EPA ruling boosts ethanol after fierce lobbying effort for corn-based fuels
By Ben Geman
February 3, 2010
The Environmental Protection Agency (EPA) handed a victory to ethanol producers Wednesday by issuing final regulations that conclude corn-based fuels will meet greenhouse gas standards imposed under a 2007 energy law.
The release of the final regulations follows a fierce campaign by ethanol companies that alleged 2009 draft rules unfairly found that large volumes of ethanol production would not meet targets in the statute for reducing greenhouse gases.
The new rules state that corn-based ethanol will meet a requirement of the 2007 law that they must emit at least 20 percent less in “lifecycle” greenhouse gas emissions than gasoline.
The statute expanded the national biofuels use mandate to reach 36 billion gallons annually by 2022. If the EPA had ruled that corn-based fuels did not meet their emissions target, the fuels could have been frozen out of the market.
The issue has been vital to the ethanol lobby, which feared that an adverse finding could stymie investment and tarnish the fuel’s image.
However, the nation’s current ethanol production — about 12 billion gallons annually — was exempted from the law’s emissions mandate.
EPA Administrator Lisa Jackson on Monday denied the agency had bent to pressure, instead arguing that EPA employed better modeling when crafting the final regulations.
“We have followed the science,” she told reporters on a conference call. “Our models have become more sophisticated. We have accrued better data.”
The new rules, which implement the expanded fuels mandate, are not a complete victory for ethanol lobbyists, who along with several farm-state lawmakers object to the way EPA measures the carbon footprint of biofuels.
Specifically, they’re upset that EPA didn’t give up on weighing “international indirect land use changes” as part of emissions calculations. The phrase refers to emissions from clearing grasslands and forests in other countries for croplands, in order to compensate for increasing use of U.S. corn and soybeans for making fuels.
“We will always be concerned about indirect land use,” said Gen. Wesley Clark, a former presidential candidate who now leads the ethanol industry trade group Growth Energy.
“Why should American farmers be penalized for the problems in the Brazilian rainforest? That’s the Brazilian government’s issue and maybe the United Nations’,” he said in an interview before EPA’s rules were released. “It is so farfetched. I know it comes out of an academic model, but it is just an academic model, and the model is not even based on current facts.”
The industry alleges the science behind the land-use emissions measurements is immature and inaccurate, while environmentalists say such calculations are vital to ensuring federal support for ethanol doesn’t actually worsen climate change.
Nathanael Greene of the Natural Resources Defense Council also praised the measure because EPA did not back away from considering the land-use emissions, even though it came up with numbers friendlier to the industry with the final rule.
“We finally have a tool that we can use to hold the industry accountable, to reward the people that are doing a better job and keep the folks that are doing a really bad job out,” said Greene, the group’s director of renewable energy policy.
EPA said several factors went into the revised emissions calculations. For instance, the agency said that better satellite data allowed more precise assessments of the types of land converted internationally.
The battle over the land use emissions is hardly over. Two senior House Democrats — Agriculture Committee Chairman Collin Peterson (Minn.) and Armed Services Committee Chairman Ike Skelton (Mo.) — introduced a bill this week that would block EPA from considering the land-use changes.Read Full Post | Make a Comment ( None so far )
February 1, 2010
Integrated petroleum company Royal Dutch Shell plc. (RDS-A: News ,RDS-B: News ,RDSA.L: News ,RDSB.L: News ) announced Monday that its unit, Shell International Petroleum Co. Ltd., has signed a non-binding memorandum of understanding or MoU with Brazilian sugar and ethanol company Cosan S.A. (CZZ: News ) in order to form an about US$12 billion joint venture in Brazil. The proposed joint venture will create one of the world’s largest ethanol producers, which will produce ethanol, sugar and power, as well as supply, distribute and retail transportation fuels.
The proposed biofuel joint venture would see both the companies consolidating certain of their existing assets in Brazil, which could dominate Brazil’s ethanol market. Brazil is a leader in biofuel production and consumption because of its abundant land and sugarcane production. The deal would enhance both companies’ growth prospects and market position in the retail and commercial fuels businesses in Brazil.
Both the companies will now engage in exclusive negotiations towards evolving a binding joint venture agreement. The transaction is subject to the creation of a final transactional documentation, due diligence, regulatory approvals and respective corporate approvals.
In a statement, Royal Dutch Shell’s downstream director, Mark Williams said, “Today’s announcement demonstrates the continued importance of Brazil to Shell. We’re looking forward to joining with a leading company in Brazil to meet the needs of retail and commercial fuels customers in that growing market.”
As part of the proposed 50:50 joint venture, Shell will contribute its 2,740 petrol stations and other fuel-distribution assets in Brazil as well as US$1.625 billion in cash, payable over two years, while Sao Paulo, Brazil-based Cosan will contribute 1,730 retail sites as well as supply and distribution assets.
Additionally, Cosan will contribute its sugar cane crushing capacity of about 60 million tonnes per year from 23 mills, as well as its ethanol production capacity of about 2 billion liters per year. Cosan will also bring in US$2.5 billion of net debt into the joint venture balance sheet. Further, Shell would contribute its 50% stake in Codexis and 14.7% stake in Iogen, two ventures exploring next-generation biofuels technologies.
With annual production capacity of about 2 billion liters, the joint venture would enhance both companies’ growth prospects and market position in the retail and commercial fuels businesses in Brazil. The joint venture would have a network of about 4,500 retail sites and a total annual throughput of about 17 billion liters, with further prospects of growth and synergies.
“Cosan’s vision is to become a global leader in clean and renewable energy. Our size, degree of sophistication and stage of development means we need a partner that not only shares our vision, but also has access to international markets to help us deliver our growth potential,” Cosan’s chairman, Rubens Ometto Silveira Mello added.
RDS-B closed Monday’s regular trading session at $54.53, up $1.15 or 2.15% on a volume of 0.67 million shares, higher than the three-month average volume of 0.63 million shares. CZZ closed at $8.60, up $0.80 or 10.26% on a volume of 2.11 million shares, higher than the three-month average volume of 1.80 million shares.Read Full Post | Make a Comment ( None so far )
(1) Renergie drafted the legislation (“HB 1270”) for the creation of an advanced biofuel industry development initiative in Louisiana. On June 21, 2008, Louisiana Governor Bobby Jindal signed into law the Advanced Biofuel Industry Development Initiative (“Act 382”). Act 382, the most comprehensive and far-reaching state legislation in the U.S. enacted to develop a statewide advanced biofuel industry, is based upon the “Field-to-Pump” strategy. Louisiana is the first state to enact alternative transportation fuel legislation that moves fuel ethanol beyond being just a blending component in gasoline by including a mandatory variable blending pump pilot program and hydrous ethanol pilot program;
(2) On December 20, 2008, Renergie submitted a testing exemption application to the U.S. Environmental Protection Agency (“EPA”) for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. On-site blending pumps, in lieu of splash blending, are used for this test. On February 4, 2009, the U.S. EPA granted Renergie a tampering waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles in Louisiana. On February 24, 2009, the U.S. EPA granted Renergie a first-of-its-kind RVP waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana; and
(3) On October 18, 2007, Renergie submitted a grant application to the Florida Department of Environmental Protection (“DEP”), pursuant to the Renewable Energy Technologies Grant Program, for the purpose of funding the comprehensive development of a sweet sorghum-to-ethanol industry in Florida. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida DEP’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 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, the Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000.
As a means of introduction for first-time visitors, the following is a list of the currently most popular articles and links on the Renergie weblog.
BP’s Strategy to Limit Liability in Regard to Its Gulf Oil Gusher
BP is Not the Only Responsible Party
BP Oil Spill of April, 2010: Why Class Action Lawsuits May Not be in the Best Interests of Potential Plaintiffs
Regional Greenhouse Gas Cap-and-Trade Programs May be the Solution
The U.N. Approval Process for Carbon Offsets
The Role of Offsets in Climate Change Legislation
Why Carbon Emissions Should Not Have Been the Focus of the U.N. Climate Change Summit and Why the 15th Conference of the Parties Should Have Focused on Technology Transfer
Our Nation’s Need to Transition to Hydrous Ethanol as the Primary Renewable Transportation Fuel
The Renergie “Field-to-Pump” Strategy
Florida’s “Port-to-Pump” Advanced Biofuel Initiative
Independent Ethanol Producers in Florida Have the Legal Right to Receive Blender’s Tax Credit
Why the Ethanol Import Tariff Should be Repealed
Independent U.S. Ethanol Producers Will Not Survive as Price Takers
Louisiana Enacts the Most Comprehensive Advanced Biofuel Legislation in the Nation
Why Big Oil Should Not be Allowed to Monopolize the Blender’s Tax Credit
U.S. Biofuel Boom Running on Empty
The Wall Street Journal
August 27, 2009
The biofuels revolution that promised to reduce America’s dependence on foreign oil is fizzling out.
Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.
The global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of two of the three main biofuel sectors — biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, is also in financial trouble, although longstanding government support will likely protect it.
Earlier this year, GreenHunter Energy Inc., operator of the nation’s largest biodiesel refinery, stopped production and in June said it may have to sell its Houston plant, only a year after politicians presided over its opening. Dozens of other new biodiesel plants, which make a diesel substitute from vegetable oils and animal fats, have stopped operating because biodiesel production is no longer economical.
Producers of next-generation biofuels — those using nonfood renewable materials such as grasses, cornstalks and sugarcane stalks — are finding it tough to attract investment and ramp up production to an industrial scale. The sector suffered a major setback this summer after a federal jury ruled that Cello Energy of Alabama, a plant-fiber-based biofuel producer, had defrauded investors. Backed by venture capitalist Vinod Khosla, Cello was expected to supply 70% of the 100.7 million gallons of cellulosic biofuels that the Environmental Protection Agency planned to blend into the U.S. fuel supply next year. The alleged fraud will almost certainly prevent the EPA from meeting its targets next year, energy analysts say.
The wave of biodiesel failures and Cello’s inability to produce even a fraction of what it expected have spooked private investors, which could further delay technology breakthroughs and derail the government’s green energy objectives.
“If your investors are losing money in first-generation biofuels, I guarantee you they’ll be more reluctant to put money into more biofuels, including next-generation fuels,” says Tom Murray, global head of energy for German bank WestLB, one of the leading lenders to ethanol and biodiesel makers.
Domestically produced biofuels were supposed to be an answer to reducing America’s reliance on foreign oil. In 2007, Congress set targets for the U.S. to blend 36 billion gallons of biofuels a year into the U.S. fuel supply in 2022, from 11.1 billion gallons in 2009. That would increase biofuels’ share of the liquid-fuel mix to roughly 16% from 5%, based on U.S. Energy Information Administration fuel-demand projections.
Corn ethanol, which has been supported by government blending mandates and other subsidies for years, has come under fire for driving up the price of corn and other basic foodstuffs. While it will continue to be produced, corn ethanol’s dominant role in filling the biofuels’ blending mandate was set to shrink through 2022. Cellulosic ethanol, derived from the inedible portions of plants, and other advanced fuels were expected to surpass corn ethanol to fill close to half of all biofuel mandates in that time.
But the industry is already falling behind the targets. The EPA, which implements the congressional blending mandates, still hasn’t issued any regulations to allow biodiesel blending, though they were supposed to start in January. The mandate to blend next-generation fuels, which kicks in next year, is unlikely to be met because of a lack of enough viable production.
“I don’t believe there’s a man, woman or child who believes the industry can hit” the EPA’s 2010 biofuel blending targets, says Bill Wicker, spokesman for Sen. Jeff Bingaman of New Mexico, chairman of the Senate Energy Committee.
The business models for most biofuel companies were predicated on a much higher price of crude oil, making biofuels more attractive. A government-guaranteed market was also central to business plans.
But once blending mandates were postponed, oil prices plunged and the recession crushed fuel demand, many biodiesel companies started operating in the red. Even ethanol producers, which have enjoyed government subsidies and growing federal requirements to blend it into gasoline, have been operating at a loss over the past year. Numerous established producers have filed for Chapter 11 bankruptcy-court protection.
Critics of the biofuels boom say government support helped create the mess in the first place. In 2007, biofuels including ethanol received $3.25 billion in subsidies and support — more than nuclear, solar or any other energy source, according to the Energy Information Administration. With new stimulus funding, this figure is expected to jump. New Energy Finance Ltd., an alternative-energy research firm, estimates that blending mandates alone would provide over $33 billion in tax credits to the biofuels industry from 2009 through 2013.
Not all biofuels may be worth the investment because they divert land from food crops, are expensive to produce and may be eclipsed by the electric car. One fact cited against biofuels: If the entire U.S. supply of vegetable oils and animal fats were diverted to make biodiesel, production still would amount to at most 7% of U.S. diesel demand.
Producers and investors now are pushing for swift and aggressive government help. Biodiesel makers are lobbying to kick-start the delayed blending mandates immediately and extend biodiesel tax credits, which expire in December.
On Aug. 7 more than two dozen U.S. senators wrote to President Barack Obama to warn that “numerous bankruptcies loom” in the biodiesel sector. “If this situation is not addressed immediately, the domestic biodiesel industry expects to lose 29,000 jobs in 2009 alone,” the senators wrote, using estimates by the National Biodiesel Board.
Mr. Obama, who supported biofuels throughout his campaign, is working to roll out grants and loan guarantees for bio-refineries and green fuel projects, said Heather Zichal, a White House energy adviser. The pace of the disbursements should speed up this fall, administration officials say.
Obama officials defended the delay in biodiesel mandates. The EPA in May proposed rules that penalize soy-based diesel under the blending mandates, because deforestation from soybean cultivation is thought to offset the fuel’s environmental benefits. Obama officials say the EPA must perform a thorough environmental review before it can issue rules. The amount of biodiesel that was to have been blended in 2009 will be added to the amount required for 2010, so that no volume is lost, they add.
Any state help might be too late for GreenHunter Energy. In 2007, the company, led by energy exploration executive Gary Evans, acquired a Houston refinery that processed used motor oil and chemicals and retrofit it to make 105 million gallons of biodiesel a year from all manner of feedstocks, from soybean oil and beef tallow to, potentially, inedible plant matter. GreenHunter’s business model hinged on selling to a government-guaranteed buyer: GreenHunter has the capacity to make 20% of the 500 million gallons of biodiesel that Congress wanted to be blended into the 2009 fuel supply.
Until the mandate kicked in, GreenHunter and other biodiesel makers counted on exporting their output to Europe, a much bigger user of diesel.
GreenHunter opened in June 2008 as oil prices skyrocketed. By then, soybean oil prices were soaring, too, pinching refiners that had banked on using soy. Mr. Evans switched to inedible animal fats.
For about a month, when oil hovered above $120 a barrel and traditional diesel ran over $4 a gallon, GreenHunter says profit margins on turning animal fat into diesel rose as high as $1.25 a gallon. It wasn’t sustainable. The price of animal fat soared too, cutting margins again.
As the EPA continued to delay the blending mandates, the global downturn obliterated demand for regular diesel. Prices cratered. GreenHunter’s plant took a direct hit from Hurricane Ike in September. By the time the plant reopened in late November, the price of diesel had dropped by more than half, and GreenHunter was losing money on every gallon of fuel.
The European Union dealt the final blow this spring when it slapped a tariff on U.S. biodiesel, killing what had been the industry’s main sales outlet.
GreenHunter has since stopped producing biodiesel. The American Stock Exchange informed GreenHunter in May that the company was out of compliance with some listing requirements; the firm has submitted a plan to remain listed. Its stock has sunk to about $2 a share from a high of $24.75 in May 2008.
Bio-refinery carcasses are everywhere. GreenHunter’s lender, West LB, arranged $2 billion in ethanol and biodiesel loans, selling them to various investors beginning around 2006. Today, half of the $2 billion in loans have defaulted or are being restructured, according to people familiar with the portfolio. Publicly traded Nova Biosource Fuels Inc. filed for Chapter 11 bankruptcy reorganization in March.
Imperium Renewables, a biodiesel maker in Washington, is trying to hang on as a storage depot, its founder says. Evolution Fuels, an outfit that used to sell a biodiesel brand licensed by country singer Willie Nelson, has stopped production and said in a securities filing it may not be able to continue as a going concern. The company didn’t return calls for comment.
Some senators have introduced a bill to extend biodiesel tax credits. A provision passed in the House grandfathers soy-based biodiesel into the blending mandates for five years.
Second-generation biofuels have had their own setbacks.
When seeking investors for Cello Energy in 2007, Jack Boykin, an entrepreneur with a background in biochemistry, said Cello had made diesel economically in a four-million-gallon-a-year pilot plant from grass, hay and used tires. What’s more, he told investors he had successfully used the fuel in trucks, according to testimony in a federal court case in Mobile, Ala. He said he had invested $25 million of his own money. An Auburn University agronomy professor advising the Bush administration on green energy endorsed his technology.
Alabama paper-and-pulp executive George Landegger and Mr. Khosla, the venture capitalist, separately invested millions in seed money into Cello and had plans to invest or lend more.
A lawsuit disputing the ownership stakes of investors produced Mr. Boykin’s revelation, in a 2008 deposition, that he had never used inedible plant material such as wood chips or grass in his pilot plant, despite claims otherwise. Construction of his full-scale facility in rural Alabama moved forward anyway.
This year, Khosla representatives took samples of diesel produced at the new Cello plant and sent them off for testing. The results showed no evidence of plant-based fuel: Carbon in the diesel was at least 50,000 years old, marking it as traditional fossil fuel.
The EPA wasn’t told about the test, and continued to rely on Mr. Boykin’s original claims when it asserted in the Federal Register in May that Cello could produce 70% of the cellulosic fuel targets set by Congress that are due to take effect next year.
The jury returned a $10.4 million civil fraud and breach-of-contract verdict against the Alabama entrepreneur in favor of Mr. Landegger, one of the investors. Work on the plant has been suspended. Several weeks after the verdict was delivered, Mr. Boykin presented evidence that he had tested fuel from the plant and it did contain cellulosic material. He is seeking a new trial.
Mr. Boykin declined to comment, but his lawyer, Forest Latta, said his client denies committing fraud. The carbon testing, he said, reflected only an early stage quality-control test during startup trials. It would be premature to conclude, Mr. Latta said in an email, that Cello’s fuel-making process is a failure. “This is a first-of-its-kind plant in which there remain some mechanical issues still being ironed out,” he wrote.
Margo Oge, director of the EPA’s office on transportation and air quality, says the agency is “looking into the whole case of Cello.” Mr. Khosla declined to discuss Cello, but said he doubts the 2010 cellulosic fuel mandates can be met. “All projects, even traditional well-established technologies, are being delayed because of the financial crisis,” he said in an interview.Read Full Post | Make a Comment ( None so far )
By Ryan C. Christiansen
Ethanol Producer Magazine
From the August 2009 Issue
The renewable fuel standard calls for 100 MMgy of cellulosic biofuel to be blended into the nation’s fuel in 2010, ramping up to 16 billion gallons per year in 2022. Will the U.S. produce enough to satisfy the mandate?
By 2022, the U.S. EPA expects the domestic biofuels industry to produce more than 32 billion gallons per year of renewable fuel. However, less than half of that fuel is expected to be corn-based ethanol. The majority, 16 billion gallons, will be cellulosic biofuel. The Energy Independence and Security Act of 2007 defines cellulosic biofuel as renewable fuel produced from any cellulose, hemicelluloses, or lignin that is derived from renewable biomass and has life-cycle greenhouse gas (GHG) emissions that are at least 60 percent less than the baseline life-cycle GHG emissions. The EPA predicts that, in the long run, those 16 billion gallons of cellulosic biofuel will be cellulosic ethanol. However, EISA’s definition for cellulosic biofuel leaves open the possibility that the mandate can be met by other fuels.
The goal of ultimately producing billions of gallons of cellulosic biofuel has a hefty price tag. Between 2002 and 2008, the U.S. DOE’s Energy Efficiency and Renewable Energy Biomass Program, established to develop and demonstrate biomass feedstock and conversion technologies for integrated biorefineries and to ensure cellulosic ethanol can be produced cost-effectively by 2012, was allocated more than $800 million in federal funding. Since 2007, the DOE has announced more than $1 billion in multi-year investments in cellulosic biorefineries and since 2006 the USDA has invested almost $600 million to develop biofuel technology.
The bulk of the DOE’s investments began in February 2007 when it announced plans to invest $385 million in six biorefinery projects over four years for a total cellulosic ethanol production capacity of 131 MMgy. Combined with the industry cost share, the projects equated to more than $1.2 billion in investments. Projects identified for funding included an 11 MMgy Abengoa Bioenergy SA plant in Kansas, a 14 MMgy Alico Inc. plant in Florida, a 19 MMgy BlueFire Ethanol Fuels Inc. facility in California, a 30 MMgy Poet LLC plant in Iowa, an 18 MMgy Iogen Corp. plant in Idaho, and a 40 MMgy Range Fuels Inc. plant in Georgia.
In May 2007, the DOE announced it would provide up to $200 million over five years to support the development of small-scale cellulosic biorefineries. The first $114 million was allotted in January 2008 for four projects. The companies identified for funding included ICM Inc., Lignol Energy Corp., Pacific Ethanol Inc., and Stora Enso Oyj. The remaining $86 million was allotted to RSE Pulp & Chemical LLC, Mascoma Corp. and Ecofin LLC in April 2008. In July 2008, the DOE announced an additional $40 million investment for two more companies – Flambeau River Biofuels LLC for its project in Wisconsin and Verenium Corp. for its demonstration-scale facility in Louisiana. Seven of the nine plants were funded for cellulosic ethanol and two for cellulosic diesel.
On the research side, both the DOE and the USDA also provided funding to companies and universities. In March 2007, the DOE invested $23 million in five projects to develop highly efficient fermentative organisms to convert biomass material to ethanol; the companies and organizations identified for funding included Cargill Inc., Verenium, E. I. du Pont de Nemours and Co., Mascoma, and Purdue University. In June 2007, the DOE and USDA together awarded $8.3 million to 10 universities for biomass genomic research. During that month, the DOE also announced a $375 million investment in three new bioenergy research centers, including the DOE BioEnergy Science Center, the DOE Great Lakes Bioenergy Research Center, and the DOE Joint BioEnergy Institute.
To close out the year, the DOE awarded $7.7 million in December 2007 to four projects to demonstrate the thermochemical conversion process of biomass-to-biofuels. Then, in February 2008, the DOE invested $33.8 million in four projects to develop improved enzyme systems to convert cellulosic material into sugars suitable for the production of biofuels. The companies identified for funding included DSM Innovation Center Inc. (a partner with Abengoa), Genencor, a division of Danisco A/S, Novozymes A/S, and Verenium.
In March 2008, the DOE and USDA awarded $18 million to 18 universities and research institutes to develop biomass-based products, including biofuels.
To meet renewable fuel standard targets, the U.S. EPA says cellulosic ethanol plant startups must begin in earnest with a few small plants during 2010-’11 and must continue at an increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years.
SOURCE: U.S. EPA
Finally, in May 2009, the DOE announced that it would provide $786.5 million from the American Recovery and Reinvestment Act to accelerate advanced biofuels research and development and to provide additional funding for commercial-scale biorefinery demonstration projects. Of the total, $480 million will be distributed among 10 to 20 projects for pilot- or demonstration-scale integrated biorefineries that produce advanced biofuels, bioproducts, and heat and power in an integrated system, which must be operational within three years. In addition, $176.5 million will be used to increase the federal funding ceiling on two or more demonstration- or commercial-scale biorefinery projects that were selected and awarded funds within the past two years. Also, $110 million will be used to support new research. Finally, $20 million has been set aside for optimizing flexible fuel vehicle technology, evaluating the impact of higher ethanol blends on conventional vehicles, and upgrading refueling stations to be compatible with ethanol blends up to E85.
To meet renewable fuel standard targets, the EPA says cellulosic ethanol plant start-ups must begin in earnest with a few small plants during 2010-’11, increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years, beginning with 40 MMgy plants from 2010-’13, increasing to 80 MMgy during 2014-’17 and 100 MMgy and upwards during 2018 and beyond. The EPA projects that approximately two billion gallons per year of new plant construction will need to come online between 2018 and 2022. In total, approximately 180 plants will need to be completed by 2022.
However, with only a few months to go before petroleum blenders must begin to use cellulosic biofuels, there are no commercial-scale plants ready to deliver the fuel. Since the DOE’s initial February 2007 funding announcement, very little money has actually been distributed to selected projects. Two of the first six companies to be awarded DOE money – Alico and Iogen – have dropped their applications. Lignol announced in February that it was discontinuing its project as a result of instable energy prices, capital market uncertainty and general market malaise. Meanwhile, subsidiaries of Pacific Ethanol filed for bankruptcy in May.
Abengoa and Poet say they are on track to begin production, but not until 2011. Only Range Fuels, which received an additional $80 million loan guarantee from the USDA in January (the first-ever USDA loan guarantee for a commercial-scale cellulosic ethanol plant), expects to begin producing at near-commercial scale during 2010, with plans to complete the first phase of its planned 40 MMgy facility in Soperton, Ga., early next year.
According to Range Fuels CEO David Aldous, the plant is expected to be mechanically complete during the first quarter of 2010 and commissioning will begin soon thereafter. The plant will produce ethanol from wood chips, he says, and will be scaled up gradually from an initial 20 MMgy capacity. The EPA is predicting that Range Fuels will supply 10 million gallons of cellulosic ethanol toward the cellulosic biofuels mandate in 2010.
Aldous says Range Fuels’ technology is unique. “It is proprietary technology,” he says. “There are a lot of companies that are doing thermal front-end processes, whether they are pyrolysis or gasification, and there are a lot of other companies using different kinds of back-ends, converting the syngas into ethanol, (but) we use a proprietary catalyst on the back end and we use a proprietary technology on the front end.” Prior to leading Range Fuels, Aldous was executive vice president for strategy and portfolio at Royal Dutch Shell plc and also served as president of Shell Canada Products. He is also the former CEO for the Shell Group’s catalyst company, CRI/Criterion Inc.
Meeting the Mandate
To help meet the 100 MMgy cellulosic biofuels target for 2010, the EPA says there will be 24 pilot- or demonstration- scale plants and seven commercial- scale plants producing cellulosic ethanol or cellulosic diesel in 2010. However, ethanol will satisfy only 28 percent of the total cellulosic biofuels mandate. The EPA says the only companies that will produce more than one million gallons of cellulosic ethanol during 2010 are Verenium, Western Biomass Energy LLC, Fulcrum Bioenergy Inc., RSE, Southeast Renewable Fuels LLC, and Range Fuels.
The majority of the cellulosic biofuels volume (72 percent), the EPA says, is projected to come from cellulosic diesel. A small portion (3 million gallons) will be produced by Flambeau River Biofuels at its 6 MMgy plant in Park Falls, Wis., while the majority of all cellulosic biofuels that will be produced, the EPA says, will be cellulosic diesel from Cello Energy (pronounced “sell-oh”), which has a 20 MMgy plant in Bay Minette, Ala. The EPA says to expect 20 million gallons from the Bay Minette plant, as well as 16.67 million gallons from each of three future 50 MMgy plants, which are expected to be swiftly built—two in Alabama and one in Georgia—at locations to be determined.
Feedstock for Cello Energy’s operation can include plant biomass, waste wood, and other organic materials, as well as plastics and used tires. The company uses a catalytic depolymerization technology, the EPA says, to convert the feedstock into short-chain hydrocarbons that are polymerized to produce diesel fuel that meets ASTM standards at a cost between 50 cents and $1 per gallon. The process is reported to be 82 percent efficient and the only energy input is electricity. Allen Boykin, president of Cello Energy, told EPM that the catalyst used by the company is a proprietary catalyst that takes approximately 22 to 25 minutes to convert garbage into fuel oil using a continuous process.
Boykin says Cello Energy’s technology has been in the making for 12 to 15 years. His father, Dr. Jack Boykin, a chemical engineer who served as a Lieutenant in the U.S. Navy from 1961 to 1965, is CEO of Cello Energy and has been conducting the research. Allen says he became involved in 2002 to help bring the system to commercial-scale. Allen says bench-and pilot-scale testing was previously conducted in Prichard, Ala.
Imports to Meet Targets
The EPA admits that because cellulosic ethanol production technology is still developing, production plants will be considerably more complex and expensive to build than corn starch-based ethanol plants, thus requiring much more capital funding as well as design and construction resources. “Although technologies needed to convert cellulosic feedstocks into ethanol (and diesel) are becoming more and more understood, there are still a number of efficiency improvements that need to occur before cellulosic biofuel production can compete in today’s marketplace,” the EPA renewable fuel standard report says. “Additionally, because cellulosic biofuel production has not yet been proven on a commercial level, financing of these projects has primarily been through venture capital and similar funding mechanisms, as opposed to conventional bank loans.”
Alternatively, the EPA suggests that usage targets might be met using cellulosic biofuel that is produced internationally, for example, from feedstocks such as bagasse or straw.
Indeed, as much as 21 billion gallons per year of cellulosic biofuel might be produced outside the U.S. by 2017, the EPA says, the majority from bagasse, but also from forest products, and mostly from Brazil.
A recent report from Novozymes describes how Brazil might produce more than two billion gallons of cellulosic biofuel from bagasse by 2020, which would represent an additional $4 billion in export revenue for that country. Like in the U.S., the development of cellulosic biofuels in Brazil will depend on the industry’s ability to attract the needed investments and political support, Novozymes says.
Despite a slow start for cellulosic biofuels in the U.S., some in the industry are bullish about the future. “Advanced biofuel companies are ready to deploy their technology and begin meeting the requirements of the [RFS],” says Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial and Environmental Section. “Now that the rules of the program are finally moving forward and the Obama administration has demonstrated a firm commitment to the industry, companies are prepared to build the next generation of biorefineries.”
Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at firstname.lastname@example.org or (701) 373-8042.Read Full Post | Make a Comment ( None so far )
Chicago Board of Trade Dictates Price of Corn and Oil Companies Control Price of Ethanol
By Brian J. Donovan
July 28, 2009
The issue is whether the proper development of an advanced biofuel industry in the United States is feasible when: (a) independent ethanol producers in the U.S. are at the mercy of volatile commodities markets for feedstock; and (b) the price of ethanol is controlled by the oil companies.
Commodity Market Volatility
The corn-to-ethanol business is highly dependent on corn prices. The price paid for corn is determined by taking the Chicago Board of Trade futures price minus the basis, which is the difference between the local cash price and the futures price. The more corn-to-ethanol contributes to our nation’s energy supplies, the more it drives up corn feedstock prices and consequently its own cost. While increased ethanol production is partially responsible for the increase in corn prices, the main driving factors in the run-up in corn prices are: rising demand for processed foods and meat in emerging markets such as China and India, droughts and adverse weather around the world, a decrease in the responsiveness of consumers to price increases, export restrictions by many exporting countries to reduce domestic food price inflation, the declining value of the dollar, skyrocketing oil prices, and commodity market speculation. It is important to note that excessive speculation is not necessarily driving corn prices above fundamental values. Speculation can only be considered “excessive” relative to the level of hedging activity in the market.
The government’s announcement that it would resurvey corn acreage in several U.S. states launched a rally in Chicago Board of Trade corn on July 23, 2009, giving life to a market that appeared to be sinking toward $3 a bushel. September corn ended up 19 cents to $3.27 a bushel and December corn ended up 19 1/2 cents to $3.38 3/4 a bushel. Traders see the market moving toward the $3.50-$3.75 a bushel range in the December contract. Ethanol futures were also higher. August ethanol ended up $0.065 to $1.597 a gallon and September ethanol ended up $0.064 to $1.555.
Dr. David J. Peters, Assistant Professor of Sociology – College of Agriculture and Life Sciences at Iowa State University, has developed a calculator to determine the long-term economic viability of proposed ethanol plants. Dr. Peters was surprised to learn how sensitive the bottom line is to small changes in corn and ethanol prices. According to Dr. Peters, a typical 100 MGY corn ethanol plant built in 2005 (financing 60 percent of its capital costs at 8 percent interest per annum for 10 years, with debt and depreciation costs of $0.20 per gallon of ethanol produced, and labor and taxes at a cost of $0.06 per gallon) will lose money in the current market:
At $3.25 corn, the ethanol break even price is $1.76 per gallon.
At $3.50 corn, the ethanol break even price is $1.82 per gallon.
At $3.75 corn, the ethanol break even price is $1.88 per gallon.
At $4.00 corn, the ethanol break even price is $1.94 per gallon.
Oil Company Monopoly
U.S. oil companies are using ethanol merely as a blending component in gasoline (in the form of E10) rather than a true alternative transportation fuel (in the form of E85). The major obstacle to widespread ethanol usage continues to be the lack of fueling infrastructure. Only 2,175 of the 161,768 retail gasoline stations in the United States (1.3%) offer E85. These E85 fueling stations are located primarily in the Midwest. According to the U.S. Department of Energy, each 2% increment of U.S. market share growth for E85 represents approximately 3 billion gallons per year of additional ethanol demand.
While alleging an oversupply of corn ethanol, U.S. oil companies, due to a loophole in the Caribbean Basin Initiative, are currently allowed to import thousands of barrels of advanced biofuel (“non-corn ethanol”) every month without having to pay the 54-cent-per-gallon tariff.
Oil companies, or affiliates of oil companies, currently have a monopoly on blending fuel ethanol with unblended gasoline. Many states, e.g., Florida, allow only oil companies and their affiliates to blend and receive the 45 cents-per-gallon blender’s tax credit. This monopoly impairs fair and healthy competition in the marketing of ethanol blends. Independent U.S. ethanol producers have the legal right, and must be assured the availability of unblended gasoline, to blend fuel ethanol and unblended gasoline to receive the blender’s tax credit and be cost-competitive.
In short, independent U.S. ethanol producers do not have bargaining power on either end of the supply chain. Corn ethanol producers are price takers. A comprehensive advanced biofuel industry development initiative is required to disrupt the status quo and establish fair and healthy competition in the marketing of advanced biofuel blends in our nation.
The Louisiana Solution
Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous advanced biofuel pilot program. On June 21, 2008, Louisiana Governor Bobby Jindal signed into law the Advanced Biofuel Industry Development Initiative (“Act 382”). Act 382, the most comprehensive and far-reaching state legislation in the U.S. enacted to develop a statewide advanced biofuel industry, is based upon the “Field-to-Pump” strategy.
It is the cost of the feedstock which ultimately determines the economic feasibility of an ethanol processing facility. “Field-to-Pump” does not allow an advanced biofuel producer to fall victim to rising feedstock costs. Non-corn feedstock is acquired under the terms of an agreement analogous to an oil & gas lease. It is not purchased as a commodity. A link exists between the cost of feedstock and ethanol market conditions. Farmers/landowners receive a lease payment for their acreage and a royalty payment based on a percentage of the gross revenue generated from the sale of advanced biofuel. “Field-to-Pump” marks the first time that farmers/landowners share risk-free in the profits realized from the sale of value-added products made from their crops.
Smaller is better. “Field-to-Pump” establishes the first commercially viable large-scale decentralized network of small advanced biofuel manufacturing facilities (“SABMFs”) in the United States capable of operating 210 days out of the year. Each SABMF has a production capacity of 5 MGY. As with most industrial processes, large ethanol plants typically enjoy better process efficiencies and economies of scale when compared to smaller plants. However, large ethanol plants face greater supply risk than smaller plants. Each SABMF utilizes feedstock from acreage adjacent to the facility. The distributed nature of a SABMF network reduces feedstock supply risk, does not burden local water supplies and provides broad-based economic development. The sweet sorghum bagasse is used for the production of steam. Vinasse, the left over liquid after alcohol is removed, contains nutrients such as nitrogen, potash, phosphate, sucrose, and yeast. The vinasse is applied to the sweet sorghum acreage as a fertilizer.
Act 382 focuses on growing ethanol demand beyond the 10% blend market. Each SABMF produces advanced biofuel, transports the advanced biofuel by tanker trucks to its storage tanks at its local gas stations and, via blending pumps, blends the advanced biofuel with unblended gasoline to offer its customers a choice of E10, E20, E30 and E85. Each SABMF captures the blender’s tax credit of 45-cents-per-gallon to guarantee sufficient royalty payments to its farmers/landowners and be cost-competitive. In the U.S., the primary method for blending ethanol into gasoline is splash blending. The ethanol is “splashed” into the gasoline either in a tanker truck or sometimes into a storage tank of a retail station. The inaccuracy and manipulation of splash blending may be eliminated by precisely blending the advanced biofuel and unblended gasoline at the point of consumption, i.e., the point where the consumer puts E10, E20, E30 or E85 into his or her vehicle. A variable blending pump ensures the consumer that E10 means the fuel entering the fuel tank of the consumer’s vehicle is 10 percent ethanol (rather than the current arbitrary range of 4 percent ethanol to at least 24% ethanol that the splash blending method provides) and 90% gasoline. Moreover, a recent study, co-sponsored by the U.S. Department of Energy and the American Coalition for Ethanol, found E20 and E30 ethanol blends outperform unleaded gasoline in fuel economy tests for certain motor vehicles.
Hydrous advanced biofuel, which eliminates the need for the costly hydrous-to-anhydrous dehydration processing step, results in an energy savings of 35% during processing, a 4% product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions. On February 24, 2009, the U.S. EPA granted a first-of-its-kind waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. Under the test program, variable blending pumps, not splash blending, will be used to precisely dispense hydrous ethanol blends of E10, E20, E30, and E85 to test vehicles for the purpose of testing for blend optimization with respect to fuel economy, engine emissions, and vehicle drivability. The Louisiana Department of Agriculture & Forestry Division of Weights and Measures will conduct the vehicle drivability phase of the test program. Fuel economy and engine emissions testing will be conducted by Louisiana State University in Baton Rouge, Louisiana. Sixty vehicles will be involved in the test program which will last for a period of 15 months.
Louisiana Act 382 ensures: (a) ethanol producers in the U.S. are no longer at the mercy of volatile commodities markets for feedstock; (b) farmers/landowners share risk-free in the profits realized from the sale of value-added products made from their crops (c) the price of ethanol is no longer controlled by the oil companies; (d) feedstock supply risk, the burden on local water supplies, and the amount of energy necessary to process advanced biofuel are minimized; and (e) rural development and job creation are maximized. Furthermore, due to the advantages of producing advanced biofuel from sweet sorghum juice, the use of sweet sorghum bagasse for the production of steam in the SABMF, and the energy savings of processing hydrous advanced biofuel, the Louisiana solution reduces field-to-wheel lifecycle GHG emissions by 100%.Read Full Post | Make a Comment ( 3 so far )
ACT No. 382
HOUSE BILL NO. 1270
BY REPRESENTATIVES PERRY, BOBBY BADON, BALDONE, BILLIOT, HENRY
BURNS, CHAMPAGNE, CHANEY, ELLINGTON, GISCLAIR, ELBERT
GUILLORY, HARDY, HAZEL, HOFFMANN, HOWARD, JOHNSON, LEBAS,
LITTLE, RICHARD, RICHMOND, GARY SMITH, JANE SMITH, AND ST.
GERMAIN AND SENATORS N. GAUTREAUX, LONG, RISER, THOMPSON,
FUELS: Creates the Advanced Biofuel Industry Development Initiative
To amend and reenact R.S. 39:364(A)(1) and to enact R.S. 39:364(A)(4) and Chapter 23-B of Title 3 of the Louisiana Revised Statutes of 1950, to be comprised of R.S. 3:3761 through 3763, relative to the development of a biofuel industry development initiative; to provide for pilot programs; to provide for state incentives; to provide for the purchase or lease of fleet vehicles; to provide for the purchase of biofuels; and to provide for related matters.
Be it enacted by the Legislature of Louisiana:
Section 1. Chapter 23-B of Title 3 of the Louisiana Revised Statutes of 1950, comprised of R.S. 3:3761 through 3763, is hereby enacted to read as follows:
CHAPTER 23-B. THE ADVANCED BIOFUEL INDUSTRY DEVELOPMENT
§3761. Legislative findings and definitions
A. The legislature hereby finds and declares that the development of an advanced biofuel industry in Louisiana is a matter of grave public necessity and is vital to the economy of Louisiana. The use of advanced biofuel will expand United States and Louisiana fuel supplies without increasing dependency on foreign oil. The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing: (1) increased value added to the feed stock crops which will benefit the producers and provide more revenue to the local community; (2) increased investments in plants and equipment which would stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed; (3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and (4) increased local and state revenues collected from plant operations would stimulate local and state tax revenues and provide funds for improvements to the community and to the region. Blending fuel-grade ethanol with gasoline at the gas station pump will offer the Louisiana consumer a fuel that is less expensive, cleaner, renewable, and more efficient than unleaded gasoline. Moreover, preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, and a reduction in greenhouse gas emissions. Therefore, an advanced biofuel industry development initiative in Louisiana is vital to ensuring the broad-based rural economic development of Louisiana and is a matter of public policy.
B. The legislature finds and declares that the proper development of an advanced biofuel industry in Louisiana requires the following comprehensive “field-to-pump” strategy:
(1) Feedstock other than corn:
(a) Derived solely from Louisiana harvested crops.
(b) Capable of an annual yield of at least six hundred gallons of ethanol per acre.
(c) Requiring no more than one-half of the water required to grow corn.
(d) Tolerant to high temperature and water logging.
(e) Resistant to drought and saline-alkaline soils.
(f) Capable of being grown in marginal soils, ranging from heavy clay to light sand.
(g) Requiring no more than one-third of the nitrogen required to grow corn thereby reducing the risk of contamination of the waters of the state.
(h) Requiring no more than one-half of the energy necessary to convert corn into ethanol.
(2) The distributed nature of a small advanced biofuel manufacturing facility network reduces feed stock supply risk, does not burden local water supplies, and provides for a more broad-based economic development. Each small advanced biofuel manufacturing facility shall operate in Louisiana.
(3) Advanced biofuel supply and demand shall be expanded beyond the ten percent blend market by blending fuel-grade anhydrous ethanol with gasoline at the gas station pump. Variable blending pumps, directly installed and operated at local gas stations by a qualified small advanced biofuel manufacturing facility, shall offer the consumer a less expensive substitute for unleaded gasoline in the form of E10, E20, E30, and E85.
C. As used in this Section, the following terms shall have the meanings hereinafter ascribed to them:
(1) “Advanced biofuel” means hydrous ethanol derived from sugar or starch (other than corn starch) or anhydrous ethanol derived from sugar or starch (other than corn starch).
(2) “Anhydrous ethanol” means an ethyl alcohol that has a purity of at least ninety-nine percent, exclusive of added denaturants, that meets all the requirements of the American Society of Testing and Materials (ASTM) D4806, the standard specification for ethanol used as motor fuel.
(3) “Hydrous ethanol” means an ethyl alcohol that is approximately ninety-six percent ethanol and four percent water.
(4) “Small advanced biofuel manufacturing facility” means an advanced biofuel manufacturing facility operating in Louisiana that produces no less than five million gallons of advanced biofuel per year and no more than fifteen million gallons of advanced biofuel 1 per year with feedstock other than corn derived solely from Louisiana harvested crops.
§3762. Pilot programs
A. The blending of fuels with advanced biofuel percentages between ten percent and eighty-five percent will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry (LDAF), office of agro-consumer services, division of weights and measures, will monitor the equipment used by a qualified small advanced biofuel manufacturing facility to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement. Since there are no ASTM standards for evaluating the quality of the product, the LDAF, office of agro-consumer services, division of weights and measures, will take fuel samples to ascertain that the correct blend ratios are being dispensed and follow the development of standards. Provided that no negative trends are observed during the trial period and fuel standards have been developed or work continues on developing them, the LDAF, office of agro-consumer services, division of weights and measures, will consider extending the evaluation period.
B. The use of hydrous ethanol blends of E10, E20, E30, and E85 in motor vehicles specifically selected by a qualified small advanced biofuel manufacturing facility for test purposes will be permitted on a trial basis until January 1, 2012. During this period the LDAF, office of agro-consumer services, division of weights and measures, will monitor the performance of the motor vehicles. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.
§3763. State incentives
A. The Louisiana commissioner of agriculture and forestry, conditioned upon the availability of funds, is authorized to award demonstration grants to persons who purchase advanced biofuel variable blending pumps which dispense E10, E20, E30, and E85. The demonstration grant shall be for the purpose of conducting research connected with the monitoring of the equipment used to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement. The grantee shall also develop guidelines for the installation and use of advanced biofuel variable blending pumps by complying with applicable National Type Evaluation Program (NTEP) and National Institute of Standards and Technology (NIST) requirements and ASTM standards.
B. The Louisiana commissioner of agriculture and forestry, conditioned upon the availability of funds, is authorized to award demonstration grants to persons who purchase vehicles which operate on advanced biofuels. A grant shall be for the purpose of conducting research connected with the fuel or the vehicle and not for the purchase of the vehicle itself, except that the money may be used for the purchase of the vehicle if all of the following conditions are satisfied:
(1) The Department of Agriculture and Forestry retains the title to the vehicle.
(2) The vehicle is used for continuing research.
(3) If the vehicle is sold or when the research related to the vehicle is completed, the proceeds of the sale of the vehicle shall be used for additional research.
C. An income tax credit of ten cents per gallon of advanced biofuel is available to qualified small advanced biofuel manufacturing facilities as defined in R.S. 3761(C)(4). The credit applies only to the first ten million gallons of advanced biofuel produced in a tax year and expires on December 31, 2012.
Section 2. R.S. 39:364(A)(1) is hereby amended and reenacted and R.S. 39:364(A)(4) is hereby enacted to read as follows:
§364. Purchase or lease of fleet vehicles; use of alternative fuels; exceptions
A.(1) The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel which results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof which meet or exceed federal Clean Air Act standards, including but not limited to hybrid vehicles. Alternative fuels shall include compressed natural gas, liquefied petroleum gas, reformulated gasoline, methanol, ethanol, advanced biofuel, electricity, and any other fuels which meet or exceed federal Clean Air Act standards.
* * *
(4) A governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30, or E85 advanced biofuel directly from a qualified small advanced biofuel manufacturing facility at a price equal to fifteen percent less per gallon than the price of unleaded gasoline for use in any motor vehicle. The price of unleaded gasoline will be the prevailing average price for the locality on the date of purchase.
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Small-scale distributed energy in Wisconsin benefits farmers, local communities
by Lisa Gibson
April 29, 2009
If Wisconsin would take advantage of “low hanging fruit” and cash in on the state’s biomass potential via small-scale distributed energy systems, advantages would reach both the agricultural sector and rural communities, according to a recently released Program on Agricultural Technologies (PATS) policy perspective. ‘How Could Small Scale Distributed Energy Benefit Wisconsin Agriculture and Rural Communities?’ was published in late April.
Authors Gary Radloff, director of policy and communications with the Wisconsin Department of Agriculture, Trade and Consumer Protection, and Alan Turnquist, outreach specialist at the Program on Agriculture Technology Studies at the University of Wisconsin-Madison, say a distributed energy system in the state might curb logistical challenges that come along with large-scale, industrial production, such as biomass feedstock aggregation, short-term storage and transportation. “In policy discussion, we need to keep in mind policy incentives for smaller-scale operations,” Radloff said.
“For me, the thing that struck home was that all of these logistics behind biomass are so dependent on location,” Turnquist said of his research. The small-scale distributed energy option is obvious, he said, creating a marriage between the idea of hundreds of thousands of producers and smaller-scale uses.
Wisconsin has almost 15 million tons of potential biomass, the paper states, and if smaller local operations use that feedstock, it could increase energy production opportunities and increase returns for rural communities. It’s not just the scale of biomass potential that makes distributed energy a powerful tool in Wisconsin, but also its diversity, Turnquist said. “The single biggest benefit is that we have the capacity to do it right now,” he said.
Small-scale operations are starting to pop up around the state, according to Radloff, mostly at rural schools. Starting small and building out might be a way to build the biomass-to-energy infrastructure in the state, he added. Some larger projects also are in the works such as Governor Jim Doyle’s order for four university campuses in the state to “come off the grid” and switch to biomass, Radloff said. If more energy is produced locally and used locally, it can complement other renewable energy sources such as wind and solar, Radloff said. The two researchers compare local energy production to something most Wisconsinites can relate to, a local farmer’s market; the money locals spend goes to other locals they might know personally.
It is possible to construct a system in which a portion of the renewable energy dividend stays at home and the long-term benefits are shared by the landowner, farmer, forester or local community, Turnquist and Radloff write, as several biomass technology options can be economically efficient when located in rural settings, as indicated by studies and real world examples.
But what if local people don’t want the energy systems in their communities? According to Radloff and Turnquist, local systems would require local participation, including organization and decision making, that could eliminate the Not In My BackYard (NIMBY) opposition wind farms and new ethanol plants have met. If the payoff and decision-making process stay in the community, locals may rally more support toward community renewable energy products, they said. “It’s not just about natural resources and infrastructure,” Turnquist said. “It’s also about people and communities.”
Opportunities also exist for small-scale projects to partner with larger-scale operations, according to the authors. They cite as an example Xcel Energy’s 2008 proposal to add a biomass-to-energy burner to their existing plant in Ashland, which already uses woody biomass.
The amount of biomass that can be produced and harvested in Wisconsin still is an open question, the paper states, along with how much the communities actually will benefit from bioenergy and other renewables. But, it adds, local energy production is an important part of the state’s economic future and policies should be crafted to ensure the economic and energy returns go to rural Wisconsin residents and that groups undertaking distributed energy projects can manage the risk in the bioenergy market.
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.Read Full Post | Make a Comment ( 1 so far )
Measuring Corn Ethanol’s Thirst for Water
Ethanol from corn consumes three times more water than previously thought.
By Phil McKenna
MIT Technology Review
April 14, 2009
Ethanol derived from corn consumes up to three times more water than previously thought, according to a new study.
Prior studies have estimated, based on national production averages, that one liter of corn-derived ethanol should require 263 to 784 liters of water to both grow the crop and convert it into fuel. Now, researchers at the University of Minnesota have concluded that the amount of water used in ethanol production varies hugely from state to state, ranging from 5 to 2,138 liters of water per liter of ethanol, depending on regional irrigation needs.
Corn ethanol is already plagued by environmental concerns such as pollution from fertilizer, pesticides, and herbicides; soil erosion; greenhouse-gas emissions from production; and competition for agricultural land with food crops.
The new study, published in the journal Environmental Science and Technology, also found that as corn-based ethanol production has approximately doubled nationwide between 2005 and 2008, related water use has more than tripled.
“Ethanol consumes more water over time as corn production extends to regions that need extensive irrigation,” says Sangwon Suh, an assistant professor of biosystems engineering at the University of Minnesota and coauthor of the study. “That means more water is needed to produce a given unit of ethanol over time.”
Suh and his colleagues examined state and county records on irrigation use for growing corn, both as food and for fuel, as well as the location, production levels, and water usage of existing corn-ethanol facilities. The researchers found that more than 80 percent of the corn used to make ethanol is harvested within a 64-kilometer radius of the refinery where it is converted into fuel. Using this information and data on local rates of irrigation, the researchers were able to estimate the water requirements of individual corn-ethanol production facilities.
In some states, such as Ohio, Iowa, and Kentucky, where corn can grow with little to no irrigation, only five to seven liters of water are required to turn the foodstuff into fuel. Almost all of this water is used to boil, ferment, and distill the biofuel. As ethanol production has increased, however, more corn is being grown in western states such as Nebraska, Colorado, and California, where irrigation needs raise the fuel’s water requirements significantly.
“This is one more nail in the coffin for ethanol,” says David Pimentel of Cornell University, in Ithaca, NY, whose own studies have shown that ethanol requires more energy to produce than it releases when burned, and that the fertilizer used to grow corn for ethanol has contributed significantly to dead zones in the Gulf of Mexico (areas of the ocean with low oxygen content due to increases in chemicals in the water).
The U.S. Energy Independence and Security Act of 2007 mandates that ethanol produced using existing technologies will have to increase from the 34 billion liters produced in 2008 to 57 billion liters per year by 2015. This includes the more arid western states, where corn-based ethanol is currently produced.
Jerry Schnoor of the University of Iowa, in Iowa City, says that ethanol producers are already planning additional production facilities in all states to meet the 2015 goals. “We’re already in an unsustainable situation in terms of water use, already drawing down aquifers like the Ogallala,” Schnoor says of the vast underground water source stretching from South Dakota to northern Texas. “This would exacerbate that decline if we expand in these irrigation states.”
Geoff Cooper, vice president of research at the Renewable Fuels Association in Washington D.C., questions the researchers’ claim that water use has tripling as ethanol production has doubled. “The bulk of expansion from ’05 to ’08 occurred in the central corn belt–places that don’t irrigate corn,” he says. “There is a finite limit to how much ethanol you can put in water-constrained areas. We are not putting ethanol plants into areas where water is severely limited.” Suh is also optimistic that water use can be reduced while ethanol production continues to grow. He says that agricultural land that has been set aside for conservation in regions that do not require irrigation could be brought back into production, and genetically engineered corn could maintain high yields with lower water requirements.
“I’m very optimistic we can achieve the ethanol production mandate without sacrificing water security in the U.S.,” he says. Schnoor adds that ethanol production could expand to the south and east, where land is cheaper and water is more plentiful.
Pimentel, however, disagrees. “You read the paper and the conclusion is certainly that it will require more and more water, but [Suh] is from Minnesota, and you have to be cautious because in Minnesota they are promoting ethanol,” he says.
The study was funded in part by the Department of Energy and the state of Minnesota.
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.Read Full Post | Make a Comment ( 2 so far )
The New York Times
July 10, 2009
Far fewer people have been refueling with high ethanol blends this year in parts of the Midwest.
In North Dakota, sales of E85 — gasoline blended with 85 percent ethanol — were down by more than 60 percent this year from January to May, compared with a year earlier, according to the state’s Department of Commerce.
Minnesota has also seen a severe dip in E85 sales, according to the Minneapolis Star Tribune. Around 1.5 million gallons were sold in May — which is almost 1 million less than a year earlier, the paper reports.
National figures are not tallied by the Energy Department.
“It’s all about price, price and price,” said Phil Lambert, the vice-president for market development at Growth Energy, an ethanol lobby group. He noted that consumption of regular gasoline has also fallen across the country.
E85 can be used in “flex-fuel” vehicles, which can also take regular gasoline. Mr. Lambert said that there were slightly more than 8 million such vehicles in the United States today, or less than 3 percent of all vehicles.
Because ethanol has a lower energy content than gasoline, ideally it should be priced 15 to 20 percent lower than regular unleaded to make it worthwhile on a cost-for-energy basis, according to Mr. Lambert. Consumers, he said, should “never, ever, ever buy E85 when it is priced higher than gasoline.”
But the price was higher, at least briefly, in Iowa, according to Monte Shaw, the executive director of the Iowa Renewble Fuels Association, in the wake of plunging gasoline prices last year.
In Fargo, N.D., E85 was retailing for up to 20 cents above regular gasoline prices this spring, according to Julie Fedorchak, the communications manager for the state’s Department of Commerce — and the town of Harvey, N.D. even put bags over its E85 pumps for a time.
Recent months have brought better news for the industry. Harvey has taken the bags off its pumps, and several states report a pick-up in demand as prices return to a more viable level.
Growth Energy has a calculator on its E85 Web site suggesting that the fuel is currently priced 15 percent below regular gasoline, although there is substantial local variation.
Mr. Shaw of Iowa said that he had recently filled up at a pump where E85 was at least 70 cents cheaper than gasoline. “That’s very attractive,” he said.
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