Archive for October, 2008

The Rise and Fall of Corn-based Ethanol

Posted on October 24, 2008. Filed under: Blender's Tax Credit, Field-to-Pump | Tags: , , , , |

The following article appeared in the October 21, 2008 edition of The Financial Times.

 

Biofuels: From hope to husk

By Kevin Allison and Stephanie Kirchgaessner

Published: October 21 2008 20:18 | Last updated: October 21 2008 20:18

It was an American dream that has failed to become a reality. For much of the last decade, enthusiasts from President George W. Bush down have touted corn-based ethanol as something approaching a superfuel, a home-grown alternative to foreign oil that would help cut smog and bring hope to struggling farmers.

It has not worked out that way. Instead, the ethanol industry has undergone a great boom and bust in which a Financial Times analysis has found investors as savvy as Bill Gates, Microsoft’s founder, have collectively lost billions of dollars.

Despite the billions more in taxpayers’ dollars that was spent to subsidize it, ethanol now eats up nearly one-quarter of the US corn crop without so far fulfilling the hopes held for its beneficial effect either on the environment or US dependence on foreign energy.

It may have helped keep gasoline prices lower in the world’s wealthiest nation, but a growing band of influential critics say it has also contributed to higher food prices in the world’s poorest countries. So far, the only sure beneficiaries from the ethanol promise have been the investors clever enough to get into the industry early and the corn farmers who have enjoyed a lucrative new market for their grain.

In short, the story of ethanol is a cautionary tale of the unintended and costly consequences that can arise when the interests of politicians and influential industries collide.

Today, ethanol is a $32.5bn (£19.1bn, €24.6bn) a year business in the US. But for nearly three decades it was an obscure cottage industry run by farmers trying to scratch out a living in the corn belt in the country’s Midwest. Americans had been making bourbon, a drinkable form of ethanol, from corn for centuries. But ethanol got its start as a fuel around the time of the 1970s Arab oil embargo, when a handful of early adherents started to argue that it could lower dependence on energy imports as well as help farmers.

Among these pioneers was a gangly, soft-spoken Minnesotan named Jeff Broin. In 1983, Mr. Broin and his father set up an ethanol still on their farm, hoping to sell corn-based fuel to the few companies then operating that had begun blending ethanol into gasoline. Three years later, the Broins bought a disused ethanol plant in nearby South Dakota and went into commercial production. The younger Mr. Broin, then just 22, could scarcely have imagined that the family company, known today as Poet, would become an ethanol powerhouse.

“We were simply trying to add value to grain,” he says. “If someone had suggested that we would become the largest producer of ethanol in the world, we probably would have laughed at them.”

Farmers such as the Broins had powerful allies in Washington. Chief among them was a coalition of 20 Democratic and Republican “corn state” senators including Tom Daschle, the former Democratic majority leader, and Chuck Grassley, a Republican senator from Iowa. But the ethanol boosters had a powerful adversary in big oil companies, which saw ethanol as a potential rival and argued that government support would be just another farm-state giveaway.

This argument resonated in the national capital during the 1980s and 1990s. President George H.W. Bush, for example, disparagingly referred to ethanol as “Daschle gas”.

But the president’s son thought differently. Mr. Grassley remembers taking the younger Mr. Bush on a tour of Iowa’s cornfields during his first presidential campaign in 2000. “I was one-on-one with him with a couple of other people in a van and I spent two days talking to him about ethanol,” says Mr. Grassley. Mr. Bush appeared to be impressed, Mr. Grassley recalls. “He said, ‘It’s this simple. We’ve only got so much petroleum and we’ve got to have renewables. It’s got to be ethanol.’”

Not long after Mr. Bush took office in 2001, the September 11 terrorist attacks gave grim weight to the ethanol lobby’s arguments. “Isn’t it more sensible to spend $140 a barrel for ethanol than it is to ship $140 over to Arabia and let their Wahabis be trained to kill you and me?” asks Mr Grassley.

The economics of ethanol were also shifting as rising oil prices made ethanol and other alternative fuels more attractive. On Wall Street, clever investors began to take notice. In May 2003, Morgan Stanley Capital Partners, the private equity arm of the US investment bank, bought Aventine Renewable Energy, an ethanol producer with plants in Illinois and Indiana, for $75m. It paid itself nearly twice that in dividends only seven months later.

In 2004, lawmakers on Capitol Hill passed a law giving refiners an incentive to blend ethanol with gasoline by letting them claim a 51 cent per gallon tax benefit on each gallon of ethanol they used. By the following year, the politicians were under pressure to go even further. The price of a gallon of petrol had jumped over the $3 mark. Global warming worries were adding weight to the ethanol industry’s claims that the fuel was an important source of renewable energy. Legislators began work on a law for a renewable fuel standard that would require gasoline producers to blend billions of gallons of ethanol into petrol each year.

Barack Obama, as a freshman Democratic senator from Illinois, a leading corn-producing state, was a big supporter. “If a terrorist hijacked a plane in Kuwait and crashed it into an oil complex in Saudi Arabia, it could take enough oil off the market and cause more economic damage in the United States than if a dirty nuclear weapon exploded in downtown Manhattan,” he said in a Senate speech. “Instead of continuing to link our energy policy to foreign fields of oil, it should be linked to farm fields of corn.”

Not everyone agreed. New York’s Senator Chuck Schumer called the proposal a “boondoggle” and said: “There is no sound public policy reason for mandating the use of ethanol – other than the political might of the ethanol lobby.” Big users of corn, such as meat processor Tyson Foods, worried it would lead to higher corn prices.

But ethanol supporters found an important, if unexpected, ally: their old rivals in the US oil industry. That was largely due to a fuel additive known as methyl tert-butyl ether (MTBE), which helped petrol burn more fully and thus lower smog emissions. Oil refiners had been using the additive for years, especially since clean air requirements were enacted in the 1990s.

By the early 2000s, however, MTBE had become a liability after scientists discovered that it lingered in ground water and polluted aquifers. California and other states banned it, leaving the oil industry searching for a substitute that would allow it to comply with environmental regulations and avoid billions of dollars in MTBE-related liabilities. Ethanol fitted the bill. “We saw ethanol as a viable product – it was a product that we knew,” says Al Mannato, fuels issues manager at the American Petroleum Institute, the oil industry’s leading lobby group.

The support of the API “significantly changed the political calculation on Capitol Hill”, says Bob Dinneen, president of the Renewable Fuels Association, the ethanol industry grouping.

This was a turning point. That summer, Congress passed, and Mr. Bush signed, the Energy Policy Act of 2005, which required refiners to blend 7.5bn gallons of biofuels into gasoline by 2012. Congress and the president created a multi-billion dollar market for corn-based ethanol virtually overnight. “Wall Street loved it,” says Kevin Book, an analyst at Friedman, Billings, Ramsey & Co, an investment bank. “Suddenly, wingtips were covered in corn dust in every state.”

Speculators poured into the industry. In November 2005, an investment company owned by Microsoft’s Mr. Gates struck a deal to pay $84m for a 27 per cent stake in Pacific Ethanol, a California group whose shares had begun trading on the Nasdaq stock market that year but had yet to produce a single drop of fuel.

Not long afterwards, two New York hedge funds – Greenlight Capital, headed by David Einhorn, and Third Point, managed by Daniel Loeb – invested nearly $75m in BioFuel Energy, a Colorado ethanol producer. Thomas Edelman, a Wall Street banker and oil and gas executive, chipped in $8.75m and was appointed chairman.

Ethanol futures prices shot up almost fourfold in the 12 months after the energy bill was signed. Meanwhile, the price of corn required to make a gallon of ethanol continued to languish thanks to surplus stores of the grain. The result was a bonanza for ethanol producers. Ethanol companies whose plants were up and running in time to catch this wave made fat profits for themselves and their investors.

In 1999, there were 50 ethanol plants in the US. By January 2007, there were 110, with 76 more under construction. Most early ethanol plants probably paid for themselves within one or two years, according to Ray Goldberg, a professor of agribusiness at Harvard Business School.

Ethanol’s potential as an oil alternative had also begun to take hold in the popular imagination. Advertisements appeared on billboards alongside highways in Missouri showed a Missouri farmer standing next to a cornfield. Opposite him was a picture of the late King Fahd, the former ruler of Saudi Arabia, dressed in traditional Arab robes. Between the two men, in large block letters, was a question: “Who would you rather buy your gas from?”

The growing cost of ethanol production to US taxpayers went largely unnoticed, amid a hype that was reminiscent of the dotcom boom of a few years earlier. As several big ethanol producers announced plans to go public, ordinary investors, largely shut out from ethanol’s early years, jumped at the chance to buy into the industry.

In May 2006, Thomas H. Lee Partners, a Boston private equity group, bought an 80 per cent stake in Hawkeye Renewables in a deal that valued the company at $1bn. THL almost immediately announced plans for an initial public offering. Morgan Stanley Capital Partners, which had been spun out of its parent bank and renamed Metalmark, reaped a tenfold return on its 2003 investment in Aventine Renewable Energy when Aventine became one of several biofuel producers to float on the New York Stock Exchange in June. The biggest star was VeraSun of South Dakota, whose shares immediately jumped 34 per cent on their debut.

But the excitement proved to be short-lived. Investors had ignored some glaring warning signs. Few recognized it at the time, but the previous year’s boom had also set the stage for a shift in the economics of the industry that would prove disastrous for those who came late to the game. In the same month as VeraSun’s IPO, ethanol futures prices fell sharply, reversing the historical correlation between the price of ethanol and the price of a gallon of gasoline. By September, ethanol that had sold for $4 a gallon in June was trading at $1.75, according to DTN, a commodities research group.

The problem was one of oversupply. Dozens of ethanol plants had come online trying to capitalize on the boom, creating a glut that pushed down prices. Corn prices, meanwhile, were rising sharply, driven by increased demand for the crop for use in ethanol production and the rising cost of oil. In the space of just three months, ethanol had moved from boom to bust.

Some of the world’s best-known investors were burnt. When Mr. Gates’ investment fund started disposing of its shares in Pacific Ethanol this April, it sold them at a steep loss. Deals such as the one Thomas H. Lee did with Iowa’s Hawkeye Renewables in 2006, which valued Hawkeye’s two ethanol plants at $1bn, began to look less wise. Some analysts say the plants could have been built for closer to $400m. When Colorado’s BioFuel Energy finally went public in June 2007, it was forced to cut its offer price twice in one week. It eventually raised $101m after expenses in a combined public offering and private placement.

Even Mr. Dinneen, the face of the ethanol industry in Washington, admits that, in hindsight, ethanol investors were suffering from “overblown exuberance”. “There was a period of growth in the industry, and the economics were uncharacteristically favorable,” he says. “People invested thinking every year was going to be like 2006, when history would tell you that was an anomaly. Clearly there was a lot of Wall Street money coming in – and I think it was with unrealistic expectations.”

If ethanol were any other industry, it might be on its last legs today. But the dream of turning cornfields into car fuel refuses to die.

The Financial Times Limited 2008

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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Corn-to-Ethanol: Credit Crisis Adds to Litany of Woes for Ethanol Producers

Posted on October 21, 2008. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

RENEWED ENERGY: Credit Crisis Adds To Litany Of Ethanol Woes

NEW YORK (Dow Jones)–VeraSun Energy Corp. (VSE), once seen as the ethanol industry’s most promising acquisitor, was already struggling with surging corn prices when the credit crisis shifted into high gear.

Record-high corn prices in June sent VeraSun and other ethanol producers into panic mode, as they changed their risk-management strategies, and tried to lock in corn contracts. But when prices sank, the ethanol companies were forced to continue to buy corn above market value.

Companies tested the limits of their working capital loans as they struggled to buy corn at elevated prices. But when the credit markets faltered in mid-September, banks clamped down on ethanol producers, limiting their borrowing ability.

“It goes to show that they stretched themselves too thin in this kind of commodity business, which can be very volatile,” said Ron Oster, a St. Louis-based analyst with Broadpoint Capital Co., an investment bank.

Although corn prices have continued to decline, producers are unlikely to get immediate relief, because ethanol prices have also tumbled. Ethanol is widely blended with gasoline, and as U.S. gasoline demand has fallen over the past year, so has demand for the corn-based component, pushing prices downward.

The price decline has exposed the weaknesses of these companies, which are caught between the cost of corn and ethanol. Like the independent refiners, who must contend with shifting prices for crude oil and gasoline, independent ethanol producers are at the mercy of volatile commodities markets. VeraSun declined to comment for this article.

“These players do not have bargaining power on either end of the supply chain,” said JinMing Liu, an analyst with Ardour Capital Investments LLC, a New York-based bank. “They are price takers.”

The exception among the ethanol producers is agribusiness giant Archer Daniels Midland Co. (ADM), which has extensive trading experience and corn-processing facilities, which allows them to direct their feedstock toward producing the most-valuable products at any given time.

Still, a federal mandate ensures that ethanol blending won’t disappear completely. The Energy Independence and Security Act of 2007 requires U.S. gasoline producers to blend 9 billion gallons of ethanol into their fuel this year, and 10.5 billion gallons next year, as they ramp up the volumes until 2022.

In A Rut Between The Rows

When the legislation was first passed, VeraSun was expected to be a major benefactor. The company, based in Sioux Falls, S.D., quickly acquired plants spanning the U.S. Midwest. For the quarter ending in June, VeraSun continued to be profitable.

But in mid-September, the company said it expected major losses in the third quarter, due to its risk-management strategy. Following that announcement, VeraSun’s shares fell 73% in a single day. Standard & Poor’s downgraded the company’s credit rating by two notches. VeraSun retained Morgan Stanley (MS) to evaluate strategic alternatives, including a possible sale.

The losses were due to hedging. Fearing skyrocketing feedstock costs, VeraSun reshuffled its position in corn futures. But when corn prices sharply declined to less than $5 a bushel, VeraSun remained saddled with contracts requiring it to pay $6.75 to $7 a bushel throughout the third quarter. As a result, VeraSun, which had a market capitalization of $293.86 million on Tuesday, expects a to report loss of $63 million to $103 million for the third quarter.

The weakness in the credit markets may make it particularly difficult for VeraSun to secure financing to offset its recent losses and continue to build projects. The company is stuck in a bit of a rut, according to Ian Horowitz, an analyst with New York-based research firm Soleil Securities Group.

“How much can that equity be worth, with a $100 million loss hanging over it?” he asked. The company’s shares traded at $1.87 Tuesday, down from a high of $30.75 in June 2006.

While VeraSun’s problems were exacerbated by a poorly executed hedging strategy, the consecutive blows of high corn prices and severe problems in the credit markets have forced companies across the sector to scale back once lofty ambitions.

Aventine Renewable Energy Inc. (AVR), based in Pekin, Ill., has delayed one plant and canceled plans to open another, after JPMorgan cut its credit facility by $50 million. Denver-based Biofuel Energy Corp. (BIOF) has also amended its bank credit lines, in an effort to continue to operate two ethanol plants.

Shakeout

The industry, stagnant since the 1980s, regained momentum in 2005, propelled by federal legislation that increased ethanol’s importance as a component of gasoline. The 2007 legislation increased interest in ethanol plants.

Through 2007, ethanol producers saw massive returns, but the high corn prices of 2008 bore down upon them. Profitability margins for ethanol producers have dropped from about 40% in 2006 to just 10% in the current quarter, according to Liu.

The result is that companies are barely able to pay off their interest expenses, he said.

“It’s going to take one or two quarters for the industry to turn back to significant profitability,” Liu said. But as margins grow, he said, they won’t be as robust as those seen in 2006.

The opportunity for real change in the industry could come in the form of consolidation, he said. Because the final product being manufactured by ethanol companies is essentially the same, the lowest-cost producers will thrive, he said.

“The next few years are going to have a fair amount of shakeout unless something unforeseen happens,” said Dan Newell, a portfolio manager with the Harmony Equity Income Fund, a South Dakota-based hedge fund that previously included ethanol companies in its portfolio.

But the credit markets may be reluctant to extend large loans needed for consolidating these debt-laden companies. Due to the collapse of high-profile banks like Lehman Brothers in September, the availability of credit for ethanol projects may be limited, at best.

 

(Jessica Resnick-Ault covers ethanol and biofuels in addition to traditional crude-oil refining for Dow Jones Newswires. She can be reached at 201-938-4435 or by email at jessica.resnick-ault@dowjones.com.) 

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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Iowa Fueling Station Offers E10, E20, E30 and E85

Posted on October 21, 2008. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , , , |

New gas station serves up mixes of gas, ethanol

Related Images:

Matt Ryerson/The Hawk Eye
Unity Biofuels manager Jason Egli of Cedar Falls programs a temporary sign Monday on U.S. 34 in Mount Pleasant. The company has opened two ethanol stations. The other is in Olds.

By DARCIE HOENIG

dhoenig@thehawkeye.com

MOUNT PLEASANT — One of Iowa’s first retail fueling stations dedicated to dispensing ethanol opened last week on U.S. 34 in east Mount Pleasant.

Outfitted with three 24-hour pay-at-the-pump blender pumps, Unity Biofuels offers four different blends of ethanol: E10, E20, E30 and E85. The station also offers biodiesel at one of its pumps.

Using tanks of 98 percent denatured ethanol and unleaded gasoline, the blender pumps mix the consumer’s selection right at the pump. If E30 is selected, for example, the pumps blend 30 percent ethanol with 70 percent gasoline, said Jason Egli, manager of Unity Biofuels.

Egli, along with area businessmen Tom Fullenkamp, Paul Von Tersch and Dave Reiff, opened a similar station next to the St. Avenue Stop in Olds on Sept. 5.

“We wanted to bring in our local resources to fuel local cars,” said Egli, a Crawfordsville native who resides in Cedar Falls.

The cost per gallon of each blend varies, each contingent on the price of E10, the ethanol blend found at most gas stations. Typically, E20 will run 15 to 20 cents cheaper than E10, E30 between 20 and 30 cents less than E10, and E85 will be priced 70 cents to $1 lower than E10.

Of the four blends offered at the station, E30 has been shown to be the most economical in studies done by the University of Minnesota and elsewhere, Egli said.

“In terms of the cost per mile driven, there was no loss to slightly better with E30,” Egli said.

While all vehicles are approved by the Environmental Protection Agency to fill up with E10, blend levels above 10 percent ethanol are only approved for flexible fuel vehicles. Flexible fuel vehicles, which are equipped with multifuel engines, are manufactured by Ford, Chrysler and Dodge, Egli said.

The EPA is still researching whether intermediate ethanol blends can be used in standard vehicles.

Since the pumps blend the fuel on site, Unity Biofuels earns the blender credit or Volumetric Ethanol Excise Tax Credit, which was established in 2004 to provide oil companies with an incentive to blend ethanol with gasoline. Earning up to 51 cents per gallon, the blender credit helps keep costs at the pump lower.

Using an ethanol source less than 30 miles from Mount Pleasant also helps keep prices down. Recently, Unity Biofuels worked out an agreement with Big River Resources, an ethanol production plant in West Burlington, to provide the ethanol for the station.

In the future, the station may obtain its ethanol from one of its own production facilities. Unity Ethanol LLC, a separate company headed by the same individuals, is planning to build two 110-million-gallon-per-year ethanol plants, one in Cotter and one in Ottumwa.

While the company has land options for both facilities, they are still in the financing process, said Egli, who is also chief operations officer for Unity Ethanol.

Egli said a convenient store and restaurant at the blender pump station are also in the works, and both should be open by summer 2009.

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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Lotus to Develop OMNIVORE Research Engine

Posted on October 18, 2008. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

Lotus to develop OMNIVORE Research Engine

Lotus conduct research study into engine efficiency when utilising sustainable second and third generation bio fuels

Lotus Engineering, the world renowned automotive consultancy division of Lotus announces a collaboration with Queen’s University Belfast and Jaguar Cars Ltd to develop an engine which maximises fuel efficiency when running on renewable fuels. The OMNIVORE concept will employ novel engine architecture to achieve a high thermal efficiency when fuelled on any alcohols or gasoline.

The project is sponsored by Defra (Department for the Environment and Rural Affairs) and the DOE NI (Department of the Environment Northern Ireland) through the Renewable Materials LINK Programme. Lotus Engineering is currently undertaking a design study and the build of a single cylinder research engine for completion in January 2009. Vehicle modelling will validate the reduction in vehicle CO2 emissions. Queen’s University of Belfast’s School of Mechanical and Aerospace Engineering will be adding its world leading expertise in engine simulation, with Jaguar Cars Ltd a consultative partner at all stages of development.

This engine design is expected to significantly increase fuel efficiency for sustainable bio alcohol fuels. The architecture features an innovative variable compression ratio system and uses a two-stroke operating cycle with direct fuel injection. The OMNIVORE engine will be ideally suited to flex-fuel operation with a higher degree of optimisation than is possible with existing architectures.

Mike Kimberley, Chief Executive Officer of Group Lotus Plc said: “The automotive industry is now focusing on its environmental obligations to reduce CO2 emissions and improve efficiencies and we are seeing the high technology capabilities of Lotus Engineering being in strong demand. Not only does our brand value of ‘performance through light weight’ fit perfectly with the necessary direction of the industry to produce lighter, more efficient vehicles, we are also working on all aspects of future fuels, investigating alternative powertrains to accommodate alcohol fuels as they enter the market.”

Kimberley continues: “Alcohols possess superior combustion characteristics to gasoline which allow greater optimisation. Taking full advantage of the benefits of sustainable bio alcohols will ensure a greater percentage of vehicle miles will be travelled using renewable fuels. We are delighted with the investment from DEFRA which will assist this partnership in taking forward research development and the demonstration of this environmentally conscious transport solution.”The OMNIVORE programme complements the recently unveiled Lotus Exige 270E Tri-fuel as part of Lotus’ research to understand the complex combustion process involved in running on mixtures of alcohol fuels and gasoline, which will be important for a successful transition from today’s fuels to the sustainable, synthetic fuels of the future.

Geraint Castleton-White, Head of Powertrain at Lotus Engineering said: “The requirement to operate on gasoline in today’s flex-fuel engines limits their thermal efficiency when operating on alcohol fuels. However, the physical and chemical properties of alcohols, when compared to gasoline, provide the potential for higher thermal efficiency operation to be achieved. This single-cylinder research engine will investigate a highly thermal efficient combustion system that optimises engine performance to fully exploit the properties of both gasoline and alcohol fuels and maximise efficiency.

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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Florida Companies Follow Renergie’s Lead in Producing Ethanol from Sweet Sorghum

Posted on October 15, 2008. Filed under: Advanced Biofuel, Field-to-Pump, Hydrous Ethanol | Tags: , , |

Sweet on Sorghum

By SUSAN SALISBURY

Palm Beach Post Staff Writer

Sunday, October 12, 2008

 

Sweet sorghum is best known as a syrup poured over hot biscuits.

 

But now a half-dozen Florida companies want to serve up the crop as a biofuel for creating ethanol.

 

Its future as a biofuel looks sweet: The crop is more environmentally friendly than sugar cane or corn, and has a higher energy yield.

 

Biofuels are plant-derived sources of energy. Refined, they can be added to gas or used alone as a fuel.

 

Even the credit crunch isn’t stopping companies from moving forward, although they say the lack of loan money could slow the industry overall.

 

“The syrup has been around forever. The idea for ethanol hasn’t,” said Morris Bitzer, a University of Kentucky professor emeritus who fields as many as 50 inquiries a month from around the world about sweet sorghum as an ethanol feedstock.

 

“It’s so hot that I have shipped seeds to 30 countries and to five places in Florida.”

 

While the United States has no commercial production of ethanol from sweet sorghum, last year China and India produced 1.3 billion gallons of ethanol from the crop, Bitzer said.

 

Although sweet sorghum is being promoted as a “new energy crop,” it has been grown in the mid-South for more than 80 years, said Zane Helsel, a visiting Rutgers University professor who is field-testing sorghum varieties at the University of Florida Everglades Research and Education Center in Belle Glade.

 

The technology to make sweet sorghum into ethanol is readily available, unlike the technology needed to make cellulosic ethanol, which is derived from plant wastes or waste from processing, such as sawdust, or crops grown specifically for fuel production, such as switchgrass.

 

Sweet sorghum “is much like sugar cane,” Helsel said. “You can squeeze the juice out and straight up ferment it to ethanol, like grapes and winemaking.”

 

Helsel said the numbers from his test plots show sweet sorghum yields ranging from 100 to 600 gallons of ethanol per acre.

 

When it comes to use as a biofuel, sweet sorghum is one-upping sugar cane on its own turf. Many Florida companies hoping to produce ethanol considered sugar cane or corn as feedstocks before settling on sweet sorghum.

 

“After 18 months of research on sugar cane, we said, ‘What else is available?'” said Brian Donovan, CEO of Renergie Inc. in Gainesville. “A friend started growing sweet sorghum in China. Now everybody is a sweet sorghum fanatic.”

 

With the right variety and harvesting equipment, sweet sorghum can yield up to 800 gallons of ethanol per acre, Donovan said.

 

Donovan’s company plans to start construction this month on a plant in Kaplan, La., and eventually hopes to build as many as 10 biorefineries in Florida. For now, infrastructure is lacking here, he said.

 

Some sour sentiment

Not everyone is sold on sweet sorghum.

 

While some say it grows year-round in South Florida, except perhaps in January, Callery-Judge Grove production manager Mark DuBois said he found the crop did not grow well in the summer. Also, there’s no market for it now, except for cattle feed, and it’s too expensive to haul it from the grove near Loxahatchee to the nearest cattle in Okeechobee County, DuBois said. He doesn’t plan to plant it again.

 

“Where do you take it while you are waiting three to four years to grow a sorghum crop for biofuel?” DuBois said. “I have taken a real hard look at the sorghum thing. I can’t make it come out on paper.”

 

More work needs to be done with the crop, said George Philippidis, associate director of Florida International University’s Applied Research Center in Miami.

 

“There is all this hoopla about sweet sorghum,” he said. “A lot of people are jumping to conclusions and making statements with very little information in hand. It has not been done here. We need to see how the soil and the climate and everything else works with sweet sorghum.”

 

The crop is “promising,” Philippidis said, but “big plans for a plant here and a plant there are premature.”

 

Bradley Krohn, president of Tampa-based United States EnviroFuels LLC, said: “These projects are difficult. You have to have a grower base. It’s not like corn where you can buy it off the open market.”

 

Even so, Krohn is forging ahead with plans for a $70 million sweet sorghum-to-ethanol plant with a 20 million-gallon capacity in Venus.

 

As for financing, the credit crunch could actually help ethanol plants attract dollars from investors looking for a place to put their money where they can expect an upside, Donovan said.

 

Krohn is more pessimistic. He believes tight credit markets will hurt the renewable fuel industry, as most companies need to obtain a certain level of debt financing. “It could either eliminate projects or slow projects down significantly,” Krohn said.

 

Ray Coniglio, president of Global Renewable Energy in Sebastian, which has grown three different sorghum crops, said the company is applying for a federal grant while lining up investors and farmers.

 

“It may be difficult finding all the investors we need, but we are prepared for that,” Coniglio said. “Florida has a mandate of 10 percent ethanol by 2010. If we don’t produce it here, we will have to import it. It is a very good opportunity.”

 

Other companies looking to produce ethanol from sweet sorghum include Southeast Renewable Fuels LLC in Fort Lauderdale and DeGrande Biofuels Corp. in Altamonte Springs.

 

Los Angeles-based New Planet Energy LLC, which has an office in Vero Beach, plans to use it as part of the feedstock mix for a plant planned there.

 

And at Destiny, the futuristic city to be developed near Yeehaw Junction, sweet sorghum is being planted in test plots.

 

“We have enough information to suggest that with fuel prices what they are now, it should be economical,” Helsel said. “It’s something we can do right now until we get other technologies like hydrogen and fuel cells.”

 

Why sweet sorghum?

Sweet sorghum is being pursued as a feedstock for half of the dozen or so ethanol plants planned by Florida companies. The crop, a cousin of sugar cane, is favored for its high sugar content. No ethanol is produced from sweet sorghum in the U.S., but almost 2 million gallons of sweet sorghum syrup are produced each year.

 

Pluses:

·                     Sweet sorghum takes less water and fertilizer to grow than corn or sugar cane.

·                     It can be planted in rotation with vegetables.

·                     It can be grown on marginal soils not suited for food crops.

·                     It can be grown in three to four months, compared with 13 to 14 months for sugar cane.

·                     It isn’t publicly traded.

·                     It produces eight energy units for every energy unit invested in its cultivation and production, about the same as sugar cane. Corn produces 1.25 energy units for each energy unit invested.

·                     Its sugar can be converted to ethanol using existing technology.

 

Minuses:

·                     It can’t be stored and must be used within 24 hours after harvest or half its sugar content is lost.

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan and Mr. Michael J. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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    Renergie created “field-to-pump," a unique strategy to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies.

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