“For people in production agriculture, these soaring new sources of crop demand are pretty heady stuff,” agrees Keith Collins, USDA chief economist. “They are creating ethanol euphoria, similar to the export euphoria of the 1970s when the former Soviet Union first started importing our grain.”
A Good Thing
Many in the ag community, at least, are familiar with the benefits of biofuels. For one, these products burn cleaner, reducing carbon monoxide, greenhouse gas, and other toxic emissions. The fuels are also celebrated for their promise to reduce dependence on foreign oil.
Biofuels can be a boon to our domestic economy, particularly rural areas. “This is a home-grown, renewable energy source. It’s grown in America, refined in America, and used in America,” says Bob Thompson, sales and marketing manager at Town & Country Co-op, a Medina, OH-based retailer that serves both ag and the general public in 14 counties.
Shirley Ball, farmer and executive director of Ethanol Producers and Consumers (EPAC), says the benefits can really come “home” if farmers “can get a fair price for their commodity and be co-owners of processing plants.”
Biofuel advocates see no need to take sides, pitting corn-based fuels against soybean-based ones. “Many players in the renewable fuel industry realize that to make a larger dent in our intake of foreign oil, we need to provide all the renewable energies we can, in concert,” says Amber Pearson, communications specialist, National Biodiesel Board (NBB). “We see ourselves as team players rather than competitors.”
Meeting The Demand
USDA’s Collins estimates that to meet the growing ethanol demand, farmers will need to plant 90 million corn acres by 2010, 10 million more than this year.
Where are these extra acres going to come from? Pat Steiner, 25-year industry veteran and brand manager with Syngenta, suggests three possibilities: wheat acreage, Conservation Reserve Program (CRP) lands, and soybean holdings. He doubts a move away from wheat — but USDA’s Collins believes 7.2 million current CRP acres could be used to grow corn or soybeans “in a sustainable way.” However, much of the CRP’s 36 million acres are located in the northern Great Plains, where the dry climate does not favor corn, points out Robert Wisner, economist with Iowa State University Extension, in Illinois Farm Bureau’s Farmweek.
What about those soybeans? “I think that with the additional alcohol plants going up around us, the farmers have more market choices. I can see them planting more corn and less soybeans,” says Rick Peterson, general manager of Farmers 4-County Coop, Belle Plaine, IA. “The number of plants being built has certainly changed the landscape of corn marketing in the whole state.”
Then too, necessary crop gains won’t come strictly from increasing planted acreage. Breeding work continues to push higher yields and now, traits such as drought tolerance and better processing qualities are being tailored for the biofuel landscape.
How Did We Get Here?
Ethanol has been used as a fuel for going on two centuries now. In 1860, Nicholas Otto — best known for developing the modern internal combustion engine — used ethanol as a fuel in one of his engines. In 1898, when Rudolph Diesel demonstrated his compression engine at the World’s Exhibition in Paris, he used peanut oil, the original biodiesel.
In 1908, Henry Ford’s Model T was designed to run on a mix of gasoline and alcohol, a compound he prophetically called the fuel of the future. Hemp was the first ethanol biomass source. Vegetable oils were used in diesel engines until the 1920s when a change was made to the engine, allowing it to use a petroleum residue, now known as diesel #2.
During Prohibition (1919-33), ethanol could only be sold when mixed with petroleum. And during both World Wars, ethanol use increased temporarily with shortages of oil.
Come the 1970s, oil supply disruptions in the Middle East and environmental concerns brought renewed interest in biofuels, prompting Congress to enact a series of tax benefits to ethanol and biodiesel producers and blenders. This 25-year history of federal support for alternative energy also has meant monies for research, development, and construction of biofuel technologies.
Most recently, the Energy Policy Act of 2005 (EPAct) increases the amount of biofuel, usually ethanol, that must be mixed with gasoline sold in the U.S., tripling the current requirement (7.5 billion gallons by 2012). The act also gives per-gallon tax credits to both biodiesel and ethanol producers, and offers a 30% credit to gas stations to install clean-fuel equipment and pumps.
Biofuels gained another benchmark of support in 2006 when President George W. Bush announced the Advanced Energy Initiative (AEI) in his State of the Union address. The measure aims to accelerate the development of domestic, renewable alternatives such as biofuel, solar, wind, and hydrogen power as well as better use of coal.
Biodiesel is now used in over 200 major fleets in the U.S., including those run by the U.S. Post Office, U.S. military, metropolitan transit systems, and school districts. “The support and enthusiasm for biofuels coming from federal and state government is overwhelming,” says Tom Slunecka, executive director of the Ethanol Promotion and Information Council (EPIC). He attended the first-ever Renewable Energy Conference in St. Louis, MO, last month. Speakers included none other than President Bush, Secretary of Agriculture Michael Johanns, and Secretary of Energy Samuel Bodman.
Individually, states such as Iowa and Minnesota are getting into the fray. New legislation in Iowa, for instance, requires 25% of the state’s energy come from renewable resources by 2025.
Auto manufacturers are further advancing the technology. “The Big 3 have all made public commitments to ramp up the number of E85 vehicles they have,” Slunecka says. Currently more than 6 million E85 vehicles are on the road today, with more than 1,000 E85 stations to be in place by the end of the year.
NBB’s Pearson notes that while “only about 3% of the passenger vehicles on the U.S. market are diesel — vastly different from Europe, where about 50% are — that is set to change, according to JD Power and Associates. By about a decade from now, that 3% should be up to 10%. Of course, the tables turn when you’re talking about farm implements/machinery and more industrial-sized vehicles, which are largely diesel.”
Slunecka says that while ethanol is clearly ahead on the infrastructure curve, “biodiesel is coming on strong, extremely fast.” There will be nearly 80 biodiesel facilities operating in two years.
Education is key. Many consumers don’t realize they have “flex-fuel” vehicles that can run on ethanol (see www.e85fuel.com/e85101/flexfuelvehicles.php for a list). Slunecka outlined a few of EPIC’s plans for upcoming promotions, including talking with fans as they exit National Football League games on the East Coast and posting a Jumbotron ethanol ad in the middle of New York City during the month of November (and Macy’s Thanksgiving Day Parade). At EPIC’s Web site is an online learning module to train auto mechanics on “the ins and outs of using ethanol.” At the site, too, ethanol supporters can purchase hats, shirts, bumper stickers, and the like “because everybody in agriculture needs to be an advocate and tell their cousins and relations in the city that they need to make sure they’re purchasing ethanol,” Slunecka says.
Can anything throw the biofuel boom off track?
“Not much,” thinks Syngenta’s Steiner. The cost of producing the fuels continues to go down as technologies improve — developments which could quell protests that ethanol production is not energy-efficient enough.
In contrast, the technology to get ethanol from other cellulose sources such as wood chips, stalks, and switchgrass (less field production-intensive than corn) is developing very slowly, though President Bush’s AEI earmarks $150 million for research here.
Can those who fear ethanol will leave the world hungry derail the market? “The American farmer has proven over and over again he can step up to the challenge of producing more and more fuel and fiber,” comments Slunecka. And EPAC’s Ball points out that if developed, there could be a great human-food market for distillers dried grain, a byproduct of ethanol production. The distilling process creates a tidy package that still contains all the crop’s nutrients, including protein, fiber, germ, and vitamins, she explains. These products could then be used to enhance all kinds of food in the U.S. and abroad.
What if oil prices reverse substantially (though OPEC officials seem loathe to see it go below $50-some per barrel)? “I think even if crude prices dropped by 50% today, the market will continue to grow,” says ag retailer Thompson. “I think Americans are so skeptical … they’re just tired of being yanked around like a yo-yo by overseas oil-producing nations, many of which are not friendly to our government or our way of life.”
Many ag retailers are strong believers in the promise of biofuels. Thompson says his co-op began offering E85 this summer, and reports that sales have been “better than expected. We hope to break even with it in a year.” Town & Country has been selling biodiesel for several years and has a 12,000-gallon tank dedicated to storing soy methyl ester for blending with diesel fuel.
Sunrise Cooperative, Norwalk, OH, started offering biodiesel back in 2001, handling 55-gallon drums. “We now have bulk heated storage for 40,000 gallons and purchase over 500,000 gallons of pure soy methyl ester that we sell as straight biodiesel or as blends with regular diesel fuel,” explains Dwight Gessner, energy division manager. This blending accounts for over 6 million gallons of fuel per year.
Sunrise was ready to sell E85 at its retail site last year, but demand on ethanol caused the price to be too high to be competitive. Now, supplies are improving — and sales have been “fair. We need more flex-fuel cars at the consumer level,” says Gessner.