By Makarand Gawade, Staff Writer
Every coin has two sides, and likewise, the U.S. corn based fuel ethanol industry has its supporters and opponents. I have worked in biofuel industry for over ten years and with the comprehensive experience, know-how, and knowledge in this space, I believe this is a sustainable clean energy and I am a proponent of the industry. This article is about the challenges the U.S. corn based ethanol industry is facing and whether this industry is geared up to overcome these challenges.
Image Source: www.slideshare.net
Food versus fuel: One of the important challenges U.S. fuel ethanol industry faces is the food versus fuel argument. Critics have argued that corn based biofuel can’t provide substantial amount of energy for transportation without starving the poor. This argument has started since the inception of the corn based fuel ethanol industry in the U.S. and has created negative sentiments among consumers and investors. Furthermore, critics argued that farmers are replacing food crops with corn ethanol crops. I would like to demystify these myths. Firstly, it is critical to understand that only field corn is used to produce ethanol and feed livestock; sweet corn consumed by humans is not used for ethanol production. Secondly, average corn yield per acre has more than doubled in the last four decades, from 72.4 bushels per acre in 1970 to 168 bushels per acre in 2014. If we look closely at the past U.S. corn production and demand streams, it is very apparent that every bushel of corn that was converted into fuel ethanol came from excess production due an increase in productivity and not by “diverting” corn to produce ethanol. To sum, I would argue that the impact of corn ethanol on grain and food supplies is marginal and it is clear from numerous researches and findings that ethanol is not the primary driver of food prices.
Viability of Cellulosic (second generation feed-stock) ethanol: Second generation feed-stocks are not a food crop; it is biomass that is considered waste. Some of the examples are corn stalk, grass, paper pulp, and waste vegetable oil. However, this next generation biofuels space faces significant investment, production, and technological challenges. Converting biomass into biofuels continues to be an intricate process and has a high operating cost. Thus, the biomass conversion process essentially needs to become more efficient and cost effective to increase the commercial appeal of second generation ethanol. However, experts remain optimistic with the encouraging development in research and development, government incentives, and investments in this space, and predict that five billion gallons of second generation ethanol could hit the market in the next five years.
Image Source: bizneworleans
Global crude oil prices: U.S. Ethanol producers are battling with the drop in revenues and profits with the tumbling crude oil prices. The recent dip in the crude oil prices pushed down ethanol prices to a historic low in U.S. Furthermore, ethanol producers are also facing a recent jump in the price of corn. These circumstances are forcing some ethanol makers to scale down production in 2015. However, analysts predict a steady ethanol demand and argue that this phase is temporary and ethanol industry will overcome this challenge as it did in 2008 with the historic high corn prices.
Image Source: www.prwatch.org
Blend Wall (E10): The “blend wall” is the maximum quantity of ethanol that can be blended into each gallon of motor fuel each year given legal or practical constraints. Current blend wall in the U.S is E10 that means only 10% of ethanol can be blended with gasoline. To increase the blend wall, oil companies and their downstream partners have to make significant investment in terminals and in the retail infrastructure which is needed to distribute higher level of blends above E10. U.S environmental protection agency (EPA) determined a cost of six cents per gallon of ethanol to modernize the existing infrastructure to handle higher blends up to E85. However, no significant investment towards modernizing the existing facilities in order to handle higher blends of ethanol took place.
Another barrier is the additional price customer needs to bear to run a flex-fuel car on higher ethanol blend. Although ethanol is cheaper by the gallon than regular gasoline, ethanol has about one-third less energy than an equal volume of gasoline. Thus, higher the ethanol blend with gasoline lower would be the mileage for a car. I look at this argument from the sustainability and clean energy perspective. I feel it is still worth to incur the additional cost for higher ethanol blend because ethanol is renewable, it can reduce dependence on foreign oil, and it burns cleaner than gasoline.
In sum, I believe this industry is interestingly poised. There are some setbacks such as higher corn prices, low crude oil prices, and blend wall. At the same time, several encouraging dimensions such as higher corn yields, highly efficient plants, growing market for by-products, and second generation fuel ethanol are facilitating this industry to thrive and grow.
References:
http://www.ethanolrfa.org/pages/policy-positions-food-vs-fuel
http://www.forbes.com/sites/pikeresearch/2013/07/11/despite-evidence-food-vs-fuel-fight-continues/
http://www.bloomberg.com/bw/stories/2006-05-18/ethanol-myths-and-realities
http://www.renewableenergyworld.com
http://www.reuters.com/article/2015/06/26/usa-epa-hearing- dUSL1N0ZB28R20150626