Posts tagged “ethanol”
The USDA recently updated the numbers on the energy balance of corn ethanol in 2015 Energy Balance for the Corn-Ethanol Industry. Today returning guest Todd “Ike” Kiefer scrutinizes the numbers in the report and he raises some critical questions about the data and methodology.
Previously Mr. Kiefer wrote an article critical of the Navy’s efforts to promote biofuels in a periodical that is sent to Congress and top military leaders. The article was entitled Energy Insecurity: The False Promise of Liquid Biofuels (discussed here). He also wrote a guest article here in the past called EPA’s Sleight of Hand on Cellulosic Fuel Rule Change. His biography can be found at the end of the article.
I would remind readers that while I may agree with much, if not most of what Mr. Kiefer writes, these are his opinions. I have not taken a close look at this USDA paper myself, so it is possible that we could have a difference of opinion on some element(s) of the analysis. I don’t know that to be the case, but until I read the paper myself I offer up that caveat. CONTINUE»
Sam Avro, Energy Trends Insider editor, recently received an inquiry from a reader about the popularity of ethanol free gasoline in the Midwest. Coincidentally, I recently visited Indianapolis and had noticed a large billboard advertising ethanol free gasoline.
I thought I’d share what I found. Much to my surprise, there are about 8,000 gas stations offering ethanol free gasoline and only about 1,200 offering E85 (85 percent ethanol). There are about ten million flex fuel cars on the road designed to burn E85. Assuming a cost of about $100 per car to make it flex fuel, and assuming that about 10% of flex fuel cars actually use E85, this would mean that consumers have paid about nine billion dollars for nothing.
Introduction to the GSR
Today I want to take a deep look at the global biofuels picture, drawing mainly from the Renewables 2014 Global Status Report (GSR) that was released in June by REN21, the Renewable Energy Policy Network for the 21st Century. I had intended to draw data primarily from the recently released Statistical Review of World Energy 2014, but I believe that the GSR is the most comprehensive report available when it comes to the global renewable energy picture. The GSR has more complete renewable energy data than the BP Statistical Review, but both reports complement each other. Full disclosure, however, I have been a contributor to the GSR for the past five years.
Before I begin, let me introduce REN21 and what are they trying to achieve. From the foreword to the 215-page report: CONTINUE»
This spring, the EPA will likely reduce the amount of corn ethanol that must be blended into our fuel supply by about 1.3 billion gallons (for a total of about 13 billion gallons) simply because our transportation system can’t absorb any more of it without exceeding a 10% blend, risking damage to cars. This is called the “10% blend wall.” Unlike beef, or chicken, gasoline, or smart phones, ethanol consumption isn’t consumer driven. In general, because consumers could care less about corn ethanol, fuel blenders also could care less about it except as an economically viable anti-knock additive in more modest quantities. They have to be forced to blend more of it by the government. Unless or until some unforeseen consumer demand arises, mandated blending will be necessary to keep the corn ethanol industry solvent.
And just as importantly, where is future growth going to come from? We can’t use all of our corn crop. This isn’t new technology. We’ve been making moonshine by distilling ethanol from fermented seeds and fruit for thousands of years. CONTINUE»
What Ethanol Problem?
If you live in the Midwest, you are in the midst of a thriving ethanol industry. But the Midwest does not control its own destiny when it comes to ethanol. That is still controlled by the federal government.
When I first started writing about energy nearly a decade ago, many of my early articles were addressed at the ethanol policies we were pursuing in the US. Even though I supported renewable energy, I felt like we were going about things in the wrong way. While I acknowledged that you could subsidize lots of ethanol production into existence, there needed to be a clear path for sustainability in the event that strong government intervention waned.
Today, nine years after I began writing about energy, we have an ethanol industry that has undergone rapid growth, but it is an industry that still relies heavily on the hand of government in the form of the Renewable Fuel Standard (RFS). One need look no further than the uproar over the Environmental Protection Agency’s (EPA) decision to lower the RFS for 2014. CONTINUE»
Disagreement, But The Outline of A Compromise
Yesterday I watched the livestream of a National Journal’s event, “Biofuels Mandate: Defend, Reform, or Repeal” from Washington, DC. I encourage you to skim through the replay. The session highlighted a wide range of views concerning the US Renewable Fuels Standard (RFS), including those of the corn ethanol and advanced biofuels industries, poultry growers, chain restaurants, environmentalists, and small engine manufacturers. Although these broke down pretty sharply along pro- and anti-RFS lines, I thought I detected hints of the kind of compromise that might resolve this issue. I’d like to focus on the elements of such a deal, rather than rehashing the positions of all of the participants, with one necessary exception.
The Requirement for Reform
The most disappointing contributions to the discussion occurred during the interview with Representative Steve King (R, IA) by National Journal’s Amy Harder. If we accept Mr. King’s perspective, we should embrace the RFS as being as relevant today as when it was conceived, with no changes required. That flies in the face of the serious market distortions now manifesting in the “blend wall” at 10% ethanol content in gasoline. Among other things, Mr. King claimed that a 2008 reduction of $0.06 per gallon in the now-expired ethanol blenders credit brought the expansion of the corn ethanol industry to a standstill. The industry’s own statistics tell a very different story, with US ethanol production capacity having grown by a further 86% since that point.
We’ve Arrived at the “Blend Wall”
The Energy and Commerce Committee of the US House of Representatives has been holding hearings this week on the Renewable Fuel Standard (RFS). It’s otherwise known as the ethanol mandate, although it covers biodiesel, as well. These hearings are timely, since at least two bills have been introduced to reform or repeal the RFS. During Tuesday’s session Rep. Waxman (D-CA) referred to the “gasoline blend wall, which may be around the corner.” In fact, a review of current gasoline sales and this year’s ethanol target confirms that the ethanol “blend wall” has arrived, at least for some of the nation’s refiners. That explains the urgency of the debate about the future of the RFS.
The blend wall is simply the threshold at which the RFS requires more ethanol to be blended into US gasoline than the quantity necessary to dose essentially all of it with the maximum 10% ethanol content for which most cars on the road were designed. Because the Environmental Protection Agency, which administers the RFS, has been unwilling to exercise its flexibility under existing law, the fuels industry must now choose from a set of unattractive options: It can limit mainstream gasoline to 10% ethanol content and absorb substantial RIN costs (see below) or penalties for failing to blend the required volumes of biofuel. It can produce less gasoline than the country needs, or export more of its production, to reduce its renewable fuel obligations. Or it can produce higher-ethanol blends such as E15 and risk the integrity of millions of cars and large portions of the country’s fuels infrastructure, including all but the newest gas station pumps and tanks. All of these choices affect the price consumers pay at the pump.
(RR edit: Some of you need to turn on your sarcasm detectors).
I just finished reading a story that made my blood boil. It was about how the oil industry is using dirty tricks to keep the ethanol industry in check. I need to sit down, take a deep breath, and make sure everyone knows of the atrocity that has happened in Kansas.
The problem started when the ethanol lobby requested — and subsequently received — a waiver from the Environmental Protection Agency (EPA) that would allow up to 15% ethanol in gasoline blends. The current limit is 10%, which is a problem for the ethanol industry because the mandate in the Renewable Fuel Standard already has the country at the 10% limit. It would be a huge boost to the ethanol industry if that limit was moved up to 15%, because that would increase the potential size of their US market by 50%. CONTINUE»
US Ethanol Policy Should Reflect Circumstances and Consequences
This April, two separate bills were introduced in the US House of Representatives to reform, or repeal, the federal Renewable Fuel Standard (RFS) that mandates how much ethanol and other biofuels must be blended into gasoline.
To understand why reform or repeal makes sense now, we should recall the factors that led Congress to enact this standard six years ago and consider how many of the basic assumptions underlying its design have changed since then. That requires a review of US fuel consumption and import trends, commodity prices, and the impact of the RFS on food prices. After summarizing the other points I want to focus on the last one, based on an interview I conducted with Dr. Yaneer Bar-Yam, an expert on complex systems who has developed a model that explains the behavior of food prices since the introduction of the first, less ambitious RFS in 2005.
Chemicals and Fertilizer Industries
In last week’s post Who Wins from Rising Natural Gas Prices?, I discussed the sectors that would benefit from rising natural gas prices. This week, let’s talk about the potential losers.
Natural gas is an important feedstock for the chemicals and fertilizer industries, so higher prices could pressure those sectors. Oil companies with significant chemical operations could also see this business segment take a hit, but based on ExxonMobil’s (NYSE: XOM) advocacy of liquified natural gas (LNG) exports, it clearly believes the net effect of rising natural gas prices on the company would be positive.
Dow Chemical (NYSE: DOW), on the other hand, has come out strongly against LNG exports because of the potential cost to its own business and that of other heavy users of natural gas. Ironically, last week the Department of Energy granted a permit to a facility called Freeport LNG — in which Dow owns a 15% stake. Dow’s answer to that is that they invested in the facility when it was supposed to be an LNG import facility.
But the risks to the chemicals and fertilizer industries are well-known. What isn’t as well-known is the risk from higher natural gas prices to the biofuels sector. This may be counterintuitive, since renewables like wind and solar power become more competitive as natural gas prices increase. CONTINUE»