanol, for the problems faced around the world. Even though ethanol may have a small impact on grain prices, the amount of corn that actually shows up in the price of grocery items is actually very small. Before getting to the Texas A&M study I wanted to jump back to the report I saw on rice issues in Southeast Asia. Evidently, the cost of rice has skyrocketed on projected weak inventories because of large increases in demand from India and China, whose countries are getting bigger and richer and demand more corn and especially, rice. Because of possible supply problems India, (second only to Thailand in Southeast Asia in the amount of rice exported), has agreed to suspend exporting any rice to ensure domestic demand is met. This has caused other countries such as Cambodia to fear for their own domestic stocks and have in turn closed their rice export industries. What this has done is put the whole rice burden for South Asia on the back of Thailand. And whether the rice stockpiles are actually decreasing or not, the action by certain counties has caused exactly what was originally feared... no rice on the open market.
Interestingly there are a lot of parallels between what is seen in Asia with rice and what is seen in the US with corn. A few months ago China decided that since there population was growing, they would suspend exporting corn. Since China is second only to the US in corn exports, this has a huge impact on the world corn market. Even though it has allowed the US to increase corn exports to record numbers, it has generated a wave of speculation and commodity purchasing of corn and other US products because of a perceived drop in inventories. This drop may be real, but it has little or nothing to do with biofuels.
More importantly, the increase in energy prices, along with the weakening dollar, has driven investors away from the stock market and into the commodities market; where speculation continues to drive up the price of grains.
The Texas A&M study was able to look at these trends and find that the overall biggest cause of rising food prices is high energy prices. They even found that grocery items such as milk, eggs, and bread that are closely tied to corn were largely unaffected by biofuels production and that reducing or removing ethanol production would have little impact on these prices. I find it interesting that media outlets will assume that one things causes another without any causal evidence to back up their claims. So next time you are in a conversation with a friend/neighbor/coworker about this topic, let them know that you've got scientific study after study that will refute any claim that ethanol is a major contributor to global food price increases.

For the original Texas A&M study:
http://www.afpc.tamu.edu/pubs/2/515/RR-08-01.pdf