May 2012 Ethanol Producer Magazine

MAY 2012

INSIDE: ADVANCING FEEDSTOCK PATHWAYS

ALSO Ethanol Producers Respond to Tight Margins, Big SuppliesPage 34

Energy Beet Ethanol Projects Moving ForwardPage 48

www.ethanolproducer.com

World’s First Commercial-Scale Cellulosic Plants Near CompletionPage 42

Steelin theGround

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4 | Ethanol Producer Magazine | MAY 2012

MAY issue 2012 VOL. 18 issue 5

contents

Ethanol Producer Magazine: (usPs No. 023-974) May 2012, Vol. 18, issue 5. Ethanol Producer Magazine is published monthly by BBi international. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

fEAturESDEPARTMENTS

6 Editor’s Note First-Gen Adjustments, Second-Gen Developments By SuSanne Retka Schill

7 Ad Index

10 Events Calendar Upcoming Conferences & Trade Shows

12 View from the Hill Ethanol: Increasing National Security By BoB dinneen

14 Drive Solution to Today’s Energy Crisis is Here Today By tom BuiS

16 Grassroots Voice Beware of Dog By BRian JenningS

18 Europe Calling Looking Beyond the Obvious By RoB VieRhout

20 Business Matters Ethanol Producers Field EPA 114 Information Requests By todd PalmeR and anna Wildeman

22 Business Briefs

24 Commodities report

28 Distilled

72 Marketplace

CeLLuLOsiC eTHANOLSteel in the Ground First cellulosic ethanol plants near completion, including one in ItalyBY KRIS BEVILL

60 susTAiNABiLiTYEu requires Sustainable BiofuelsAbout getting certified to export ethanol to EuropeBY ANTjE GRzESIK

64 PROJECT DEVELOPMENTIowa Partners to Develop Cellulosic ProjectsSecretary of Agriculture outlines Iowa advantagesBY BILL NORTHEY

68 ENERGYEnergy Management: Project or Process?Planning to achieve 10-20 percent energy savingsBY jARON VANDE HOEF

PRODUCTION reining in Production: Hunkering Down as Margins, Supplies rebalanceFirst-quarter margins tight due to seasonal pressures, other factorsBY HOLLY jESSEN

PATHWAYsAdvancing Pathways for Advanced feedstocks Three energy grasses evaluated: energy cane, giant reed and napiergrassBY ERIN VOEGELE

FEEDSTOCKEnergy Beets: Who Will Leap first?Plans advance to use well-known, but little-used feedstockBY HOLLY jESSEN

CONtrIButIONS

4234

48 54

MAY 2012

INSIDE: ADVANCING FEEDSTOCK PATHWAYS

ALSO Ethanol Producers Respond to Tight in Margins, Big SuppliesPage 34

Energy Beet Ethanol Projects Moving Forward8

www.ethanolproducer.com

World’s First Commercial-Scale Cellulosic Plants Near CompletionPage 34

Steelin theGround

ON tHE COVErM&G’s 13 MMgy cellulosic ethanol facility is nearing completion in Crescentino, Italy. PHOTO: MOSSI & GHISOLFI GROUP


editor’s note

SuSanne Retka Schill, [email protected]

fIrSt-GEN ADjuStMENtS,SECOND-GEN DEVELOPMENtS

FOR INDUSTRY NEWS. FOLLOW US: tWIttEr.COM/EtHANOLMAGAzINE

APRIL 8-10, 2013Minneapolis Convention CenterMinneapolis, MN

save the date2013 event

Contact us:[email protected] Follow Us: twitter.com/biomassmagazine

NETWORKING OPPORTUNITIESSPEAK. EXHIBIT. SPONSOR. ATTEND.

the ethanol industry broke some records early this year: record ethanol stocks were reported in the first quarter as well as a record spread between ethanol prices and gasoline for blending, with ethanol more than $1 lower. those record numbers, plus negative margins and the looming blend wall, raise the question of what it might mean for the industry. associate editor holly Jessen sets out to learn what the industry is saying and reports what she learns in her production feature starting on page 34. While no one has a crystal ball and many express concerns that the ethanol industry needs to make adjustments, all agree the industry has become much stronger in the past five years, since the 2008 downturn, and is applying the lessons learned.

As the first-generation ethanol industry reaches maturity, the cellulosic ethanol in-dustry is readying its commercial debut. in this issue, ePm associate editor kris bevill takes a closer look at several projects expected to begin producing cellulosic ethanol later this year, including a 13 mmgy facility nearing completion in crescentino, italy. Guido Ghisolfi describes the approach his family-held Mossi & Ghisolfi Group is taking to cel-lulosic ethanol.

For other advanced biofuel developers, a major hurdle to overcome is getting the feedstock of choice approved for the renewable fuel standard. associate editor erin Voegele discusses the work underway to approve the pathways for three such grassy feedstocks: napiergrass, giant reed and energy cane. Jessen interviews several developers of yet another feedstock. While adding ethanol production capacity to sugar-producing plants has been a model in brazil and europe, the north american developers Jessen speaks with are looking at energy beets.

MAY 2012 | Ethanol Producer Magazine | 7

TM

EDItOrIALEDITOR

Susanne retka Schill [email protected]

ASSOCIATE EDITORS Holly jessen [email protected]

Kris Bevill [email protected]

COPY EDITOR jan tellmann [email protected]

ArtART DIRECTOR

jaci Satterlund [email protected]

GRAPHIC DESIGNERLindsey Noble [email protected]

PuBLISHINGCHAIRMAN

Mike Bryan [email protected]

CEO joe Bryan [email protected]

VICE PRESIDENTtom Bryan [email protected]

SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor [email protected]

EXECUTIVE ACCOUNT MANAGER Howard Brockhouse [email protected]

SENIOR ACCOUNT MANAGER jeremy Hanson [email protected]

ACCOUNT MANAGERSMarty Steen [email protected] Brown [email protected]

Andrea Anderson [email protected] Austin [email protected]

CIRCULATION MANAGER jessica Beaudry [email protected]

ADVERTISING COORDINATOR Marla Defoe [email protected]

SENIOR MARKETING MANAGER john Nelson [email protected]

EDItOrIAL BOArDMike jerke, Chippewa Valley Ethanol Co. LLLP

jeremy Wilhelm, Cilion Inc.Mick Henderson, Commonwealth Agri-Energy LLC

Keith Kor, Pinal Energy LLCWalter Wendland, Golden Grain Energy LLC

Neal jakel Illinois River Energy LLCBert farrish Lifeline Foods LLC

Eric Mosebey Lincolnland Agri-Energy LLCSteve roe Little Sioux Corn Processors LP

Customer Service Please call 1-866-746-8385 or email us at [email protected]. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexi-co. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping.

Article reprints are also available for a fee. For more information, contact us at (866) 746-8385 or [email protected]. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at (866) 746-8385 or [email protected]. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to [email protected]. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

COPYRIGHT © 2012 by BBI International

Please recycle this magazine and remove inserts or samples before recycling

58 2012 International Fuel Ethanol Workshop & Expo75 2012 National Advanced Biofuels Conference & Expo67 2013 National ethanol Conference6 2013 international Biomass Conference & Trade show

26 ACE American Coalition For Ethanol52 Aggreko44 Agra Industries33 Ashland Hercules Water Technologies59 BBI Consulting Services21 BetaTec Hop Products31 BrownWinick Law Firm30 Buckman27 CHS Renewable Fuels Marketing32 CiT23 Cloud/Sellers Cleaning Systems39 CPM Roskamp Champion40 Ethanol Producer Magazine71 Fagen Inc.50 Freez-it-Cleen62 Gamajet Cleaning Systems, Inc.

53 & 76 Genencor, DuPont Industrial Biosciences2 Growth Energy

36 Hammertek17 Himark bioGas5 iCM, inc.

8-9 inbicon37 Indeck Power Equipment Co.38 Interra Global Corporation13 INTL FCStone Inc.15 Lallemand Ethanol Technology70 Nalco46 Perten instruments, inc.11 Phibro Ethanol Group3 Pioneer Hi-Bred international, inc.

66 Premium Plant Services, Inc.10 R3 Fusion41 Renewable Fuels Association65 RPMG, Inc47 Sulzer Process Pumps (US) Inc.19 Tranter Phe63 U.S. Water Services57 Victory Energy Operations, LLC. 45 Vogelbusch USA, Inc.56 Wabash Power Equip. Co.29 WCR incorporated51 WiNBCO

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View from the hiLL

Ethanol: Increasing National SecurityBy Bob Dinneen

america’s addiction to foreign oil has had a significant impact on our economy and our national security. The millions of barrels of petroleum imported to the united states not only cost billions of dollars, they also require putting military lives in danger protecting the fuel supply lines. The only effective strategy for improving U.S. energy security is in reducing the nation’s oil dependence.

At 10 percent of the u.s. fuel supply, used in 97 percent of the nation’s gasoline, ethanol provides a domestic, renewable alternative to imported oil. In 2011, the use of 13.9 billion gallons of American ethanol helped reduce the need for imported oil by 485 million barrels. That is roughly equivalent to 13 percent of total U.S. crude oil imports, saving the American economy $49.7 billion.

Reducing oil import dependency has been a national security priority and policy objective since the 1970s. Yet, only since 2005, the year the renewable fuel standard (RFS) was first enacted, has the U.S. seen a reversal of the long-term trend of increasing oil import dependence. During this time frame, America’s oil

demand has decreased while imports have fallen from 60 percent to 45 percent, in large part due to the increase in domestic ethanol production. in 2010, u.s. oil imports fell below 50 percent for the first time since 1997. Without ethanol, without the foundation of the RFS, our oil imports would have been 52 percent last year. Maintaining critical policies like the RFS is essential to increasing our national energy security.

While gasoline demand is currently at its lowest point in more than a decade, prices at the pump continue to run up due to the increasing cost of crude oil. Nevertheless, prices of gasoline would undoubtedly be higher without the enormous contribution of ethanol in our fuel. A study by Iowa State University and the University of Wisconsin found that in 2010, domestic ethanol production helped lower gasoline prices by 89 cents per gallon. That means the average American household spent $800 less on gasoline than would have otherwise been the case. The researchers also found that for the first decade of the 21st century, growth in ethanol production and use helped keep gasoline cheaper by an average of 25 cents per gallon. As such, American drivers saved an average of $35 billion annually on gasoline purchases from 2000 to 2010.

The Energy Information Administration recognizes the contribution ethanol has made to increasing national security stating, “increases in domestic biofuels production…played an important role in moderating import dependence.” EIA also says ethanol growth since 2005 is

“helping to displace traditional hydrocarbon fuels and so reducing petroleum import needs.”

ethanol presents the u.s. with a critical opportunity to expand domestic energy production and reduce imports. Today, ethanol is the only commercially viable renewable fuel alternative we have to imported oil. The future of energy independence, and of our security both abroad and at home, is taking place right here, right now, every day, in ethanol plants across this great nation.

author: Bob DinneenPresident and CeO of the

Renewable Fuels Association(202) 289-3835

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driVe

Solution to Today’s Energy Crisis is Here TodayBy Tom Buis

the driving season is upon us, and americans across the country are again feeling the pain of skyrocketing gas prices. Whether it is going to work, school or a well-earned vacation, out-of-control gas prices have a tremendous economic impact on our nation’s motorists and our economy. unfortunately, this time of year also brings us what is fast becoming an unwelcome American tradition—digging even deeper into family finances to pay for filling the tank with record-priced gasoline. Gas prices are well above $4 a gallon, and in some states could be more than $5 by the summer. High gas prices mean higher transportation and food costs. Yet we have the solution to high gasoline prices right under our noses, in the form of clean, renewable ethanol—an alternative fuel that delivers higher octane to motor fuel and sells at a buck less a gallon than gasoline on the commodity exchange.

By increasing blends of ethanol into motor fuel, we can reduce overall prices at the pump. Growth Energy is committed to working with all our partners in the

industry, including fuel retailers, to deliver E15 to the marketplace. E15 gasoline has been approved by the EPA for all vehicles built since 2001—or more than 80 percent of the vehicles on the road today—after exhaustive, rigorous engine and emissions systems testing.

Many retailers and fuel providers are already stepping up to the plate to help lower gas prices by registering to sell E15. While there is some reluctance by retailers to offer e15, mostly as a result of scare tactics by Big Oil, we need to continue to urge the adoption of E15 all across this great nation. E15 can replace up to 7 billion gallons of gasoline, create over 130,000 jobs, improve our environment and offer savings to consumers at the pump.

Not only does E15 save consumers at the pump, at 113 octane, ethanol presents a unique opportunity to increase engine performance with higher-octane fuels, which is an important goal as U.S. automakers manufacture more high-compression engines to increase fuel performance.

Growth Energy has already begun the effort to open the fuels market and give Americans the fuel choice they deserve. In the fight for public opinion, Growth Energy’s American Ethanol partnership with NAsCAR has shown fans across the country that if ethanol is good

enough for NASCAR’s racecars, it’s good enough for your street cars. NASCAR made the switch to E15 and is nearing two million miles with the fuel without incident.

Ethanol is not a “someday” solution to our current energy crisis. It is here today. The American ethanol industry has extra capacity that can be used today and, with the development of cellulosic ethanol from biomass feedstocks such as corn cobs or other waste, we can produce enough ethanol right here in America to displace all of our imported oil. But as long as we allow our fuels market to remain captive to foreign oil, our nation will be continue to be exposed to oil shocks—similar to 2008—whenever Iran sends boats in the Strait of Hormuz, or oil companies reduce refining capacity, or China puts another million cars on the road. All these things are out of our control, and any one of them will mean that our nation will continue to be held captive to foreign oil. This must change.

author: Tom BuisCEO, Growth Energy

(202)[email protected]


GrAssroots Voice

Beware of DogBy Ron Lamberty

they say the reason a little dog doesn’t back down from a big dog in a fight is that dogs don’t have mirrors. The little dog knows he’s looking at another dog, and in his mind, he’s just like that dog. For the same reason, a German shepherd will recoil at the site of a Shih Tzu. The big dog doesn’t know he’s the big dog.

Sometimes, it’s good to not know that you’re not the big dog; sometimes it helps to take a look in the mirror.

Each spring, the American Coalition for Ethanol invites our members to gather in Washington, D.C., for a couple of days on Capitol Hill, talking to elected officials about the importance of ethanol to our nation’s fuel supply. in preparation for this year’s event, we held up a mirror to our industry, convincing our members to size themselves up and recognize the scale of ethanol and beneficial impact it has on our country.

We work in an industry where the big dog looks at himself in the mirror all day, every day—in that kind of mirror that makes things appear larger, and taller and with bigger shoulders. That view is also

the one they use in their advertising and “studies,” and it’s the one they bring to Capitol Hill when they tell Congress that if they just continue to let the Big Dog eat, Big Oil will protect us from everything. Well, everything but high gas prices, pollution, high consumer costs from expensive transportation . . .

But I digress. What ACE saw in the mirror when we looked at the ethanol industry was that, although we’re not THE Big Dog, we are A Big Dog. Consider these examples:

The Bakken Oil field is a big deal right now—lots of jobs, lots of oil. If you took all of that oil and made it into gasoline, and then added U.S. ethanol to it, you’d have e85. in other words, u.s ethanol plants provide four times the auto fuel that the Bakken field can produce right now. At its expected peak, gasoline from Bakken oil will be less than half ethanol’s volume right now.

Keystone XL pipeline and the Arctic National Wildlife Reserve are also projects put forward as solutions to our nation’s energy and employment woes. Those will each carry—at their expected peak—700,000 barrels of oil a day. That’s very good. That would make 5 billion gallons of gasoline each. Those two, combined with another project the same size, would be about as big as ethanol (assuming no growth in ethanol the 10 years it would take those projects to get to full speed).

We took those facts to the hill, and shared them with friend and foe alike, and told them that they were absolutely right when they passed the renewable fuels standard—and that they should continue to support it. We mentioned that ethanol is a buck cheaper than gas right now, and that e15 would be about 15 cents less than unleaded gasoline, if everyone who was holding it up would let this medium-sized dog out of its kennel. Most importantly, we reminded them that we are doing all of it without subsidies. We don’t eat like the Big Dog eats. The object in your rear view mirror is about as big as it looks. Woof, woof.

author: Ron Lambertysenior Vice President,

American Coalition for ethanol(605) 334-3381

[email protected]

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europe cALLinG

Looking Beyond the ObviousBy Robert Vierhout

For the average non-European it is difficult to understand why in europe so many passenger cars run on diesel instead of gasoline. Knowing that trucks, buses, ships, trains and planes all need diesel to get propelled, you could expect that the preferred fuel for lighter modes of transport would be gasoline. The logical result: Europe’s supply and demand for fuels is not in balance. We are rather short on diesel and long on gasoline.

The unbalanced tax structure on fuels is making the situation worse by the day. By subsidizing diesel, drivers will not move away from diesel cars. As the diesel price at the pump stays well below the price of gasoline, there is no direct visible incentive to change over to gasoline engines.

Take as an example the country where I live, Belgium. Why do 9 out of 10 passenger cars run on diesel? More miles per gallon and lower costs per gallon are all good for the consumer. But at macro-level there are some real negatives: less income for the state (lower taxes); more environmental costs to adjust the supply shortage and shipping massive volumes of diesel from Russia to Europe; increased health costs as there is an increased

risk of heart and respiratory diseases due to more polluting particles in the air.

Looking at the total picture, the case for stimulating diesel is not that obvious at all. As long as regulators refuse to change the dynamics of the fuel market, however, the situation for gasoline demand will continue to decrease. In almost every EU member state we see consumption of gasoline going down. Even in an ethanol/gasoline-loving country like Sweden, diesel cars are becoming more popular by the day.

Of course, the decrease in gasoline consumption is not just due to an increased number of diesel drivers; it is also partly the result of gasoline engines finally becoming more fuel efficient. Also, the fact that smaller cars are getting more popular for economic reasons means less fuel consumption. For the ethanol sector, this is potentially a worrying development: less gasoline volume obviously means less ethanol blended in.

So, is it possible to change the tide and still get more ethanol into the motor fuel stream?

Besides the obvious, but contentious change in taxation structure, there are options such as promoting E85 and going from E10 to E20/25. These higher blend solutions will not be hailed by the oil industry as great solutions. Promoting E85 is most likely a kind of horror scenario for the oil industry. An e20 scenario is possibly a more palatable solution. Due to expected indirect land use change implications, the environmental

performance of biodiesel is now under scrutiny. More ethanol use could then compensate for the reduced use of biodiesel.

But there is another solution: getting ethanol into the diesel fleet. This option would kill two birds with one stone: countering the effects of less gasoline demand and contributing to closing the gap in diesel supply. In Europe, there is a good example of such a way forward.

The Swedish truck company, scania, has shown for a number of years that it is possible to have diesel trucks/buses running on ethanol. A mixture of 95 percent hydrous ethanol and a few chemicals (ignition improver, lubricant additive, corrosion inhibitor) will run in a converted diesel engine. In the Swedish city of Stockholm, over 400 buses use this engine and fuel, in what is viewed as a very successful project.

scania has plans to roll out more of these engines in the rest of Europe. To my mind this could be a clear win-win situation: more ethanol, less diesel—looking beyond the obvious.

author: Robert VierhoutSecretary-general, ePURE

[email protected]


business mAtters

Ethanol ProducersField EPA 114Information RequestsBy Todd Palmer and Anna Wildeman

in the past several months, ePa has issued clean air act Section 114 information Requests to numerous ethanol production facilities across the country, seeking information concerning all aspects of their operations. These requests generally seek historic performance and specification data for different processes, including scrubbers, thermal oxidizers, boilers, dryers, flares, storage tanks and loadout equipment. Some requests appear to highlight venting of pressure relief valves and header connections on certain processes. Due to the nature of these requests and EPA’s broad enforcement authority, it is essential that these requests be taken seriously and that facilities respond to the agency’s requests in a timely fashion. Failure to do so can result in fines up to $37,500 per day of violation.

In issuing a Section 114 Information Request, EPA may be trying to develop a regulatory scheme for an industry, pursuing enforcement action against a particular company for violations of the Clean Air Act, or simply trying to understand how an industry handles some operational or technical issue. Regardless of the agency’s intended use of the information it collects, companies receiving a Section 114 Information Request are advised to seek legal counsel prior to responding.

section 114 of the Clean Air Act provides EPA broad authority to request information from any person who owns or operates an emission source, who manufactures emission control or process equipment, or any other person the

agency believes can assist in achieving its regulatory or enforcement objectives. Section 114 also authorizes EPA to require the recipient to audit processes, install emission monitoring equipment or perform stack testing. EPA has similar authority to request information pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act and the Resource Conservation and Recovery Act.

The agency has been known to ask for information on numerous topics. The range of topics is often dictated by the agency’s intended use of the information. For example, if the agency is seeking to pursue enforcement action, a section 114 Information Request may ask for specific information about a facility’s operational history, recent equipment installations and emission monitoring data. Although addressed to one facility, such requests are often issued on an industry-wide basis, indicating EPA has targeted that industry for a regional or national “enforcement initiative” on a particular regulatory topic. On the other hand, if the agency is seeking to develop a regulatory scheme, a request may be geared toward manufacturers or suppliers of equipment for a particular industry, and may ask for information about the type, size and operational needs of an industry’s standard equipment and process lines. Importantly, EPA has been known to use information from manufacturers or suppliers—including the names of facilities at which certain equipment has been purchased or installed—to assist in enforcement initiatives.

Section 114 Information Requests often require the recipient to gather and produce information and data that can

be years, and sometimes decades, old. All such requests will include detailed instructions for how requested information is to be organized and produced and what, if any, additional narrative explanation is required by the agency to provide context for the data it is receiving. EPA requires that a response be certified by an individual as true and complete. it is essential to remember that, unless it is deemed confidential business information (CBI), everything submitted to EPA becomes subject to Freedom of Information Act requests by the public. Although a person can request certain information be treated as CBI, such a request must be properly substantiated. As such, any information gathered for submittal to EPA must be carefully reviewed to ensure that submittal to the public agency will not waive any other confidentiality, such as attorney-client privilege or work-product.

Aside from data gathering, Section 114 also authorizes EPA to perform on-site facility inspections after receiving consent from the owner or a warrant from a court. Note that many ethanol facilities have been issued Title V air permits that effectively grant EPA consent. EPA inspectors may refuse to undergo site-specific safety training prior to the inspection and could consider such demands as a denial of access to the facility.

authors: Todd Palmer,Attorney, Michael Best & Friedrich LLP

(608) [email protected]

Anna Wildeman

Attorney, Michael Best & Friedrich LLP(608) 283-0109

[email protected]

Ethanol ProducersField EPA 114Information RequestsBy Todd Palmer and Anna Wildeman

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BuSINESS BRIEFSPeople, Partnerships & Deals

Scott Thurlow has been named presi-dent of the Canadian Renewable Fuels

Association, replacing Gordon Quaiattini who stepped down from the position last year. a lawyer, thurlow most recently served as vice president with temple scott associates, where he provided strategic government relations advice to businesses and nongovernmental associations. “renew-able fuels are already a significant part of canada’s energy mix,” thurlow said. “i look forward to collaborat-ing with the crFa’s

membership to help them work with all lev-els of government to promote the use of renewable fuels.”

Marcos Jank announced in late march that he will step down as president of UNI-CA, the brazilian sugarcane industry asso-ciation. he will remain in the position until a successor is chosen. Jank joined Unica in 2007 and led a major reform of the organi-zation’s objectives and strategy. Under Jank’s leadership, Unica’s international work played a key role in two major achievements, according to the organization: the U.s. ePa’s 2010 decision to designate sugarcane ethanol as an “advanced biofuel,” in recognition of its documented ability to sharply reduce co2 emissions compared to gasoline; and the ex-piration at the end of 2011 of the 54-cent-per-gallon tariff.

Pinnacle Engineering has opened a new office in Omaha, Neb., with Matt Hen-ry transferring from the company’s corpo-rate office in Minneapolis to lead the office. henry is responsible for air quality permits, stack test management and annual compli-ance services for the renewable energy mar-ket.

Robert Anderson has joined legal firm Faegre Baker Daniels LLP as a partner. With 30 years of experience helping corporate cli-ents in the energy in-dustry on a wide range of finance and project development efforts, he will lead the renewable energy practice area of the firm’s energy, re-sources and clean tech industry group. With

the merger of Faegre & Benson and Baker & Daniels in January, the firm has more than 800 legal and consulting professionals work-ing in the U.s. and internationally.

Shawn Easterly has joined Memphis-based Buckman Laboratories inc. as its new energy center specialist working ex-clusively with ethanol plants. buckman offers a wide range of water treatment products and services for the ethanol industry, and with the addition of easterly’s expertise, the company is expanding its tech-nology and services. most recently, easterly

was with new age cryo where he provided energy center consulting services as well as dry ice cleaning in ethanol plants.

Blake Moret, senior vice president, control products and solutions, Rockwell Automation, was elected vice chair of the manufacturing institute board of trustees. “the institute is playing an important role developing our manufacturing workforce, and maximizing the impact of technical in-novation,” moret said. “We have an oppor-tunity to link related activities between in-

dustry, centers of learning and government agencies.”

Jim Suetholz has been appointed as the central United states sales manager for Sted-man Machine Co. he has more than 17 years of experience in capi-tal equipment sales in the mining, steel and various other heavy industries throughout north america. his responsibilities include selling crushing equip-

ment and size reduction systems in the cen-tral U.s.

Novozymes ceo and President Steen Riisgaard was named the 2012 George Washington carver award recipient for in-novation in industrial biotechnology by bio’s industrial and environmental section. the award honors the vision of George Washington carver, an originator of the “chemurgy” movement who, more than a century ago, achieved world renown by com-bining agriculture and science to produce everyday biobased products, changing the nature of farm economics and sustainability. Industrial biotechnology is the modern-day equivalent, combining biotech innovations with renewable biomass to create solutions that can revitalize manufacturing and energy, according to bio.

Abe Hughes and Bob Casper have joined the board of directors of Growth energy. hughes is the vice president north america for new holland agriculture. casper is the president of ethanol Products llc, a subsidiary of Poet ethanol Products. Growth Energy represents 75 U.S. ethanol producers and 63 associated companies in its advocacy efforts to promote emission reduc-tions, create american jobs and strengthen national security through increased use of ethanol.

energy Practice Coming from the San Francisco office of Foley & Lardner, Robert Anderson joins Faegre Baker Daniels to lead the renewable energy practice.

new canadian leaderCRFA’s new president, Scott Thurlow brings first-hand experience in government affairs, having served as director of parliamentary affairs fro the former Minister of Natural Resources in Canada.

hands-on experience shawn easterly has experience in training, operations and troubleshooting at ethanol plants, including five years with ICM Inc. working on the startup of numerous plants.

Stedman SalesJim Suetholz is the new sales manager for stedman Machine Co. in the central u.s.


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business briefs

shAre your industry briefs to be included in business briefs, send information (including photos and logos if available) to: business briefs, Ethanol Producer Magazine, 308 second Ave. n., suite 304, Grand forks nd 58203. you may also fax information to (701) 746-8385, or email it to [email protected]. please include your name and telephone number in all correspondence.

Following a 36-year career at Archer Daniels Midland Co., John Rice is retiring. Rice joined ADM in 1976 as a tax accoun-tant. In 1993, he was elected a vice president of the company, and subsequently served as president, north american oilseeds and food oils; and senior vice president, global corn processing, bioproducts and food. in 2005, Rice was elected executive vice presi-dent, global marketing and risk management; and in 2007, he was named executive vice president, commercial and production. in 2010, Rice was named vice chairman, office of the chairman, a role designed to apply his expertise to an expanded set of strategic challenges including extracting value from existing assets and driving operational excel-lence.

an electrical designer at Epic Systems

Inc., Angela Schwartz received the epic Way award at the company’s annual meeting. Founded in 1995, Epic is a multidiscipline engineering and fabrication firm providing turnkey solutions for modular process plants and systems and other packaging and manu-facturing systems.

the GEA Group has acquired Nu-Con Ltd. in auckland, new Zealand, a major global supplier of powder handling components, complete powder handling sys-tems and bulk filling lines. Sales and services in North America for GEA Nu-Con prod-ucts and solutions will be handled by Gea Process engineering inc., which is recog-nized as a leader in industrial drying, thermal concentration, membrane filtration, powder processing and handling, emission control, and aseptic liquid filling as well as process in-tegration and process automation solutions.

Burns & McDonnell has received a Grand conceptor award from the american council of engineering companies’ mis-souri chapter for a cellulosic ethanol demon-stration project. Zeachem inc. hired burns & McDonnell in 2010 to provide engineer-ing design, procurement and construction management services for its 250,000 gallon-

per-year demonstration facility in Boardman, ore. the Grand conceptor is the highest recognition given by the acec for engineer-ing excellence.

Perten Instruments is celebrating its 50 year anniversary. Founded on the com-mercialization of the now, world standard falling number method to determine sprout

damage in grains, Perten is at the forefront of testing and analysis of grains, grain prod-ucts, feed and food production and provides both functional and compositional forms of analysis. today’s systems include analyz-ers for in-line/on-line devices, interfacing to plant systems and automation.

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March 23—With natural gas prices trad-ing well below replacement cost, it’s not sur-prising that the natural gas production com-munity has reduced drilling from roughly 1,000 active rigs in September 2010 to under 700 today—a 30 percent drop in the past 18 months. With a lag between drilling and production, we have not yet seen the impact. moreover, we expect the rig count to con-tinue dropping as long as the value of natural gas stays low.

When production will drop and by how much is uncertain due to several factors. First, horizontal drilling and fracturing tech-nology has improved dramatically and each new well is producing more gas and each rig can drill more wells per year. as such, the traditional relationship between rig count and production no longer holds. note in the chart, that even as the rig count dropped

during 2010 and 2011, production increased. second, there continues to be significant drilling activity in liquid-rich and oil-prone forma-tions since the value of crude and liquids remains very high and the value of natural gas does not drive drilling decisions. a heavy liq-uid or oil-prone well will have roughly one-third the production of a dry gas well. con-tinued drilling in those formations helps nat-ural gas supply and production, but likely will not keep up as gas-prone drilling continues to drop. We expect the market will be well supplied in the near term. With prices under

Natural Gas Report

Corn Report

Drilling activity responds to low prices By CASEy WHELAN

Dwindling Argentine corn crop prospects boost markets By jASON SAGEBIEL

COMMODItIES REPORT

March 26—The mid-March corn mar-ket sustained a rally on reduced prospects for south america corn and soybeans. a dwindling soy crop in south america pushed soybean markets higher as continued reports of china’s need for corn advanced that com-modity. The USDA did not make any changes to argentina’s corn production in its march supply/demand report and Brazil’s corn pro-duction was actually placed at 62 million met-ric tons (mmt), up 1 mmt from the previous estimate, although many analysts continue to reduce their projections. The USDA also did not change the U.s. corn supply and demand, leaving carryout at 801 million bushels despite traders’ expectations for a decline.

Outside influences continue to impact daily market dynamics. china’s economy and expected growth in feed grain consumption

keeps the market supported. in addition, the trade keeps a close eye on ethanol margins and corn basis. The March 30 quarterly stocks report was expected to reveal whether rationing has occurred among feeders and the first report for the 2012-’13 marketing year released the same day to reveal planting intentions.

the accompanying chart illustrates that corn produc-tion in the former soviet Union countries (FSU-12) has exceeded argentine production. higher corn prices have encouraged expansion and al-lowed nontraditional corn producing regions to prosper. FsU corn exports could even ex-

$2.50 per MMBtu, the active rig count will continue to drop and eventually production will also begin to tail off. When that happens, prices will again move up.

ceed argentine exports this year. remember, there are other regions of the world that can fill the deficit from a poor Argentine crop.

Argentina and FSU-12 Corn Production (mmt)

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82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

FSU-12Argentina


DDGS Report

Ethanol Report

DDGS exports pick up as domestic demand stays steady By SEAN BrODErICK

Ethanol losing ground on gasoline prices By rICK KMENt

COMMODItIES REPORT

DDGS Prices ($/ton)

LOCAtION MAy 2012 APr 2012 MAy 2011

Minnesota 203 195 210

Chicago 222 215 218

Buffalo, N.Y. 225 230 220

Central Calif. 258 260 250

Central Fla. 232 228 224sOuRCe: CHs inc.

Natural Gas Prices ($/MMBtu)

LOCAtION MAr 16, 2012 MAr 1, 2012 APr 1, 2011

NYMEX 2.35 2.46 4.36

NNG Ventura 1.91 2.41 4.34

CA Citygate 2.34 2.75 4.26

SOURCE: U.S. Energy Services Inc.

regional Ethanol Prices Front Month Futures (AC) $2.292

rEGION SPOt rACK

West Coast $2.42 $2.58

Midwest $2.28 $2.40

east Coast $2.35 $2.61SOURCE: DTN

regional Gasoline Prices Front Month Futures Price (RBOB) $3.385

rEGION SPOt rACK

West Coast $3.40 $3.44

Midwest $3.28 $3.35

east Coast $3.23 $3.18SOURCE: DTN

Corn futures Prices (May Futures, $/bushel)

DAtE HIGH LOW CLOSE

Mar. 26, 2012 6.56 6.37 1/4 6.37 1/4

Mar. 19, 2012 6.75 3/4 6.62 6.63 1/2

Mar. 25, 2011 7.17 1/4 6.88 1/4 6.89 1/2SOURCE: FCStone

Cash Sorghum Prices ($/bushel)

LOCAtION MAr 23, 2012

fEB 17, 2012

APr 1, 2011

superior, Neb. 6.14 6.07 6.45

Beatrice, Neb. 6.09 6.12 6.56

Sublette, Kan. 6.22 6.15 6.47

Salina, Kan. 5.91 6.14 6.57

Triangle, Texas 6.47 6.34 6.81

Gulf, Texas 6.84 6.75 7.31

SOURCE: Sorghum Synergies

u.S. Ethanol Production (1,000 barrels)

PEr DAy MONtH END StOCKS

Jan. 2012 938 29,063 21,753

Dec. 2011 960 29,772 18,261

Jan. 2011 920 28,524 20,672SOURCE: U.S. Energy Information Administration

March 26—Although ethanol and gasoline prices moved higher in march, the pace of posted gains in the two markets was a night and day difference and the underlying reasons completely separate. While demand is expected to bounce higher through the upcoming spring and summer driving season, etha-nol values are mainly focused on the cost of production and narrowed down to the overall price direction of corn markets. Gasoline prices, on the other hand, have had to do much more with overall global and domestic demand, as well as political unrest through the middle east. Uncer-tainty whether iran supplies will be avail-able in the near future keep both crude

and rbob prices strongly supported. in march, ethanol futures prices

increased 9 cents per gallon and RBOB increased nearly 40 cents and the price spread between the two was around $1.0903 per gallon. This means that etha-nol futures were trading at more than a $1 per gallon discount to the rbob gasoline market. the only time there has been a wider price spread was in June 2008, when ethanol was priced $1.097 cents under the gasoline market. the uncertainty of supplies of gasoline and the currently growing ethanol stock lev-els continue to keep the ethanol market subdued despite corn prices trading near $6.50 per bushel.

March 26—DDGS rallied in March, partly in tandem with corn futures move-ment, but more as a result of increased export demand. at least three bulk ves-sels destined for china traded, and south korea stepped back into the bulk market after a long hiatus. the chinese boats are slated to arrive before the ministry of Agriculture’s June 28 decision on the anti-dumping case, which raises the ques-tion whether those boat buyers know something that we do not. all of this has kept the barge market tight, especially in the nearby slots. container demand con-tinues to comprise much of the exports, with sales to places like Vietnam and the Philippines.

Domestically, demand is steady. But with milk prices lagging, hog margins

sharply down and poultry using more feed wheat, the only animal sector with decent demand is cattle, and that has been tempered by unseasonably warm weather. Plant margins are poor and maintenance downtimes in april will not be shortened, which should temper supply. the railroads have been moving cars at near-record velocities, causing is-sues at plants with too many cars in their yards. We are seeing more corn oil being extracted, which is creating ration chal-lenges, especially for hogs and poultry.

We are sure to see active futures movement, which will create opportuni-ties for plants to lock in DDGS prices at a good percentage of the value of local corn.

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distilled Ethanol News & Trends

Capacity CreepEPM map cites 6 percent capacity gain from spring 2011

twice a year, Ethanol Producer Magazine publishes an updated Fuel ethanol Plant map, which includes information about both existing ethanol plants and projects under development. The latest plant map—mailed with the May issue—shows a steady, small increase in capacity among U.s. ethanol plants. a year ago, the map showed 14.31 billion gallons in capacity, which grew by about 3 percent by the fall map, and by another 3 percent from fall to this spring―it now shows 15.19 billion gallons. to clarify, this number includes idled plants, a few of which have been idled for well over a year. Plants stay on the map until it has been verified the facility has been dismantled.

Much of that capacity creep is occurring in the 10 top producing states, which saw a 330 MMgy increase in capacity from spring to fall ’11 and another 201 MMgy increase from last fall to this spring, a 2.7 percent and 1.6 percent increase respectively. the total increase from a year ago to last fall was 436 million gallons and from fall to this spring, 439 million gallons. From the 2011 spring map to the 2012 spring map only two ethanol plants came online. Both Aventine Renewable Energy-mount Vernon llc and hereford renewable energy llc are plants for which construction had been halted and started up again. the re-maining capacity increases can be accounted for as ethanol producers ratchet up production numbers with efficiency gains.

the list of U.s. plants under construction went though some changes from the fall plant map to the current plant map. aventine’s aurora West facility was listed as under construction. the plant was completed but not commissioned, and as construction is no longer ac-tive at the site, it was flipped to the proposed plant list. Of the three remaining starch/sugar plants on the under construction list, AltEn LLC and Aventine/Riverland Biofuels facilities, both previously oper-ated, are now under new ownership and work is ongoing to upgrade and restart them. renewable energy technologies llc, on the other hand, a 2.2 MMgy beverage, food processing waste-to-ethanol facility is a brand-new facility expected to come online this summer.

Archer Daniels Midland Co. takes the lead in top ethanol produc-ers once again, reporting 1.72 billion gallons of production capacity. ADM doesn’t report individual plant capacities, so the plant map re-flects a total number rather than individual plant capacities. ADM’s ca-pacity includes its rather substantial maximum wet mill capacity, where presumably a large portion of the starch fraction is converted to prod-ucts other than ethanol.

Given that unknown ADM fuel ethanol number, Poet LLC will most likely continue to carry the standard as the nation’s largest dry mill ethanol producer at 1.699 billion gallons. Third largest is Valero Renew-able Fuels at 1.2 billion gallons and fourth is Green Plains Renewable Energy at 740 MMgy. If you add the capacity of the 78 ethanol plans

run by the top 10 producers, it comprises half the U.S. ethanol indus-try’s capacity, or 7.54 billion gallons.

Corn still leads the pack in first-generation ethanol plants under development, feeding 861 million gallons of corn-only plants and an-other 250 million gallons using corn and stover and other cellulosic feedstocks. in cellulosic ethanol project development, all forms of woody biomass lead the feedstock choice at 174 MMgy of the exist-ing, under construction and proposed projects on the spring map, or roughly 42 percent. Corn stover and cobs and municipal solid waste are the next most popular at about 20 percent each, or 80 MMgy and 78 MMgy respectively. —Susanne Retka Schill, Holly Jessen

1.35

1.4

1.45

1.5

1.55

Spring '11 Fall '11 Spring '12

Gallo

ns (I

n Bi

llion

s)

Woody BiomassCorn Stover, CobsMSWEnergy GrassesSwitchgrassStrawSorghum

Woody BiomassCorn Stover, CobsMSWEnergy GrassesSwitchgrassStrawSorghum

Corn OnlyCorn plus CellulosicOther Grains (some with corn)Sugarcane, Sweet Sorghum

Diversified Feedstocks Unlike first-generation ethanol plants, no one feedstock stands out in the list of operational, under construction and proposed cellulosic ethanol plants in the u.s. and Canada. SOURCE: ETHANOL PRODUCER MAGAzINE

king corn Corn dominates the list of ethanol plants using the first-generation sugar and starch conversion process, and even dominates among proposed plants, many of which are considering corn plus cellulosic feedstocks. SOURCE: ETHANOL PRODUCER MAGAzINE

cellulosic Feedstock choices

Starch/Sugar Feedstock choicesFor u.S. Plants under development

total capacity u.S. Starch/Sugar


Ethanol News & Trends

distiLLed

research showing consumers are willing to pay a premium for ethanol was published in the march issue of the Journal of Environmental Economics and Management. soren anderson, a michigan state University economist, calcu-lated that when ethanol increased 10 cents per gallon above the price of gasoline, there was only a 12 to 16 percent decrease in demand.

Frankly, anderson was surprised at what he found. “i was expecting to see a sharp re-duction in sales of E85 the moment that the price rose above the price of gasoline on an energy-adjusted basis,” he tells EPM. “But this doesn’t seem to be happening. instead, it ap-pears that many E85 buyers are willing to pay a premium for the fuel, and some fraction of these buyers continue to buy the fuel, even when its price rises above that of gasoline.”

anderson developed a model based on information gathered in Minnesota from 1997 to 2006, during which nearly 5,000 monthly observations of ethanol prices and sales vol-umes were made at more than 200 retail gas stations. the economic analysis is one of the first to examine the way in which consumers value ethanol, anderson says. Previous analy-sis assumed consumers viewed the two fuels in the same way, with ethanol and gasoline considered perfect substitutes after adjusting for the lower gas mileage of ethanol.

The findings have economically signifi-cant implications for policy decisions affecting cellulosic ethanol, he says. looking ahead to 2022, he calculates that the cost of producing cellulosic ethanol will be considerably higher than the projected cost of gasoline. “if con-sumers treat gasoline and ethanol as perfect substitutes, only buying the fuel that gives them the lowest fuel cost per mile, then fuel retailers will need to price ethanol at or below the price of gasoline for consumers to buy ethanol,” he says. this means, he adds, that producers will lose money in an attempt to comply with the renewable fuel standard (RFS)—unless cellu-

losic ethanol is subsidized or consumers are willing to pay a premium for the fuel.

Despite the encouraging results of his study, anderson concludes it wasn’t enough to justify the ethanol blending mandates con-tained in the renewable fuel standard. “this reduces substantially the simulated efficiency cost of an ethanol content standard, since some households choose ethanol without large subsidies, mitigating deadweight losses,” he says, adding that mandating ethanol blend-ing is expensive. another consideration is the amount of emissions ethanol actually reduces, a topic he notes is hotly debated.

ethanol industry supporters, on the other hand, point to the role of the rFs in moderating gasoline prices, reducing imports of foreign oil and supporting growth of the advanced and cellulosic biofuels sectors. on March 27, a coalition of eight groups, including

the renewable Fuels association and Growth energy, sent a letter to congressional leaders urging them to reject attempts to reduce, waive or eliminate the rFs. they pointed to a center for Agriculture and Rural Development study that found that in the decade from 2000 to 2010, ethanol reduced gasoline prices an av-erage of 25 cents per gallon, saving consum-ers $34 billion yearly. the groups also partially credited the rFs with reducing oil imports below 50 percent for the first time in 2010. Fi-nally, they pointed to the need to bolster the second-generation biofuels industry still in its infancy. “efforts to amend or reform the rFs would send a chilling signal to a marketplace just when the advanced and cellulosic biofu-els industries are on the cusp of commercial production to help meet this nation’s energy independence and security needs,” the letter says. —Holly Jessen

E85 loyaltyEconomist finds buyers willing to pay more

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researchers Delve into Enzyme CostsIt is commonly assumed lower in literature

in order to decrease enzyme or cellulase costs for lignocellulosic biofuel, such as wood-to-ethanol production, two important factors need to be considered, according to a paper published in the april edition of Biotechnol-ogy and Bioengineering. “the cost of cellulases is not clear in the literature and should be more widely available,” Daniel Klein-Marcuschamer, one of four researcher authors tells ePm. “in addition, research must be done to either lower the enzyme loading, or increase the yield of ethanol at the biorefinery.”

Klein-Marcuschamer, the director of technoeconomic analysis at the Joint bioenergy institute, joined researchers from lawrence berkeley national laboratory, sandia national Laboratories and the University of California-berkeley, in publishing “the challenge of en-zyme cost in the Production of lignocellulosic biofuels.” the cost contribution of enzymes is a subject of debate, with some calling it a “major barrier” and others assuming the cost

of enzymes will decrease with technological advances. For this paper, researchers said “the vast majority of the literature to date has sig-nificantly underestimated the contribution of enzyme costs to biofuel production.” they concluded that significant effort must be put forth to lower the cost of enzymes, and there-fore, the total cost of biofuel production.

The paper examined steam-exploded poplar as a feedstock for cellulase production. “steam explosion is a pretreatment process in which the biomass is put in contact with high-pressure steam, and when the pressure is re-leased, the lignocellulosic components are ren-dered labile to attack by the cellulases that the fungus [such as trichoderma reesi] produces.” Klein-Marcuschamer says. “As the fungus ‘eats’ the poplar, it produces an excess of cellulases that can be harvested for selling.”

after calculating the cost per kilogram of enzyme production, the researchers concep-tualized the cost per gallon contribution of

enzymes for a corn stover-to-ethanol process. With typical enzyme loading of filter paper unit per gram (FPU/g) of cellulose the researchers calculated a cost range of 68 cents to $1.47 per gallon of ethanol produced. if, on the other hand, enzyme loading was reduced to 5 FPU/g cellulose, the range was calculated at 34 cents to 73 cents per gallon of ethanol. Other studies pegged enzyme costs as low as 10 cents per gal-lon of ethanol produced to 40 cents per gallon. —Holly Jessen

Facility-Dependent

(48%)

Labor-Dependent

(7%)

Raw Material(28%)

Transportation(1%)

Utilities(10%) Waste

Treatment(2%)

Consumables(4%)

cost analysis Breakdown of the annual operating cost of the designed enzyme production facility. Nearly half of the cost of production is associated with capital investment, including depreciation, insurance, maintenance and other costs.SOURCE: “THE CHALLENGE OF ENzYME COST IN THE PRODUCTION OF LIGNOCELLULOSIC BIOFUELS”

distiLLed

Closing the Bookson EPICNebraska producers receive final incentive payments

Sept. 30 marks the official sunset of Nebraska’s long-running Eth-anol Production incentive credit fund, but ethanol producers in this second-largest ethanol producing state have already earned all of the credits available for the year, essentially ending the program months in advance.

the ePic fund housed a series of three ethanol incentive pro-grams, the last of which has been paying qualified producers 18 cents per gallon of ethanol produced, capped at 22.5 million gallons per year per producer, since 2003, delivering nearly $180 million to the 10 plants that came online between 2003 and 2008. Funds acquired through grain checkoffs provided half of the money used for the ethanol incentive program; the other half came from the state’s general fund.

the goal of the ePic fund was to encourage companies to estab-lish ethanol facilities in the state. steve sorum, ethanol project manager at the nebraska ethanol board, says the program achieved that goal. “it was very successful, partly because it was so timely,” he says. “it was in effect in the building boom of the mid-2000s, so there were companies that were looking to build plants, and nebraska provided an incentive that made it attractive.” Payments provided through the ePic

fund allowed those producers to amortize their projects during a time when acquiring financing was difficult otherwise, he says. While many believe the corn ethanol industry has matured to the point of no longer needing financial incentives, Sorum says there is no doubt that the end of EPIC will affect the cash flow of Nebraska’s producers, noting that producers received anywhere from $14 million to $22.5 million over the course of the program.

there are no plans currently to create a new corn ethanol incen-tive program in nebraska, but sorum says there has been discussion by the industry and legislators to form a program focused on cellulosic biofuels production. “Because Nebraska has a well-established ethanol structure, it would be perfect for the new era of plants,” he says.

other midwest states appear to have similar intentions. last year, minnesota also ended its ethanol producer incentive program, after providing incentives to corn ethanol producers for nearly 20 years, but wasn’t ruling out the possibility of forming a new program for cellulosic producers. sorum admits that because state revenues have been down in recent years, locating funding for new programs will be difficult, but because the corn ethanol industry has been such a success in states like Nebraska, legislators may find a way to make it work. “Ethanol has become an $8 billion industry in Nebraska over the past 30 years and more than half of it happened in the last 10 years,” he says. “It’s been a great addition to the economy in this state and i think it sets the tone for possible future programs.” —Kris Bevill


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Looking Down on the futureResearchers employ satellites to analyze feedstock potential

an analysis recently conducted by re-searchers at the University of montana utilized nasa satellite data to evaluate the bioenergy potential of the U.s. and found that farmers would need to plant biofuel crops on 80 per-cent of cropland or on 60 percent of current pastureland in order to produce 36 billion gallons of biofuel by 2022 as required by the renewable fuel standard (rFs). the research also suggests, however, that if technologies to produce biofuel from waste feedstocks can be commercialized, currently available agriculture and forestry residues can be utilized to meet up to 80 percent of the total 2022 RFS mandate.

University of montana doctoral student Bill Smith led the research and co-authored a paper on the findings, titled, “Bioenergy Poten-tial of the United states constrained by satel-lite observations of existing Productivity,” which was published in the american chemi-cal society’s Environmental Science & Technol-ogy journal. he says that while there have been multiple other studies conducted to evaluate the potential of bioenergy production in the

U.s., the nasa algorithm used by his group, combined with other meteorological data fo-cused on climate and water constraints, offers a more complete and accurate estimate of the landscape’s true production potential. “What’s different about our analysis is we have this ex-plicit data for every square kilometer of the U.s., versus a lot of previous studies that use plot-level measurements that are fairly localized and have to use methods to extrapolate to dif-ferent areas,” he says. “some of those studies take into account biophysical factors (how they change across various landscapes), but others don’t do that as well, so you get a wide range of bioenergy potential estimates.”

the researchers made several assumptions when conducting the analysis. one assumption was that crop yields will remain at their current levels. smith says this assumption was made based on previous studies that compared cur-rent productivity rates to natural productivity and found that nature produces the maximum potential. “even with all of our current human management, agricultural productivity is gen-

erally less than natural productivity,” he says. “there are exceptions, usually because of ir-rigation. if you irrigate in an arid climate, you get production higher than what’s natural. [but] our thinking for things like irrigation and fertil-izer were that these two factors, particularly in the U.s., are already nearing a point of unsus-tainability.”

other researchers contributing to the proj-ect included co-authors Cory Cleveland, assis-tant professor of soil sciences at Um, and steve running, director of the university’s numerical terradynamic simulation Group and regents professor of ecology. While the results of the analysis indicated that the biofuels industry is on the right track by targeting residues for feed-stocks, running cautions that it is important to continue to focus on establishing attainable production goals. “While we encourage the appropriate use of agricultural residues, forest slash and beetle-killed trees for bioenergy, the nation needs realistic targets of the capacity for bioenergy production that would not compete with food production,” he says. —Kris Bevill

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production

Supplies Rebalance

Pulling Back Green Plains’ 120 MMgy ethanol plant in Bluffton, ind., is one of nine faculties owned by the company. Although the facilities were not identified, two of Green Plains ethanol plants reduced run rates by 30 percent in response to tight margins and ethanol oversupply in the first quarter of 2012.

PHOTO: GREEN PLAINS RENEWABLE ENERGY


production

The ethanol industry went from booming business to tight and even negative margins in the first quarterBy HOLLy jESSEN

the year 2011 turned out to be a good one for ethanol producers. even with high corn prices the industry was prof-itable, especially in the fourth quarter, bolstered partially by record exports. Then, in December margins tightened dramatically, and ethanol stocks began to build, setting the stage for a whole new landscape.

as a result, margins were ugly in February and were shaping up pretty poorly in March, said Mike Chisam, president and CEO of Kansas Ethanol LLC, a 55 mmgy plant in lyons, kan. on the other hand, the good news is that margin structures can change for the better as rapidly as they fall, he added.

Production Reductionsin early February, ethanol industry giant, Green Plains renewable energy

inc., announced it was slowing production at two of its nine ethanol plants. al-though the company didn’t specify which plants reduced run rates, it did identify those plants as the most inefficient facilities. Todd Becker, president and CEO of Green Plains, told ePm the company was evaluating the situation on a daily basis, determining if it needed to cut back at additional Green Plains plants, as well as when to return to full production. “it will last as long as we need to keep them lower, relative to the earnings power in those plants,” he said.

Green Plains was arguably the most notable example of an ethanol pro-ducer reacting to tight ethanol margins and high ethanol stocks by reducing run rates. While a handful of other ethanol plants also announced production reduc-tions, experts agree many others were quietly doing the same without making the information public. “everybody has got to at least be thinking about doing

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production

it,” said Donna Funk of Kennedy and Coe llc. “some are just at the point to take ac-tion quicker than others, due to different phi-losophies.”

While kansas ethanol llc didn’t slow its production rates, the company did stra-

tegically go into its three-day spring mainte-nance shutdown early. and, kansas etha-nol wasn’t the only one to make that move, chisam said. the decision to shut down at the end of February instead of in march, as usual, came about because ethanol produc-

tion was exceeding demand. “ethanol plants just aren’t helping themselves by continuing to crank out product and putting it out in the marketplace,” chisam said.

Although a 20-day supply of ethanol is less than 17 million barrels, ethanol stocks were well above that number at 22 million barrels in February and early march, accord-ing to information from the U.s. energy Information Administration. The March 9 report showed that stocks went from what was at that time a high of 22.1 million barrels back down to 22 million barrels. As of the march 16 eia report, however, stocks shot back up to a new all-time record of 22.7 mil-lion barrels—equivalent to a 27-day supply. Ethanol production averaged 896,000 barrels per day as of Feb. 24, 906,000 barrels per day as of March 2, 892,000 barrels per day on March 9 and 893,000 barrels per day as of march 16.

rising ethanol stocks started at the end of 2011, when inventories were thin and mar-gins were very attractive, prompting ethanol producers to churn out as much ethanol as possible. “When that environment changed in terms of demand, the industry was slow to react,” said steve mcninch, ceo of West-ern Plains Energy LLC, a 50 MMgy plant in oakley, kan. “the industry had record pro-

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Peaking Production EIA data shows that ethanol production peaked in January and then dropped slowly as producers reacted to an oversupply in the marketplace.

SOURCE: ACCENDANT PARTNERS

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Rising Stocks East Coast, Midwest and overall U.S. ethanol stocks rose dramatically from the first of the year, according to EIA data.

SOURCE: ACCENDANT PARTNERS

duction levels the last week of December the first week of January, at a time of extremely low demand.”

independent of the “gross oversupply” of ethanol, the first quarter of the year is tra-ditionally a time of tight margins for the etha-nol industry. Gasoline demand, and therefore demand for ethanol for blending, slumps after the holidays and doesn’t typically pick back up again until the summer driving season hits, mcninch said.

so what’s the difference between this first quarter and other first quarters? It’s all about contrast. “We are running at about the same [profitability] level as we were last year at this time,” said Rick Kment, a Telvent DTN biofuels analyst. “We saw almost the highest margins ethanol have seen in recent history through the fourth quarter of 2011, so the challenge for ethanol producers is not that we are totally out of line from where we were in the past, but it was such a significant shift from where we were only three months ago,” he said in late February.

production

Kment saw that reflected in the Neeley biofuels hypothetical 50 MMgy ethanol plant, an internal company model used to gauge the health of the ethanol industry. DTN uses cash prices it tracks for corn and ethanol at the rack to calculate net profitability using various assumptions. the hypothetical etha-nol plant has no capital debt and would most closely represent an older ethanol plant that started operating before the ethanol bust, he said. While no two plants are alike, the hy-pothetical plant on paper does give DTN a good measurement tool.

In October and November 2011 the hypothetical model showed a net profitabil-ity of 65 to 70 cents, he said. Compare that to the end of February, when the figure had dropped dramatically to a negative 27 cents in net profitability per gallon of ethanol, with a corresponding net operating profit of 4 cents. as of close of markets march 14, the numbers were changed for the better at negative 18.7 cents per gallon net profitabil-ity and a net operating profit of 13 cents per gallon.

that trend is likely to continue into spring and summer, said Scott McDermott, partner with ascendant Partners inc. “once ethanol stocks come down over the next sev-eral months, the ethanol price will likely find more support as gas prices continue to rise, which will eventually result in better ethanol

production margins,” he said in mid-March. “We are not out of the woods, but there is light at the end of the tunnel.”

another potential release of the mar-gin pressure valve for ethanol producers is the next corn crop. if the early growing sea-son looks good, it could be a predictor of a healthy corn harvest. “if it appears to be abundant, i think you will start to see corn prices come down, which will immediately help margins,” Funk said.

What’s Gas Got to Do with It?the new Year also brought with it a

widening spread between gasoline and etha-nol prices. as of the third week in novem-ber, reformulated blendstock for oxygenated blending (rbob) and ethanol futures were virtually the same, kment said. by the end of February RBOB was trading for $3.04 and ethanol $2.26—a 78-cent price spread. that gap continued to widen as gas prices kept rising and by close of markets march 14, $2.30 ethanol futures and $3.34 RBOB futures pushed the price spread to more than $1.

that attractive price spread has been promoting discretionary blending in the U.s. at the same time as export demand is also high, said sander cohan, analyst at esai inc., which offers energy consulting services to ethanol producers and others. those fac-

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Biofuels BenchmarkingTM

Annual Grind Margin

Average Leaders Laggards

margin Performance Christianson & Associates track the difference in grind margin between industry leaders and laggards participating in their benchmarking program. Figures for 2012 were not yet available at press time as data is collected quarterly.

sOuRCe: CHRisTiANsON & AssOCiATes


production

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tors will continue to send a strong signal for ethanol in the marketplace. “What’s interest-ing is that although the prices will favor it, the demand for ethanol is limited by a weak gasoline market and also by limits on discre-tionary blending,” he added.

it’s not just a short term situation, ei-ther, McDermott said. Average annual gas demand is down more than 10 percent from peak demand in July 2007, according to EIA figures. In addition, projections are that gas demand will drop another 0.34 percent this year and will also be down slightly in 2013.

although most experts agree low gas demand is a bigger factor, a rush to blend ethanol at the end of 2011—before the sun-set of the Volumetric ethanol excise tax Credit—did have an impact. “It’s not the major factor, but i think it’s a factor,” said ron lamberty, senior vice president with the american coalition for ethanol. also the owner of two retail gas stations in south Dakota, Lamberty says he has definitely heard of cases where blenders were pur-chasing larger amounts of ethanol to ensure they’d get the 54-cent tax incentive before it went away. For some the gamble didn’t pay out. “as it turned out, the price of [etha-nol] dropped enough that if they bought it early or middle December they probably lost money on the deal,” he said.

in order to take advantage of Veetc, blenders needed two things: to also be a fuel retailer, and to have plenty of storage capac-ity. before Veetc expired, internal reve-nue Service-issued guidance said that blend-ers who sold their own fuel could collect the tax incentive when it was blended, even if it wasn’t physically at a retail fueling station, lamberty said.

that kind of vertical integration is what gives some ethanol producers a dis-tinct advantage over others, said Don Roose, president of U.S. Commodities, a West Des moines, iowa, brokerage company that ad-vises ethanol plants. ethanol plants oper-ated by petroleum companies, such as Valero energy corp. and murphy oil corp., can continue to blend ethanol to meet blend-ing requirements, even if margins tighten up at their ethanol facilities. nonvertically integrated ethanol plants, on the other hand,

have to take a look at other options, such as throttling back on production levels.

Crystal Ballalthough there’s no crystal ball guaran-

teeing the future, many experts believe the ethanol industry will make it through current tough times. tight margins for two or three months—especially following strong mar-gins in the late third and fourth quarters—won’t be enough to cause huge distress in the industry, says Green Plains’ becker.

kment agrees. “From all appearances now, this is more of a controlled risk man-agement issue, versus a total panic in the market, so i think that’s going to continue to help to stabilize the market long term,” he says.

it’s possible there could be a few bank-ruptcies and it could lead to more consolida-tion in the industry, Funk says. but it won’t be anything like what happened in 2009. most ethanol plants today are better situated financially to survive a period of tight mar-gins, having paid down debt. Back in 2008, when corn prices shot up, and in 2009, the time of multiple bankruptcies, there were more brand-new plants that were thinly capi-talized and heavy on debt. “some of them were plants that probably never should have had money loaned to them to start with,” she says.

as the industry continues to mature, kment predicts more ethanol plants will model themselves after the ebbs and flows of the animal packing industry. While that industry is producing constantly, rates fluctu-ate based on seasonal demand, to maximize profits and minimize losses. He believes the ethanol industry will begin to develop its own model of this, rather than running at full production rates year round. the indus-try will also begin to take a longer-term ap-proach to its contracts for ethanol and distill-ers grains, depending on seasonal patterns. “i do expect that to be a little bit more of a fluid movement in overall demand than what we have seen in the past,” he said.

author: Holly JessenAssociate editor, Ethanol Producer Magazine

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ceLLuLosic ethAnoL

nearing completion By late February, many components of M&G’s 13 MMgy cellulosic ethanol facility in Crescentino, Italy, had been installed, including the reactors for fermentation and hydrolysis (shown far right), beer columns and the lignin boiler and electrical plant generator (center left).

PHOTO: MOSSI & GHISOLFI GROUP


ceLLuLosic ethAnoL

The largest cellulosic ethanol plants in the world are ready to prove their mettleBy KrIS BEVILL

Steelin the

Ground

Guido Ghisolfi is a confident man. a chemical engineer by trade, at 55, he’s already spent three decades leading research and development (R&D) activities at Italy-based Mossi & Ghisolfi Group, a $3 billion per year chemical firm that ranks as one of the world’s largest PET producers (a polymer used in plastic bottles and other products). M&G, which Ghisolfi describes as a fam-ily group (Mossi and Ghisolfi are his mother and father), also happens to be constructing the largest cellulosic ethanol production facility in the world to date through its subsidiary, global engineering, procurement and construction com-pany chemtex. the facility will be mechanically complete this summer and won’t begin producing until the third quarter of this year, but Ghisolfi says he already knows the process will work and will be cost-competitive with first-generation ethanol, and he’s ready to guarantee it. “chemtex is ready to sell plants,” he says. “come and see the plant and i’ll sell you one. if you want to buy one now, i’m more than happy to sell you the technology with a guarantee, and i can tell you how much it costs.”

How is this possible? Ghisolfi traces M&G’s path toward cellulosic ethanol back to 2004, when the company acquired Chemtex from Mitsubishi Corp. Along with Chemtex came corn ethanol technology it had acquired from Delta-T Corp., which brought ethanol into Ghisolfi’s interests. He began to examine the existing U.s. ethanol industry and quickly concluded that while corn ethanol production was an acceptable practice in the U.s., the process would not be viewed as positive-ly in Europe, where food versus fuel concerns were more widespread. So M&G decided to explore other technologies to produce ethanol in a feedstock agnostic environment from strictly nonfood biomass. The firm also realized immediately that the technology would need to be cost-competitive with first-generation etha-nol and other fuels. “We did our homework and the family was faced with a not simple situation, that is to say that there is a solution, but the ticket we have to pay to enter into this development path is a very expensive ticket,” Ghisolfi says. The company determined the risk was worth the cost, and M&G invested more than


ceLLuLosic ethAnoL

$200 million to fully fund its cellulosic etha-nol activities, including technology develop-ment, the establishment of a pilot plant, de-veloping biomass supplies to properly feed the technology, and, finally, the construction of a 15-20 MMgy production facility.

of the handful of cellulosic ethanol developers making their way toward com-mercial cellulosic ethanol production, M&G is the first to make it this far with no outside financial support. Ghisolfi says it is because the company has self-financed everything that it has been able to make such significant progress in a short amount of time. “We were not slowed down by lack of funds or the need to raise capital,” he says. “once the family had decided to invest a considerable amount of money, we could spend our mon-ey according to our initial plan.”

That plan includes the commercial-scale facility in crescentino, italy, designed to process 40,000 tons per year of biomass, but expected to process up to 60,000 tons per year, which means the plant could pro-duce up to 20 MMgy of cellulosic ethanol when fully operational. locally obtained rice straw, wheat straw and arundo donax will serve as the facility’s primary feedstocks, but the trademarked Proesa process technology developed by chemtex is feedstock agnostic, a quality which Ghisolfi says will be key to the technology’s wide-ranging success. “We can make cellulosic ethanol starting from any biomass, any grass, any straw,” he says. “You can run a week with rice straw, a week with corn stover, a week with wheat straw, without changing hardware and without changing en-zymes. This gives a lot of flexibility because you can get different types of biomass from the area around the plant depending on the season [and] the cost.”

the pretreatment portion of the Proesa technology is also lenient compared to oth-er processes being developed, negating the need to create uniformly sized pieces of bio-mass, for example. Ghisolfi likens the pro-cess to boiling spinach. “When you throw the spinach in the pot, you don’t measure the size of the spinach,” he says. “it’s the same thing here. You don’t need particular pre-handling of the biomass [to make it] one inch by one inch or two inches by two inches.

the biomass can be cut by hand or by ma-chine, cut roughly or precisely, depending on the process used by the local farmers.” the Proesa technology itself is described by Ghi-solfi simply as being composed of “a piece of iron that turns.” he stresses that the pro-cess is low-temperature and doesn’t require the use of acids or chemicals. there are also no requirements for rare earth metals, which means the overall cost is lower and the po-tential deployment area for the technology is larger, he says. the company is partnered with novozymes to use its enzymes in the production process but, because the technol-ogy is chemical-free, Ghisolfi says fewer en-zymes are required to be used, which lowers the cost.

the only coproduct produced as a re-sult of this process is lignin, according to Ghisolfi. At Crescentino, the company has invested $50 million to construct boilers to translate that lignin into 15 megawatts of power, enough to serve the production facil-ity with leftover available to sell to the local utility. because power prices are high in italy, Ghisolfi says it was easy to determine that adding on that aspect of the project would be a worthwhile investment. it’s an optional component, however, so he expects that not everyone will be willing to up the cost of their project by one-third to produce power. he points out that without the boiler costs, the crescentino project is on track to pro-duce ethanol for about $5 per gallon, and he expects that price to continue to go down with each consecutive plant that is built.

Ghisolfi hopes to soon see the Proesa technology at use in the U.S., but M&G doesn’t plan to operate any of the facilities. Last October, M&G formed a joint venture with tPG capital and tGP biotech to create beta renewables. the new company, led by Ghisolfi as CEO, was created exclusively to license the Proesa technology. the company is taking over ownership of the crescentino plant, but the goal is primarily to use the plant as a showcase for the technology. “this is a plant that is large enough to be economically viable, but it will be a demonstration plant,” Ghisolfi says. “The next plants, we want to license, not build.”

Ghisolfi sees the most immediate de-


ceLLuLosic ethAnoL

mand for second-generation technology to come from first-generation ethanol produc-ers and blenders in the U.s. who are seek-ing ways to meet the federal renewable fuel standard’s call for increased amounts of cel-lulosic biofuels. however, because the Proesa technology produces C5 and C6 sugars, the possibilities for end products are broad and applicable to anyone wanting to produce cost-efficient sugars. Ghisolfi predicts that by about 2014, a second wave of customers will come into view, consisting of companies that are already attempting to ferment sug-ars to produce everything from butadiene to acrylic acid. “so far, everybody went to brazil because they thought there are cheap sugars in brazil,” he says. “We hope we can make them change their minds and stay in the U.s. because we can deliver cheap sugars in the U.s. as well.” currently, sugars can be had for about 22 cents a pound at the international level. Ghisolfi says he can beat that price by half, producing sugars using Proesa technol-ogy for 10 cents per pound. He admits his claims are met with skepticism, but he is firm in his estimates and says Beta Renew-ables has already begun to forge partnerships with chemical producers. around July, when the crescentino plant begins to continuously produce ethanol, the process will be further proved and the build out can begin in earnest,

he says, although he willingly admits that there will soon be others in the same position. “i would be very happy to be the first, or one of the first, players in the market,” he says. “But i don’t pretend to have all of the market for me. if they want to buy from someone else, they will, because there will be someone else relatively soon. [but] we have a lot of skin in the game as chemtex. We bought the plant, so we know how much it costs. i can show steel to people. We’re not talking about a hole in the ground. and if someone is, allow me the term, dumb enough to invest $100 mil-lion in the R&D for several years and $150 million into a plant, it means that this is going to be working.”

Indian River Bioenergy CenterThe first U.S. plant planning to begin

operating at a commercial-scale is the Ineos new Planet bioenergy llc facility, dubbed the indian river bioenergy center, located near Vero beach, Fla. the plant will produce 8 MMgy of ethanol and 6 megawatts of power using locally sourced municipal solid waste and vegetative waste, including some waste citrus, beginning in the second half of this year. In mid-March, the project was still on track to be mechanically complete by april and expected to meet the U.s. ePa’s expectations of producing about 2 million

gallons of cellulosic ethanol this year. last year, Ineos Bio received a $75 million loan guarantee from the USDA for the Indian river project, helping to alleviate some of the risk associated with being one of the first-of-its-kind projects, but Ineos has also invested heavily in the project and has a lot at stake in making it work. “When it comes down to it, the thing that’s completely in our control is commissioning this unit and getting it up and running and producing ethanol, and that has to be our primary focus at this moment,” says ineos bio ceo Peter Williams. calls from the petroleum industry to dismantle the cellulosic biofuels portion of the renewable fuel standard are not increasing the pressure to produce, he says, adding that the time will soon come when those renewable identifica-tion numbers (rins) will become available to them.

Fiberightother facilities on the U.s. ePa’s antici-

pated producer list for cellulosic ethanol this year include demonstration-scale facilities operated by Zeachem inc. and kl energy corp as well as american Process inc., which is nearing completion on a 800,000 gallon per year facility in alpena, mich., which will utilize wood hydrolyzate from a nearby hard-board manufacturing facility as its feedstock.


ceLLuLosic ethAnoL

Real-time DDG/DDGS Analysis

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the company expects to begin operating the facility in about a month. the only other cel-lulosic producer expected to contribute to the rFs this year is also the only cellulosic ethanol producer that owns an existing commercial-scale facility. Fiberight llc purchased a for-mer corn ethanol plant in blairstown, iowa, several years ago and has been slowly modi-fying it to produce ethanol using msW as a feedstock. CEO Craig Stuart-Paul says that work continues today, and he doesn’t expect blairstown to produce this year, but Fiberight will begin producing batches of ethanol from its demo plant in lawrenceville, Va., by June. Fuel produced in Virginia will be marketed by Protec Fuel management llc to the U.s. navy. in march, the company was carrying out some process modifications to increase efficiency and conducting small revisions to ensure it receives a $25 million loan guarantee offered by the USDA in January. Stuart-Paul says the “post-Solyndra” environment has prompted the USDA to require more proof of process at a smaller scale before granting loan guarantees to commercialize, so there-fore more emphasis is being placed on op-erating the demo plant at a precommercial scale for the short term. that streamlining process is expected to be finalized in June, approximately. In March, Stuart-Paul wasn’t ready to guarantee that Fiberight could pro-duce all of the 1.6 million gallons of etha-nol expected by the ePa this year, but said meeting the agency’s target is not his primary concern. “We’re in a position now where we want to do this right; we don’t want to blow it,” he says. “We will have some production, but the thing is, there is actual steel going into the ground now, we’re among them, and there will be gallons produced.” according to Stuart-Paul, the number of gallons produced is less important than the fact there will be actual production this year. “Once those first few plants begin producing and can produce successfully … look at what happened in the corn ethanol industry. Once those first few plants produced, you had a massive increase in the amount of overall production nation-wide. Everyone was waiting for the first ones to come online.”

author: Kris BevillAssociate editor, Ethanol Producer Magazine


Right on track The Indian River BioEnergy Center project, shown here in March, continues to progress on track and on budget, according to Ineos Bio, and will produce measurable amounts of cellulosic ethanol this year.

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high yielder A field of energy beet hybrid grown by Betaseed Inc. in Anchorage, Alaska, yielded an impressive 40-plus tons per acre in four months.

PHOTO: STEVE LIBSACK, BETASEED


North American sugar-to-ethanol strategy differs from Brazil’s, Europe’s By HOLLy jESSEN

feedstock

the technology isn’t the issue. clear examples of ethanol production from sugar beets and energy beets already exist. And, yet—despite the potential of the feedstock—North America has yet to see a full-scale beet-to-ethanol production facility built.

However, there’s been some exciting progress lately. North Dakota-based Green energy Group is resolutely moving forward with a plan to build multiple 20 MMgy dedicated energy beet plants in the state. The quest began in 2007 and took some big leaps in early 2012, when it received $1 million in funding from the North Dakota Renewable Energy Council and other sources, says Maynard Helgaas, president. Around the same time, North Dakota State University, which has been assisting with the project, submitted an energy beet ethanol life-cycle analysis to the U.S. EPA in an effort to get it qualified as an advanced biofuel. The group has its first location selected, although it hasn’t been announced yet, and hopes to begin processing ethanol by fall 2014. “It wouldn’t take us long once we complete our research to get the most efficient processing out of energy beets—then we will build the plant,” helgaas tells ePm.

Green Vision Group’s vision is ambitious—they want to build least 12, pos-sibly 16, energy beet-to-ethanol plants in North Dakota. When asked if that’s feasible, Cole Gustafson, chair of NDSU’s department of Agribusiness and Ap-plied Economics, points to the growth of the corn ethanol industry since 2004. At that time, it might have seemed out of range to imagine more than 200 U.S. ethanol plants, but that’s exactly what happened—and it can happen for energy beet ethanol too. “it certainly is a possibility,” he says. “it’s going to take us several years to get there.”

More than 3,000 miles due east, Canadian company Atlantec BioEnergy Corp. is building a 79,000 gallon a year energy beet demonstration plant in Corn-wall, Prince edward island. the plant is expected to begin production of ethanol in July, says ron coles, vice president of agricultural resources and public rela-tions for the company. the company is working with some north american groups interested in its closed-loop technology, which includes anaerobic diges-tion of the leftover beet pulp for power production.

in the meantime, others are waiting and watching, holding off until someone else is successful. “It’s kind of that idea of who moves first, who takes the first leap,” says carl christian radinger, owner of Putsch Group, in a telephone call from Germany. “You know, everybody is waiting for somebody to do it to see

Energy Beets: Who Will Leap First?


feedstock

how the economics really are, not just on paper. there needs to be a reference plant.”

steve libsack, director of business devel-opment and strategic accounts for betaseed inc., says the same thing. “it’s a little bit of a chicken and egg situation in that until the first plant is up and going, it’s a little blurry,” he says, adding that willing project developers and in-vestors are needed.

Compare, ContrastIn Europe, some food-grade sugar pro-

ducers have added ethanol production to their sugar beet processing plants, much like the bra-zil sugarcane model, radinger says. he and his colleagues at Putsch, manufacturer of beet pro-cessing equipment, couldn’t think of a single, dedicated, energy beet ethanol plant in europe. instead, the most common overseas use for energy beets is on-farm biogas production, an attractive option due to high energy prices.

interest for U.s. ethanol production, on the other hand, is more focused on energy beets. Gustafson just doesn’t see U.s. sugar producers adding on ethanol production. For one thing, North Dakota’s proposed energy beet-to-ethanol plants will utilize a more effi-cient processing technology than existing sugar production facilities, he says. still, it is techni-cally achievable, and becomes more feasible if

Beet opportunity Officials of the Canadian government and Atlantec BioEnergy display artist renderings of the research and development facility now under construction in Canada. Ron Coles, vice president of Atlantec BioEnergy, is second from the left.

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how Sweet it is Maynard Helgaas, president of Green Vision Group, speaks at the site of a test plot of energy beets in Oakes, N.D. The field is irrigated.

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there are changes to the U.s. sugar program. in that case, granular sugar producers could conceivably convert or augment food-grade sugar plants. “it certainly is a possibility,” he says, “especially if we see changes in national farm legislation.”

in other words, it could be done, but it’s not likely, betaseed’s libsack agrees. For one thing, there’s not a whole lot of room for expansion in areas of the U.s. where sugar beets are already in production. by going the energy beet route, competition for land can be avoided.

at least one U.s. company is targeting sugar beets, but without following the euro-pean model exactly. This spring Iowa-based energae lP signed a purchase agreement for the idled alchem ethanol plant in Grafton, N.D., and said it would upgrade the plant for dedicated sugar beet-to-ethanol production, possibly by fall. the energy investment group was working to get sugar beet producers on board and was confident it could secure enough feedstock for the 10 MMgy plant, said

Jerry krause, general partner in energae, in early march. he didn’t discount energy beets altogether but pointed out that sugar beets were already an established crop in that area.

so what’s the difference between sugar beets and energy beets? Clearly, either one works for ethanol production. to produce table sugar, producers are looking for sucrose, sucrose and more sucrose. energy beets, on the other hand, contain multiple sugars, meaning sucrose as well as glucose, fructose and other minor sugars, called invert sugars, libsack says. to create energy beet hybrids, plant breeders like betaseed, a wholly owned subsidiary of German company kWs, select for traits such as high sugar yield, not just su-crose production.

another difference has to do with the front-end processing equipment needed to remove stones and clean the beets. this isn’t as rigorous as is necessary for sugar beets, which ultimately end up in sugar shakers and birthday cakes. the company, which operates as Putsch Usa in asheville, n.c., also makes

equipment for slicing sugar beets or mashing energy beets as well as juice filtration.

High on Sugarbetaseed’s energy beet trials are being

conducted around north america and prove there are many areas where energy beets would thrive, libsack says. “We’ve literally had trials from nova scotia to southern cali-fornia and from alaska to Florida and i really haven’t found a place that i can’t grow beets,” he tells ePm.

the company has been working with groups looking at energy beet production in the northern states of North Dakota and minnesota, as well as areas such as kentucky, Florida and mississippi. in southern areas, energy beets can be grown as spring and/or winter crops. For example, the mississippi Delta Region has been identified as an area where energy beets can be grown as a win-ter crop without displacing or replacing any current crops. “We believe that the beet can be harvested on a year-round basis, weather

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permitting, to give us a year-round supply of feedstock,” he says, adding that betaseed’s par-ent company KWS has a patent-pending tech-nology for beet storage. “it isn’t for storage of a sugar beet for sugar production—we’ve looked at that for years and it simply doesn’t work—but for energy beets for ethanol pro-duction, the beet is very, very stable.”

Green Vision Group and NDSU are fo-cusing on energy beets because they believe it will produce a truly green fuel, and they are confident the EPA will agree and bestow the coveted advanced biofuels designation. the group believes North Dakota, in particular, is

an ideal place for energy beet-to-ethanol produc-tion. “this region has the lowest cost of pro-ducing sugar, nation-wide,” Gustafson says.

Green Vision Group is focused on producing low-carbon ethanol, starting in the field all the way to actual production. that means encouraging farmers to utilize farming practices that reduce nitrogen and chemicals used in the field, Gustafson says. it’s also why they plan to

build smaller-scale ethanol plants, so all feed-stock supplies are within a 20-mile radius.

as a crop, energy beets increase soil health due to a deep tap root and are tolerant of drought and alkaline or saline soils, helgaas points out. as a feedstock for ethanol produc-tion, high yields are a big attraction. energy beet trials conducted in North Dakota dem-onstrated yields ranging from a high of 37.8 tons per acre on irrigated land, to 25.2 tons per acre on dry land. overall, the group ex-pects about 75 percent of the land utilized to produce energy beets to have at least some ir-rigation and average yield of 32 tons would

add up to 1,000 gallons of ethanol production in just one acre of land. in other words, en-ergy beets have the power to produce about double the amount of ethanol in one acre, when compared to corn, he says.

another facet of the project’s attractive-ness is the efficiency of the ethanol produc-tion process it will utilize. as an example, Gustafson points to the partnership with heartland renewable energy of muscatine, iowa, which brings a technology to the table to build a “self-propelled” ethanol plant. The engineering and consulting firm has a patent for a process to create spray powder, which will be used to produce up to 70 percent of the plant’s thermal needs. stillage from the fermentation process will be spray dried—put through a nozzle at high pressure to evaporate water and produce a dry material, he says.

besides ethanol, energy beet ethanol plants produce other valuable coproducts, including animal feed from the leftover beet pulp, much like distillers grains. “What we are also very excited about is the positives of pro-ducing renewable chemicals from these sugars in addition to biofuels,” Gustafson says. “We have to see what the marketplace is, that’s part of the research that we are addressing right now.”

author: Holly JessenAssociate editor, Ethanol Producer Magazine

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Wide open Spaces This 2009 map shows sugar beet, corn and sugarcane production areas. Although critics point to high sugar beet prices in the U.S., planting energy beets in areas where sugar beets aren’t produced would be feasible, says Carl Christian Radinger, owner of Putsch Group. Green areas show sugar beet producing country, yellow is corn and red is sugar cane.

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growing a giant USDA researchers collect samples from giant reed in California.

PHOTO: USDA AGRICULTURAL RESEARCH SERVICE


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EPA evaluates energy cane, giant reed and napiergrassBy ErIN VOEGELE

for

Advancing

AdvancedFeedstocks

the approval of new feedstock pathways un-der the renewable fuels standard (RFS2) is critical to the developing cellulosic ethanol industry. the addition of new pathways expands the library of biomass crops available for conversion into RFS2 compliant biofuels and using approved feedstocks is the only way producers can generate re-newable identification numbers (RINs) for the resulting fuel. The approval of specific feedstock pathways is also critical to financing a project, since investors may be less willing to support a project that relies on an unapproved feedstock.

On Jan. 5, the U.S. EPA issued a direct final rule regarding pathways for three grassy biomass crops—energy cane, giant reed and napiergrass. the agency also published a parallel proposed rule for the pathways on the same day. according to the ePa, it pub-lished the direct final rule without a prior proposed rule because it viewed the addition of these new RFS2 pathways as noncontro-versial. the ePa explained the new pathway determinations did not require new agricultural sector modeling and involved relatively straightforward analyses that largely relied on work that had already been completed as part of the RFS2 final rulemaking. In the direct final rule, the EPA also noted that the pathways would become effective March 5 unless the agency received adverse comments or a hearing request by Feb. 6. the ePa did receive such comments, and on March 5 published a notice in the Federal Register officially withdrawing the direct final rule.

several public comments are posted to www.regulations.gov in regard to the direct final rule, some in support of the new path-ways, others critical. robert bendick, director of U.s. government

affairs at the nature conservancy, posted a critical comment on be-half of the national environmental coalition on invasive species. the comment noted that the rule would approve renewable fuel pathways for plant species that are listed as noxious weeds and/or are considered invasive species in the U.s. “ePa has not considered how this rulemaking will affect the introduction or spread of these species, nor has it taken action to avoid or minimize these effects,” bendick said in the comment.

However, the EPA’s withdrawal of the direct final rule does not mean that the pathways will not be amended to the RFS2. rather, it will complete the rulemaking process using the paral-lel proposed rule it published for the pathways. according to the agency, it intends to address all comments in a subsequent final action. the agency also noted that it will not institute a second comment period on the action.

While the pathways for energy cane, giant reed and napier-grass will be delayed, the research community and biofuels industry are continuing the efforts to bring the advanced feedstocks to com-mercial fruition.

Developing the CropsThe USDA’s Agricultural Research Service is diligently work-

ing to improve and develop advanced biofuel feedstocks, including extensive work with napiergrass, energy cane and a wide variety of other bioenergy crops. according to Jeff steiner, ars national program leader for biomass Production systems, no matter what feedstock an ars research program focuses on, a primary goal is to reduce inputs while increasing yield. Specifically, ARS research-

Pathways


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ers work to reduce the use of nitrogen and water. in addition, the research programs also focus on improving the traits of these crops for use by the biorefining industry. “The real twist on the whole thing is to try to design the feedstocks so that they are friendly to specific conversion technologies,” he said.

regarding the ars’s work with napier-grass, steiner notes ars researchers are look-ing at a full systems approach to developing napiergrass as a biomass crop. the work, he continues, is led by research geneticist bill an-derson in tifton, Ga. “[anderson] is particu-larly looking at breeding for higher yield and improved production efficiencies along with genetic components that would enhance the conversion ability of the crop into biofuels,” he says. While the ars is continuing work to further improve napiergrass, steiner says there are varieties of the crop that are ready for commercial deployment. “one of those is called merkeron,” he continues. “that mate-rial is actually in pretty good shape.” in dry-land conditions, the variety can achieve yields of 8 to 10 dry tons per acre and with some irrigation, the yield can be pushed to 15 dry tons per acre.

The high-yielding, lesser-known napier-grass biomass crop is attracting interest, ac-cording to steiner. “We have cooperative research and development agreements with specific companies that are interested in the materials,” he says. “We are working closely with them. they are helping to set the qual-ity standards for their conversion processes to optimize their systems. We work in that with them, as well as with the general materials to improve yields, reduce input costs and so forth.”

the ars is also working with energy cane. Gail Wisler, ars national program leader for horticulture and sugar crops, notes that the department’s work on energy cane originated with its sugarcane program. “in order to im-prove sugarcane for disease resistance, adapt-ability to different soils and cold tolerance [our researchers] need to—by necessity—bring in a wide variety of parents for crossing,” she says. “in that process, we used to throw out [result-ing varieties] that were very high in fiber and low in sugar. now, of course, it turns out that many of these sorts of byproducts of the sug-

arcane industry have been released for initial exploration with the energy cane world.” as a result, the ars has expanded research into energy cane. according to Wisler, promising varieties of the feedstock have been released. they have been trialed in more northern loca-tions, and have done very well, she said. While Louisiana is the northern-most region of the world that currently grows sugarcane com-mercially, Wisler says that preliminary trials of energy cane have been conducted as far north as north carolina.

While work is clearly progressing with both feedstocks, steiner stresses that it is im-portant to understand there isn’t a single bio-mass feedstock that is going to fit the needs of the entire biorefining industry. Rather, different feedstocks will be more appropriate for cultivation in certain regions and conver-sion with specific technologies. “It’s going to be how do you optimize these systems based on their agronomy, their production ecology, how it fits into the production cycle of exist-ing crops, as well as how does it fit into the businesses plans and operation plans of the biorefineries that utilize them,” he says.

regarding the potential for some bio-mass crops to be invasive, steiner points out that any crop—not just biomass feedstocks—could cause some detrimental side effects or unintended consequences, whether biological, environmental or economical. the key will be

Full of Fiber Energy cane is essentially a high-fiber, low-sugar variety of sugarcane.

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to grow each biomass crop in the most ap-propriate environment. For example, there are some regions in which a crop like giant reed might prove invasive, but there are also other locations where it might not cause any unin-tended consequences. napiergrass is most ap-propriately grown in USDA plant hardiness zones 8A, 8B, and 9, as growing it in those zones will help ensure the crop doesn’t flower. according to steiner, it may also be possible to manipulate a particular crop genetically to minimize or eliminate those problems.

Industry PerspectivesEdeniQ Inc. is one biorefining company

planning to employ energy cane as one of its feedstock sources. While edeniQ ceo brian Thome notes that his company’s near-term development and scale-up plans are focused on the use of agricultural residues, it has also had excellent results converting energy crops, such as energy cane and switchgrass, into cel-lulosic ethanol. the addition of new feedstock pathways represents significant benefits to fu-ture cellulosic biofuel projects. “We have spent significant time working with energy cane as a

feedsock for our process,” thome says. “We have not spent time working with giant reed or napiergrass, but expect similar excellent per-formance. the approval of new feedstocks [under RFS2] provides EdeniQ and its licens-ees greater flexibility in the planning of future commercial projects.”

thome also notes that additional path-ways are important to the industry as a whole. “The financial incentives provided by cellu-losic rin credits, enabled by these pathway approvals, are critical for the cellulosic ethanol industry to justify the considerable investment of the resources needed to develop, scale-up and commercialize new technologies,” he says. While the ePa’s work on these three new bio-energy feedstocks is a step in the right direc-tion, there are still many feedstocks that are in earlier stages of the pipeline. according to thome, additional approvals for feedstocks and pathways will provide the industry with greater flexibility, which enables more attrac-tive economics for commercial opportunities.

brooke coleman, executive director of the advanced ethanol council, adds that the approval of new feedstock pathways are a crit-ical component of the investment discussions cellulosic ethanol companies are currently having. according to coleman, his organiza-tion would like to see the ePa prioritize and fast track the fuel pathway proposals for feed-stocks clearly associated with projects that will be the first to come online with commercial-scale production. some of these feedstocks include municipal solid waste and dedicated hardwoods, he says. companies that are near-ing commercial production need the ePa to send a signal to the market regarding path-way approvals for their respective feedstocks, coleman adds. “those pathways need to be fast tracked because if the development plans get ahead of the pathway certification, then you have arrested development that creates a feedback loop into all of the other problems that they are having,” he says. ensuring that the first commercial producers of cellulosic ethanol are able to generate rins for their fuel will help negate some of the pushback against the RFS2’s cellulosic volume targets.

author: Erin VoegeleAssociate editor, Biorefining Magazine


Bigger Biomass USDA researchers collect samples from giant reed in California.

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contRiBution

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

EU Requires Sustainable Biofuels How U.S. ethanol producers can become certified By ANtjE GrzESIK

sustAinAbiLity

the u.S. has been a net ex-porter of ethanol since 2010, when more than 350 million gal-lons of ethanol going to overseas markets, according to the Renew-able Fuels association. In 2011, U.S. exports reached nearly 900 million gallons, with the european Union one of the top des-tinations.

The EU has a target of deriving 10 per-cent of transportation fuel from biofuels by 2020. Thus, ethanol consumption in the EU will increase significantly in the future. The

EU 27 Annual Biofuels Report published by USDA’s Global Agriculture Information Net-work states that the consumption of ethanol for conventional and advanced fuels in the eU will reach 1.498 billion gallons in 2011, where-as only 1.271 billion gallons will be produced domestically. the gap has still to be covered by imports. During 2011 and 2012, Germany and France remain the main markets, and Germany will import 30 percent of its ethanol consumption.

RED Basics

The EU Renewable Energy Directive (Di-rective 2009/28/EC) establishes a common framework for the promotion of energy from renewable sources in the european Union. in the area of biofuels and liquid biomass for electricity and heat production, the eU set sustainability requirements for renewable fuels to qualify as meeting the mandatory renewable energy targets. With the RED in effect since Dec. 5, 2010, member states must transpose the directive into national legislation. last July, the EU Commission approved seven certifica-tion schemes that companies can use to verify sustainability claims. the national legislation in Germany is based on certification by volun-tary certification schemes.

the directive requires the use of sustain-

social standards

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high biodiversity

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areas

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2

importantsustainabilityrequirements

iScc PrinciplesPrinciple 1: Biomass shall not be produced on land with high biodiversity value or high carbon stock. High-carbon value areas shall be protected.

Principle 2: Biomass shall be produced in an environmentally responsible way. This includes the protection of soil, water and air and the application of Good Agriculture Practices.

Principle 3: Safe working conditions through training and education, use of protective clothing and proper and timely assistance in the event of accidents.

Principle 4: Biomass production shall not violate human rights, labor rights or land rights.

Principle 5: Biomass production shall take place in compliance with all applicable regional and national laws and shall follow relevant international treaties.

Principle 6: Good management practices shall be implemented.


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sustAinAbiLity

able biomass seeking to prevent companies from converting forest, peatlands or biodi-verse grassland for the production of biomass for the use in biofuels for the eU market. car-bon-rich areas or areas with a high degree of biodiversity are not allowed to be used for the production of biomass for biofuels or liquid biomass for heat and power generation. if the land use has been changed after January 2008, biomass from this area cannot be certified as sustainable.

Furthermore, an RED requirement states that biofuels must achieve a reduction in green-house gases (GHG) of at least 35 percent in comparison to fossil fuels. Beginning in 2017, the GhG emission savings target rises to at least 50 percent, and in 2018 the target is at least 60 percent for biofuels and bioliquids produced in installations in which production started on or after Jan. 1, 2017.

U.s. ethanol producers exporting into the EU can show that they fulfill these sustainabil-ity criteria by being certified under the frame-

work of one of the certification schemes for sustainability and GhG emissions approved by the eU commission. the eU recognized schemes can be used in all 27 member coun-tries.

the seven schemes approved by the eU commission are bonsucro eU, Greenergy, international sustainability and carbon cer-tification, Bioenergy Sustainability Assurance (RBSA), Roundtable on Sustainable Biofuels-EU RED, Roundtable on Responsible Soy-EU RED (RTRS) and 2BSvs. The RBSA, Green-ergy and 2BSvs are company- or industry-driv-en schemes. the roundtable initiatives include bonsucro eU, certifying sugarcane in brazil; rtrs, targeting soy from brazil and argen-tina; and ISCC, a global multi-stakeholder scheme for all kinds of biomass. the roundta-ble initiatives include social and ecological cri-teria that exceed legal requirements. it should be noted, however, that bonsucro eU as well as 2BSvs are only partially approved and not recognized for biodiverse grassland, one of

the basic requirements of the EU RED. Fur-thermore, it is not possible to do individual GHG-calculations within these schemes.

Getting Certified Fully operational since early 2010, ISCC

is an international certification system for sustainability and GhG emission savings that can be applied for all kinds of biomass and bioenergy. it was developed through an open stakeholder process involving associa-tions, corporations, research institutions and nongovernmental organizations (nGos). as a forum for stakeholder dialogue, the associa-tion was inaugurated in Berlin in January 2010 and today has 60 members. The member list includes companies such as Archer Daniels midland co., cargill inc., bunge, basF, bayer and associations like european bioplastics, bundesverband bioenergie, canola council of canada, as well as research institutions like the kiel institute for the World economy and nGos like the WWF. U.s. members include


sustAinAbiLity

the Illinois Corn Growers Association, De-gart Global llc and the morgan stanley capital Group inc.

iscc can be applied to demonstrate sustainability in the bioenergy sector and ad-ditionally on a voluntary basis for food, feed or chemical applications. Around 1,200 com-panies from 52 countries are already using it. in the U.s., several ethanol producers already seized the opportunity and became ISCC-cer-tified. A full list of certificate holders is avail-able on the ISCC website (www.iscc-system.org).

Principles, Processiscc comprises six principles with re-

spective criteria and does not only aim at the prevention of ecological shortcomings but also at the safekeeping of adequate working conditions and the protection of health of the employees on farms. The verification of the six principles is carried out by the assess-ment of databases, maps, satellite images, the assessment of internal documents, interviews of personnel, management and stakeholders, as well as visual inspection of company facili-ties, storage facilities and infrastructure.

biofuels have a production chain with many links, from farms to distribution of the fuel. biomass is also transformed into other intermediate and/or final products. Evidence concerning sustainability needs to be docu-mented regarding the raw material and/or intermediate products used. to ensure the fulfillment of sustainability criteria through-out the whole production process, iscc has developed a transparent procedure that can be verified by independent auditors. ISCC is cooperating with 17 officially recognized in-ternational certification bodies, such as TÜV, sGs and control Union. a full list is available on the iscc website.

the process starts at the First Gathering Point—the company collecting sustainable biomass such as an agricultural cooperative or wholesaler buying biomass. all delivering farmers must provide self-declarations of sustainability, of which a predefined sample will be audited. Group audits of farms are also possible. the auditor’s task is to verify onsite that the actual processes match the documentation. Once a certificate is issued, the First Gathering Point can sell and export

the certified products to certified wholesal-ers. The next stage is the certification of the companies doing the biomass conversion to biofuels or other renewable fuels. The certifi-cation process can be extended up to the end product reaching the final customer.

In the EU RED, a mass balance method is laid down as the chain-of-custody method to ensure traceability along the entire supply chain. mass balances use records allowing a quantitative accounting and traceability at all stages of the production and delivery of sustainable biomass. the accounting ensures that the incoming quantity of biomass does not exceed the outgoing quantity.

The certification process also covers the calculation of GhG emissions along the supply chain including both generated GhG emissions and GhG abatement in compari-son to the use of fossil energy. this includes emissions from biomass production, conver-sion processes and transport. The EU RED includes default values for different biomass and biofuel options. additionally, iscc offers individual GhG emission calculations for dif-ferent supply chains. these individual calcula-tions are getting more and more important.

OpportunitiesSustainability certification is now the

norm for exporting ethanol into the eU. in the German biofuels sector, for example, only certified biofuel can be used to meet the quota. there also is a potential for premium prices on certified products. It is a safe as-sumption that sustainability criteria will apply to other sectors in the future and that vol-untary certification makes sense in order to satisfy increasing consumer demand for sus-tainable products. Sustainability certification of biomass and final biobased products also represents a huge opportunity in general: For the first time, ecological and social standards can be established in the global raw materials markets. it is important to seize this oppor-tunity. renewable energy producers can lead other sectors in achieving sustainability for future generations.

author: Antje GrzesikSystem Management, ISCC System GmbH

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Iowa Partners to Develop Cellulosic Ethanol ProjectsIncentives, research capabilities, workforce development among advantages Iowa offers By BILL NOrtHEy, IOWA SECrEtAry Of AGrICuLturE

proJect deVeLopment

When it comes to offering a place for cellulosic ethanol pro-ducers to prosper, iowa rises to the top of the list. the state lends key assistance on a number of dif-ferent fronts. From research support to the crucial infrastructure ethanol producers need for operations, state government in iowa is a willing partner to companies making sig-

nificant capital investments and creating well-paying, high-quality jobs.

As the nation’s top corn-producing state, iowa leads the U.s. in raw biomass production to fuel the biorenewables industry, with the ability to harvest 15 million to 20 million dry tons of biomass each year. that makes iowa a natural location for cellulosic ethanol compa-nies looking for a reliable source of feedstock. in cases where corn stover is used as the feed-

stock, it takes an organized effort to develop and nurture the supply chain, something that partnerships in iowa have helped build for cel-lulosic ethanol producers locating operations here.

the concentration of raw materials in iowa also helps the state lead the way in devel-oping value-added, biomass-based fuels and chemicals.

Developing State Government Partnerships

With iowa’s choice to be a leader in de-veloping the biosciences, biofuels and biopro-

logistic challenge A big issue for the Iowa Value Added Agriculture Support Team has been to aid cellulosic developers in working out supply chain logistics.

PHOTO: IOWA DEPARTMENT OF AGRICULTURE AND LAND STEWARDSHIP


proJect deVeLopment

cessing sectors, comes attentiveness to their needs. iowa offers a number of potential part-nerships with state government to help cellu-losic ethanol developers. those partnerships could include assistance with the following:

• Tax incentives.• Research. • Feedstock supply chain.• Specialized workforce.• Finding plant efficiencies.• Energy sources.• Infrastructure.

and, when cellulosic ethanol companies are looking for air and water permits for their facilities or are facing other regulatory issues, iowa’s state government is more focused than ever on making it easier for them to proceed through the regulatory process so they can get on to doing business.

to make the most of partnerships with state government in iowa, it helps for cellu-losic ethanol developers to identify what as-sistance they might need as they explore loca-tions. a special iowa working group, made up of state and federal officials, the Iowa Farm bureau Federation and other organizations, can help provide technical and financial assis-tance to value-added agricultural businesses. the Value added agriculture support team has a history of working with ethanol projects and others to add value to iowa commodities.

the biggest issue Vaast has worked on in the area of cellulosic ethanol producers is the logistics of moving cellulose—in most cases corn stover—and building the kind of structure that rewards farmers enough to pay to harvest it and, in turn, transport it.

Iowa Advantages One significant advantage Iowa offers

qualified cellulosic ethanol producers is its refundable research activities credit for re-search and development (R&D) investments. the state is one of only a handful that offers a refundable research activities tax credit. cred-its may be paid in cash directly to the company when its tax liabilities are met. it is just one of the ways iowa rewards innovation by compa-nies investing heavily in R&D and in creating cutting-edge advantages in biofuels and other industries. iowa has been consistent in its sup-

port for the credits over the years when fed-eral research credits have fluctuated.

iowa’s high Quality Jobs initiative, ad-ministered by the Iowa Economic Develop-ment authority, is another potential source of tax incentives for cellulosic ethanol producers. Qualified companies can earn tax incentives to help offset the costs of locating, expanding or modernizing a facility in iowa. incentive pack-ages are flexible to meet the needs of compa-

nies and can include tax exemptions, credits or refunds. businesses must meet wage threshold and other requirements to qualify.

research is another advantage. iowa state University, located in the central iowa community of Ames, has provided significant support to help build a thriving biofuels in-dustry in the state. the biocentury research Farm is just one of the many research centers at isU that are supporting the groundbreaking


progress in biofuels. the biocentury research Farm assists corn ethanol plants in becoming more efficient and expanding into advanced biorefineries that produce not just fuels, but products that include industrial chemicals, food, feed and biomaterials. its focus spans the whole system—from plant genetics to biofuels production.

isU’s biocentury research Farm part-nered with ethanol producer Poet llc to study the effects of corn stover harvest on soil qual-ity as Poet’s plant in emmetsburg prepares to produce up to 25 million gallons of cellulosic ethanol every year. Research found that 1.5 to 2 tons of corn stover per acre can be safely har-vested. the study is just one recent example of how Iowa state government—in this case one of its public universities—is able to team up with private industry to advance the next gen-eration of biofuels.

the biocentury research Farm has

worked with DuPont Cellulosic Ethanol to de-velop a supply chain of feedstock corn stover including harvesting, storing, and transporting it. DuPont’s 25 million gallon cellulosic etha-nol plant to be built nearby in nevada, iowa, is expected to use 300,000 tons of feedstock every year.

The research farm is also where start-up avello bioenergy, founded by isU students, is building a demonstration plant to produce petroleum replacement products for precom-mercial testing. the company’s bioasphalt is being used on a demonstration bike path in Des Moines.

another important research effort at iowa state University is the bioeconomy institute, which brings together efforts across the uni-versity to advance the use of biorenewable re-sources in producing fuels, chemicals, materials and energy.

Workforce, Innovationbecause of the cluster of biofuel com-

panies and entities doing groundbreaking re-search, iowa has a skilled workforce in this area. besides its public research universities, the state is home to a strong network of com-munity colleges that can partner with private industry to train workers. the iowa bioprocess training center operated by indian hills com-munity college was designed especially to meet the training needs of the value-added agricul-ture and bioprocessing industries and works with companies that include cargill inc.

a convergence of biofuels companies and research makes iowa a natural place for innova-tion to bloom. Iowa can count more than 40 existing ethanol plants, many biodiesel plants and two commercial-size cellulosic ethanol plants coming online—as well as the cutting-edge collaboration being done at the biocen-tury research Farm

the development of coproducts that can make ethanol production more efficient and cost-effective—such as biochar in field ap-plications, or other products in livestock feed production—is another Iowa advantage, with isU providing the research capacity.

What started out as highly sophisticated wet-mill corn processing plants has grown into a number of additive industries helped by government incentives. in particular, iowa’s re-search activities tax credit is something that has been a benefit for companies in this area.

it all adds up to create a cluster effect of expertise. businesses with various skills are brought together where they can learn from each other, perhaps be each others’ customers and discover something in their own business-es that could be beneficial to another, creating value to their operations.

cellulosic ethanol projects have unique needs that must be met in order to get their operations off the ground. the state of iowa, its research entities and other interested groups in the state can lend support to making those types of projects happen. the state of iowa stands ready to partner with cellulosic etha-nol and next generation projects planning on bringing innovative projects and high-quality jobs to iowa.

author: Bill NortheyIowa Secretary of Agriculture


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Energy Management: Project or Process? Commitment to continuous improvement helps small steps become 10-20 percent savings By jArON VANDE HOEf

enerGy

For industrial processing fa-cilities, energy costs are usually among the top three operating costs, making it a prime area to focus efficiency efforts. Production costs like labor and input costs are somewhat fixed, whereas energy expenses can be reduced without sacrificing production capacity or qual-

ity. Finally, the risk of increasing energy cost is higher than ever before. Just look at these 2003 statistics from www.energystar.gov to under-stand why:• Global demand for all energy sources is

forecast to grow by 57 percent over the next 25 years.• U.S. demand for all types of energy is expect-

ed to increase by 31 percent within 25 years.

• By 2032, electricity demand in the U.S. will grow by at least 40 percent.

to meet this demand increase, new power generation equal to nearly 300 1,000-megawatt power plants will be needed by 2030, and to pay for these new power plants, energy costs will increase. the good news is that companies can reduce overall energy consumption to impact the bottom line.

opportunities to capture energy manage-ment savings are real. if we look at buildings and industrial facilities as a single component

PHOTO: INTERSTATES ENGINEERING


enerGy

of energy use in the U.s., we see some dra-matic numbers. the total number of buildings and industrial facilities in the U.s. has grown to over 5 million with an annual energy cost estimated at $202.3 billion. It is further esti-mated that at least 30 percent of the energy consumed in these buildings is done so either inefficiently or unnecessarily. Certainly there is both reason and opportunity for energy man-agement.

anyone with a home appliance is sure to have heard of energy star. energy star also has a program that focuses on buildings and industrial plants. it has developed fo-cus groups, key performance indicators, and best practices for specific industries, such as corn refining, food processing, petrochemical manufacturing and oil refining. Energy Star’s seven-step system has helped many industrial facilities achieve 10 to 20 percent savings on energy costs. With electricity bills easily ex-ceeding $100,000 per month for a large pro-cessing facility, a conservative 10 percent sav-ings results in annual savings of $120,000 in electricity cost alone.

Good energy management is a process. single projects will reduce energy costs, but without a process in place to keep them down and monitor them, the costs will creep back up. The metaphor of low-hanging fruit ap-plies. basic, quick and easy energy reduction projects produce immediate energy savings, but that low-hanging fruit will grow back time and again, if there is not a process to prevent it from doing so.

7-Step Energy Star Program There are three things to do first when

making a commitment to continuous im-provement, the first of the seven steps. Con-sider appointing an energy director—one with a personal passion for energy management—to take the lead in setting goals, tracking prog-ress and promoting the energy management

program. this person is not necessar-ily a technical expert, but should un-derstand all aspects of your business and how energy management will help achieve both financial and environ-mental goals. Depending on the size of the organization, the energy director role could be full time or part time. it is common for a facility manager, lead process engineer or a plant manager to fill the role of energy director. Outside consultants could also support this role. With the energy manager identi-fied, form a dedicated energy team to execute the facility’s energy manage-ment activities and ensure integration of best practices across the facility. in-clude individuals from all major areas of the facility. then, institute an ener-gy policy to serve as a vision statement and provide a foundation for future decisions. this policy is the base for setting performance goals and for integrating energy management into the organizations’ culture and operations.

the second step in the energy star pro-gram is assessing performance, which requires reliable information. think about the desired level of detail when considering which data to track. For example, do you want to look at overall service entrance metering for natural gas and electricity or, is submetering specific areas better? Account for all energy sources and uses and gather two years of monthly data, both cost and quantity. in addition, col-lect facility and operational data such as hours, production, units produced, weather history—anything impacting energy consumption in the two-year time period. The data may be needed to be normalized, especially if multiple facili-ties are to be compared. normalization fac-tors include climate zone, facility size, weather history, hours of operation, product type, etc. establish a system to store and track the in-

formation using any number of tools from a simple spreadsheet to an energy management software package. Utility companies are one resource for such tools. evaluate the tools for the level of detail, the ease of use and mainte-nance and ease in reporting.

With data in hand, use it to establish baselines, using metrics that effectively express good energy performance for a facility. this might be per square foot or per unit of pro-duction. evaluate progress using benchmarks such as past performance, performance at oth-er facilities, industry averages, etc. another ap-proach is to benchmark against best practices, a more qualitative approach. analyze trends, developing a use profile to measure peaks and valleys. Identify areas of high-cost energy use, and identify data gaps. From a qualitative standpoint, gather information and opinions about lessons learned. ask others what they believe to be the energy ‘hogs.’ Review poli-cies and procedures to determine if energy management is addressed in all areas. techni-cal assessments and audits are commonly out-

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sourced. external advisors often have greater potential to see things overlooked by those close to the process. they also have perspec-tive of other industries and facilities that could help improve your facility.

setting goals is the third step in the en-ergy star program, taking your energy man-agement program to a working level using information and research you have assembled to create tangible working goals. First consider

the scope of the goals. are the goals for the entire organization or a specific facility? What time periods are addressed? A short-term or annual goal may be quite different than a long-term goal. Focus on making specific goals, es-timating their potential for improvement and tie it to a defined amount of energy reduction. some examples of goals would be to reduce energy consumption relative to output by 10 percent or by a specified unit of measure-

ment such as Btu, or to achieve a 20 percent improvement in energy performance within five years.

Action, implementation With goals in place, step four is to create

an action plan. Use results from any technical assessments and audits to help identify action items and establish a monitoring system. en-sure the right people are in place and given the responsibility to meet the stated goals. action plans can include repeated energy audits to build momentum and improvement ideas.

The implementation phase in step five is where a program succeeds or fails. many great plans end up gathering dust on a shelf some-where. a good implementation plan includes a good communication plan. identify key au-diences, determine the information they need and how to reach them. celebrate small wins to maintain momentum. invest in training to help people understand and implement energy changes. When personnel performance is tied to energy goals, and environmental responsi-bility is included, people respond.

the process continues in step six with regular progress evaluations. a formal review compares results to the action plan, prompt-ing performance reassessments and the up-dating of goals and action plans. be sure to share it with others in your company, and do not allow lessons learned to be missed or over-looked. Use what you have learned to establish best practices.

The final step recognizes it is important to let people know that progress is being made. look for both internal and external outlets for celebrating accomplishments—a great moti-vator for employees, and a great public rela-tions tool to help outside people understand just how important your company thinks it is to care for the environment.

energy management is a continuous pro-cess, not just a single project. it is realistic to save 10 to 20 percent on energy bills through hard work that pays off with better margins and profit. It takes time to address any com-plex issue. now is the time to get started be-fore energy costs increase even more.

author: Jaron Vande Hoef, P.e.Senior Project Engineer, Principal, Interstates Engineering

[email protected]

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ValvesBest Supply company316-262-8336 www.bestsupplycompany.net

cashco, inc.785-472-4461 www.cashco.com

Wastewater Treatment Servicesicm, inc.877-456-8588 www.icminc.com

Yield enhancementhimark biogaS780-700-5110 www.himarkbiogas.com

ethanol ProductionExisting Producerslouis dreyfus commodities402-844-2680 www.LDCommodities.com

FinanceinsuranceeRi Solutions, inc. 316-927-4294 erisolutions.com

Lender Representativesneatech, llc303-906-6235 www.netatechllc.com

Legal ServicesAttorneysgreenwich Blackhawk Prof. corp.310-393-2200 www.greenwichblackhawk.com

Meet Phil ProctorProfession: Silo Cleanout

SpecialistYears of service: 20Training: MSHA/OSHA

CertifiedExperience: Cleaned

more than 8,500silos in 9 countries

27815 State Route 7, Marietta, OH 45750 USA800.322.6653 • Fax: 740.374.5908

E-mail: [email protected] • www.molemaster.com

Engineered Solutions for Silo Cleanout Problems Worldwide.

THE FACEOF COMMITMENT

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A Legacy of Dedication and ServiceWe put safety, reliability and productivity first.Our certified, trained technicians use the mosttechnologically advanced silo cleanoutequipment and techniques available. Call usfor your next project or ask us about our newabrasive blasting services because no othercompany in the world offers Mole•MasterExperience!

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Your Solution. Advertise Today.

EPM MARKETPLACE

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May 2012 Ethanol Producer Magazine

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Transcript of May 2012 Ethanol Producer Magazine