Archive for January, 2009

Energy Loan Program With No Projects May Get Funds

Posted on January 30, 2009. Filed under: Advanced Biofuel, Field-to-Pump, Rural Development | Tags: , , , , |

Energy Loan Program With No Projects May Get Funds

By Daniel Whitten

 

January 29, 2009 (Bloomberg) — Congress is planning to direct at least $10 billion in economic stimulus funding to an Energy Department loan guarantee program that hasn’t backed any projects since it began in 2005.

 

The new money is intended to generate $100 billion in loans for renewable energy and transmission projects, according to Senator Byron Dorgan, a North Dakota Democrat. Congress previously approved at least $38.5 billion for clean-energy loan guarantees, and not a single project was funded.

 

“It will get worse the more you put into it,” said Doug Koplow, president of Earth Track of Cambridge, Massachusetts, which reviews environmental subsidies. “There is still a lot of talk about dumping much more in, and you have to be wary.”

 

Lawmakers, trying to encourage a shift to clean-energy sources such as wind and solar, have sought to stretch government funds by using loan guarantees instead of grants or direct support for renewable energy projects.

 

The Senate’s economic stimulus plan includes about $78 billion overall for Energy Department programs or tax breaks for energy projects. The House plan would spend about $10 billion less on such projects.

 

A July Government Accountability Office report found the Energy Department’s loan guarantee program lacked “adequate management and internal controls.”

 

Energy officials hadn’t determined the resources needed to carry out the program, set policies for processing applications or monitor the loans, the report found. GAO, the investigative agency for Congress, also said the Energy Department had no clear idea of program costs or how it would identify eligible lenders.

 

Staff Expertise

Former Energy Secretary Samuel Bodman told reporters Jan. 14, before he left office, that the loan guarantee program had foundered initially because the staff lacked experience financing large projects. The department hired staff with such expertise before he left, Bodman said. A spokesman for the department said in an e-mailed statement today that Energy Secretary Steven Chu has targeted the program for improvement. “Fixing the program is a top priority for Secretary Chu so that we can get moving with investments that will build a new energy economy, put Americans back to work and address the climate crisis,” said Dan Leistikow, the department spokesman.

 

Mary Anne Sullivan, an attorney at Hogan & Hartson in Washington who represents clients seeking guarantees, said the department’s improved preparation, combined with the new Obama administration’s commitment to the program, should lead to loan guarantees being given out.

 

‘More Quickly’

“With motivated administrators of the program, it should go much more quickly,” said Sullivan, who was a general counsel at the Energy Department during former President Bill Clinton’s administration.

 

Koplow, of Earth Track, said government employees who administer financing programs don’t have any personal or institutional risk in reviewing whether projects will succeed.

 

Brent Blackwelder, president of the Washington-based environmental group Friends of the Earth, said in a statement yesterday that under the Senate plan, as much as half of the $100 billion in loans might be used for nuclear power plants. He said that would be a waste of the money.

 

Duke, Southern

Seventeen companies have submitted applications seeking $122 billion in loan guarantees for nuclear-plant construction, the department said in October. Among the companies are Atlanta- based Southern Co., Duke Energy Corp., in Charlotte, North Carolina, and PPL Corp., based in Allentown, Pennsylvania.

 

Officials at the Nuclear Energy Institute, the industry’s main lobbying group, have said the guarantees are critical because of the high cost of building reactors and difficulty in getting financing.

 

The department also has received applications from Tesla Motors Inc., of San Carlos, California, which makes electric cars; and Alico Inc., in La Belle, Florida, and Irvine, California-based BlueFire Ethanol Fuels Inc., both of which are planning cellulosic ethanol plants.

 

Congress approved the loan-guarantee program as part of energy legislation in 2005. It called for the government to guarantee repayment of loans made to fund energy projects such as nuclear power plants, coal projects and renewable-energy investments.

 

Of the $38.5 billion already authorized, the department is planning to distribute $18.5 billion in guarantees for nuclear plants; $10 billion for renewable or energy-efficient systems; $8 billion for clean coal; and $2 billion for processing of nuclear fuel.

 

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net

 

 

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.  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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Opportunity for Harmonization of Federal and State Fuel Economy/GHG Standards in U.S.

Posted on January 28, 2009. Filed under: Advanced Biofuel, Field-to-Pump | Tags: , , , , |

Obama Memos on California Waiver and CAFE Create Opportunity for Harmonization of Federal and State Fuel Economy/GHG Standards in US

Green Car Congress

27 January 2009

Nhtsapavley2015
Outcomes for average fuel economy in MY 2015 under different rules and scenarios, including the original proposed CAFE from NHTSA, the California Pavley rules applied to the national fleet, and alternative scenarios from the NHTSA FEIS. Click to enlarge.

On Monday, US President Barack Obama issued two memoranda, one, to Lisa Jackson, the new Administrator of the Environmental Protection Agency (EPA); the other, to Roy LaHood, the new Secretary of the Department of Transportation (DOT).

The resulting activity will create an opportunity to harmonize fuel economy and greenhouse gas emissions standards in the US not just between two different sets of tailpipe or fuel economy numbers (California Pavley versus federal CAFE), but also between the two currently differing approaches to implementing and managing the regulations.

In his memo to Jackson, Obama requested a review of the EPA’s earlier denial of the waiver to California to implement its greenhouse gas reduction standards for vehicles sold in the state. Granting of the waiver opens the way for implementation of the state standards in California and 13 other adopting states (in total representing about 40% of the US market).

In his memo to LaHood, the President requested very precisely a final order for federal fuel economy standards for only model year 2011, with further consideration and analysis to occur prior to issuing rules for subsequent model years. The original intention of the DOT’s National Highway Traffic Safety Administration (NHTSA) had been to issue rules for model years 2011-2105. (Earlier post.)

In the absence of harmonization, the downside scenario for the auto industry is two sets of regulations, based on different metrics, applied to 15 different—at current count—fleets: the California fleet under the Pavley regulations; the different fleets of each of the 13 other states currently queued up to implement the California standard; and the remaining national fleet under federal CAFE.

…the federal government must work with, not against, states to reduce greenhouse gas emissions.  California has shown bold and bipartisan leadership through its effort to forge 21st century standards, and over a dozen states have followed its lead.  But instead of serving as a partner, Washington stood in their way.  This refusal to lead risks the creation of a confusing and patchwork set of standards that hurts the environment and the auto industry.

The days of Washington dragging its heels are over.  My administration will not deny facts, we will be guided by them.  We cannot afford to pass the buck or push the burden onto the states.  And that’s why I’m directing the Environmental Protection Agency to immediately review the denial of the California waiver request and determine the best way forward.  This will help us create incentives to develop new energy that will make us less dependent on oil that endangers our security, our economy, and our planet.

As we move forward, we will fully take into account the unique challenges facing the American auto industry and the taxpayer dollars that now support it.  And let me be clear:  Our goal is not to further burden an already struggling industry.  It is to help America’s automakers prepare for the future.  This commitment must extend beyond the short-term assistance for businesses and workers.  We must help them thrive by building the cars of tomorrow, and galvanizing a dynamic and viable industry for decades to come.

—President Obama

Federal CAFE. The Energy Independence and Security Act (EISA) passed in 2007 mandates that the Secretary of Transportation prescribe annual fuel economy increases for light duty vehicles, beginning with model year 2011, resulting in a combined fuel economy national fleet average of at least 35 mpg US (6.72 L/100km) by model year 2020—about a 40% increase over current levels. The wording of the statute leaves open the possibility of a standard higher than 35 mpg in 2020.

In April 2008, NHTSA published a Notice of Proposed Rulemaking (NPRM) for model years 2011-2015—the maximum period for a single rulemaking permitted under EISA 2007. NHTSA decided to front-end load the standards; in other words, the increase in the first five years of CAFE would be more aggressive. Under the NPRM, national fleet average fuel economy would have increased to 31.6 mpg (7.44 L/100km) in MY 2015.

In October, 2008, NHTSA published a Final Environmental Impact Statement, which, as required by law, detailed a number of alternative rulemaking scenarios, some resulting in lower fleet fuel economy by 2015, but some resulting in much higher fuel economy, with the most extreme achieving 42 mpg (5.6 L/100km) by MY2015. Primary elements driving the varied results were different cost-benefit assessments, and underlying assumptions such as the price of fuel. (Earlier post.)

By statute, a fuel economy rulemaking must precede the beginning of the affected model year by at least 18 months. In order to have a viable MY2011 fuel economy standard, in other words, the rule needs to be published by 30 March 2009. NHTSA had originally intended to issue the final rulemaking at the end of 2008; however, the outgoing Bush Administration left the issuance of the rules to the incoming Obama Administration. (Earlier post.)

In a final rulemaking which was developed, although not issued (although it was leaked), NHTSA moved closer to one of its alternative scenarios, with a resulting increase in national fleet average fuel economy of 31.8 mpg (7.4 L/100km) by 2015.

By requesting a rulemaking only for MY 2011, President Obama opens up a window for further revision of the emerging rulemaking. From the Obama memo:

(b) before promulgating a final rule concerning model years after model year 2011, [I request that] you consider the appropriate legal factors under the EISA, the comments filed in response to the Notice of Proposed Rulemaking, the relevant technological and scientific considerations, and to the extent feasible, the forthcoming report by the National Academy of Sciences mandated under section 107 of EISA; and

(c)  in adopting the final rules in paragraphs (a) and (b) above, you consider whether any provisions regarding preemption are consistent with the EISA, the Supreme Court’s decision in Massachusetts v. EPA and other relevant provisions of law and the policies underlying them.

In Massachusetts v. EPA, the Supreme Court held that carbon dioxide and greenhouse gases are pollutants can be regulated under the Clean Air Act, and that as such the Environmental Protection Agency has the authority to set regulatory standards for greenhouse gas emissions from motor vehicles. (Earlier post.)

Attribute-based standards. The new CAFE rules radically change the older CAFE structure by moving to an attribute-based standard based on each OEM’s fleet mix. With the new structure, there is no longer any inherent advantage in selling small cars; as you move to larger-sized vehicles, the fuel economy requirements decline.

In a briefing on the impending new CAFE last year, John German, American Honda’s Manager, Environmental Policy Analysis noted that as there is no inherent advantage in downsizing under these rules, vehicles are likely to remain similar in size while increasing fuel efficiency through advanced technology, weight reduction and aerodynamics. There is no advantage to companies that produce smaller vehicles, and no penalty to companies making more larger vehicles. (Earlier post.)

California Pavley. Under the Federal Clean Air Act, California has the right to set its own tougher-than-federal emission standards, as long as it obtains a waiver from US EPA. Other states can choose to adopt the California standards, or stick with the federal standards.

Enacted in 2004, California’s AB 1493 (Pavley) established for the first time standards for CO2 emissions for new light-duty vehicles sold in the state. The Pavley regulations are not per se fuel economy regulations; because the vast majority of greenhouse gas emissions from the operation of a vehicle stem from combustion of the fuel, they serve as a very close proxy for fuel economy regulations, however.

Since enactment, the Pavley regulations have been in limbo as the EPA under the Bush Administration first took no action on the waiver request, and then ultimately denied it in 2007. (Earlier post.)

At the same time, various legislative efforts were mounted to preclude states from setting individual vehicle emissions standards, and the rules themselves were contested in a series of court cases by the auto industry and dealers. California won in the courts, but the denial of the waiver pushed it back into the courts as California sued to overturn the decision.

Pavley standards. Unlike the vehicle attribute-based approach of the new CAFE, the Pavley regulations use the older model of a manufacturer’s entire fleet, divided into two main categories: Passenger cars/Light duty trucks 1 (PC/LDT1) and Light duty trucks 2 and 3 (LDT2/3). PC/LDT1 includes vehicles of less than 3,751 lbs GVW; LDT2 includes light duty trucks with test weights between 3,751 lbs. and 8,500 lbs. gross; LDT 3 incudes non-commercial medium duty vehicles ranging between 8,500 and 10,000 lbs.

These are slightly different than the federal government’s distinction between cars and light trucks, the former which consists only of passenger cars, the latter which comprises LDT1/2/3. For example, under California categories, the state will have a fleet that is 70% PC/LDT1 and 30% LDT2/3 in MY 2016, according to the Air Resources Board (ARB). Under federal categories, according to ARB, California’s fleet at the same time will be 59% cars and 41% light-duty trucks.

Arbfederalpavley
Pavley applied to the federal fleet. Source: ARB. Click to enlarge.

In an analysis published in February 2008, ARB mapped the federal fleet to the California categories (PC/LDT1 and LDT2/3), assuming a 50:50 ratio, and then applied the Pavley emission standards, with an accompanying conversion of g CO2/mile to mpg fuel economy. The outcome, according to ARB, would yield a combined national fleet fuel economy of 31.3 mpg (7.52 L/100km) in MY 2015—or .5 mpg lower than the 31.8 mpg US fleet average in the NHTSA final rule that was not published. 

However, the Pavley standards are much more exacting on the passenger car side than the federal requirements. For the PC/LDT1 category, the average fuel economy resulting under Pavley is an estimated 40.6 mpg (5.79 L/100km) in MY 2015. The NHTSA rule applied to  passenger cars (which would not have included the LDT1 trucks) would have resulted in average fuel economy of about 37.1 mpg (6.34 L/100km).

Pavleynhtsa
MY2011-2015 national fleet fuel economy under CAFE and Pavley scenarios. Click to enlarge.

For the LDT2/3 category (without the lighter LDT1 vehicles), Pavley would result in an average 25.5 mpg (9.22 L/100km). The NHTSA rule applied to light trucks (equivalent to LDT1, LDT2 and LDT3) would result in an average of 27.1 mpg US (8.68 L/100km).

The ARB analysis concludes that continuing with Pavley and anticipated Pavley 2 rules will result an average fuel economy in the state of 42.5 mpg (5.53 L/100km) by 2020. If applied to the national fleet, the Pavley standards would result in average fleet fuel economy of 39.2 mpg (6.0 L/100km), compared to the EISA 2007 minimum of 35 mpg (6.72 L/100km).

The “patchwork”. The patchwork of standards adduced constantly by the auto industry and dealers, and referenced by President Obama in his remarks prior to signing the two memos, results more from the structural implementation of the two systems, rather than the basic difference in fuel economy numbers (which, for the initial years, are relatively small and in some cases are more aggressive on the CAFE side.) 

The Pavley regulations apply to a manufacturer’s fleet as delivered for sale within a state; new CAFE applies to vehicles on an attribute basis. Although the target fleet number for the Pavley standards will remain the same across the different implementing states, the vehicle mixes sold in those states vary.

In a report published in January, the National Automobile Dealers Association noted that:

…each CARB state will pose a different regulatory challenge for automakers, because consumer appetites vary from state to state, and therefore no two state fleets are alike. Accordingly, the mix of vehicles automakers “deliver for sale” in California differs from what they “deliver for sale” in other states. These differences mean that being in compliance in California, and offering the exact same choice of vehicles nationwide will not guarantee compliance in any other CARB state. Thus, the more states that opt into the CARB regime, the more cumbersome the patchwork would become.

…Generally, CARB’s regime would pressure automakers to “deliver for sale” small vehicles in each CARB state (irrespective of consumer demand) to offset the sale of larger vehicles.

—“Patchwork Proven”

In an interview with GCC, Charles Territo, the director of communications for the Alliance of Automobile Manufacturers, which had participated in the lawsuits against the California regulations, said:

It’s really important to get beyond the rhetoric of “California good”, “California bad”. Doing this on a state-by state basis won’t work. From a compliance and regulatory standpoint it won’t work.

There is great wisdom in a single national standard, and the ability of manufacturers to average sales in one area versus another area. You can do that and still get significant CO2 reductions. That’s where we want to be. We understand it, we get it. We all are looking forward to working with the new administration and figuring out a way to get beyond this debate.

The ultimate goal should be a plan that enhances energy security, reduces CO2 emissions, gives manufacturers the flexibility they need to comply, and gives consumers access to a wide range of vehicles that are very fuel efficient at an affordable price.

Resources

 

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.  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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US Weekly Ethanol Margins in the Red, Demand Soft

Posted on January 24, 2009. Filed under: Advanced Biofuel, Field-to-Pump, Rural Development | Tags: , , , , |

US weekly ethanol margins in the red, demand soft

 

 

NEW YORK, Jan 23, 2009 (Reuters) – U.S. ethanol distillers on average remained in the red this week on soft demand from motor fuel blenders.

 

 

Ethanol producers have been suffering negative or low margins for months on weak demand, particularly as ethanol prices have traded above gasoline prices.

 

 

As distillers trim production because of the lack of demand, the price structure between ethanol and gasoline could continue to plague the renewable fuels industry for weeks or months.

 

 

“Anxiety levels are not expected to be reduced in the near future,” said Rick Kment, an industry expert at DTN in Nebraska.

 

 

Spot ethanol prices fell about 2 cents a gallon to $1.58 in the Midwest market, dealers said. Cash gasoline prices were about $1.10 to $1.15 per gallon, on the other hand.

 

 

The ethanol crush spread was practically unchanged at 20 cents a gallon, using the formula of the Midwest ethanol price minus the corn price divided by 2.8.

 

 

Operating costs such as natural gas prices and overhead trim the crush spread by about 25 cents per gallon, bringing net margins to about -5 cents a gallon.

 

 

Some producers make the livestock feed distillers grains as a byproduct of making ethanol, which can improve profits. Those near feedlots can sell wet distillers grains, which are energy efficient. Ethanol plants that are further from feedlots sell dried distillers grains, but have to spend money on natural gas to dry them.

 

 

Corn is the main input cost for U.S. ethanol makers. March corn CH9 closed at about $3.88 a bushel on Thursday, down about 3 cents from last week.

 

 

A downturn in ethanol margins over the last several months has deepened a series of production shutdowns and curtailments as the hardest-hit distillers slow operations.

 

 

U.S. ethanol company VeraSun Energy Corp., which filed for bankruptcy protection in October after making expensive hedges on corn and amid the credit crunch, said 12 of its 16 plants were closed.

 

 

The U.S. Renewable Fuels Standard mandate requires 11.1 billion gallons of biofuels to be blended into gasoline in 2009. The stricter mandate has given producers some hope that margins would turn around this year.

 

 

Long term the RFS could be in trouble. The Energy Information Administration, the top U.S. energy forecaster, said late last month that the United States would likely blend just 30 billion gallons per year of biofuels by 2022, not the 36 billion gallons the mandate requires.

 

 

As the price of ethanol has soared compared to gasoline, prices for credits — known as Renewable Identification Numbers — that refiners and blenders can buy in the open market to meet their biofuels mandates, instead of making the product, have risen to about 12 to 13 cents. (Reporting by Timothy Gardner, editing by Jim Marshall)

 

 

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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Incentivizing Biofuels Sustainability

Posted on January 17, 2009. Filed under: Advanced Biofuel, Field-to-Pump, Rural Development | Tags: , , , , |

From the February 2009 Issue of Ethanol Producer Magazine

Incentivizing Biofuels Sustainability

Scientists weigh in on sustainable biofuels production including how to best manage cropping systems and establish an incentive program that awards environmentally responsible biofuels development.
by Jessica Ebert

 

A conference conceived by Dale Brockway of the USDA Forest Service and shepherded by the conference co-chairs William Parton, an ecologist at Colorado State University, and Richard Pouyat with the USDA Forest Service, took more than a year to plan. Parton and Pouyat are members of the Ecological Society of America, which organized the event and brought more than 300 people to the Ronald Reagan Building and International Trade Center in Washington, D.C. For one day, speakers representing various government agencies, ethanol producers and academic researchers, presented their views on the environmental benefits—and costs—of biofuels production.

“From the beginning we wanted to promote a thoughtful discussion about the environmental implications of biofuels,” explains Clifford Duke, the director of science programs for the ESA. “But when we started planning the conference we weren’t sure if the issue would remain salient over the roughly year and a half we thought it would take to do the planning for the conference.” Then, about two weeks before the conference, which was held on March 10, two papers were published in the journal Science that raised concerns about the carbon debt that could potentially be linked to biofuels production.

The ESA’s Ecological Dimensions of Biofuels conference provided a timely forum for discussing the sustainability of biofuels production systems and the means by which biofuels industries, particularly the emerging cellulosic ethanol industry, can grow and prosper while promoting environmental stewardship. The one-day event was followed by a two-day workshop where 50 scientists, including ecologists, soil scientists, economists, water quality experts, botanists and microbiologists, were invited to discuss the issues that emerged from the conference. These workshop discussions culminated in a policy paper that was recently published in the journal Science.

In that paper, 23 of the workshop participants explained how the explosion of grain-based biofuels production systems and conventional management practices has caused environmental harm, including increased soil erosion, loss of biodiversity, and the leaching of fertilizer nutrients such as nitrogen and phosphorus from soil to ground and surface waters. These effects stem from policies that promote action before the consideration of consequences. The authors point out that the 2007 mandate for 36 billion gallons of renewable fuels by 2022 and the subsidies for both refiners and growers as stipulated in the 2008 Farm Bill will encourage the same acceleration and adoption of production systems before the environmental impacts of these systems are properly vetted.

For example, “To get maximal yield, farmers may apply maximum amounts of fertilizer, which can exacerbate a nutrient-loss problem,” says Andrew Sharpley, a water quality researcher at the University of Arkansas and a contributor to the Science paper. “The crop may not be grown on lands that are most suited to it. These policies may encourage a shift away from rotating crops to a monoculture,” he says, and there is a potential for increased use of water. “All of this could impact the quality and quantity of water in the long run.”

This, however, is not the way it needs to be, these scientists write. In the bulk of their paper, these experts in soil and water quality and agricultural systems and economics explain that these impacts can be reversed or at the very least lessened. They explain how the adoption of best management practices and the development of sustainable incentive programs can soften the environmental impacts of grain-based ethanol production and strengthen the potential positive attributes of cellulosic biofuels.

“Sustainable biofuel production systems could play a highly positive role in mitigating climate change, enhancing environmental quality and strengthening the global economy, but it will take sound, science-based policy and additional research effort to make this so,” the researchers write. “Decision makers at all levels need to understand that applying best available practices to biofuel crop production will have positive impacts both on the sustainability of our working lands and on providing a long-term place for biofuels in our renewable energy portfolio, and that the policies necessary to ensure this outcome are not currently in place.”

Incentives for Best Management
So what practices should be used and what policies are needed to ensure environmental sustainability in the face of accelerated biofuels production? At the farm level, the authors outline best-management practices that build healthy soils, promote water quality and increase biodiversity. The use of no-till farming, advanced fertilizer technologies and cover crops, for example, can slow erosion and capture nutrients thereby preventing runoff into nearby waterways or ground water. Creating patchworks of land characterized by mixtures of crops, grasses, shrubs and areas of unmanaged habitat can increase the presence of pollinators, beneficial insects and wildlife, Sharpley explains.

In addition, the improvement of crops through genetic manipulation or classical selection can increase the stress tolerance of these plants or reduce the need for pesticides. The biggest benefits, however, may come from the development of cellulosic feedstocks. Many of these will be perennial crops that, once established, require little if any chemical inputs or tillage. These feedstocks are also better suited to being raised among a mixture of species.

Although the environmental benefits of these best-management strategies are known, the adoption process is slow at best. “If we’re going to expand agriculture for biofuels and use more agricultural lands, we need to do that in the right way and use the best-management practices we have,” Parton says. “We need to find policies to do that.” Therefore, at the government level, a program that rewards environmentally conscious growers and producers should be established, the authors write. An incentive program like this would award subsidies when certain performance standards were met. These standards would likely be regionally based and could include the use of best-management practices and measures of greenhouse gas emissions, water quality and soil erosion. This kind of incentive program could be modeled after the organic food certification program where canners or processors have to make sure that their suppliers have met certain standards and the products are truly organic.

“It means that you don’t have policemen out there,” explains Otto Doering, an agricultural economist at Purdue University. “It means that the processing plant that buys the materials has to make sure the grower of the cellulosic material is doing the right thing. You don’t have big government regulation. It’s built into the market system.”

The U.S. EPA has the perfect opportunity to make something like this happen. Under the 2007 Energy Independence & Security Act, the EPA must certify that any ethanol production, beyond the 15 billion gallons that’s already being produced or that will be produced at plants under construction, meets certain greenhouse gas emission requirements. “What we’re saying is that we shouldn’t just think of greenhouse gas standards, we should put it in a broader framework for good environmental stewardship,” Doering says.

The first step toward such a framework was taken with the publication of the Science paper, which its authors intended to be a springboard for greater dialogue. The ESA is planning to follow this up with the publication of several science-based manuscripts from the conference speakers. These papers will be published in the society’s peer-reviewed journal Ecological Applications. The ESA is also working with the Energy Foundation, a partnership of major donors that provides grants to institutions working to advance energy efficiency and renewable energy, to publish five reports on biofuels sustainability, which will be written for the public and will be produced as part of the ESA’s “Issues in Ecology” series, according to Duke.

In addition, Parton is working through the ESA to organize an international conference on biofuels sustainability. “The Science paper reflects what the science community is concerned about and that we need to do something ahead of time,” Parton explains. “It’s an interesting and global science question. We know what we should be doing. We’re just not doing it.”

Jessica Ebert is a freelance writer for Ethanol Producer Magazine. Reach her at jebertserp@yahoo.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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Study: Global feedstock yields are overestimated

Posted on January 16, 2009. Filed under: Advanced Biofuel, Hydrous Ethanol | Tags: , , , , |

From the February 2009 Issue of Ethanol Producer Magazine

Study: Global feedstock yields are overestimated

by Erin Voegele

 

Web exclusive posted Jan. 16, 2009, at 4:22 p.m. CST

A recent study has found that global yields of most biofuels crops have been overestimated by 100 to 150 percent or more, suggesting that many countries need to reset their expectations of agricultural biofuels to a more realistic level. The study was led by Matt Johnston and Tracey Holloway with the University of Wisconsin-Madison Nelson Institute for Environmental Studies and Jon Foley with the University of Minnesota. Agricultural data from nearly 240 countries was used to calculate the potential yields of 20 different biofuels feedstocks, including barley, cassava, maize, potato, price, sorghum, sugarbeet, sugarcane, sweet potato, wheat, castor, coconut, cotton, mustard, oil palm, peanut, rapeseed, sesame, soybean and sunflower.

The study indicated that the potential for biofuels production in both developing and developed countries has often been exaggerated because current yield estimates are generally based on data sourced from the United States and Europe, which doesn’t account for local differences in climate, soils, technology and other factors that can influence agricultural yields.

By offering an analysis of detailed, regional yield data that encompasses this variability, the researchers hope to empower countries to make wiser choices on whether to invest in ethanol or biodiesel, which crops to plant, and how to make the best use of exiting farmland. In the past, Johnston said, policymakers, companies and farmers have partially based decisions about biofuels on yield tables, which make simple side-by-side comparisons of the fuel yield per unit of land for various crops. For example, a yield table might compare the amount of ethanol one hectare of sugarcane can generate, compared to one hectare of corn. He said the problem with yield tables is they often reflect the best case scenario. “They might pick Brazilian sugarcane, versus rapeseed from France, versus maize from the United States,” Johnston said. “Those aren’t really fair comparisons because you are really cherry picking the best information from the best results from everywhere in the world, and putting them side by side. That’s not very realistic for most people or places in the world.”

To get a more realistic picture of the potential yields of these crops, the researchers used a global agricultural database, which was developed at the UW-Madison’s Nelson Institute Center for Sustainability and the Global Environment (SAGE). The database, referred to as the M3 database, provides actual yields for 175 crops, circa the year 2000, at a resolution of roughly five miles by five miles across the entire globe. According to Johnston, the M3 database contains more than 22,000 unique census information datapoints from around the world that was sourced from the USDA and similar organization from around the world. “Basically, it’s a compilation of agricultural census information from around the world,” he said.

Johnston sourced data from the M3 database on the 20 biofuels crops he’s studying to calculate and map the amount of biofuel that could be produced per hectare in every possible country by crop combination. He then computed a global average yield for each of the 20 feedstocks, as well as the average yield of each in both developed and developing nations as a whole.

“What we wanted to do was calculate yield potential,” Johnston said. You can’t say that just because you get a certain corn yield in Iowa that you can realize that yield everywhere else in the world, added. “That’s just not true. Crops grow better in certain regions because of climate or water or soil conditions,” Johnston said.

The next step is to compare the yields of biofuel feedstocks in areas with similar climates, and then study how differences in management practices may be contributing to production gaps. The goal is to help supply countries and farmers with the best data possible so they can make the most of existing farmland and better balance the investment in biofuels against other needs.

The basic idea will be to compare apples to apples. “We group all the points in the world that have similar water, soil, and climate suitability,” Johnston said. These points are divided into 100 unique bins, or unique groups, with each one being considered a different agricultural suitability. “The idea is you can compare different places around the world that share similar climate conditions, and then compare the yields,” he said. “Then you can say within this bin, we should be able to achieve what some of the top countries are – what some of the top plots are.” The research should give farmers around the world a tool to help compare their plots of land with other plots of land around the globe that share similar climate, soil and water conditions. “Yield potential is what we are trying to calculate,” Johnston said. “We can use this tool and the result of this study to optimize efforts [to improve yields].”

The results of the research have been published in an open access journal, called Environmental Research Letters. The full research article, titled “Resetting global expectations from agricultural biofuels,” can be accessed on the Environmental Research Letters Web site. In addition, supplemental materials and access to data used to complete the research is available on the SAGE Web site.

 

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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Double Whammy for Ethanol

Posted on January 12, 2009. Filed under: Blender's Tax Credit, Hydrous Ethanol | Tags: , , , , |

Double Whammy for Ethanol

Corn Prices Rise as Oil Drops, Putting Squeeze on Margins

 

By IAN BERRY

Wall Street Journal

January 11, 2009

 

CHICAGO — Corn producers have gotten a holiday gift in the form of rising prices, but that rally is a lump of coal for one big corn customer, the ethanol industry.

 

Corn’s rally also comes as crude-oil prices sag, something that has put even more pressure on profit margins in an ethanol industry in which many producers already were in a precarious state, with multiple factory closures, analysts say.

 

The price of the corn futures contract for March delivery has climbed to as high as $4.26 a bushel Tuesday on the Chicago Board of Trade from $3.0925 on Dec. 5. It closed Friday at $4.1075.

 

Analysts are befuddled by the rally, saying there is no good fundamental answer. Dry weather limiting South American corn production, concern about enough acres being planted in 2009 and even traders following their so-called technical charts all have been cited, but many analysts say weak demand isn’t going away amid a world-wide recession.

 

A rally in corn prices — the price of the corn futures contract for March delivery climbed to as high as $4.26 a bushel recently from $3.0925 on Dec. 5 — has befuddled some analysts. Above, harvesting corn in Illinois.

 

Michael Swanson, senior agricultural economist for Wells Fargo, and other analysts point out that rising prices typically limit demand, and so in that sense the rally has been counterintuitive. “I think this market is going to get disciplined,” Mr. Swanson said.

 

On the ethanol end, producers extract value out of each bushel of corn by selling the fuel and a byproduct, dried distiller grains. Mr. Swanson says corn prices are too high to allow the 80 cents left over from the sale of each bushel that the “very best” ethanol factories need to cover chemical, labor, handling and depreciation costs, let alone the $1.20 a bushel an average factory needs.

 

Marty Foreman, analyst for Doane Advisory Services, said that in the summer, ethanol was selling as much as $1.75 a gallon less than gasoline at the pump. Now the situation has reversed. The price of the crude-oil futures contract for February delivery fell 87 cents to settle at $40.83 a barrel Friday on the New York Mercantile Exchange, while February Nymex reformulated gasoline blendstock for oxygen blending futures, or RBOB, rose 2.30 cents to $1.1112 a gallon. February ethanol futures rose 3.2 cents to $1.685 a gallon on the Chicago Board of Trade.

 

“It’s a tough market to sell extra fuel into,” Mr. Swanson said. “These farmers are thinking ‘this is going in the right direction, let’s rally another 30 cents.’ Well, if they rally another 30 cents, that 30 cents comes right out of the ethanol pocket. And they’re not just going to run this plant just to lose money.”

 

Analysts say an increase in gasoline demand, which would help cure ethanol’s woes, is possible. But some analysts, including Mr. Foreman, think corn prices will remain firm.

 

Corn’s recent rally also doesn’t help export demand, which has been anemic. Analysts say the last week of relatively strong exports was in early December.

 

Corn’s rally isn’t as detrimental to feed demand, even though livestock producers also are hurting. Ron Plain, agricultural economist with the University of Missouri, said that while there is a direct relationship between corn prices and livestock prices, there is a lag between them.

 

“You can turn an ethanol plant on and off,” Mr. Plain said. “You can’t go out to your pigs, and say, ‘Hey, I’m sorry, corn’s expensive, hang out for the next six months and I’ll be back with some more feed.’ “

 

Write to Ian Berry at ian.berry@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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Verenium Cranks Up Demo Plant — What Next?

Posted on January 11, 2009. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

Verenium Cranks Up Demo Plant — What Next?

by Katie Fehrenbacher

http://www.earth2tech.com

January 9, 2009

 

 

Remember cellulosic ethanol startup Verenium? Last we heard the company had started the commissioning phase of its cellulosic ethanol demo plant in May 2008, and it had big plans to start construction of a 30-million-gallon-per-year commercial plant in the middle of 2009. Well, a glowing story on the company came out in USA Today this week, which says the company just this week “cranked up” the demo plant. Verenium spokesperson Morgen Grandjean provided a few more details to us in an email and said the commissioning phase of the demo plant is 75 percent completed. The plant is currently producing small amounts of cellulosic ethanol at this time, but “the plant has not been running continuously.”

 

The USA Today article makes no mention of plans for a commercial scale plant. Instead, the story says Range Fuels’ commercial plant is expected to be the first in the U.S. later this year. Verenium’s Grandjean told us in an email that the company is “still slated to break ground on our first commercial facility in the second half of this year.” So, either the company failed to tell the USA Today reporter that information, or the reporter failed to include it. We would guess that, if the company does start construction of a commercial plant in the “second half of this year,” it will be more towards the end of 2009.

 

The USA Today story also doesn’t mention some financial hurdles facing Verenium: In December, the company put out an announcement that said it wasn’t in compliance with NASDAQ rules for maintaining a minimum market capitalization. The company had until this week to regain compliance; if it was unable to meet that deadline it could appeal or apply for transfer to the Nasdaq Capital Markets. We’re not sure what the company’s moves were.

 

The company has been spending very heavily. That’s not surprising given that Verenium is just turning on its demo plant and hasn’t started any considerable production yet, but for just the three months ending Sept. 30, 2008, the company reported a net loss of $133.24 million. And that loss was way up from the same period for 2007, in which the company reported a loss of $20.50 million. At this point the company has little revenue coming in; for the quarter ending Sept. 30, the company reported revenues of $16.38 million.

 

One thing Verenium does have in its corner is the promise of more funding from its partnership with biofuels bigwig BP. The deal with BP provides Verenium with $45 million in payments over the first 12 months of the agreement, and $2.5 million per month over an 18-month period. The deal created a special purpose entity called Galaxy Biofuels, which will have access to Verenium’s technology and will be jointly owned by BP and Verenium.

 

Verenium is actually better off than many companies trying to pioneer cellulosic ethanol in this difficult economic climate. BlueFire Ethanol told Reuters recently that it is delaying groundbreaking on its cellulosic ethanol plant in Lancaster, Calif., for several months.

 

Verenium’s coverage in the USA Today article positions cellulosic ethanol as a solution that is just around the corner. The article says: “Simply put, the nation will soon be running its cars, at least partly, on debris,” and also emphasizes that while corn-based ethanol makers are struggling, cellulosic ethanol makers are laying the groundwork for the next revolution. The cellulosic ethanol companies are struggling with many of the same things that the corn guys are facing in 2009 — especially access to capital. And even if those challenges are conquered, cellulosic ethanol won’t make much of a dent in the fuel supply for many years to come.

 

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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Brazil’s Ethanol Industry

Posted on January 8, 2009. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , , |

The following article appeared on the CattleNetwork.com website on January 8, 2009.

Brazil’s Ethanol Industry

 

The energy crisis of the 1970s brought about high gas prices and limited supplies that generated an intense interest in renewable fuels and weaning ourselves from foreign sources of oil. However, when gas prices plummeted in the 1980s, renewable fuels and energy independence were quickly forgotten.

 

The story evolved differently in Brazil. After investing heavily in renewable fuels in the 1970s, Brazil kept the program alive during the 1980s. This has given Brazil a head start in the current situation. With its robust ethanol program, Brazil has developed an extensive ethanol industry. In this article we will discuss the structure and growth potential of Brazil’s ethanol industry. In future articles we will discuss Brazil’s domestic usage and exports.

 

Brazilian Ethanol Production

 

Brazil is the world’s number two ethanol producer and the leading ethanol exporter, using sugarcane as its feedstock. Ethanol production has expanded in recent years as shown in Table 1.

 

Table 1. Brazilian Ethanol Production

Three types of production facilities exist in Brazil:

 

Sugar mills (producing only sugar) – The sugarcane is washed, chopped, shredded and crushed between rollers. The juice (grapa) contains 10 – 15% sucrose. The remaining material (by-product) is called bagasse.

 

Mills with distillery plants (sugar and ethanol production), and  Independent distilleries (only ethanol production).

 

U.S. and Brazilian Ethanol Comparison

 

 

The United States and Brazil are the two largest ethanol producers in the world as shown in Table 2. Together they account for almost 90 percent of world production.

 

Table 2. World Fuel Ethanol Production (2007)

The feedstock for Brazilian ethanol is sugarcane. In the U.S. the feedstock is corn. Below is a comparison of Brazil’s sugarcane-ethanol industry and the U.S. corn-ethanol industry.

 

Labor and Environmental Impact

 

Traditionally, sugarcane fields have been burned just before harvest to remove leaves and fertilize the fields with ash. The smoke, which is blown into nearby towns, turns the sky gray and makes the air hazardous. However, a recent law bans the burning of sugarcane fields.

 

Sugarcane production requires hand labor at harvest. This creates a large group of migrant workers who can only find work a couple of months a year during sugarcane harvest. A skilled harvester can cut 1,000 pounds of sugarcane in an hour. Machines are replacing human labor for harvesting cane.

 

Energy Balance

 

The energy content of sugarcane is divided into three equal parts. One-third of the energy is in the sucrose and is converted to ethanol. One-third of the energy is in the sugarcane tops and leaves which are left in the field. The remaining third is bagasse which is fibrous material that is left over after pressing the sugarcane.

 

Bagasse is burned to provide an energy source for the ethanol facility. Bagasse burning co-generates electricity which is used in the plant and also sold to the energy grid. However, only 12 percent of sugar-ethanol mills currently sell electricity to the grid. The cost to connect to the grid is very expensive. In addition, many mills are not located close to the grid.

 

Since sugarcane is replanted only once every six years and harvested with hand labor, it requires less energy for production than corn.

Table 3. Comparison of Brazil and the U. S. Ethanol Industries

 

Future Expansion

 

Brazil has a natural advantage in ethanol production. It has a vast unused or little-used land area that can be converted to agricultural production. In addition, its tropical climate is well suited for sugarcane production.

 

The Sugarcane Technological Center (CTC) is the leading research center for sugarcane and ethanol in Brazil. It is responsible for over 80 percent of the research and development activities in this area. Brazil has made substantial investments in research to improve sugarcane varieties in recent decades. The research has produced varieties more resistant to drought and pests, along with higher yields and higher sugar content. During the last 30 years, sugarcane yields have increased three-fold.

 

Dedini Corporation is Brazil’s largest builder of ethanol plants. They are developing a process that can convert the cellulose from bagasse, tops and leaves into sucrose for ethanol production. This technology has the potential to almost double the ethanol production from an acre of sugarcane.

 

According to Brazilian sources, sugarcane planted acreage (all uses) is expected to increase to over 25 million acres by 2012/13. The number of sugar ethanol plants are expected to increase from 325 (2006/07) to 410 (2012/13). Ethanol production is expected to reach ten billion gallons. This compares to the current production of 7 billion gallons (Table 1).

 

Table 4. Agricultural Land in Brazil (2007)

Source :Don Hofstrand, co-director AgMRC, Iowa State University Extension, 641-423-0844, dhof@iastate.edu

 

 

 

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That cheap gasoline? Don’t get used to it

Posted on January 7, 2009. Filed under: Blender's Tax Credit, Hydrous Ethanol | Tags: , , , , |

That cheap gasoline? Don’t get used to it

Analysts see scene being set for another set of oil price shocks next year

The Associated Press

Tues., Jan. 6, 2009

 

HOUSTON – All that money you’re saving these days at the gas pump? You might want to put it in the bank.

 

The same cheap oil that’s providing relief to drivers and businesses in an awful economy is setting the stage for another price spike, perhaps as soon as next year, that will bring back painful memories of last summer’s $4-a-gallon gas.

 

The oil industry is scaling back on exploration and production because some projects don’t make economic sense when energy prices are low. And crude is already harder to find because more nations that own oil companies are blocking outside access to their oil fields.

 

When the world emerges from the recession and starts to burn more fuel again, and higher demand meets lower supply, prices will almost certainly shoot higher.

 

Some analysts say oil could eventually eclipse $150 a barrel, maybe even on its way to $200. In such a scenario, gasoline would easily cost more than the record high of $4.11 a gallon set last summer. Oil trades at about $50 today.

 

No one knows for sure, but some analysts say the spike could happen as soon as next year, perhaps in 2011 or 2012.

 

“I think those supply limits will come back to bite with a vengeance,” said Sean Brodrick, a natural resources analyst at Weiss Research Inc.

 

High prices at the pump last summer — more than $4 per gallon for gas on average — helped slash demand for oil. From November 2007 to October 2008, Americans drove 100 billion fewer miles than the year before, according to government figures. The nation’s biggest automakers lurched toward bankruptcy as sales of sport utility vehicles and trucks plummeted.

 

“We wouldn’t be bailing out the automobile industry today … had we not had this crazy situation with oil prices,” said Daniel Yergin, chairman of Cambridge Energy Research Associates, a consulting firm, and author of “The Prize,” the Pulitzer Prize-winning history of the oil industry. Oil giants like Exxon Mobil, Chevron and ConocoPhillips have yet to announce their 2009 capital spending plans, but analysts say even the cash-rich companies are likely to shelve some projects.

 

Already, Royal Dutch Shell has postponed a near-doubling of production in Canada’s oil sands — an operation that analysts say only makes economic sense when oil is about $20 a barrel more expensive than it is now. Marathon Oil says it expects to cut capital spending by 15 percent in 2009.

 

Brodrick said canceled or postponed oil and gas projects could contribute to a drop of 7 percent or more in global oil production this year.

 

Smaller oil producers could cut spending by 30 percent, said Oppenheimer & Co. analyst Fadel Gheit. The majority of U.S. crude and natural gas is supplied by smaller, independent companies, not the Exxons and Chevrons, and smaller producers have been forced to pull back because of frozen credit markets.

 

All this comes as the Organization of Petroleum Exporting Countries, which controls about 40 percent of world crude supplies, embarks on its biggest single production cut ever.

 

It adds up to another round of price shocks for consumers that’s probably inevitable, said Bruce Vincent, president of Houston-based Swift Energy Co., an independent producer.

 

“Demand will start growing, supply will start coming down, and you’ll have that intersect again where prices will take off dramatically,” Vincent said. “(But) it’s not healthy for the economy. It’s not healthy for the industry.”

 

Already, the futures markets are pricing in more expensive oil. While a barrel of light, sweet crude for February delivery costs about $50, the market for September oil is already over $60. Big Western oil companies like Exxon and ConocoPhillips have also been cut off from crude reserves under the control of nationalized oil companies from Saudi Arabia to Venezuela. Late last year, the International Energy Agency said it will take more than a trillion dollars in annual investments to find new fossil fuels over the next two decades in order to avoid shortages that could choke the global economy.

 

When the world economy recovers from the current malaise, “Are we going to get another one of these violent cycles where prices overshoot and you get back in the same spiral?” asked Yergin. “Some volatility is inevitable in global commodity markets, but this kind of extreme volatility is bad for everyone. It creates deep wounds.”

 

Another part of the problem, said Judy Dugan, research director for the nonprofit Consumer Watchdog, is that oil companies didn’t invest enough in new exploration over the past several years, as they raked in billions in profits.

 

“They’re screaming, ‘Drill, baby, drill,’ but they didn’t invest anywhere near where they should have been investing when prices were high,” she said. “Now that prices have crashed, they say prices are too low, knowing full well prices are going to go back up.”

 

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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Economist: “Blending Wall” Stands in Way of Ethanol Growth

Posted on January 3, 2009. Filed under: Blender's Tax Credit, Hydrous Ethanol | Tags: , , , , |

Economist: ‘Blending wall’ stands in way of ethanol growth

 

WEST LAFAYETTE, Ind. (December 19, 2008) – Ethanol production opened the door to the renewable fuels industry. The industry now must get past an imposing wall of federal regulations and market conditions if it hopes to grow, said a Purdue University agricultural economist.

 

“The ethanol industry is now faced with what is called a ‘blending wall,'” said Wally Tyner, an energy policy specialist. “The ethanol industry will not and cannot grow with the blending wall in place. That means we won’t have cellulosic ethanol and the demand for corn for ethanol will be limited unless the blending wall is somehow changed or we find a way around it.”

Unless the barrier is removed, ethanol production could level off by 2010, Tyner said.

 

The blending wall refers to the amount of ethanol gasoline companies are permitted to blend with petroleum-based fuel. Federal standards set the amount at 10 percent of gasoline consumption.

 

“As a nation we consume about 140 billion gallons of gasoline a year,” Tyner said. “So if we blended ethanol with every single drop of gasoline we consume, the maximum amount of ethanol blended would be 14 billion gallons a year. But for a number of reasons we can’t blend ethanol with every drop of gasoline. Our effective blending wall is actually about 12 billion gallons, or 9 percent.

 

“We’re not at 12 billion gallons yet, but we’ll be there in 2009 or 2010. When we hit that blending wall, the Environmental Protection Agency cannot require gasoline companies to blend more ethanol than they are legally permitted to blend.”

 

Several factors prevent the ethanol industry from breaking through the blending wall, Tyner said. For starters, there are too few cars and trucks on the nation’s roads capable of running on any gasoline with an ethanol blend higher than 10 percent, or what is commonly called E10, Tyner said. A huge gap exists between the E10 fleet and flex-fuel vehicles that run on E85 – an 85/15 ethanol to gasoline blend, he said.

 

“Only about 7 million of our nation’s 300-plus million cars are E85 flex-fuel vehicles,” Tyner said. “Also, we have just 1,700 fuel pumps in the entire country that can dispense E85, and most of those are in the Midwest. All of the E85 that’s marketed nationwide could be produced by one ethanol plant.”

 

Some in the ethanol industry have proposed that E10 be replaced by an E15 or E20 blend, thereby increasing ethanol use. However, automobile manufacturers do not believe today’s E10 vehicles can run on a higher ethanol blend, Tyner said.

 

“Because the automobile fleet in the United States turns over about every 14 years, it would take some time before E15 or E20 cars would be as common as E10 are now,” he said.

 

Ethanol production growth also is held back by environmental and infrastructure factors, Tyner said.

 

“In the South during the warm summer months, the vapor pressure of ethanol blends is higher than conventional gasoline,” he said. “That causes more evaporative emissions and means the blended fuel does not meet Environmental Protection Agency evaporative emission standards.

 

“On the infrastructure side, ethanol cannot be shipped by pipeline because it is so corrosive and would absorb any water in the pipeline. It must move by truck, rail or barge instead. That presents logistical problems.”

 

For ethanol production to push past 12 billion gallons per year the blending wall would have to be eliminated and oil prices would need to increase, Tyner said.

 

The blending wall affects corn prices, as well, by cutting the link between the corn price and the cost of crude oil, Tyner said. In the ethanol era, corn prices have followed oil prices up and down.

 

“In the economic models we’ve developed, corn prices never exceed $6 per bushel with the blending wall in place, even with oil prices at $160 per barrel, because you simply can’t blend any more ethanol,” he said.

 

“So the blending wall is perhaps the biggest issue the ethanol industry will face in 2009-10. Without a resolution of this issue, ethanol industry growth is about finished.”

 

Writer: Steve Leer, (765) 494-8415, sleer@purdue.edu

Source: Wally Tyner, (765) 494-0199, wtyner@purdue.edu

Ag Communications: (765) 494-2722;
Beth Forbes, forbes@purdue.edu
Agriculture News Page

 

 

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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    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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