January 3, 2012. On Sunday January 8th, the 30-year old ethanol subsidy will expire. Given the price of gas, and the escalating federal alternative-fuel mandate, there will likely be little or no drop in production. Tax payers will pay less by 45¢/gallon of ethanol or 4.545¢/gallon of the gasoline-blend most of us buy. But that does not mean we will pay more at the pump.
The reason the ethanol industry has lobbied hard for this in the past is because they get the money. And that means that without the subsidy they would lose the money. And that means they don't think they could just pass the cost on to us. This makes sense economically, because in the long-run, the price of ethanol sticks very close to the price of gasoline. So I think this is a win for taxpayer/drivers, and a loss for the ethanol factories.
But it won't help the environment. Ethanol will still increase CO2 emissions a bit because it requires significant fossil inputs and because producing a barrel of ethanol will not force Saudi Arabia or Exxon to [#pump a barrel less of oil]. Besides the CO2 emissions, the increased production of corn requires huge amounts of nitrogen fertilizer, much of which which ends up in the Gulf of Mexico, and it raise the price of corn for the worlds poor. Subsidies, even environmental ones, are usually poisonous (research is the main exception.)
We use only data from pro-corn-ethanol researchers, & the National Academy of Sciences —no data from anti-ethanol researchers. We love cellulose ethanol.
Energy Independence? 2.8%
According to the pro-corn-ethanol US Dept. of Agriculture, 2006 ethanol production was enough for 1.5% oil independence, and by 2017, we will max out at 3.7%. But this ignores the foreign fossil energy input to ethanol production, shown at the right. (see Driving)
Greenhouse gas reduction? 0.2% max
Less than 0.2% in 2017. These global warming emissions calculations based on data from the National Academy of Sciences (NAS), which is more optimistic than data from UC Berkeley's Renewable and Appropriate Energy Lab. Corn's heavy use of nitrogen fertilizer is contributing to the dead zone in the Gulf of Mexico — the NAS again.
How did we get into corn ethanol anyway?
Follow the money. Huge subsidies, huge profits, lots of votes. The politicians are for it. They're doing the math, but not the global warming emissions math. Who started it?
How big are the subsides?
In 2006, the feds paid ethanol blenders $2.5 billion and ethanol corn farmers $0.9 billion. We paid an extra $3.6 billion at the pump. Total was $2.21 extra per gallon of gasoline replaced. Of all that, $5.4 billion went for windfall profits, creating what USDA's chief economist called "ethanol euphoria."
|[=pump a barrel less of oil] Producing more ethanol cause oil producers to pump less, and oil users to use more. There is no direct effect—nothing forces any producer or consumer to change behavior—so the effects work only through the world price of oil. The net result is that ethanol displaces roughly 70% of what environmentalists expect. So its carbon reduction is 30% less and that ends up meaning that the ethanol production actually increases carbon emissions. So Why does the Environmental Protection Agency mandate it? Because environmentalists are not good economists. Here's the paper I wrote on this for the Clean Air Task Force, to help them sue the EPA to stop the ethanol mandate.|
|[=PopNotes] Just hover over green-underline links above to see the "pop" notes.|
Many who want to slow global warming support corn-ethanol subsidies. It seems to make sense because corn takes CO2 out of the atmosphere so using corn-ethanol is carbon neutral. The problem is that making corn ethanol makes lots of GHGs.
ADM, a big multinational corporation, was the first big lobbyist for corn ethanol, but once it got going the farm states got behind them. It's not just the ethanol makers who make money, all corn farmers make money, even the ones who sell their corn for chicken feed, or corn syrup. The demand for ethanol corn drives up the price of every bushel of corn, and corn is the biggest crop in the US.
In 2006, over $8 billion in subsidies (some direct and some from artificially high ethanol prices) went into the ethanol market. This doesn't even count the extra money made on the 80% of corn that is not used for ethanol. Any politician that tries to cutting off that much money will lose a lot of votes. Here's the ADM story.
How ADM makes a killing on ethanol
Excerpts from the NY Times, June 25, 2006
Farmers are seeing little of the huge profits ethanol refiners like Archer Daniels Midland (ADM) are banking. ... The ethanol explosion began in the 1970's and 1980's, when ADM's chief executive, Dwayne O. Andreas, was a generous campaign contributor and well-known figure in the halls of Congress who helped push the idea of transforming corn into fuel.
Given the glut in corn, the early strategy of Mr. Andreas was to drum up interest in ethanol on the state level among corn farmers and persuade Washington to provide generous tax incentives. But in 1990, when Congress mandated the use of a supplement in gasoline to help limit emissions, ADM lost out to the oil industry, which won the right to use the cheaper methyl tertiary butyl ether, or MTBE, derived from natural gas, to fill the 10 percent fuel requirement.
Adding to its woes, ADM was marred by scandal in 1996 when several company executives, including one of the sons of Mr. Andreas, were convicted of conspiracy to fix lysine markets. The company was fined $100 million. Since then, ADM's direct political clout in Washington may have waned a bit but it still pursues its policy preferences through a series of trade organizations, notably the Renewable Fuels Association. ...
But ADM has not lost interest in promoting ethanol among farm organizations, politicians and the news media. It is by far the biggest beneficiary of more than $2 billion in government subsidies the ethanol industry receives each year, via a 51-cent-a-gallon tax credit given to refiners and blenders that mix ethanol into their gasoline. ADM will earn an estimated $1.3 billion from ethanol alone in the 2007 fiscal year, up from $556 million this year, said David Driscoll, a food manufacturing analyst at Citigroup. ...
ADM has huge production facilities that dwarf those of its competitors. With seven big plants, the company controls 1.1 billion gallons of ethanol production, or about 24 percent of the country's capacity. ADM can make more than four times what VeraSun, ADM's closest ethanol rival, can produce.
Last year, spurred by soaring energy prices, the ethanol lobby broke through in its long campaign to win acceptance outside the corn belt, inserting a provision in the Energy Policy Act of 2005 that calls for the use of 5 billion gallons a year of ethanol by 2007, growing to at least 7.5 billion gallons in 2012. The industry is now expected to produce about 6 billion gallons next year. ...
Now, government officials are also pushing for increasing use of an 85-percent ethanol blend, called E85, which requires automakers to modify their engines and fuel injection systems.
In the ultimate nod to ADM's successful efforts, Mr. Bodman [Energy Secretary] announced the new initiatives in February at the company's headquarters in Illinois.
"It's been 30 years since we got a call from the White House asking for the agriculture industry, ADM in particular, to take a serious look at the possibilities of building facilities to produce alternative sources of energy for our fuel supply in the United States," said G. Allen Andreas, ADM's chairman and Dwayne Andreas' nephew. ...
Boom in Ethanol Reshapes Economy of Heartland
By ALEXEI BARRIONUEVO, June 25, 2006, New York Times
What's in the 2005 Energy Bill?
On the gasoline front, the big ticket item is subsidies for ethanol—as usual. Archer Daniels Midlands (ADM) owns 7 ethanol plants with a production capacity of 1,103,000,000 gallons per year. The ethanol tax subsidy is 51¢/gallon, so that comes to $562,000,000/year. (Now there's a lobbying effort that paid off.) But we need energy independence, right? Unfortunately, reducing fossil imports by the energy in 1 gallon of gasoline costs us a couple dollars in subsidies. (There is hope for better ethanol.)
Why we like cellulosic ethanol
Only a small part of most plants is sugar or starch, the part that can be digested by humans and fermented by yeast into ethanol. Most of the rest is cellulose. Naturally, using the bulk of the plant is more efficient. Better yet, we need not use our food plants. Some grasses store more energy in cellulose than does corn, and require far less nitrogen fertilizer, far fewer pesticides, and less process heat (energy).
The main drawback now is expense. Of course cellulose ethanol could be overdone like anything else, but much more could be produced with much less ecological damage. And with some plausible advances, it could be cheaper than gasoline.
Shown below is a table from the Chief Economist, USDA, March 2007 cellulosic ethanol. It's the best snapshot you'll find of the current state of cellulosic ethanol production.
The first demonstration plant making cellulose ethanol
Currently, Iogen Corporation in Ottawa, Canada produces just over a million gallons annually of cellulose ethanol from wheat, oat and barley straw in their demonstration facility.
Best summary of Cellulose Ethanol —DOE's 2006 Annual Energy Outlook
Inside the first cellulose-ethonal plant
Currently, Canada’s Iogen Corporation is trying to commercialize an enzymatic hydrolysis technology for ethanol production. The company estimates that a plant with ethanol capacity of 50 million gallons per year and lignin-fired CHP will cost about $300 million to build. By comparison, a corn ethanol plant with a capacity of 50 million gallons per year could be built for about $65 million, and the owners would not bear the risk associated with a new technology. Co-location of cellulose ethanol plants with existing coal-fired electric power plants could reduce the capital cost of the ethanol plants but would also limit siting possibilities.
A commercial cellulose-ethanol plant is on its way
Vinod Khosla, a co-founder of Sun Microsystems and a venture capitalist who bet big and early on Google and Amazon, is now betting on Celunol Corp. Celunol is developing a 55-million gallon ethanol production facility in Jennings, Louisiana [Which seems to have gone bust -- 11/2011]. That's 55 times bigger than the Canadian demonstration plant—this is a full-blown commercial plant.
In 1995 Celunol bought rights and patents from the University of Florida to commercialize their cellusose technology and has since acquired and developed more cellulose technology.
The sugar in cellulosic biomass is locked up in cellulose, which contains normal C6 sugar, and hemicellulose, which contains Xylose (C5) sugar. Since normal yeast can't ferment Xylose, Celunol has acquired genetically engineered E. coli bacteria which can turn almost all of it into ethanol.
The diagram explained. First the hemicellulose in the biomass is broken into Xylose sugar (gray bar). Then the Xylose is separated from the remaining cellulose (blue bar). The Xylose is fermented with E. coli (top yellow), and the cellulose is broken down into normal glucose (red) which is fermented the normal way (bottom yellow). Finally all the ethanol is distilled (the water and lignin byproducts removed). The lignin is burned in the the still's boilers.
A Report from Fortun "Brainstorm" During a discussion on energy resources this afternoon (June 29, 2006) Vinod Khosla offered a deal to Royal Dutch Shell CEO Jeroen van der Veer. Khosla said he'd be willing to sign a long-term fixed-price contract guaranteeing to supply Shell with ethanol. The price would be set to allow Shell to retail the stuff for $1.99 a gallon at the pump and make a profit. Or something like that--Afterwards I saw Van der Veer and Khosla sitting in the shade of a tree on the Aspen Institute grounds, deep in discussion.
Iogen's Milestone: It's Selling Ethanol Made of Farm Waste
By CHRISTOPHER J. CHIPELLO
Staff Reporter of THE WALL STREET JOURNAL. April 21, 2004
MONTREAL -- Iogen Corp., a Canadian firm at the forefront of efforts to turn agricultural waste into ethanol, has become the first supplier of such biofuel to the commercial fuel market.
The moderate initial shipment marks a milestone in the development of so-called cellulose ethanol, made from farm refuse such as wheat straw and corn stalks, instead of the corn or other grains used for the ethanol now commonly blended with gasoline. Turning farm waste into fuel for automobiles has long been an alluring, but technically tricky, prospect.
Iogen officials have said they hope to begin work on a full-scale commercial plant next year, but significant hurdles remain.
Iogen is ahead of other firms seeking to commercialize ethanol from farm waste, said John Ashworth, an official of the Department of Energy's National Renewable Energy Laboratory in Golden, Colo., which has a pilot plant where companies test cellulose-ethanol concepts. Iogen's much-larger plant in Ottawa is the only demonstration plant for the technology, he said.
The plant, which has an annual production capacity of 260,000 gallons, began about two weeks ago to turn wheat straw into ethanol that meets Canadian fuel specifications, according to people familiar with the situation. Petro-Canada will take delivery today of Iogen's initial 1,300 gallon shipment.
Proponents of cellulose ethanol argue that it has great potential to help reduce greenhouse-gas emissions, since the feedstock is readily available as a byproduct of farm crops. But wheat straw or corn stalks must be broken down into sugars that can be fermented, making the production process for cellulose ethanol more complex and costly than for conventional ethanol. Iogen and others have been developing techniques to reduce those costs.
Within the next year or so, Iogen hopes to begin construction of the full-scale plant, which would cost around US$250 million, and have annual production capacity of about 52 million gallons. But company officials have acknowledged that the risks involved in scaling up production will make it difficult to secure conventional financing for the project.
Gas prices are soaring, pipelines are burning.
Here are four ways to fix the mess before the well runs dry.
Fortune Magazine, 23 August 2004
One biomass fuel offers tremendous promise, though it will take time to put into wide-scale use, is cellulosic ethanol-- which shouldn't be confused with corn-based alcohol best known for the size of its subsidies. Cellulosic ethanol is made from switchgrass, poplar trees, and straw. And it yields more energy than the corn version, says Carnegie Mellon University economist Lester Lave.
One group of supporters, the Energy Future Coalition, a bipartisan group that includes ex-Senator Wirth and Republican former White House counsel Boyden Gray, has put forth its own modest proposal. The World Trade Organization has issued rulings against farm subsidies for cotton and sugar. If the rulings stand, the US will need to either end the subsidies or pay billions in fines. As Wirth puts it, "No politician I know wants to take something away from a lot of constituents." He proposes shifting subsidies from cotton and sugar to switchgrass and trees. It would cost the government nothing, but would provide benefits for consumers, farmers, and even the environment (grass and trees take a lesser toll on land than cotton). Even without the subsidy swap, a $500- million-a-year investment in ethanol could pay off bigtime, allowing for gas spiked with 20% cellulosic ethanol within 20 years. All of a sudden--if you assume that hybrids and other measures hold the line on usage--you can actually reduce gasoline consumption by that same 20%.
Reality check: Like most alternative fuels, cellulosic ethanol is expensive (though subsidies will reduce the cost), and significant production remains at least five years away. As of now only one plant--run by a company called Iogen in Canada (with the support of Shell)--is producing it. Moreover, as economist Lave acknowledges, many tens of millions of acres would be required to grow the biomass. Still, it is promising enough that it earned the endorsement of a Pentagon-commissioned study last year, which looked at how the US can prepare for a post-oil world.
Make ethanol from cellulose, not corn starch
John D. Podesta speaking to the Appolo Alliance
Detroit, Michigan, February 9, 2004
Instead of using the starch from the corn kernel, using cellulose will increase the amount of ethanol from a crop because more of the plant will be used. This also avoids the consumption of food crops for industrial applications.
Starch-based ethanol has limited benefits in terms of oil displacement and greenhouse gas emissions, due to the substantial fossil fuel inputs required to grow grain and convert it to alcohol.
The benefits of cellulose conversion are dramatically larger; indeed, a conventional internal combustion engine operating on cellulosic ethanol produces fewer greenhouse gas emissions on a life-cycle basis than a fuel cell operating on hydrogen derived from fossil fuels.
The energy of ethanol relative to gasoline
A. 76,000 = BTU of energy in a gallon of ethanol
B. 116,090 = BTU of energy in a gallon of gasoline
C. .655 = 2/3 = GGE of energy in a gallon of ethanol. A / B. (GGE =energy in a gal. of gas)
D. 1.53 = Gallons of ethanol with the energy of 1 gallon of gasoline. D = B / A.
The basic story on ethanol mileage and cost
Some Ethanol proponents claim it doesn't hurt their mileage, but this goes against physics, and you will not find the ethanol lobby making such fraudulent claims--they could be sued. But just to be sure, zFacts analyzed all of EPA's ethanol mileage tests for one year and, big surprise, ethanol gave exactly 2/3 the mileage of gasoline.
Now there is one possible loophole and it is used by a Swedish sports car, the SABA 9-5 Bio-power. Here's the trick. Higher compression ratios make engines more efficient, and because of its high octane, ethanol can take a higher compression ratio. The Bio-power is turbo charged and when it uses E85 it switches to a higher compression ratio. It still gets fewer mpg on ethanol, but it does a little better. Unfortunately it's very expensive. An easier approach is to use diesel, which also gives you a high compression ratio and mileage as good as a hybrid at less cost. That's why all big trucks are diesel.
The USDA tells us that ethanol cost 57¢ more per gallon on average over the last 25 years (and it still does). Put that together with the fact that it takes 1.53 gallons to equal a gallon of gasoline.
23% extra fuel cost of using E85 with 2006 models
The EPA has measured the gas mileage of 2006 flexible fuel models. For the 31 models they tested the average reduction is 26% fewer miles per gallon. For example a car that gets 30 mpg on regular would typically get 22.2 mpg with E85. This is exactly what is predicted from the fact that E85 has less energy per gallon than gasoline.
For these calculations, the EPA assumes that E85 costs $2.00 and regular $2.20/gallon. Obviously they are on the low side, especially for ethanol, but this proportion is similar to what DOE predict for the next few years. The loss in mileage more than makes up for the cost savings, and on average the EPA predicts driving on E85 will cost 23% more than driving on regular.
Here's a letter from someone using only E85.
He's getting slightly worse mileage than predicted by ethanol's low energy: 2/3 the energy of gasoline. But Sam has been fooled by the deceptive (but true) claim that Ethanol has high octane and thinks he should actually get better mileage.
I have a 2003 Chevrolet Suburban. The ONLY fuel I have used on this vehicle is the Ethanol 85, and I am not happy.
1.) I have seen that in other states the price of Ethanol is LOWER than regular gas. I go to the gas station in Annapolis, Maryland on West Street. The price for this fuel is $1.95 per gallon. The regular gas price is $1.43 per gallon in my area.
2.) This fuel is rated at 100 Octane and SHOULD result in better fuel mileage. My vehicle is rated from 16-22 MPG. Since I have gotten this vehicle and using this fuel I cannot get ANY better than 13.2 MPG.
I believe in this program and want to continue to support it. I am a retired police officer and not made of money. My friends laugh at me and call me a fool. They say my intentions are great, but NOT at that cost.
This letter was posted by National Ethanol Vehicle Coalition. They answered, but did not tell him why he was getting low mileage—they don't want people to know.
This is what the Iowa Dept. of Agriculture tells us:
"E85 is priced to be competitive with 87-octane gasoline. In Iowa, prices typically range about 8-10 cents more than regular unleaded."
Even at the same price, E85 would be 41% more expensive than regular gasoline.
Ethanol has only about 2/3 the energy of gasoline
The lower heating value (LHV) of conventional gasoline = 115,500 Btu/gallon
Hence it takes 115.5/76 = 1.52 gallons of Ethanol to replace the energy in one gallon of gasoline.
Every fuel has two energy values, sometimes called lower and high heating values. The lower value is the energy you can get without condensing the water out of the exhaust. "Condensing furnaces" for your home do just that and can almost recover the higher heating value. Cars cannot use steam in their exhaust; it just goes out the tailpipe.
For cars, and all internal combustion engines, the lower heating value is the relevant value, yet DOE almost always publishes the higher heating value.
How much should you pay for E10 and E85?
If regular gas is $3.00/gallon you should pay
$2.90 / gallon for E10 (10% ethanol).
$2.13 / gallon for E85 (85% ethanol).
If regular gas is $2.00/gallon you should pay
$1.93 / gallon for E10 (10% ethanol).
$1.42 / gallon for E85 (85% ethanol).
Then you will be paying the same amount per mile driven.
The formula is this: For EX, where X is the percent ethanol
Ethanol price should = Gasoline price times (100 – X + X/1.52)/100
Notice that 100 – X is the percent of gas and X/1.52 is the percent of ethanol adjusted down by about 2/3 because it has less energy.
New Recipe For Gasoline [Ehanol] Helped Drive Up the Price
NY Times, May 6, 2006, By MATTHEW L. WALD
WASHINGTON, May 5 — Nine months after Congress passed major energy legislation, one provision affecting gasoline formulas is helping to drive the price of gas up much faster than the rising price of crude oil.
Ethanol is pricey and energy-poor. Its price is up by about $1.30 a gallon in the last year, in part because of heavy demand for something to replace MTBE. But ethanol has only about two-thirds as much energy.
And because the new gasoline recipe contains less energy, mileage per gallon is declining.
On Friday, ... the Energy Policy Act of 2005 ended the requirement that gasoline sold in areas prone to air pollution include an "oxygenate." ... Refiners over most of the country's big gasoline markets, anticipating the rule, have already dropped the chemical MTBE.
The refiners were not explicitly required to drop MTBE, but virtually all have done so because it has polluted groundwater and exposed them to liability suits. ... But now refiners must replace that ingredient. And they need a substitute that is also high octane, as MTBE is. Refiners have turned in part to ethanol, which is also an oxygenate but not a pollution worry.
Ethanol costs more than gasoline, and shipping it from the Midwest, is cumbersome and expensive, because it has to go by barge, railroad tank car or tanker truck, rather than pipeline.
West Texas Intermediate, the American benchmark oil, was up only about 39 cents a gallon last month compared with April 2005, while the wholesale price of gasoline rose about 64 cents over the same period. ... Experts at the Energy Department, the refiners' trade association and elsewhere agree that the changeover from MTBE was a factor, although they differ about the amount. ...
The oxygenate requirement has been obsolete for years. It was intended to make the fuel mix leaner, reducing air pollution. But that works only on older cars, with carburetors, not in modern vehicles with oxygen sensors and fuel injectors.
Does the SAAB 9-5 beat the ethanol mileage problem?
Autobog gives these values.
More ethanol subsidy info from the heart of ethanol country. June 2, 2009
Corn ethanol subsidies totaled $7.0 billion in 2006 for 4.9 billion gallons of ethanol. That's $1.45 per gallon of ethanol (and $2.21 per gal of gas replaced).
Even with high gas prices in 2006, producing a gallon of ethanol cost 38¢ more than making gasoline with the same energy, so ethanol did need part of that subsidy. But what about the other $1.12. Not needed! So all of that became, $5.4 billion windfall of profits paid to real farmers, corporate farmers, and ethanol makers like multinational ADM. Why is it the farm states put up with this?!
Where did those subsidies come from:
That's quite a bit when you figure it only made us 1.1% more energy independent and only reduced US greenhouse gases by 1/19 of 1%.
Who should get the subsidy?
In 2006 ethanol blenders were handed $2,500 million in subsidies while the Department of Energy awarded $385 million spread over four to six years to help build cellulose ethanol plants. That's about 32 times less per year. But celluse gets a bit of subsidy from the USDA. Altogether it may get 10% as much as corn-ethanol. The problem is the lobby for cellulose is much weaker than the corn-ethanol lobby.
Corn ethanol does not need subsidies. Cellulose ethanol research does--it would actually do some good. But's what's needed is research, and very small-scale plants, not the big ones that are being built on pretense.
Oil get's big subsidies, not ethanol. Wrong by 54 times!
"Ethanol Today," (8/'05) states "Five years ago, a US General Accounting Office report showed that ethanol had received $11.6 billion in tax incentives since 1968, while the oil industry had received over $150 billion in tax benefit over the same period.
Probably true. But the oil industry produced 1068 times more energy so the subsidy rate per unit energy was 54 times higher for ethanol. That's like ethanol gets 54¢ and oil gets 1¢. Now if we had oil subsidies, and we do, and ADM is making more profit than ...