Alternative Energy

We’re entering an interesting era where energy independence is becoming a technological possibility but achievement of that goal could rely upon which direction the heavy hand of the government pushes the market.

Much attention is being focused Brazil's success, which may achieve energy independence this year. But those using Brazil as a poster child for the US ethanol industry ignore a rather inconvenient truth – Brazilian ethanol is produced from sugar cane (which can only be grown in tropical climates) while ethanol produced in the US is corn-based.

Simply put, ethanol is booze – the distilled product of the fermentation of sugar.

Having natural sugars in the form of sucrose, sugar cane produces more ethanol by volume than corn. To make ethanol from corn the starch in the corn must first be converted to sugar – an additional process that requires a significant amount of energy.

The amount of energy required to produce energy from a substance can be measured and is called the Energy Returned On Energy Invested (EROEI) ratio.

For example, an EROEI of 1.5 indicates that for every unit of energy invested, a 50% gain is realized. Corn has an EROEI of 1.5, while sugar cane has an EROEI of 7. That’s a 50% return versus a 700% return.

We’re talking apples to oranges here.

In spite of the fact that corn is a rather inefficient source for ethanol production, the ethanol from corn market is booming. In 2005, 16 new distillation plants were under construction – this year close to 80 are beginning construction. Is the market moving here, or is it being guided by a 51-cent per gallon federal subsidy on production or a 2.5 percent ad valorum tariff on imports combined with a 54-cent per gallon import duty? The total subsidy (including tax credits/exemptions, growing and production subsidies) for the ethanol-from-corn industry is estimated to be between $5.1 and $6.8 billion.

This boom is helping corn producers by doubling the price of corn in the past year causing spot shortages to the point where distillers are seeking to import corn to keep refineries operating at profitable levels and tortilla riots are occurring in Mexico.

Ethanol may prove to be the weapon by which we win energy independence, but it won’t be soon and probably will come from the production of ethanol from plant cellulose. This technology is not yet commercially viable and includes the need to create genetically altered materials (algae is a likely target) to convert cellulose to usable sugar.

Cellulosic ethanol (ethanol created from plant cellulose) as a renewable fuel source is attractive because cellulose is present in all plants – including the stems and leaves left over from plants already harvested and processed for food.

Another inconvenient truth normally ignored by ethanol-from-corn proponents is the impact on the food supply and the amount of corn required to have an impact on our daily fuel requirements. Using today’s figures (not accounting for future increases), if all US cars ran on 100% domestically produced corn ethanol – 97% of the land mass of the USA would have to be planted with corn.

Cellulosic ethanol research includes the identification and study of the cultivation of plants that can be grown in less than optimal conditions, require little or no fertilizer and would not crowd out current crops. The hemp lobby is active in this research, and “switch grass”, a hardy perennial weed also has been identified as a viable source.

Last month, the US Department of Energy announced their decision to get involved in the cellulosic ethanol market in the form of a $386 million investment (by RFP) in 6 cellulosic ethanol plants with the goal being the production of 130 million gallons of cellulosic ethanol per year. The private sector partners in this venture will be matching that with a $814 million investment.

For comparison, cellulosic ethanol has a ROEI of 4 (300% return) to sugar cane’s 8 (700% return) and corn’s 1.5 (50% return). It is projected that the cellulosic ethanol ROEI will be increased to 6 with improvements in the technology. Not on par with sugar cane, which only grows in tropical climates, but better than corn by an order of magnitude.

Unfortunately, the 130 million gallons won’t put much of a dent in our consumption; it’s about 5 days worth of fuel. It does, however, fund the science and prove the technology.

Should the government be involved in the private sector? Some argue against it. I argue against a $5 billion annual subsidy for corn ethanol which creates an inferior product, a closed market and a lasting corporate entitlement program. Ethanol from corn makes no sense.

I don’t argue against all government involvement. From our space program we got GPS, Velcro, Tang, pens that write upside down and extremely cool screen savers.

When the government gets involved in a market, it picks a winner – and we’re on the wrong team right now in the energy industry.