Ethanol – the Good, the Bad, the Ugly, the Beautiful

The Good

By John Addison. The 9 billion gallons of ethanol that Americans used last year helped drive down oil prices. For those of us who fuel our vehicles with gasoline, as much as 10 percent of that gasoline is ethanol. The Energy Independence and Security Act of 2007 requires that more biofuel be used every year until we reach 36 billion gallons by 2022.

Reduced oil prices are good. We can go from good to great, if we move past fuel from food and haste to fuels from wood and waste. Although the economics do not yet favor major production, pilot plants are taking wood and paper waste and converting it to fuel. Other cellulosic material is even more promising. Some grasses, energy crops, and hybrid poplar trees promise zero-emission fuel sources. These plants absorb CO2 and sequester it in the soil with their deep root systems. These plants often grow in marginal lands needing little irrigation and no fertilizers and pesticides, standing in sharp contrast to the industrial agriculture that produces much of our fuel.

Cellulosic biofuels are becoming economic reality. Norampac is the largest manufacturer of containerboard in Canada. Next generation ethanol producer TRI is not only producing fuel, its processes allow the plant to produce 20% more paper. Prior to installing the TRI spent-liquor gasification system the mill had no chemical and energy recovery process. With the TRI system, the plant is a zero effluent operation, and more profitable.

A Khosla Ventures portfolio company is Range Fuels which sees fuel potential from timber harvesting residues, corn stover (stalks that remain after the corn has been harvested), sawdust, paper pulp, hog manure, and municipal garbage that can be converted into cellulosic ethanol. In the labs, Range Fuels has successfully converted almost 30 types of biomass into ethanol. While competitors are focused on developing new enzymes to convert cellulose to sugar, Range Fuels’ technology eliminates enzymes which have been an expensive component of cellulosic ethanol production. Range Fuels’ thermo-chemical conversion process uses a two step process to convert the biomass to synthesis gas, and then converts the gas to ethanol.

Range Fuels in Georgia is building the first commercial-scale cellulosic ethanol plant in the United States. Phase 1 of the plant is scheduled to complete construction in 2010 with a production capacity of 20 million gallons a year. The plant will grow to be a 100-million-gallon-per-year cellulosic ethanol plant that will use wood waste from Georgia’s forests as its feedstock.

The Bad

Over one billion people are hungry or starving. Agricultural expert Lester Brown reports, “The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year.”

Corn ethanol that is transported over 1,000 miles on a tanker truck, and then delivered as E85 into a flexfuel vehicle that fails to deliver 20 miles per gallon is bad. GM and Ford have pushed flexfuel vehicles that can run on gasoline or E85, which is a blend with as much as 85 percent ethanol. For the 2009 model year, the best rated car running on E85 in the United States was the Chevrolet HHR using a stick-shift, with a United States EPA gasoline mileage rating of 26 miles per gallon, and an E85 rating of only 19 miles per gallon.

In other words, if you passed on using E85 and drove a hybrid with good mileage, you would double miles per gallon and produce far less greenhouse gas emissions than any U.S. flexfuel offering. Top 10 Low Carbon Footprint Four-Door Sedans for 2009

The problem is not the idea of flexfuel. You can get a flexfuel vehicle with good mileage in Brazil. The problem is that GM and Ford used their flexfuel strategy as an eay way out, instead of making the tougher choices to truly embrace hybrids and real fuel efficiency. Flexfuel buying credits and ethanol subsidies have created incentives to buy cars that fail to cut emissions.

A new paper – Economic and Environmental Transportation Effects of Large-Scale Ethanol Production and Distribution in the United States – documents that the cost and emissions from transporting ethanol long-distance is much higher than previously thought. Ethanol is transported by tanker truck, not by pipeline, although Brazil will experiment with pipeline transportation.

The Ugly

It’s a tough time to make money with ethanol. Major players, like Verasun, are in bankruptcy. For the industry, stranded assets are being sold for pennies on the dollar. With thin margins, low oil prices, and high perceived risk, it is difficult to get a new plant financed.

Activists worry about oil refiners, such as Valero, offering to buy ethanol producers such as Verasun. But oil companies can bring needed financing, program management, and blending of next generation biofuels with existing petroleum refined gasoline, diesel, and jet fuel.

Government mandates for more ethanol do not match today’s reality. Subsidies to industrial corn agriculture are not good uses of taxpayer money. Encouraging federal, state, and local governments with their 4 million vehicles to give priority to flexfuel vehicles with lousy mileage is government waste.

Not all government help is misplaced. Range Fuels large-scale cellulosic ethanol production was helped with an $80 million loan guarantee. The loan guarantee falls under the Section 9003 Biorefinery Assistance Program authorized by the 2008 Farm Bill, which provides loan guarantees for commercial-scale biorefineries and grants for demonstration-scale biorefineries that produce advanced biofuels or any fuel that is not corn- based.

The Beautiful

Beautiful is the transition to electric drive systems and the development of next generation biofuels. Last year, Americans in record numbers road electric light-rail in record numbers. In 2008, Americans drove 100 billion miles less than 2007. Americans also drove 40,000 electric vehicles.

Critics and special interests try to stop the shift to electric vehicles by wrongly stating that if there is coal power used, then there are no benefits. Mitsubishi estimates that its electric vehicle is 67 percent efficient, in contrast to a 15 percent efficient gasoline vehicle. Efficient electric drive systems lower lifecycle emissions. With the growth of wind, solar, geothermal, and other renewables, lifecycle emissions from electric transportation will continue to fall. For example, my main mode of transportation is electric buses and rail that use hydropower. My backup mode is a Toyota Prius that I share with my wife.

Long-term we will continue to see the growth of electric drive systems in hybrid cars, plug-in hybrids, battery electric, fuel cell vehicles, light-rail, and high-speed rail. Over decades, the use of internal combustion engines will decrease, but the transition will take decades, especially for long-haul trucks. During these decades we can benefit from next generation biofuels that will replace corn ethanol and biodiesel from food sources.

Shell has a five-year development agreement with Virent, which takes biomass and converts it to gasoline – biogasoline. Gasoline, after all, is a complex hydrocarbon molecule that can be made from feedstock other than petroleum. Unlike ethanol, biogasoline has the same energy content as gasoline. Unlike cellulosic ethanol alternatives, Virent produces water using a bioforming process, rather than consuming valuable water. Virent has multi-million dollar investments form from Cargill, Honda, and several venture capital firms. Biogasoline will be its major initial focus. Its technology can also be used to produce hydrogen, biodiesel, and bio jet fuel.

Sapphire is an exciting new biofuels company backed with over $100 million investment from firms such as ARCH Venture Partners, the Wellcome Trust, Cascade Investment, and Venrock. The biotech firm has already produced 91-octane gasoline that conforms to ASTM certification, made from a breakthrough process that produces crude oil directly from sunlight, CO2 and photosynthetic microorganisms, beginning with algae.

The process is not dependent on food crops or valuable farmland, and is highly water efficient. “It’s hard not to get excited about algae’s potential,” said Paul Dickerson, chief operating officer of the Department of Energy’s Office of Energy Efficiency and Renewable Energy “Its basic requirements are few: CO2, sun, and water. Algae can flourish in non-arable land or in dirty water, and when it does flourish, its potential oil yield per acre is unmatched by any other terrestrial feedstock.”

Scale is a major challenge. Producing a few gallons per day in a lab is not the same as producing 100 million gallons per year at a lower cost than the petroleum alternative. Yet, some of our best minds are optimistic that it will happen in the next few years. We will see fuel from marginal lands, from crops and algae that sequester carbon emissions. The fuel will blend with existing gasoline, diesel, and jet fuel, and run in all engines, not just those with low mileage.

Some think that such a transition is as impossible as an interception with a 100 yard run for a touchdown in a Superbowl. It is exciting when the impossible happens.

John Addison is the author of the new book – Save Gas, Save the Planet – which is now available at Amazon. He publishes the Clean Fleet Report.

3 replies
  1. Brennan
    Brennan says:

    Glad to see someone break down this issue like that. I think it is pretty misunderstood and is hard to really get clear information on since there are so many pushing on each side with propaganda.

  2. Ron Steenblik
    Ron Steenblik says:

    John,There is some good stuff in this article, but some of it sounds like an advertisement for Range Fuels. Are you and Vinod Khosla good buddies?What you neglect to mention in respect of cellulosic ethanol is the enormous amount of government support being thrown at it. The government loan guarantees are only the tip of the iceberg. At the time they were awarded, ethanol producers, including future producers of cellulosic ethanol, could count on selling into an ethanol market bouyed by a $0.51/gallon federal excise tax credit. At the time, Vinod Khosla spoke as if large-scale production of cellulosic ethanol was right around the corner … i.e., would be profitable under those conditions.Yet in the spring of 2008, when ethanol prices (thanks to rising oil prices) had risen even further, Congress clearly heard the message that, no, the current level of government support STILL wasn’t enough. So it created a new, producer tax credit of $1.01 per gallon, specifically for cellulosic biofuels. That is $1.50 per gallon of gasoline equivalent, once one adjusts for ethanol’s lower heat value.Moreover, unlike the volumetric ethanol excise tax credit, the cellulosic producer tax credit cannot benefit imported fuels, such as ethanol from Brazil. So, in addition, the industry will benefit from the market protection afforded by the $0.54/gallon specific-rate duty on imported fuel ethanol.Beyond that, there is of course the guaranteed market for cellulosic ethanol created by the federal Renewable Fuels Standard. And let’s not forget the producer payments, tax credits, fuel-tax exemptions and sales-tax exemptions provided by numerous individual states.When cellulosic ethanol is able to stand on its own, please let us know. For the moment, it appears, it is still an expensive taxpayer-funded experiment.

  3. Anonymous
    Anonymous says:

    Let me say that I have had a hand in over 100 of these ethanol plants and there are some major discrepancies here. I’m not a writer so I‘ll just do the best that I can.Starving people: You know you can’t eat the corn that goes into an ethanol plant don’t you? You could boil it for weeks and still can’t eat it. It would have been animal feed and AFTER you make ethanol all the protein is still there and is still used for animal feed. So if it goes straight to the animal you have thrown away those BTUs. When ethanol is profitable farmers, will plant ground the government was paying them not to plant. Economy: Flex fuel cars are the same old cars we have always driven. Your right E85 cuts up to a third off normal economy. E10…which is whats in your car right now whether you know it or not doesn’t count for much in economy or emissions or relying on foreign oil. BUT there has been many studies on E30. You can use it in normal cars and there’s almost no loss in fuel economy. That’s removing 30% of the gas we burn. Is that not worth anything. The ones holding back E30 is Detroit and your government.Now then some other dumb points I want to make.Ethanol pipe line? How do you think gas gets to your 7 / 11? Do you think theres a pipe line under every gas station?Brazil’s feed stock is all in one place and most of the population is in its place. Why not have a pipe line ?Electric cars might be viable one day and they might be able to make a 40mpg car for the rest of us with kids and dogs and soccer equipment and garden supplies. I know I have no use for a Smart Car…I got a Harley for that.Sorry don’t have time to refine this more. Gotta go.Devlin

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