In lean market, efficiency improvements key for ethanol

Source: By Will Vraspir, Hastings Tribune • Posted: Tuesday, March 29, 2016

Improving efficiency in the ethanol industry has been crucial to its survival during economic downturns.

Todd Sneller, administrator of the Nebraska Ethanol Board in Lincoln, pointed to a recent study by the U.S. Department of Agriculture that highlighted the improvements in efficiency.

When the ethanol industry started, the energy put into processing at a plant was barely less than the energy created. For every unit of fossil energy put into a plant, 1.2 to 1.5 units of energy was produced.

“Now the latest USDA study says that for every unit of fossil energy going into a plant, there are four units of energy that come out of that,” Sneller said. “That’s a terrific increase over time.”

He pointed to companies using different seed varieties that improve oil extraction or starch conversion and other improvements to develop the ethanol sector over time. He said the companies that invested the large amounts of money they made at the beginning were able to lower production costs to help sustain themselves through economic downturns in the industry.

“I’ve been interested in seeing those trends because they speak to a maturing of the sector as time has gone on,” he said. “In times of marginal profitability, like we’re in now, the focus really has evolved to recognize if you’re sloppy during those periods, you’re probably going to have a tough go of it.”

With stricter carbon emission regulations being enacted around the globe, Sneller said, ethanol has become more popular in the world market.

“A lot of this is going to places in the world where low carbon fuel standards have been embraced to a bigger extent than they have in the U.S., so those really become the emerging markets in the ethanol sector,” he said.

Besides a lower cost, he said, ethanol needs to leave its mark with its other added values, including lower carbon intensity and lower toxicity. Given its higher octane and cleaner burning components, ethanol has a competitive advantage over gasoline when one is looking to comply with carbon emission and greenhouse gas regulations.

But Sneller said he is concerned about the Environmental Protection Agency’s undermining of the Renewable Fuel Standard requirements set out by Congress in the Energy Independence and Security Act of 2007.

The bill set out to increase the volume of renewable fuel product to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022. At this point, however, the EPA has lowered the associated incremental increases several years in a row.

Instead of the robust growth expected, he said, the ethanol sector has seen policy languish in oil industry lawsuits. Investors are ready to support new technology being developed in the emerging market, but it’s being hampered by the EPA’s actions.

“Because the EPA has insisted on undermining the standards that Congress has set, it’s caused a lot of hesitation so you see delays in rolling out new technology,” he said. “That sort of uncertainty really puts the brakes on investment.”

While oil lobbyists try to cast aspersions on the ethanol industry, Sneller said, people need to examine the real price of oil, including money spent protecting shipping lanes, cleaning up oil spills and tending to public health and the environment.

And it doesn’t just affect the ethanol sector.

Sneller said automakers need a higher-octane fuel to meet the carbon emission standards imposed on them. Automakers have developed small engines that operate at a lower cost but require a higher octane fuel. But before they can produce vehicles that perform best at E25 or E30, they need to be assured those biofuels will be available.

He said promoting a variety of ethanol blends would also give consumers options.

“What we’re trying to do is make sure that when you pull up to a gas pump, you have a choice other than 100 percent hydro-carbon product,” he said. “You have a choice of ethanol blends that may range up to 85 percent. That’s been the real push — to give consumers a choice.”