February 18, 2006
Corn Ethanol Production Expands In United States

Many corn ethanol plants are under construction and being expanded.

There are 34 new plants under construction, according to the Renewable Fuels Association, an industry trade group in the District. Eight of the 95 existing plants are expanding. And 150 more new plants or expansions are in the planning stages.

The ethanol market is a product of politics. The US federal government is the cause of the increased demand for ethanol.

The ethanol industry also is being boosted by requirements in federal energy legislation approved last year that requires an increasing amount of the additive to be used.

Ethanol's subsidy from the US federal government might be about $0.75 per gallon.

Some studies peg the federal ethanol subsidy to producers at $3 billion per year.

The United States last year consumed an estimated 4 billion gallons of ethanol, compared with 140 billion gallons of gasoline.

In spite of federal subsidies and the high price of oil the E85 fuel (85% ethanol, 15% gasoline) costs more per gallon and carries cars fewer miles.

Plus, stations charge more for E85 than gasoline, even though it carries cars fewer miles.

Corn as the great liquid fuel alternative still doesn't seem convincing to me.

The price of natural gas in the United States has fallen in the last couple of months.

The March natural gas contract gained 6.8¢ to $7.13/MMbtu after falling for more than a week to a 7-month low.

To put that in perspective the spot price of natural gas hit a peak of over $15/MMbtu in late 2005. But natural gas was about a dollar cheaper a year ago than it is today. Note that in many areas of the world where natural gas is produced it is much cheaper. The US would have lower natural gas prices if it had more liquified natural gas (LNG) terminals. But local opposition to LNG terminals keeps US prices well above world market prices. Declining US production and delays in LNG terminal construction strike me as reasons to expect continued high natural gas prices.

So how does this lower price for natural gas affect natural gas's competitiveness with corn? Corn is around $2 per bushel though it might drop lower.

The projected 2005/06 price range for corn is $1.60 to $2.00 per bushel, down 5 cents on each end from last month, compared with $2.06 for 2004/05.

Dennis Buffington's Energy Strategies website puts the useful energy in corn at 6,808 BTU per pound and 56 pounds per bushel. So from that one would expect 147 pounds of corn to be the equivalent energy of 1 million BTU of natural gas. But Buffington also states that 170 pounds of corn has energy equivalent to 1 million BTU of natural gas. My guess is he might be accounting for burning efficiency.

Taking the 170 pounds of corn figure for 1 million BTUs and dividing by 56 pounds per bushel times $2 per bushel one gets $6.07 per million BTUs (MMbtu) for corn. Natural gas at $7.13 is not that much more expensive. But if corn fell to $1.60 per bushel then it would cost $4.86/MMbtu.

Corn as a heat source is a lot more compelling if your only fossil fuel alternative is oil. A gallon of #2 heating oil (basically diesel) has the energy equivalent of 22 pounds of corn. So a $2 bushel of corn has the heat content of 2.55 gallons of heating oil.

Corn production costs will fall in the future as agricultural technology advances. But what will happen to natural gas prices? Corn's price probably has less upside risk. For someone choosing a heating energy source for a new building if the choice is between natural gas and corn if one can build the corn feeder to be large enough to allow infrequent corn deliveries the corn might be the more economic choice.

But can corn make much of a dent in satisfying US energy needs? In the comments section of a previous post I estimated that if yield per acre could be maintained then it would take 36% of the US land mass to produce enough energy from corn to replace US consumption of oil and natural gas. That rough calculation ignored energy conversion losses to make ethanol. The calculation ignored the fact that corn can not grow with as high a yield per acre in the areas where it is not grown. In some areas it can't be grown at all (e.g. where would the water come from?). Plus, what about nature? Massive biomass production would destroy large areas of habitats. Corn for biomass energy can not scale up become a big energy source.

My take on corn: For individuals looking to switch away from expensive heating oil if you can solve the corn delivery problem to your satisfaction then corn heat will cost less. Comparing corn to natural gas as a heat source the choice is less clear.

At the level of national energy policy corn has at best a small role to play. Corn for liquid transportation fuel is a politically driven mistake. If corn must be used for political reasons then better to promote it as a heat source.

My fear with corn is that biotechnology will so lower the cost of corn production that a big shift from natural gas to corn will result in large scale habitat destruction as more land gets shifted to corn production. I'd prefer cost breakthroughs in nuclear and solar energy as more environmentally agreeable energy solutions.

Once all planned corn ethanol facilities are built in Nebraska those facilities will use half of Nebraska's corn crop.

Cassman told the Nebraska Ethanol Board that, when considering the 11 ethanol plants in production, seven plants that will be producing by 2007, and five plants that are in the planning stages, 1.31 billion gallons of ethanol could be produced in Nebraska.

That scale of production would use 580 million bushels of corn, which is only 50 percent of Nebraska's total corn crop, Cassman said.

580 million bushels of corn will be used to produce 1.31 billion gallons of ethanol. That's a ratio of 2.26 gallons per bushel. Scale that up to the entire 11 billion bushel per year US corn crop and dedicate it all to ethanol and the result would be only 24.85 billion gallons of ethanol. But ethanol has only 67.5% as much energy per gallon as gasoline. So all the US corn production diverted to ethanol would yield the equivalent of only 16.77 billion gallons of gasoline as compared to the 140 billion gallons consumed per year. But corn production uses energy. So the picture for corn ethanol is even worse once energy inputs are considered.

Out of about 11 billion bushels of corn grown in the United States per year Nebraska grows over 11 percent of it.

The 2005 Nebraska corn crop is the second-largest on record, according to the release. It was 1.27 billion bushels.

So about 6 percent of US corn production is going to toward ethanol production in Nebraska alone.

Update: A UC Berkeley group took a harder look at energy inputs and outputs for corn ethanol and found a small environmental benefit from switching to corn ethanol.

Dan Kammen and Alex Farrell of the Energy and Resources Group at UC Berkeley, with their students Rich Plevin, Brian Turner and Andy Jones along with Michael O'Hare, a professor in the Goldman School of Public Policy, deconstructed six separate high-profile studies of ethanol. They assessed the studies' assumptions and then reanalyzed each after correcting errors, inconsistencies and outdated information regarding the amount of energy used to grow corn and make ethanol, and the energy output in the form of fuel and corn byproducts.

Once these changes were made in the six studies, each yielded the same conclusion about energy: Producing ethanol from corn uses much less petroleum than producing gasoline. However, the UC Berkeley researchers point out that there is still great uncertainty about greenhouse gas emissions and that other environmental effects like soil erosion are not yet quantified.

The UC Berkeley team has made its model, the Energy and Resources Group Biofuels Meta Model (EBAMM), available to the public on its Web site.

"It is better to use various inputs to grow corn and make ethanol and use that in your cars than it is to use the gasoline and fossil fuels directly," said Kammen, who is co-director of the Berkeley Institute of the Environment and UC Berkeley's Class of 1935 Distinguished Chair of Energy.

Despite the uncertainty, it appears that ethanol made from corn is a little better - maybe 10 or 15 percent - than gasoline in terms of greenhouse gas production, he said.

"The people who are saying ethanol is bad are just plain wrong," he said. "But it isn't a huge victory - you wouldn't go out and rebuild our economy around corn-based ethanol."

But they are defining "benefit" as greenhouse gas emissions reduction and the benefit is small. How about the effects of putting much larger areas under till for farming? Also, the benefit is small. That suggests the net energy gain is small.

The UC Berkeley researchers think the ticket to making biomass more competitive is to develop better ways to convert cellulose sugar polymers into simpler sugars which could then be used to produce ethanol.

The transition would be worth it, the authors point out, if the ethanol is produced not from corn but from woody, fibrous plants: cellulose.

"Ethanol can be, if it's made the right way with cellulosic technology, a really good fuel for the United States," said Farrell, an assistant professor of energy and resources. "At the moment, cellulosic technology is just too expensive. If that changes - and the technology is developing rapidly - then we might see cellulosic technology enter the commercial market within five years."

Some grasses produce over 3 times as much energy per acre as corn. In theory producing ethanol from such grasses could be far more favorable in terms of both the ratio of energy out to energy in and also in terms of the size of the amount of land needed.

Still, I remain unethusiastic even for greatly improved biomass. If one really wants to reduce greenhouse gases then nuclear, solar, and wind energy are clearly the ways to go. They each would require far less land area than biomass. But all 3 are in need of technological advances for cost reductions. We also need far better battery technology since all 3 deliver energy as electricity.

Share |      Randall Parker, 2006 February 18 12:07 PM  Energy Biomass


Comments
IllinoisDriver said at February 18, 2006 12:38 PM:

Filled up my tank two days ago. Gasoline was $2.17 a gallon, E85 was $2.19. Not only do you have the energy efficiency issues with ethanol production but it is no longer that much a bargain to your average motorist. I wish Barack Obama and all the Farm Belt Republicans on the opposite side of the aisle would direct the pork dollars elsewhere. E85 isn't saving Joe Blow money and it's costing the US taxpayer.

Invisible Scientist said at February 18, 2006 3:14 PM:

Surely, in the future, biotechnology will make it possible for plants to grow 10 times faster in only 10 % of the surface area. This means that the biofuels will ultimtely be reasonable souces of energy. But the greenhouse effect is still a problem...

Richard said at February 19, 2006 4:39 AM:

If they are growing 10 times faster, they are taking more out of the soil and will need more inputs and will that be petroleum based fertilizers?

Invisible Scientist said at February 19, 2006 7:45 AM:

Excellent Point. I forgot about this... I now remember having read that one reason the Brazilian farmers who create more farming land by burning forests have not been successful, is that most of the nutrients in the forests happen to be in the trees, and that the soil that remains after burning the forest, quickly becomes depleted in a few years... But this does not mean that there won't be some other typesof genetically engineered plants that might survive even in deserts with only some minimal water and CO_2.

carl said at February 19, 2006 9:18 AM:

Coincidentally, saw this today:

http://www.newswise.com/articles/view/518130/

Alan njeru said at February 19, 2006 11:02 AM:

People all in arms against Ethanol talk as if crude oil and its derivatives don't get any subsidies. Your local gasoline is one of the most heavily subsidized items in the market place if you consider that the USA has to send fleets of armed navy ships to protect production, transportation and routes. That is not reflected in the final price. Moreover, many people don't calculate the entire lifecycle of gasoline when they talk about "cheaper" gasoline: crude oil products happen to have huge externalities; society not companies are responsible for negative aspects like pollution.

US agriculture is currently facing huge gluts of everything from pork to corn. burning that corn doesn't make much sense. If new outlets for this farm produce aren't found price collapse might ensue or the US government will be forced to intervene heavily to prevent that from happening.


Ethanol has its issues, but at its infancy any industry happens to be highly inefficient and then draws efficiencies as newer sophisticated technology is introduced.

By the way corn derived Ethanol is one of the ways to produce ethanol. Cellulose too can be used either though cellulose hydrolysis followed by fermentation of via cellulose ingesting bacteria. Gasification sourced Syngas (CO+H) derived from any carbaceous material too can be used in the presence of MoS2 catalyst. Only time will tell which methods work and which don't.

Bob Mottram said at February 19, 2006 11:29 AM:

I tend to agree that bioethanol is not a catch-all solution to the world's energy needs, and may well have negative environmental impact is large expanses of land are required for corn production. It might be possible to boost productivity by genetically engineering the crop, but probably not by a large margin. Nevertheless it is good to see fuels other than oil being tried, even if they are heavily subsidised at present. Whatever the pros and cons of bioethanol may be, sticking with the status quo of heavy dependency upon cheap oil is not a viable long term option.

Better than covering large areas of land with crops would be hydrolosis of sea water to produce hydrogen as fuel. There is no shortage of sea water, and the environmental impact of having a lot of solar panels floating on the sea is likely to be negligable. It's true that the initial investment required would be high, but after that you're getting fuel practically for free.

bigelow said at February 19, 2006 2:41 PM:

Maybe I don’t get your message Mr. Parker. Pushing the R&D and subsidizing the build out of all four methods -nuclear, solar, wind and cellulose biomass- makes sense. Assume any one option must solve our energy problems or it is not worth it?

Petroleum has had decades of subsidies and military protection. The government should give the other techniques the same breaks now too.

Randall Parker said at February 19, 2006 3:12 PM:

Alan Njeru, bigelow,

If the US pulled the US military out of the Persian Gulf the oil would continue to flow. We aren't in the Cold War. I do not see the need for the US presence there. Beyond that presence I do not see a big US government subsidy for oil.

However, I fear you miss my point: Even if corn ethanol was cheaper we'd have to convert huge areas of the US to corn fields to get a significant percentage of our fuel from corn. I'm opposed to that.

Corn ethanol is not cellulose biomass. Celluose biomass would require maybe a third or less of a footprint. Far better to spend the money now going to corn ethanol on solving the celluose problem. However, even the celluose biomass approach would require use of far more land than I'd like to see used for farming. Still, I'd prefer cellulose over corn kernels as a starting point for making liquid fuel.

But better yet, I'd prefer to divert the billions of taxpayers dollars now going to corn ethanol to go toward photovoltaics research. Currently the US government spends only a few tens of millions of dollars per year on photovoltaics research.

Also, I oppose "subsidizing the build out". Better the government spend on research that can lead to cheaper technologies and not on purchasing equipment made using too expensive technologies. For example, photovoltaics made from silicon crystals are not the route to an order of magnitude cheaper photovoltaics. The starting material is too expensive. So subsidizing the purchase of photovoltaics made with such a process is not getting us closer to where we'd all like to reach: super cheap photovoltaics.

simon said at February 19, 2006 3:19 PM:

Ethanol subsidies are proof that government intervention only creates greater problems for humanity. I must concur with Randall that biomass strategies do not have long term viability. i would spend the subsidy money on research - both basic and innovation.

Paul Dietz said at February 19, 2006 5:05 PM:

If biofuels take off, the obvious place to grow the plants is the humid tropics, where there is a 12 month growing period, more sunlight, and more water.

Ah, but the soil is terrible, you might say. I've commented that this may be on its way to being a solved problem. If so, then sayonara, tropical rain forests.

Paul Dietz said at February 19, 2006 5:33 PM:

Oh, another thing: when it says it 'uses half of Nebraska's corn crop', note that (1) most of this corn is grown for animal feed, and (2) the ethanol production process leaves the protein in the corn unconsumed. 'Distillers grain', the stuff left after fertmentation, is an even richer source of protein for animal feed than the unfermented corn. If it is fed to cattle immediately, the energy intensive step of drying it for storage/shipment can be avoided, further improving the energy ratio of ethanol production.

aa2 said at February 19, 2006 5:56 PM:

The luddites of our age are pushing ethanol because they know it isn't a real solution. And big oil/king coal is only too happy to fund them and support them so that real alternatives might be delayed.

aa2 said at February 19, 2006 6:09 PM:

bigelow - "Petroleum has had decades of subsidies and military protection. The government should give the other techniques the same breaks now too."

I agree 100%. One way to do it is to calculate how much more military spending is required to secure petroleum and to include that amount as a tax on the price of oil.

Randall Parker said at February 19, 2006 6:15 PM:

Paul Dietz,

But in order for ethanol to become a major source of transportation fuel demand for corn for ethanol will have to far outgrow the amount of corn grown for animal feed. So the dual use scenario for corn breaks down beyond some point and that point falls far far short of having ethanol replace most gasoline.

Plus, as demand for corn grows the corn will need to be grown on more marginal land and the ratio of inputs to outputs will rise. More fertilizer, more tractor movements per amount of corn, etc.

Richard said at February 20, 2006 1:53 PM:

Question, I grow a lot of green beans and the roots systems are tiny because they take a lot from the atmosphere, fixing nitrogen in the soil. Can ethanol be made fromlegumes?

theoretically, I guess one could bioengineer a highly efficient soybean that with enough acreage could suck all the nitrogen out of the air and enhance the soil at the same time:)

Randall Parker said at February 20, 2006 5:42 PM:

Richard,

It is my understanding that soybeans produce lower yields per acre than corn.

BTW, Monsanto is developing genetically engineered corn that fixes nitrogen from the atmosphere.

Richard said at February 20, 2006 8:06 PM:

Randall,

The inputs are less.

If the monsanto corn reduces the amount of fertilizer for corn it might work.

Randall Parker said at February 20, 2006 8:29 PM:

Richard,

But land is a limiting factor for how much energy we can get from biomass. For energy biomass to work we need crops that can produce far more energy per acre, not less.

Richard said at February 21, 2006 4:15 AM:

Well then, is that not the purpose of genetic engineering. The win win win is more production on less land with less inputs. Soy or corn, or rutabagas for that matter, that is the goal. I agree there is a point of diminishing returns for even the most advanced science, though Kurzweil seems to be promising us eternal life and plentitude.

Russ Josephson said at February 28, 2006 2:17 PM:

While ethanol makes people feel good, it is bad energy policy.
It mainly benefits a few wealthy interest groups.

A study released in 2003 by researchers at UC, Berkeley revealed that
“energy consumed in corn farming and ethanol production
is six times greater than what the end product provides your car engine in terms of power”.

Berkeley geoengineering professor Tad W. Patzek says:
"In terms of renewable fuels, ethanol is the worst solution.
It has the highest energy cost with the least benefit."

Everyone should READ THE WHOLE THING AT:
http://www.energybulletin.net/5062.html

Lorne McClinton said at March 7, 2006 11:58 AM:

Nearly everyone's comments in this link seem to have the mistaken idea that the price of corn is anymore linked to its cost of production than oil is to its cost of production. (Saudi Arabia production costs the last figures I saw were approximately $2/barrel). Corn, like oil, gold, copper and pork bellies is a commodity and prices fluctuate according to perceived supply versus perceived demand (notice I use the word perceived not actual). While ethanol is taking a rising percentage of US production it still is not taking enough to cause the markets to think it is enough to cause shortages for other corn consumers. As ethanol production continues to eat up a rising percentage of the US (and the rest of the world's corn crop) the demand will raise the value farmers receive for their corn. The biggest effect of the increse in ethanol, while limiting dependence on foreign oil to some extent, will be to reduce the huge amount of dollars the US federal government needs to pay out in subsidies to keep its farmers viable.

Take a look at what Brazilian ethanol, made from sugar cane, has done to the price of sugar. Brazil accounts for approximately 20% of the world's sugar production. 40% of this production now goes into ethanol. World sugar demand has been dropping for decades but in the past year or so ethanol production started to use up enough sugar to trip a psychological barier in the markets. The net result - Sugar prices are the highest they've been in 25 years. The same thing will happen to corn, wheat, canola, soybeans and palm oil as more and more of the production is used for ethanol or biodiesel. In short the more agricultural production we turn to fuel the higher the prices will go for the grains used to make bio-fuels.

Food for thought - If the purpose of biodiesel and ethanol production is to lessen dependence on mid-east oil, why does the US have a tariff on Brazilian ethanol and not on Saudi oil?

(If you want to get a near cost free understanding how the commodity markets work sign up for a trading account on the University of Florida's online commodity trading simulator. www.factsim.org. For US$50 you get a years access and a $50,000 trading account. Not quite the same rush as having your kids college funds riding on variations in the world's copper supply but since they use real data from the NOrth American exchanges you can learn how they work with losing your shirt.

Bruce Burton said at March 14, 2006 11:09 PM:

Filled up today at a station in northern Green Bay, WI. E10 was $2.45, which is the prevailing price for unleaded regular. E85 was $1.95. Not all E85 is being sold at a premium price.

Robert Rapier said at March 23, 2006 8:00 PM:

Grain-based ethanol will never be viable on its own. It is not an industry in its infancy. It is quite mature. There aren't going to be any major economic breakthroughs. And those who argue that oil is subsidized miss a very important point. Grain-derived ethanol contains a huge fossil fuel input. Subsidized oil also subsidizes ethanol. Anything that makes fossil fuels more expensive also makes ethanol more expensive. You can see the trend at the official Nebraska Governmentwebsite: http://www.neo.ne.gov/statshtml/66.html Take a look at that graph, and you can see that ethanol prices rise with gas prices. Grain-ethanol is tied to fossil fuels, and the energy return is mediocre at best. I have dissected some of the economics of grain ethanol here: http://i-r-squared.blogspot.com/

Enough Already said at May 9, 2006 4:04 PM:

Common sense says we can't win any energy battle without stabilizing demand at a base level. If we know how much energy we'll really need, half the problem is solved in theory.

There should be far more discussion of zero population growth, the ultimate conservation strategy. There's little hope of reducing net consumption if the population keeps growing mindlessly. Global warming will also be more difficult to reign in. Currently, growth rates are 3 million per year in the U.S. and 75 million worldwide. It seems like a joke to talk of reducing pollution with more people spewing it all the time.

I agree with everyone who worries about nature being invaded by more agriculture in a rush to use biofuels. I'd like to know exactly where Brazil grows its sugarcane. It's unclear whether rainforest is being sacrificed to that end. A recent 60 Minutes piece on ethanol made no mention of land acreage. The report was dumbed-down to the point of offering no real education for the masses.

E.A.

http://enough_already.tripod.com/

If any other species behaved like Man we'd call it a plague.


John McCormick said at May 16, 2006 10:34 AM:

Is the US ethanol industry building itself in a box canyon?

I follow closely the NOAA and National Snow and Ice Data Center and other webs devoted to publishing archived and recent measurements of the Artic Ice melt back.

While the 2005 September meltback was the most extensive ever observed, the 2005-2006 winter freeze of new ice has been observed as alarmingly diminished. Some believe the meltback and diminished new ice formation may be the tipping point for a complete reversal of the natural occurance of Arctic ice melt in summer and refreeze in winter. In fact, a soon to be published report issued from the US Naval PostGraduate College in Monterey projects an ice free Arctic in summer months within the next 15 years.

Can anyone contribute sites and references to reports that equate Arctic ice meltback (turning 90 percent reflective surface to 40-60 percent absorptive surface) to climatic changes in Central and Western North America; i.e., the corn crib of North America? If precip and temperature changes are severe enough in those corn producing regions the crop yield could be affected to a degree unimagined by US corporations now investing hundreds of millions in new ethanol capacity to meet projected demand.

I find, on the internet, little to no disucssion about the questions an Arctic ice melt back raises. People looking only at the forest of renewable energy might be missing an important tree that can come crashing down on their policy house.

law said at November 27, 2007 10:09 PM:

People miss the real solution here. We can have ethanol as part of the solution but rather than trying to increase ethanol production up to 140 billion gallons per year in order to displace gasoline, we should be reducing our maximum liquid fuel consumption to match our ability to produce ethanol. So we can only make 25 billion gallons of ethanol, well then let's reduce our liquid fuel demand so that we only use 25 billion per year. Can we do this? hell yeah!!

Check out the GM volt. It's a E-REV or PHEV, this stands for extended-range electric vehicle or plug in hybrid. The volt will get 40 miles on only eletricty and then get 50 miles per gallon on gasoline, so on ethanol I guess it will get 40 miles per gallon. Imagine if you had 40 miles of electric only range every morning on your car, most people wouldn't even use any gasoline/ethanol. I wouldn't. Only for long trips. I think my personal demand for gasoline could drop below 10% of what it is today without changing driving habits; however, people will change driving habits and seek destinations that allow them to use mostly electricity. I'm sure we could get our demand for fuel down to 25 billion gallons in fact I think we could get it down to 14 billion per year.

So the point is that we boost ethanol production to around 15 billion gallons per year and allow it to increase only slowly from there, then we switch our fleet of vehicles, trains, farm equipment etc over to E-REV technology as a natural replacement and as this occurs our demand for liquid fuels reduce, we woud just simply reduce the gasoline supply and keep ethanol constant until just about all vehicles, tractors, etc are E-REV and our liquid fuel demand is around 15 billion gallons per year.

You know, this also follows peak oil theory as car replacement will be around 3-5% per year and oil decline is expected to be around that. What a great idea this is.

Larry Hedges said at January 8, 2008 5:34 PM:

Ethanol

Say what ever you want, but ethanol will be our salvation. Private enterprise will make the system work.

Government needs to get out of the way.

Larry Hedges

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