Demand for Ethanol Increases as Technology Plows Forward

The demand for ethanol will continue to grow despite the fact that oil prices continue to drop and the energy sectors of today’s economy continue to struggle. That’s the thought being shared by ethanol industry experts in a recent article publised over on Renewable Energy World.

On August 31, 2009, Stephen Lacey posted an article titled: Think Ethanol is Going Away? Think Again.

In the article, Lacy writes…

Many people have been talking about the death of ethanol in the U.S. Due to both the falling price of oil and the dismal economy, companies have been going bankrupt left and right, production facilities are sitting idle and public excitement has flatlined.

The last year has certainly caused a great deal of turmoil in the industry. But make no mistake: The ethanol industry is far from being dead. In fact, the industry will produce more fuel this year than it did last year.

In 2008, the U.S. produced around 9.2 billion gallons of ethanol. This year, we will likely see more than 10 billion gallons.

“There is this misperception that the ethanol industry has gone away,” said Jeff Broin, the CEO of Poet, the nation’s leading biofuel producer. “But we’re actually producing more fuel this year. There’s not much of a build-out of new facilities, but we’re still pumping out fuel.”

Advocates are hailing this as proof that the ethanol industry is still strong, despite a very tumultuous year. Detractors of corn ethanol are mourning the continuation of an industry that they say will do little to reduce oil consumption and even less for the environment.

Whatever you think about ethanol, the fact is that it is here to stay for a while. The question is: Can the industry scale up production of cellulosic fuels fast enough to make the industry sustainable? No one really knows yet.

The author then introduces a more promising question for those who support ethanol over traditional pteroleum fuels: Is there enough supply to meet the growing demand?

Perhaps not.

Again, author Stepehn Lacey writes more on the topic:

“There’s still a lot of growing up to do in the cellulosic area,” said Broin in an interview for an upcoming edition of our Inside Renewable Energy podcast. “We’re trying hard. But we’re not going to get very far without an increase in the blend wall for ethanol.”

The current blend wall, set by the Environmental Protection Agency, requires fuel blenders to add 10 percent ethanol into gasoline. Broin and others say that wall needs to come up to at least 15 percent in order to create a market for cellulosic fuels.

If that wall does not expand and there is no additional market for the fuel, investors will not see any reason to put money into new, risky projects, he said.

If ethanol is to be a major part of the fuel mix, cellulosic fuels will have to play a role — and not just for socio-economic and environmental reasons. Even if it were a good idea, our nation’s corn crop could never make a major dent in total oil consumption. We need a variety of feedstocks that can be grown on marginal lands. That diversification is key to the future of the ethanol industry.

“I think everyone recognizes that we need to get these cellulosic fuels going,” said Rick Kment, an analyst with DTN Research. “It needs to happen, but right now the market isn’t really there.”

So how will the market for next-generation fuels get created? And given all the turmoil taking place in the industry, will it ever take place? Many analysts believe that the current crisis could be an opportunity for a rapid restructuring of the industry. Others believe that cellulosic fuels will be too expensive and cumbersome and that electricity should be the fuel of the future.

There are a lot of competing views, but no clear cut answers. But we can try to find them.

If you’re interested in hearing more on the discussion of biofuels, you may want to check out the Renewable Energy Podcast, which will debut this Thursday online.

Categorized | Energy, Energy & Fuels
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