Cellulosic growth likely for ethanol industry

Source: By Terry Anderson, Iowa Farmer Today • Posted: Wednesday, May 11, 2016

LAVISTA, Neb. — Great market opportunities exist for the ethanol industry, Doug Durante said as he opened the Ethanol 2016: Emerging Issues Forum April 28.

“We can help the auto industry meet their requirements,” he said.

“They provide the cars to allow us to actually use the fuel, and the pumps and infrastructure will follow. And we know we can produce the fuel.”

Durante is executive director for the Clean Fuels Development Coalition, based in Bethesda, Md.

The 11th annual forum, held for the first time at the LaVista Conference Center, drew a cross section of the ethanol industry, from input producers to plant operators to fuel marketers and congressional and state lobbyists.

In particular, opportunities exist for low-carbon fuel programs. With increasing concerns over air quality, ethanol can be positioned as a healthier, more-efficient fuel.

Current regulations aren’t going to permit continued growth in corn-based ethanol production, Durante said.

“Little growth is expected, so we have to drive the demand,” he said.

Starch from corn has hit the production blend wall at about 15 billion gallons a year. Growth is most likely to come from cellulosic, he said.

If renewable sources aren’t going to drive more ethanol usage by consumers, Durante said that may happen by promotion of low-carbon, higher octane fuels, fuel economy and efficiency, health benefits and price.

“Ethanol can make major, significant contributions to addressing all these issues if it has access to the market,” Durante said.

“That access is blocked by EPA, but the wall is slowly being dismantled, and we know which bricks to pull out.”

Carbon is a major issue. Durante called it “the new black,” reflecting the recent Paris accords, at which upwards of 200 countries agreed to cut carbon levels.

Carbon dioxide (CO2) levels are driving the new corporate average fuel economy (CAFE) standards.

He added states may be seeking unrealistic reductions, with California’s Low Carbon Fuel Standard (LCFS) already at risk. Four alliances from the 1990s (West Coast, Great Lakes, New England and Mid-Atlantic) involved at least 18 states.

“That’s a lot of gas if all of them apply the California standards,” Durante said. “That’s good news with models opening up and creating a pathway for corn ethanol.”

Carbon reduction has become a global market, with carbon credits used as a monetized, tradable currency.

One credit equals a reduction of 1 ton of carbon dioxide, recently peaking at $132 per ton, Durante said.

The LCFS also has led to major investments in alternative power sources, noting $3.6 billion in solar power in Iowa led by Warren Buffett.

Automakers have been on board with new ethanol blends, he said, although the EPA has not.

“Flex-fuel vehicles work, but they’re being phased out in exchange for electric power,” he said.

With regulatory changes, the EPA could turn around the ethanol situation, including correcting what could block higher ethanol blends, reinstate or increase vehicle credits, raise minimum octane and enforce toxic limits, and streamline the certification process for higher blends.

If necessary laws and regulations were all approved, “all automakers will immediately produce vehicles that maximize the high octane and low carbon of ethanol,” Durante said.