Ethanol Supply Chain and Industry Overview: More Harm Than...
Transcript of Ethanol Supply Chain and Industry Overview: More Harm Than...
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Ethanol Supply Chain and Industry Overview: More Harm Than Good?
Authors: Sarah L Bruce
Advisor: Alexis Hickman Bateman, Edgar Blanco
Sponsor: Yossi Sheffi
MIT SCM ResearchFest May 23-24, 2012
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Ethanol Topics
• What is Ethanol?
• Thesis Objective
• Goals of Ethanol
• Key US Legislation
• Unique Ethanol Properties
• Unintended Consequences
• Ethanol Supply Chain
• Ethanol Environmental Effects
• Conclusion
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Thesis Objective
• To determine if ethanol nets society more harm than good, based on the aggregation of a number of studies
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Ethanol Goals
• Reduce Greenhouse Gas (GHG) emissions
• Eliminate dependence on foreign oil
• Reduce fossil fuel consumption
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Renewable Fuel Standard 2007 (RFS2)
• Mandates 36 bgal of biofuel by 2022
• 4 of those biodiesel
• 99 bgal gasoline used for transportation 2009 approximately 32% of transport fuel ethanol 2022
• RFS2 caps corn ethanol at 15 bgal (by 2015)
• Rest (22 bgal) must be fulfilled by Advanced Biofuels
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Ethanol Properties
• Corrosive
• Absorbs water
• Lower energy content
• Higher octane
Leads to “Blend Wall”
Higher than 10 percent ethanol (E10) creates difficulty transporting and in engines
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Transport: Farm to Ethanol Plant
• Bulky feedstocks mean ethanol plant needs to be close to harvest site.
• From Ethanol plant must travel to Blender terminal to be mixed with gasoline
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Ethanol Production and Distribution Gasoline Consumption & Distribution
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Transport: Ethanol Plant to Blender
• Pipeline constraints
• Demand on Rail Capacity increases significantly
• Infrastructure upgrades needed if ethanol blends over E10, which will be case this year
• US needs about $2.6 billion in transportation investment to meet demand
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Transport: Blender to Refueling Station
• Stations must upgrade components
• 156,065 refueling stations in US in 2013
• 2,339 ethanol refueling stations in US in 2013
• For ten percent availability: $1.6 billion capital investment. For presence at all gas stations: $18 bill
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End Use: Consumers and Cars
• 8 million Flex Fuel Vehicles on road in US
• Study showed consumers learn about decrease in energy content with E85 (85% ethanol) which results in a plateau in demand.
• Ethanol prices less than gasoline but not low enough to account for decrease in energy content.
• E85 represents very small portion of demand
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Summary of Supply Chain
• Given RFS2 mandates ethanol is about 32% of fuel in 2022.
• Total of at least $4.2 billion capital needed by private and government funds to upgrade infrastructure
• Results in much higher blends than E10, like E30. Given past consumer patterns they may not want.
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Unintended Consequences
Food versus Fuel
Land Use Changes
Direct and Indirect
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Food versus Fuel
• 10% of corn crop “Sweet corn” for human consumption. “Field corn” used for livestock feed or ethanol.
• In 2012 40% of corn crop went to ethanol production which produced 13.8 bgals of ethanol.
• 33% of ethanol production goes to distiller’s grain which is also used for livestock feed.
• 48% of corn crop still avail for feedstock
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Land Use Changes US crop yields have increased
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Land Use Change
• 52 countries with biofuel mandates over 60 bgals by 2022.
• US has nearly reached maximum amount of corn-based ethanol with current amount of land.
• Additional ethanol to come from cellulosic, sugarcane or other advanced biofuels.
• Cellulosic technology is slow to ramp up.
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Ethanol Environmental Impact
• Assessed using Lifecycle analysis
• Greenhouse Gas Emissions
• Iowa study showed some methods of ethanol manufacture results in 22% less ghg emissions than gasoline, but more gasoline if include global land use change.
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Lifecycle Greenhouse Gas Emissions
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Emissions GREET BESS* BESS** BESS***
CA GREET
Low
CA GREET
High
Crop Production 44 29 35 34
Biorefinery 43 30 31 25
Coproduct Credit -17 -16 -19 -22
Denaturant - - - -
Land Use Change - - - - 30 30
GWI 70 45 48 38 74.7 120.99
Gasoline 92 92 92 92 99.18 99.18
GHG Reduction -24% -51% -48% -59% -25% 22%1units in g CO2-eq/MJ combusted fuel
*MidWest, New Natural Gas
**Nebraska, Natural Gas
***Nebraska & N. Gas with wet distiller's grains only
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Conclusion
• Ethanol’s benefit to society is not a binary decision, good or bad.
• Criteria for judgment is not solely environmental.
• Should not be 100% of transportation fuel solution.
• Ethanol industry is very competitive.
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Recommendations
• Most studies and models do not account for the shipping south to Brazil for corn ethanol exports
• More capital investment for development of commercial scale cellulosic plants is needed.
• Could fuel policy be regional policy: Optimal fuel solution is likely geographically dependent.
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In Closing
Ethanol Policy and Execution of Policy must be managed and evaluated carefully. (i.e. do not cut
funding to the EPA)
Thank you for your time.
Questions?
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