Text 20514, 211 rader
Skriven 2006-05-28 21:27:00 av Jeff Binkley (1:226/600)
Ärende: Ethanol
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http://www.forbes.com/forbes/2006/0605/090.html?_requestid=709

Field of Dreamers
Jonathan Fahey, 06.05.06

With work and luck, ethanol could displace imported petroleum. But don't
bet your last dollar on that.

When Eric Will, an upstate New York dealer in industrial equipment,
bought a defunct Miller brewery near Syracuse, N.Y. six years ago, he
figured he could sell the machinery for a quick profit. It didn't turn
out like that. He paid $6 million for the 420-acre site and its
contents, but a disappointing auction and individual sales brought in
just $3 million and left him with most of the vats and piping.

So Will decided to try to use the remaining equipment for what it was
intended for, turning plant matter into alcohol. But instead of beer, he
would brew ethanol, the crop-based fuel that suddenly has the nation in
a froth.

Will, now 58, first proposed the idea in 2002. At that point oil was $25
a barrel and making ethanol to burn in car engines was scarcely
economical, despite a generous federal subsidy (54 cents a gallon, via a
5.4-cent-a-gallon tax exemption for gasohol containing 10% alcohol). Now
oil costs $73 a gallon, and legislators are falling all over themselves
subsidizing and/or mandating ethanol. The 54-cent subsidy remains in
place. Next, Congress has ordered up minimum volumes of ethanol that
gasoline producers must get into fuel tanks. Then there's a 54-cent
tariff (not including a 2.5% ad valorem levy) to keep cheaper Brazilian
ethanol out of the country. Add all this up and you've got ethanol
trading for $2.95 a gallon, despite its inferiority to gasoline as a
source of energy. And now New York State wants to hand Will a check for
$4 million to support his good deeds. If his ethanol brewery fires up
he'll get that money for antipollution equipment.

Move over, ExxonMobil, here comes Northeast Biofuels, LLC. Will says he
is close to getting financing to begin a $125 million overhaul of the
brewery so that he can make moonshine on an industrial scale.

North America is high on ethanol. President Bush wants to double the use
of renewable fuel by 2012, to 7.5 billion gallons a year. Vinod Khosla,
the famous (and wealthy) venture capitalist, says ethanol can free the
U.S. from its petroleum addiction altogether. That's a lot of ethanol.
We burn 140 billion gallons of gasoline per year, and it would take more
like 210 billion gallons of ethanol to drive as far. Could Khosla
possibly be right?

"There is a simple path to replacing petroleum in this county in the
next 25 years, and it doesn't cost consumers or the government," says
Khosla. Well, it costs just a wee bit here and there. Khosla is
cochairing a California ballot measure to tax oil production in the
state and use the proceeds to develop alternative energy sources. He's
also investing in a handful of ventures. And he is all over Washington
trying to drum up support. "We are in a crisis," he says.

We may be. But ethanol may or may not have the capacity to extricate us.

Fuel that is 85% ethanol can be bought at a handful of gas stations,
mostly in the Midwest, and pure ethanol is sold all over Brazil, so it's
easy to assume the technology of making it is solved. Not so, not if the
goal is to produce enough to significantly cut U.S. oil consumption.
Ethanol today is made from corn, but that's costly and inefficient. The
technology for using other crops is in its infancy. There's only one
pilot project right now, in Ottawa, that turns wheat straw into ethanol,
and it's for demonstration purposes only.

Even studies by ethanol fans concede that achieving energy independence
via ethanol requires bullish assumptions. Among them: that refiners will
get at least twice as good at making ethanol. That the average
efficiency of our vehicles improves to 42 miles per gallon, 68% better
than the 25mpg now achieved. And that people will move closer to where
they work. If all those fantasies become reality, the U.S. could, in
theory, meet all of its transportation fuel needs with ethanol by 2050
without adding to today's current cropland, according to an exhaustive
study by the National Resources Defense Council, an environmental group
based in New York.

But what if fuel demand continues on its existing growth trend and there
is no improvement in ethanol manufacturing? Then we'd need to plant
crops on 1.7 billion acres to eliminate gasoline by 2050. That would
mean putting fuel crops on just about every square inch of the country
(total land mass, 1.9 billion acres). There would be no room for homes
or food crops.

"Biofuels will not work in isolation," says Nathanial Greene, the NRDC
report's principal author. "It is a question of whether we are serious
about stopping our addiction to oil."

Ethanol is made by fermenting sugar into grain alcohol. It can be made
from nearly any type of plant, with varying degrees of difficulty. It is
a perfectly acceptable fuel for automobiles--there are already 6 million
vehicles on the road that can run on E85, a blend of 85% ethanol, 15%
gasoline. It burns relatively cleanly.

At the moment, nearly all of the 4 billion gallons of ethanol produced
in this country is made from corn. This is a result of 30 years of
federal and state subsidies designed to give corn growers another market
for their bounty. Archer Daniels Midland (nyse: ADM - news - people ),
the world's biggest ethanol maker, can't brew it fast enough because
government mandates are creating huge demand. The ethanol shortage has
caused a doubling of its price in the past year. At today's price
ethanol is equivalent (given its low energy content) to gasoline costing
$4.50. That's before taking taxes and subsidies into account. ADM is in
pig heaven. Alcohol accounts for 17% of ADM's profits.

But apart from subsidies and mandates, ethanol from corn doesn't make
economic sense. Corn does not grow easily in the U.S., so it requires a
lot of energy to produce. How much? That's a matter of debate, bitter
debate. But a recently published survey of the various conflicting
engineering studies comes up with a plausible compromise estimate: Every
unit of energy that goes into making ethanol from corn produces ethanol
that yields 1.27 units of energy. To turn the ratio around: If you want
to displace a unit of petroleum energy, you have to burn four-fifths of
a unit in fossil fuels. Corn ethanol is barely in the plus column.
That's no way to achieve energy independence.

Brazil's energy balance is far more favorable. Sugarcane doesn't need as
much fertilizer, and Brazil is close to the equator, so it soaks up more
sunlight.

But what if some easier-to-grow crop were substituted for corn? Ethanol
dreamers have their hopes pinned on cellulose. The appealing idea is
that native plants like switchgrass and agricultural leftovers like
wheat straw and corn stover could be turned into ethanol. Substitutes
could be far cheaper than ears of corn--they require less attention,
water, fertilizer and pesticides. The problem is that turning cellulose
into ethanol on an industrial scale will be difficult and expensive.

To be fermented, cellulose must first be broken away from a plant
stiffener called lignin. "It's a tough package," says Bruce Dale, a
chemical engineering professor at Michigan State University. Dale is
developing a method to break these bonds by treating plant matter with
ammonia at 200 degrees Fahrenheit under 250 pounds of pressure for five
minutes. Dale's method, like other competing methods, works only in
laboratories so far.



Once the cellulose is exposed, its long chains of molecules must be
chopped into individual sugar molecules. You need enzymes to do that.
Another hurdle. The U.S. Department of Energy contracted with two enzyme
companies, Genencor and Novozymes, to try to reduce the cost of
cellulose-dismantling enzymes. They succeeded and were able to reduce
the cost from about $5 per gallon of ethanol produced to 25 cents.
Genencor's Jack Huttner, who runs the company's biorefinery business,
says the cost must come down another factor of one or two. But Genencor
won't start working on that until there's demand. "There's no industry
yet," he says.

The next step is to ferment the sugar that results. Some of the sugar
can't be digested by brewer's yeast. Researchers are developing
recombinant yeasts, bacteria and fungi that may eat all the sugars, but
no superstar candidate has emerged.

Alcohol would be a waste product of these replicating yeasts, but it's
not the only product. There's a lot of water. The alcohol must be
concentrated in a distillery. That burns energy.

The whole fermenting and distilling process needs to get twice as
efficient.

Both the distillery and the brewing vats consume capital. The National
Renewable Energy Laboratory says a new corn ethanol plant needs $1.40 in
equipment for every gallon per year of output. If amortizing this outlay
costs 10% a year, the capital cost adds 14 cents to a gallon of output.
A cellulosic ethanol refinery would cost $3 per annual gallon of
capacity--i.e., 30 cents per gallon produced. Even that assumes the
yeasts digest sugars twice as fast as they do now.

We're not done. Hauling ingredients and output turns out to be a
problem.

Reason: To get the needed efficiency, ethanol refineries have to be
massive, processing something like 20,000 tons of biomass per day.
Getting that switchgrass or other biomass to the refinery will be
expensive and difficult. The grass would have to come from a long way
away and it's bulky. Researchers who work with farmers estimate farmers
could deliver corn stover for $53 a dry ton to a refinery within 25
miles of their fields. The target: $30. Moving the finished ethanol
around the country would be challenging, too, because ethanol corrodes
today's pipelines. It now moves by rail, but the nation's railroads have
no spare capacity. Remember that ethanol has less energy content than
gasoline. But it weighs about the same. So it is going to consume more
of its own content in the process of being delivered.

Say this about ethanol: At least it does not present quite the
logistical nightmare that comes with the other popular alternative fuel,
hydrogen. That lightweight gas needs exotic compression schemes and
entirely novel fueling stations.

What if we repealed the import duties, inviting ethanol in from
sugarcane-growing nations near the equator? Heroic assumptions must be
made here about the willingness of American farmers and distillers to
compete. Assuming public opinion were to swing around to free markets in
agricultural goods, new questions arise. Do we want to motivate Brazil
to plow under what remains of its forests? And what do we accomplish by
replacing a potentially unreliable petroleum supplier like Venezuela
with a potentially unreliable ethanol supplier next door?

As long as not too many questions get asked, ethanol will remain in a
bull market. Which is good for Eric Will, the entrepreneur near
Syracuse. Overlooking the fact that Will will be shipping in corn from
the Midwest, at considerable expenditure of energy, and will, by raising
demand for an agricultural staple, boost supermarket bills, New York's
governor has fallen in love with the proposed ethanol plant. Ethanol
depends on politicians like George Pataki: "I have proposed one of the
most ambitious tax credits for biofuels production in the nation," he
boasts.

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