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De-Fossilizing Ethanol

Discussions of the net energy balance of grain ethanol tend to gravitate toward the fossil fuels used for growing and shipping corn. Somewhat overlooked in the net energy return debate are the quantities of natural gas and electricity consumed at ethanol refineries, which are substantial.

An ethanol refinery that produces 50 million gallons a year burns about 50,000 therms of non-renewable natural gas a day for process heat. This is no trivial expense. Using today s prices, a refinery operator would need to budget at least $15 million over the next 12 months to secure enough fuel to keep that plant running nearly every hour of the year. After corn, natural gas is the second-largest cost component of ethanol production.

That plant also exerts, on average, a 5 megawatt load on the electrical grid. The quantity of electricity consumed at that plant could support nearly 6,000 households in Madison, Wisconsin. About 75% of the electricity from Wisconsin s power grid comes from coal combustion.

Whether the goal is to reduce greenhouse gas emissions or enhance energy security, it makes little sense to pin our hopes on an agricultural commodity that has such an outsized appetite for fossil fuel-derived energy. When all is said and done, what this biofuel represents is the repackaging of stored energy (coal, petroleum and natural gas) into a land-intensive flow product (corn). Even though several months worth of sunshine goes into the production of corn, the amount of usable energy contained in ethanol is barely higher than would have been available from using the fossil energy directly.

In other words, the U.S. ethanol industry has become a monumentally elaborate enterprise for moving our energy economy in a sideways direction. But if it's forward motion we desire, then ethanol producers must begin finding renewable energy replacements for the fossil energy sources consumed in the distillation process.

There is no reason, for example, why ethanol refineries in the Midwest cannot make arrangements to source their electricity primarily from wind turbines and biodigesters. If all the ethanol refineries in the region were to commit to sourcing all of their electricity from renewable energy, it becomes virtually impossible to justify the new coal-fired power stations that utilities are itching to build for serving them.

The linkage between ethanol s rapid expansion and utility plans to add coal-fired generating capacity has received little public attention. But ethanol refineries are round-the-clock operations, which require baseload power. Moreover, refining capacity is expanding rapidly. According to the Renewable Fuels Association, there are 116 operating distilleries and 78 plants under construction around the United States. It would take at least one new coal-fired power station and part of a second to serve the added load from 78 new ethanol distilleries.

But the fossil fuel that is giving the ethanol industry its biggest headache is natural gas. As noted in a Reuters article, the ethanol boom could add roughly 1 percent to U.S. natural gas demand within a year and a half, magnifying an already tight balance between production and rising consumption from homes, businesses, and power plants.

Nineteen out of 20 ethanol plants are outfitted with natural gas boilers. Though they are considerably less expensive to build than coal boilers, soaring natural gas prices cancel out that savings. As a result, some plant operators are considering switching to coal.

A much more sustainable approach would be to use either the crop residues that are trucked into the plant or pellets made from wood and grasses grown on nearby fields. Moreover, the cost of bioheat sources like crop residues and pellets would be relatively unaffected by rising natural gas prices. In the long run, locally available bioheat is the optimal approach from an environmental, economic and risk management perspective.

But time is running out on the U.S. ethanol industry to make the transition to renewable sources of process heat. After a year of relative calm, the natural gas market is showing signs of tightening, and the growth of the ethanol industry is partly responsible for that trend. The other factor contributing to a growing supply squeeze is the observed slowdown in natural gas drilling in Canada. About half of Canada s natural gas output is exported to the United States, supplying 15% of the volume sold here.

The curtailments in rig activity are a consequence of low commodity prices and tighter capital budgets, said Roger Soucy of the Petroleum Services Association of Canada. And while U.S. natural gas output is expected to rise marginally in 2007, it may not be sufficient to offset declining exports from Canada.

In the words of senior analyst Christopher Jarvis at Caprock Risk Management, it's almost frightening where natural gas prices could be in two to three years.

For a fuel that is classified as renewable, corn-derived ethanol carries with it a very heavy carbon footprint, due to the enormous amount of fossil energy that goes into it. Yet there is a decent chance that the ethanol industry will soon head toward a more de-fossilized energy path. If this transition happens, the motivation for it will have little to do with global climate change but a lot to do with simple economic survival.

Sources:
1.Canadian rig activity falls to lowest April level since 1999, Peak Oil Daily. April 27, 2007. From ASPO-USA.
2. Ethanol boom may boost US natural gas prices, Timothy Gardner, Reuters, April 19, 2007.

First published in
Petroleum and Natural Gas Watch
April 30, 2007, Vol. 6, Number 7

Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the supply demand equation for these fossil fuels, and analyzing its effects on prices, consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit "The End of Cheap Oil" section in RENEW Wisconsin's web site: www.renewwisconsin.org. These commentaries also posted on RENEW s blog and Madison Peak Oil Group s blog.

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