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US and the ethanol industry rise: a perspective for the future

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Where is the US's ethanol industry heading? Our blogger, Noor-Hal Cuellar, aims to answer this question in her first blog of 2012. As she finds out, the challenges faced by the industry can be translated into opportunities... if the will is there.
US and the ethanol industry rise: a perspective for the future

Last time we were discussing the effect of increasing sugar prices on a reduced sugarcane supply which was affecting Brazilian ethanol industry. This condition was a partial reason why United States climbed as the net global exporter of corn ethanol since 2005 (RFA, 2010). But it is not the main one, since the development of this industry in US has been promoted as part of the different governments strategies in order to increase energy security and develop alternatives to reduce foreign oil dependence. Actually, the government has set a goal of 21 billion of gallons of advanced biofuels production by 2022 (EERE, 2010), complementing the goals set back in 2003, to supply 20% of transportation fuel needs with biofuels by 2030 (US DOE, 2003).

No wonder why as a result, United States is one of the countries with more ongoing research focused towards ethanol industry development. Even though most of its current production is first-generation ethanol from corn (obtained from enzymatic hydrolysis of starch-rich biomass) there are many demonstration and pilot plants producing second-generation ethanol in order to develop the most efficient technology to produce ethanol from woody material, energy crops and cellulose-rich sources, as corn stover and bagasse. As pointed out by EERE (2010), to develop this industry is crucial to promote the installation and implementation of integrated biorefineries, with enough capacity to convert the above mentioned biomass feedstocks into biofuels, biopower and other products that need to be affordable.

And obviously, as part of the ongoing agenda for clean energy alternatives being developed, ethanol has been part of the clean energy strategy cited by the President at the State of the Union speeches. For example, President Obama during his State of the Union 2011 speech states that “with more research and incentives, we can break our dependence on oil with biofuels…” He even suggested that the Congress should eliminate the subsidies to oil companies, even though it would be a hard battle to be fought, since the claim from oil and gas companies that their industry is a key driver for jobs creation and economic development, claim shared with the ethanol industry representatives. Bob Dinneen, president of the Renewable Fuels Association (RFA) has pointed out that the domestic ethanol industry currently supports approximately 400,000 jobs and has been a key driver in the rural development of the country based on the subsidies generated for corn cultivated lands for fuel purposes (Bevill, 2011a).

Based on the 2011 Ethanol Industry Outlook published by the RFA (2011) and the great outcome of ethanol exports, it results a little bit surprising that in this year’s State of the Union speech Obama did not make any mention at all regarding biofuels. Even though he made a big emphasis in keeping on track with the development of clean energy, his starting point was to assure increased oil and gas exploration in American soil, but then drifting towards alternative energy other than biofuels. It might be due to the fact that the results so far are quite supportive of being in the right track and some other sources of energy need more support, as he mention regarding wind energy, where United States is looking to increase his global share compared with wind energy giants as Germany and China. (Obama, 2012) Days before, a letter from Bob Dinneen was published mentioning that the upcoming State of the Union address was a unique opportunity to enhance in the public perception the importance of a strong domestic ethanol biofuels industry due to its good levels of production during 2011 (nearly 14 billion gallons) which represents ten percent of the country’s gasoline supply (Truitt, 2012).

Globally, ethanol industry faces several challenges. Even though over 90 percent of all gasoline sold in the U. S. is blended with ethanol, public perception keeps its reluctant perspective towards ethanol and the contentious food vs. fuel dilemma that is not really quite clear, but it keeps shadowing the ethanol choice. Also the ILUC (indirect land use change) which argues that for every farmland used for ethanol production, there are indirect carbon dioxide emissions associated with the usage of virgin lands for food production displaced for the use of farmlands for ethanol (RFA, 2011).


Another challenge is to provide a better choice to the prospective customer by increasing the offer of blender pumps all around the country. There is currently a high concentration of flex-fuel vehicles (FFV) able to handle high ethanol blends, but the current issues the lack of availability of E85 pumps. This might as well be considered along with the reluctant perspective from oil business, which in general perceives ethanol industry development as a competitor, when really it can be a friendly alternative and both businesses can get along. Rick Brehm, president of Lincolnway Energy in Nevada (cited by Piller, 2012), stated due to the current buildup of ethanol reported on the weekly report of the US Department of Energy during the first weeks of 2012, “the real problem is that demand for gasoline is down. We’re captive to the oil companies’ demand. If they sell less gasoline, we sell less ethanol”. So ethanol and gasoline combination should be better seen as a joint growth opportunity instead a fiery competition.

Challenges can be translated into opportunities. Ethanol industry has not fully developed yet, but so far it has shown a good alternative to reduce (reduce, not replace) our dependence towards oil as well as to increase the availability of oil resources.

References

Bevill, K., 2011a. Obama calls for more biofuels investment, no oil subsidies. Ethanol Producer Magazine. [internet] January 26. [Accessed 12 February 2012]
EERE, 2010. Biofuels, Biopower and Bioproducts: Integrated Biorefineries. [Online] U. S. Department of Energy, Energy Efficiency & Renewable Energy. November 2010. [Accessed 12 February 2012]
Obama, B., 2012. State of the Union 2012: Breaking down the State of the Union 2012. The Washington Post. [internet] January 24.  [Accessed 12 February 2012]
Piller, D., 2012. Ethanol stockpiles soar. [Online] Des Moines Register.  [Accessed 12 February 2012]
RFA, 2010. World Fuel Ethanol Production. [Online] Renewable Fuels Association [Accessed 12 February 2012]
RFA, 2011. 2011 Ethanol Industry Outlook: Building Bridges to a More Sustainable Future. [Online] Renewable Fuels Association. February 2011. [Accessed 12 February 2012]
Truitt, G., 2012. Ethanol Group Makes Suggestions for State of the Union Speech. [Online] Hoosier Ag Today. January 23. [Accessed 12 February 2012]
US DOE, 2003. Roadmap for Agricultural Biomass Feedstock Supply in the United States. DOE/NE-ID-11129. [Online] US DOE, Energy Efficiency and Renewable Energy. [Accessed 12 February 2012]

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