Ethanol production can bring jobs and reduce
oil imports, but it also comes with controversy.
As the Obama Administration searches for ways stimulate the economy and takes some unpopular positions, such as aiding banks, automakers, and in-over-their-head mortgage-holders, there may be an opportunity in another controversial area – ethanol.
Ethanol’s roller coaster ride in and out of popularity came to a head during the heated energy debate in late 2007 when anti-ethanol interests launched a campaign raising questions about the biofuel’s sustainability. Anti-ethanol rhetoric, falling oil prices and a country in the grip of a deep recession has created a perfect storm straining ethanol’s future. But is it a train permanently off the tracks?
The Renewable Fuels Standard (RFS) that calls for 36 billion gallons of biofuels by 2022 still is in place and the industry intends to deliver. They currently produce fewer than 10 billion gallons annually. And while cellulosic ethanol holds the real promise for the future and is intended to eventually make up the majority of the RFS, commercialization of the technology just isn’t ready for prime time.
Adapting to survive the downturn
The rush to build new corn-ethanol plants met a similar fate to that of automakers rush to increase truck production when the bottom fell out of the U.S. economy last year. With large ethanol producers struggling, including the bankruptcy of mega-producer Vera Sun Energy, there is reason to doubt whether the great ethanol rush can continue in its current state.
Still, producers are pushing forth with expansion plans, including a deep desire to push into mid-level blends of ethanol and gasoline above E10 and below E85. Currently, ethanol is blended at a rate of about 10 percent into gasoline (E10) as an additive. And there is a smattering of gas pumps across the U.S. selling E85 for use in flex-fuel vehicles.
After a furious and emotional debate over the use of food products to produce fuel did serious damage to ethanol’s image among Americans in 2007 and 2008, tempers cooled as gas prices fell and other political issues took front stage.
But the industry now is pushing to increase production by selling blends above E10 and is meeting fierce opposition from small engine manufacturers who say that such blends will destroy existing lawn mowers and weed whackers. And recalibrating new small engines to accept the fuels would be too costly for manufacturers and consumers, they say.
It is apparent that in the interest of their own future, the various parties are going to have to play nice and find a common ground. Forcing ethanol on consumers is a strategy of the past that is not sustainable.
Yet playing to America’s deep desire to gain energy independence and its self-interest in creating much needed new jobs may be a strategy worth considering.
Generating jobs
Producing ethanol locally results in the double benefit of job creation and reduction of importing oil. According to the Nebraska Public Power District, a single 100 million gallon ethanol plant represents $150 million in capital investment and adds $70 million in construction investment to the local community. Furthermore, such a plant expands the local economic base by $233 million. It provides up to 50 direct jobs and more than 100 indirect jobs. It adds millions in tax revenues. And yes, it may increase grain prices locally by 5-10 percent, encouraging farmers to plant more and sell more. But a corresponding decrease in farm subsidies and an increase in tax revenues is a win-win for the Federal deficit.
Yet the environmental impact of such plants must be kept in-check. And as cellulosic methods are perfected, plants can expand into the new technology using non-food feedstocks and eventually delivering huge improvements in reducing greenhouse gasses. Today’s corn ethanol plants reduce GHGs by up to 20 percent and cellulosic plants promise an improvement of more than 90 percent according to Argonne National Laboratory.
With an ethanol investment policy as part of a comprehensive alternative fuels strategy, the U.S. could displace 30 percent of oil consumption by 2020, or sooner.
The biggest question may be whether the ethanol brand has been too damaged in the minds of consumers. Left leaning environmentalists and right wing talk show hosts share an equal and universal disdain for ethanol, albeit for different reasons. Ethanol’s next big controversy may be launched from the small engine manufacturers. If America hated the idea of food vs. fuel, how will they react to fuel vs. their fishing boat motor?
So the question we’ll be looking forward to resolving will be whether the Administration will see ethanol as a train worth riding forward or as the proverbial political third rail.
Comments
Nice balanced article in on a subject most observers love or hate. Cellulose will be an extremely costly feedstock from which to make ethanol. Perhaps other alternative and more efficient feedstocks will eventually prevail: Industrial sweet potato and cassava in our south, winter barley and sweet sorghum in our temporate climates and even perhaps algae in hot dry and sunny climates of the USA. Media hype about cellulosic ethanol reminds me of the predictions of the hydrogen economy being "just around the corner" a decade ago.
Keep sending the country's wealth to the opec nations so they can call the shots, who cares, we have the federal reserve to print more money. Our nation doesn't produce products anymore, we print money and consume, let brazil prosper with ethanol, we don't need the jobs, we can import and outsource. Peace
Obama has no choice, he must support cellulosic ethanol. There are many companies pouring millions into new plants that create ethanol from waste. For example, Verenium and BP are building a 36 million gallon year cellulosic ethanol plant in Florida that creates 1800 gallons of ethanol from one acre of waste energy crop.
"But a corresponding decrease in farm subsidies and an increase in tax revenues is a win-win for the Federal deficit." Oh yeah? You need to re-do the math. If one compares the reduction in crop subsidies nowadays compared with more normal years (like 2002-2004), rather than 2005, the gain has not been that large. Moreover, the industry speaks with forked tongue on this: on the one hand, it claims that ethanol has had NO effect on grain prices, and blames increased demand from India and China instead. But it is perfectly willing to claim that it is responsible for driving up grain prices enough such that price-triggered commodity payments are no longer being paid out.
But, more importantly, while any reduction in commodity payments will always be fixed at a few billion dollars a year, the size of the subsidies for ethanol will continue to grow and grow. The subsidy for cellulosic ethanol alone is $1.01 per gallon. It would take 200 billion gallons a year just to displace the country's annual gasoline copnsumption. Prepared to fork out $201 billion a year, every year ... indefinitely?
If your answer is, "Oh, that subsidy is only temporary", please then provide some basis for making that assumption. The volumetric ethanol excise tax credit (VEETC) has been in existence, in one form or another, already for 30 years. (It, too, has been subject to sunset clauses, but of course it continues to be extended by Congress.) And I don't hear the ethanol industry calling for it to end.
You are simply ignoring the problems that blends higher than E10 will cause. Not only will small engines be destroyed, but older car engines will not work either. The auto industry has told you this and you are ignoring it. This is unacceptable and irresponsible.
I have a better idea. I totally agree that we should be pursuing E85 and using higher and higher blends of Cellulosic Ethanol to get there. Corn Ethanol is not that much cleaner and therefore should be rejected as a way of getting there. Corn Ethanol, though a noble goal of Presidents Clinton and Bush, has proven to be a mistake. I say make the present 10% Mandate for Ethanol into a %5 Cellulosic Ethanol and 5% Corn/Sugar Cane/Sweet Sorghum. This will take pressure off the Corn producers and allow the corn and food prices to come back down. It will make the gas blend cleaner. (The Greenie Weenie believers of Global warming and all that Al Gore Crap should love it.) Finally it will kick start the Cellulosic Ethanol industry.
The second part of my solution is to have the government give coupons to convert the older cars and smaller engines to E85 Specs. This would really give America millions of new jobs. Unemployed Union workers could be sent out all over the country to convert older car to E85. Conversion to E85 would make America more able to survive temporary cut offs in the supply of gasoline. Once we kick start Cellulosic we would eventually raise the Cellulosic Ethanol blend to each 5 years to get more cleaner and eventually become totally renewable.
Ethanol producing crops can also be grown in belts 35 degrees from the equator to eliminate poverty in these areas.
Increasing the ethanol content of gasoline will have negative effects on our passenger cars as well, least of which is mileage reduction. By adding more ethanol, the cost at the pump will not appreciably go down, but my mileage certainly will. Furthermore, spending $300,000,000 to build a ~40,000,000 gallon/year plant seems like a waste (that's only 2,610 bbl/day, compared to a "small" refinery that cranks out over 25,000 bbl/day) at that economy of scale. Increasing crop production is happening on the margin, and we can't assume that any increase will yield the same amount of feedstock that is currently produced in a well-established corn/sugar cane/etc. field. The only way ethanol will be viable is if we significantly reduce our fuel consumption outright (Brazil's energy consumption is 1/6 per capita of the US).
In 2008 the Petroleum excise tax credit for blending of ethanol (a non petroleum product) in gas came to about $4.6 Billion. A lot of money, but it saved us about $70 Billion on gasoline costs by lowering the gasoline price about 15% according to Francisco Blanch, Commodities Strategist for Merrill Lynch. $4.6 Billion to save $70 Billion. I'd call that a good deal.
You stated that ethanol's demand for corn "may have increased grain prices locally by 5-10 percent" let's not forget that a Congressional Budget Office report concluded that while ethanol increased food prices 10% to 15% petroleum prices increased food prices 36%.
The most important fact about ethanol is for each gallon burned it reduces GHG emissions over gasoline 51% right now (2008 University of Nebraska, peer reviewed research) and will do better if Combined Heat and Power and Closed Loop designs are used.
We don't have 20 yrs to lower GHG emissions. WE must get appreciable reductions in 6 to 10 yea
Realy, Theres plenty of room to grow more and put more people to work. Between Jersey and Virgina,There are acres and acres of land doing nothing and people out of work. I dont get it. Plant more . We have the room
The only way to save the American economy is to start to <strong>buy and support</strong> American made products
learn how you can help out!
http://letshelpamerica.com/save%20america%20pages/%282-6-11%29consumersc...
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