Corn-based ethanol's a flawed concept

Corn-based ethanol's a flawed concept
February 16, 2007 -- By Myra P. Saefong, MarketWatch

Ethanol as an alternative energy source is a flawed concept -- at least when corn is used to produce it.

And the consequences of using corn to create ethanol are far-ranging - they even impact consumers and the price they pay for meat.

So is it worth it? It depends who you ask.

"There have been numerous studies completed regarding the energy efficiency of ethanol vs. its production," said John Eichberger, vice president of government relations for the National Association of Convenience Stores.

"These range from a positive net energy return in excess of 30% to a negative net energy return of more than 30%," he said. "Researchers on both sides of the issue argue that the other research is significantly flawed."

Even so, policymakers insist that ethanol is a "positive replacement product for crude-oil based fuels and have proceeded down a path to subsidize and mandate its use," said Eichberger, whose trade organization represents the convenience and petroleum-retailing industry.

There's no doubt that renewable fuels are a good idea, said Darin Newsom, a senior analyst at Omaha, Nebraska-based DTN. "That means putting more research into more efficient ways" of making them.

That said, "corn is a short-term end to the means."

Invest energy to get energy

"Some of the warts associated with ethanol production are [real] -- it does use a lot of water, electricity and natural gas," said Newsom.

So "the problem with corn-based ethanol is that, at best, you don't get more energy out of it than it costs to grow and make it," said Sean Brodrick, a contributing editor at MoneyandMarkets.com.

"At worst, you lose energy."

A math and science lesson is in order.

An easy-to-read measure of whether ethanol's economically viable can be derived from taking a look at its "energy return on energy invested," or EROI, according to Brodrick.

"It is at the crux of why corn-based ethanol is a boondoggle," he said.

EROI can be expressed as "net energy," he explains. The EROI for corn-based ethanol is 1.2:1, so the net energy is 0.2, he said.

That means you put in 1 British thermal unit to get 1.2 BTUs from it, he said.

"At EROI of 1.2 to 1, the 3.9 billion gallons that the U.S. produced in 2005 required 3.29 billion gallons of BTU energy input, resulting in a 'net energy' of 610 million gallons," he said.

And that's being generous, he said. "There are some computations that show corn-based ethanol has a net energy of zero. Others show it as a net energy loser."

So it all depends on how you look at it.

A "break even" with the cost of production would be largely based on the cost of crude oil and the cost of corn, said Rick Kment, an analyst at DTN.

For example, if crude-oil prices are at $70 to $100 per barrel, very high corn prices can be paid and ethanol can still economically work in the system, he said.

But with $30 crude and $4 corn, "it becomes unprofitable," he said.

At current price levels, DTN estimates a net profit -- after depreciation and all other factors -- to be near 5 cents per gallon of ethanol produced, he said.

That's down from a 50-cent per gallon net profit at the first of the year, and down from $2.50 a gallon in June 2006, Kment said.

March crude-oil futures closed Thursday at $57.99 a barrel on the New York Mercantile Exchange, while March corn futures were trading around a 10-year high above $4 a bushel on the Chicago Board of Trade. And March ethanol stood at $2.08 a gallon on the CBOT.

'Dead argument'

Still, there are many more experts who say there's really no question as to whether corn-based ethanol puts out more than it uses up.

"The argument over the energy balance of ethanol is really a dead argument," said Matt Hartwig, a spokesman for the Renewable Fuels Association, the national trade group for the ethanol industry. "Study after study has proven them [the critics] to be flat out wrong," he said.

Hartwig called attention to the Web site for the biomass conversion research laboratory at Michigan State University.

A Feb. 5 note on the site prepared by Bruce Dale, professor of chemical engineering at the university, said the net energy analysis is "simple and has great intuitive appeal," with net energy defined as ethanol's heating value minus the fossil energy inputs required to produce the ethanol.

But "it is also dead wrong and dangerously misleading."

Tadeusz Patzek, professor of civil & environmental engineering at the University of California at Berkeley, said in a report last year that the "energy cost of producing and refining carbon fuels in real time, e.g., corn and ethanol, is high relative to that of fossil fuels deposited and concentrated over geological time."

"We do not value energy per se, but rather the services or 'qualities' that the energy provides," argued Dale.

"We need to carefully choose our metric of comparison," he said.

One gallon of ethanol contains 84,000 BTUs, which is about 2/3 that of gasoline, according to Neil Koehler, chief executive of Pacific Ethanol Inc.

"Since ethanol burns more completely (and cleanly) than gasoline, this lower energy density can be completely offset by increased efficiency," he said.

It's eating at corn

But ethanol's impact on the corn market has been "dramatic," said DTN's Newsom.

"If ethanol demand increases to projected levels, corn supplies will be incredibly low at the end of the 2006-2007 marketing year in August 2007," he said.

The U.S. produced an estimated 4.9 billion gallons of ethanol last year and used more than 5.5 billion, according to the Renewable Fuel Association's Hartwig. Ethanol is blended in more than 46% of the nation's gasoline, he said.

"It would seem that the corn market is poised for a long-term rally in price," said Newsom. He predicts that the high of $5.54 a bushel from 1996 seems like a "reasonable price target."

Meanwhile, limitation in the corn market itself should be considered.

"Corn-based ethanol will be of limited supply," said Charles Perry, chairman of energy-consulting firm Perry Management. The U.S has a limited amount of productive land so we "can spare only a limited amount of our corn crop for ethanol."

At the same time, this corn use for ethanol has been "hampering feeding, with some talk in the livestock industry of herd reduction due to higher feed costs," said Newsom.

"Our food prices will go through the roof -- $4-$5 corn makes for very expensive beef, pork and chicken," said Bernie Feshbach, president of investment firm Feshbach & Sons.

Also, "the use of corn makes ethanol a regional (Midwest) issue as the U.S. lacks the infrastructure to move the product around to meet demand," said Newsom.

But the logistics involved with ethanol production could be irrelevant.

"More attention needs to be paid to the personal economics of ethanol since many consumers are more concerned with cost, than with how a fuel is derived," said Geoff Sundstrom, a spokesman for motorist group AAA.

The industry will get a chance to discuss all of these things soon. The Renewable Fuels Association's 12th annual National Ethanol Conference is next week from Feb. 19-21 in Tucson, Ariz.

The group's Web site says registration for the conference is closed because it's reached its capacity. Interested parties are being placed on a waiting list.

Corporations Agree To Cut Emissions

Corporations Agree To Cut Emissions
February 20, 2007 -- Reuters via CNN

More than 100 corporate heads, international organizations and experts set out a plan on Tuesday to cut greenhouse gas emissions, calling on governments to act urgently against global warming.

"Failing to act now would lead to far higher economic and environmental costs and greater risk of irreversible impacts," the Global Roundtable on Climate Change warned in a statement, announcing their first major agreement since they began talks in 2004.

The group, which includes executives from a range of industries including air transport, energy, and technology, called on governments to set targets for greenhouse gases and carbon dioxide (CO2) emissions.

The agreement urged governments to place a price on the carbon emissions released by power plants, factories and other sectors to discourage emissions.

"Of course, addressing climate change involves risks and costs. But much greater is the risk of failing to act," said Alain Belda, chairman and CEO of the world's top aluminum producer Alcoa, who signed the pact.

The group includes General Electric, Ford Motor Co., Toyota Motor North America, investment bank Goldman Sachs, and Wal-Mart among its major corporations.

President George W. Bush's administration has rejected mandatory caps on emissions of carbon dioxide and other gases in the United States that contribute to a documented rise in world temperatures -- which is linked to more severe storms, worse droughts, rising seas and other ills.

But the White House has recently been on the defensive, especially since the February 2 release of a report by the Intergovernmental Panel on Climate Change, which called global warming "unequivocal" and said with 90 percent probability that human activities help cause it. (Full story)

The atmospheric concentration of carbon dioxide is about 30 percent higher than in 1900 and nearly half of this increase has occurred since 1980.

Given fast-rising emissions from developing nations, the group estimated that a "business-as-usual" path could put the planet at three times the carbon dioxide levels seen before 1900.

The largest carbon-emitting sector is power generation, responsible for more than 40 percent of global energy-related emissions.

Industry accounts for more than 18 percent of emissions, transport contributes another 20 percent, and the residential and services sector roughly 13 percent.

The group estimates that technology to head off mounting carbon dioxide concentrations would cost about 1 percent of global gross domestic product. Costs would fall as technologies become more established, it predicted.

"If we delay too long in beginning the changeover to increasingly de-carbonized energy systems, the eventual costs will only rise and the impact of climate change will only become more severe," the group wrote in its agreement, warning that poorer nations would see the worst impact from climate change.

Canada’s House Backs Steep Emission Cuts

Canada’s House Backs Steep Emission Cuts
February 14, 2007 -- Reuters via The New York Times

The House of Commons passed a bill Wednesday intended to force the Conservative government of Prime Minister Stephen Harper to achieve the steep cuts in greenhouse gas emissions required by the Kyoto Protocol on climate change.

The vote was 161 to 113, with all three opposition parties supporting the Liberal Party bill. It still has to go to the Senate, where a Liberal majority should ensure its passage.

The bill would require the government within 60 days to detail the measures Canada would take to meet its Kyoto obligations to reduce greenhouse gases to 6 percent below 1990 levels by 2012.

Canada’s emissions are 27 percent above 1990 levels, and the government has said it would be impossible to meet the targets without doing great damage to the economy.

Labor Minister Jean-Pierre Blackburn said the Liberals were simply trying to embarrass the government by trying to force draconian steps that would paralyze Canada.

“If we took drastic measures to the point that companies had to close, that would not be right,” he told reporters.

The Sum of All Ears: Corn Ethanol to Replace Gasoline, A Bad Idea

Excerpts from:
The Sum of All Ears
January 29, 2007 -- By Paul Krugman, The New York Times via Economist's View

Corn Cop-Out, Commentary, NY Times: For those hoping for real action on global warming and energy policy, the State of the Union address was a downer. There had been hints and hopes that the speech would be a Nixon-goes-to-China moment, with President Bush turning conservationist. But it ended up being more of a Nixon-bombs-Cambodia moment.

Too bad... The only real substance was Mr. Bush’s call for ... ethanol to replace gasoline. Unfortunately, that’s a really bad idea. There is a place for ethanol in the world’s energy future — but that place is in the tropics. Brazil has managed to replace a lot of its gasoline consumption with ethanol. But Brazil’s ethanol comes from sugar cane.

In the United States, ethanol comes overwhelmingly from corn, a much less suitable raw material. In fact, ... researchers ... estimate that converting the entire U.S. corn crop — the sum of all our ears — into ethanol would replace only 12 percent of our gasoline consumption.

Still, doesn’t every little bit help? Well, this little bit would come at a very high price compared with ... conservation. The Congressional Budget Office estimates that reducing gasoline consumption 10 percent through ... fuel economy standards would cost ... about $3.6 billion a year. Achieving the same result by expanding ethanol production would cost taxpayers at least $10 billion a year...

What’s more, ethanol production has hidden costs. ...[T]he Department of Energy ... says that the net energy savings from replacing a gallon of gasoline with ethanol are only ... about a quarter of a gallon, because of the energy used to grow corn, transport it, run ethanol plants, and so on. And these energy inputs come almost entirely from fossil fuels, so it’s not clear ... ethanol does anything to reduce carbon dioxide emissions.

So why is ethanol, not conservation, the centerpiece of the administration’s energy policy? Actually, it’s not entirely Mr. Bush’s fault.

To be sure, ... Mr. Bush’s people seem less concerned with devising good policy than with finding something, anything, for the president to talk about that doesn’t end with the letter “q.” And the malign influence of Dick “Sign of Personal Virtue” Cheney, who no doubt still sneers at conservation, continues to hang over everything.

But even after the Bushies are gone, bad energy policy ideas will have powerful constituencies... Subsidizing ethanol benefits two well-organized groups: corn growers and ethanol producers (especially the corporate giant Archer Daniels Midland). As a result, it’s bad policy with bipartisan support. For example, earlier this month legislation calling for a huge increase in ethanol use was introduced by five senators, of whom four, including ... Barack Obama and Joseph Biden, were Democrats. In a recent town meeting in Iowa, Hillary Clinton managed to mention ethanol twice...

Meanwhile, conservation doesn’t have anything like the same natural political mojo. Where’s the organized, powerful constituency for tougher fuel economy standards, a higher gasoline tax, or a cap-and-trade system on carbon dioxide emissions?

Can anything be done to promote good energy policy? Public education is a necessary first step, which is why Al Gore deserves all the praise he’s getting. It would also help to have a president who gets scientific advice from scientists, not oil company executives and novelists.

But there’s still a huge gap between what obviously should be done and what seems politically possible. And I don’t know how to close that gap.

Logistics of Installing Solar Panels

Game Theory: Climate Change Game

Game Theory
February 8, 2007 -- BBC News Science & Nature via Sierra Club Compass

The BBC challenges visitors to play its climate change game, wherein, as president of the EU, "You must tackle climate change and stay popular enough with the voters to remain in office."

Note: The game designers admit they had to strike a compromise between strict science and playability, but the assumptions, research and compromises that went into making the game are all well explicated here.

The Daily Show's Response to IPCC Report