INSIDE: Q&A WITH E85 PUMP INSTALLERS PROPEL AND PROTEC FEBRUARY 2014
Flex Fuel’s Frontline
New CAFE Rule Asks Automakers To Bet Big On Ethanol Page 44
Plus: US Retail Stations
On Road To E15
Page 30
And:
ICM’s Steve Vander Griend On Defense For Ethanol
Page 40
www.EthanolProducer.com
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CONTENTS
FEBRUARY 2014
VOLUME 20 ISSUE 2
DEPARTMENTS 6
EDITOR'S NOTE Price is Ethanol's Biggest Asset By Tom Bryan
7
FEATURES
AD INDEX
10 THE WAY I SEE IT
Mother Nature: Ethanol’s CEO By Mike Bryan
11 EVENTS CALENDAR 12 VIEW FROM THE HILL
RFS is a Gold Medal Win By Bob Dinneen
14 DRIVE
We’ve Notched Some Wins, Will Face More Hurdles By Tom Buis
16 GRASSROOTS VOICE
EPA’s Un-depth E15 Un-analysis By Ron Lamberty
18 EUROPE CALLING
Changing the Tide By Robert Vierhout
30
40
MARKET
PROFILE
With a little help, U.S. retailers eagerly adopt ethanol’s next ubiquitous blend. By Chris Hanson
ICM’s Steve Vander Griend wants to true up ethanol emissions testing. By Susanne Retka Schill
The Curb Appeal of E15
In Defense of Ethanol
20 BUSINESS BRIEFS 24 COMMODITIES 26 DISTILLED 58 BUSINESS MATTERS
Growing the Market for E15, Midlevel Blends and Exports By Donna Funk
60 TALKING POINT
Kernel of Opportunity: Corn Fiber-to-Ethanol By Steffen Mueller
62 TECHNOLOGY
The Role of Fluorescent Microscopy By Chris Hanson
66 MARKETPLACE
ON THE COVER A 2015 Chevrolet Tahoe in “Crystal Claret” red. PHOTO: GENERAL MOTORS
4 | Ethanol Producer Magazine | FEBRUARY 2014
44
56
FLEX-FUEL
Q&A
A changing federal incentive for FFVs leaves automakers with a difficult choice. By Tom Bryan
Propel and Protec are growing America’s access to ethanol’s highest retail blend. Questions by Ron Kotrba
Weighting on the Line
E85’s Pump Pros
Ethanol Producer Magazine: (USPS No. 023-974) February 2014, Vol. 20, Issue 2. 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.
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EDITOR'S NOTE
Price is Ethanol’s Biggest Asset The attributes of ethanol have long been touted as three-prong: Its production benefits rural America, its inclusion in gasoline lowers vehicle emissions, and it reduces our nation’s reliance on foreign oil.Those three E’s of ethanol—economy, environment and energy—still ring true. But a fourth key asset, the biofuel’s price advantage,
Tom Bryan
President & Editor in Chief tbryan@bbiinternational.com
may be its real strong suit. We report this month that the implementation of ethanol’s next ubiquitous blend, E15, and the proliferation of E85 pumps and flex-fuel vehicles (FFVs) hinges on ethanol’s low price relative to gas. In our page-30 feature, “The Curb Appeal of E15,” we learn that independent gas stations like Good & Quick in Nevada, Iowa, are whipping their larger competitors with broad offerings of lower-priced ethanol blends. EPM’s Chris Hanson reports that, despite regulatory hurdles and oil industry resistance, dozens of U.S. retail stations have put E15 under their canopies. Why? It’s lower priced and customers want it. This month’s cover story, too, drives home the point that all blends of ethanol must be attractively priced to gain further market penetration. The potential for E85 to be priced much lower than E10 and nonethanol gas is now a provocative issue. We report in our page-44 feature, “Weighting on the Line,” that too few Americans demand FFVs and the sole incentive for their production is being sapped. Without a regulatory incentive to produce FFVs, consumer demand for E85-capable vehicles will need to pick up in order for automakers to continue making them. So it’s clear that, like E10 and E15, creating market pull for E85 and FFVs is achieved with low pricing at the pump, along with an unmovable national commitment to biofuels that sends retailers and automakers the right signals. In “E85’s Pump Pros,” on page 56, we speak to Propel Fuels and Protec Fuel, two companies growing America’s access to ethanol’s highest retail blend. Each is experiencing rapid growth in high-population, FFVdense markets. Both, however, are reliant on continued FFV production which—in a true chicken-or-the-egg dilemma—is reliant on E85 access and demand. One of those original three E’s of ethanol—environment—does show up in this month’s issue. Our page-40 feature, “In Defense of Ethanol,” gives voice to ICM’s Steve Vander Griend, a formidable watchdog on ethanol emissions testing. His critical focus reminds us that continuing to prove ethanol’s overall emissions benefit supersedes other industry battles.
FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | FEBRUARY 2014
TWITTER.COM/ETHANOLMAGAZINE
ADVERTISER INDEX VOLUME 20 ISSUE 2
EDITORIAL President & Editor in Cheif Tom Bryan tbryan@bbiinternational.com
54
2014 International Fuel Ethanol Workshop & Expo
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2014 National Advanced Biofuels Conference & Expo
65 3
Ashland Water Technologies
Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Holly Jessen hjessen@bbiinternational.com Senior Editior Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Staff Writer Chris Hanson chanson@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com
ART Art Director Jaci Satterlund jsatterlund@bbiinternational.com
BetaTec Hop Products
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Buckman
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Cashco, Inc.
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CHS Renewable Fuels
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DuPont Industrial Biosciences
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Eco-Energy Inc.
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Fagen, Inc.
13
Ferm Solutions Inc.
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Fermentis - Division of S.I. Lesaffre
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Fluid Quip Process Technologies, LLC
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Gamajet Cleaning Systems, Inc.
48 2
Growth Energy
Graphic Designer Raquel Boushee rboushee@bbiinternational.com
55
Hydro-Klean LLC
11
ICM, Inc.
PUBLISHING
8-9
Inbicon
Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com
SALES Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager Chip Shereck cshereck@bbiinternational.com Account Manager Kelsi Brorby kbrorby@bbiinternational.com Account Manager Brittany Ruhr bruhr@bbiinternational.com Marketing Director John Nelson jnelson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com
INTL FCStone, Inc.
32
Iowa Economic Development Authority
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Lallemand Biofuels & Distilled Spirits
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Louis Dreyfus
49
Methes Energies
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Mole Master Services Corporation
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Nalco, an Ecolab Company
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Novozymes
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POET-DSM Advanced Biofuels
59
Premium Plant Services, Inc.
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Renewable Fuels Association
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RPMG, Inc.
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Sukup Manufacturing Co.
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Sulzer Process Pumps
Advertising Coordinator Marla DeFoe mdefoe@bbiinternational.com
26
38-39
Syngenta: Enogen
Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. 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 Mexico. 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 701-7465367. 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 service@bbiinternational.com. 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 service@bbiinternational.com. 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 hjessen@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.
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2014 International Biomass Conference & Expo
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Tower Performance, Inc.
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Tramco, Inc. Vecoplan LLC
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Vogelbusch USA, Inc.
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Wabash Power Equipment Co.
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WestAgro Executive Brands
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FEBRUARY 2014 | Ethanol Producer Magazine | 7
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THE WAY I SEE IT
Mother Nature Ethanol’s Friend and Nemesis By Mike Bryan
The uncertainties of ethanol are mostly weather related. While this won’t come as any great
revelation, it has certainly come home to roost in the past couple of years. The importance of the ethanol industry to the energy security and price of gasoline in America is not even a question any longer. The question is what’s the weather forecast? As any farmer will tell you, depending on the weather is a helluva way to run a business. Unfortunately, the weather not only affects the production cost of ethanol, but more importantly it negatively affects public opinion and political support. The oil industry clearly has its obstacles to overcome as well, such as drilling costs, reserve limitations, etc. Most of those numbers are kept close to the vest, however, and since no one really knows the actual reserve limitations, we pretty much have to take them at their word. On the other hand, the weather that affects corn production is public knowledge and speculation can run rampant as to what effects it will have, often sending shockwaves of hesitation through Congress. It seems to me that much of the consternation over corn-to-ethanol, including the current debate on the renewable fuel standard (RFS) is rooted in America’s ability to produce sufficient corn to meet the needs of food and fuel. This, of course, is largely dependent on Mother Nature. As long as we depend on corn as the primary feedstock for ethanol production, I see no way to avoid this continuing cycle of uncertainty. Make no mistake, I fully support the use of corn as a feedstock for ethanol, even though it will go through its ups and downs riding on the weather. It has never been a food vs. fuel issue. As anyone with half a brain will tell you, we produce more than enough corn to supply not only our global commitments but also enough to produce 10 percent or more of America’s fuel supply. We simply cannot trash an entire industry that has added so much to our economy, 10 | Ethanol Producer Magazine | FEBRUARY 2014
our energy security and to our environment because we have a bad weather year. Nor can we ignore the fact that we will have another bad weather year at some point and corn production could again be limited. Rather than throw the ethanol industry under the bus because of a bad weather year, we should be creating a feedstock reserve during the high production years. We have already capped the amount of ethanol from corn at 15 billion gallons per year in the RFS, so we know what we will need year in and year out. Now we should begin building a corn reserve specifically for ethanol production during those years of bumper crops. I wouldn’t begin to detail the logistics of how, but I know that there are many in the USDA who would be willing and able to configure such a strategy. But first, Congress needs to put aside the weather issue and the oil industry propaganda about food vs. fuel and land use and the other nail strips that have been tossed in front of the tires of ethanol and ask a simple question: Does ethanol have a place in America’s energy future? If the answer is no, then whether it be corn or cellulose as the feedstock there is no point in continuing, because there will always be weather issues and fabricated nail strips no matter what feedstock is used. If the answer is yes, then the question is what do we need to do to preserve ethanol’s future? Congress should work together with the appropriate government agencies to help build a sustainable pathway that ensures the future of this important energy source rather than succumb to the propaganda of those who are bent on destroying it. That’s the way I see it!
Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com
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International Biomass Conference & Expo March 24-26, 2014 Orange County Convention Center Orlando, Florida Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. This event is the world’s premier educational and networking junction for all biomass industries. 866-746-8385 | www.biomassconference.com
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VIEW FROM THE HILL
RFS is a Gold Medal Win By Bob Dinneen
As the Olympic flame burns, I find myself reflecting upon one of the greatest moments in Olympic history—the “Miracle on Ice.” Against all odds, a gang of ragtag American
hockey players faced off against the dominating Soviet Union in the 1980 Olympic Games in Lake Placid, N.Y., defeating the hockey superpower 4-3. Thirty-four years later, America’s ethanol industry is in the same kind of fight against Big Oil’s crushing domination of the fuel market. A victory would give American drivers access to low-cost, octane-boosting, American-made green fuels. It would give drivers a choice at the pump that not only saves them money, but also helps create a cleaner environment, while driving America to a stronger, more secure future. The fight isn’t easy, it isn’t pretty, and sometimes it is flat-out ugly, but the ultimate reward makes it necessary. The U.S. hockey players’ never-quit attitude was on display for the whole world to see and can be seen again as biofuels advocates fight back against the seemingly relentless attacks from Big Oil’s front line, the American Petroleum Institute. API’s captain, Jack Gerard, has an unlimited capacity to fire slapshot after slapshot, with a bottomless advertising and lobbying budget and the backing of industry giants such as BP, ConocoPhillips, and ExxonMobil in order to protect their monopolistic stronghold on the fuel market. But we are shooting right back with heart and spirit because we are fighting for a more secure, stronger and better America, and not just our bottom line. We are fighting for a more secure America where OPEC is no longer dictating prices, military priorities no
longer include protecting oil supplies in the Middle East and consumers have a choice at the pump. We are fighting for a stronger America where job opportunity abounds in rural economies, coast to coast, border to border. Where well-paying jobs and farmrelated opportunities reverse the brain drain from rural communities to urban cities, as small businesses grow and feed off the success and demand generated by biorefineries. We are fighting for a better America that protects the environment and reduces greenhouse gas emissions. Ethanol has already made leaps and bounds reducing greenhouse gas emissions since the passage of the renewable fuel standard. It is vital for our children and grandchildren that we continue along that path and leave a legacy of clean energy and not a world where we fracked the country half to death in the pursuit of oil. We are fighting for a consumer-based America where ethanol and domestically sourced oil are offered side-byside in an open and competitive marketplace, putting American drivers back in the driver’s seat. Opening up the fuel market to a wide variety of choices will be a gold medal moment for consumers across the country. Just as in the last 10 minutes of the U.S./Soviet hockey game where goalie Jim Craig blocked shot after shot, we will continue to deflect shots from Big Oil, Congress and now the EPA in order to protect the renewable fuel standard. As we’re only six years into a 15-year RFS schedule, we’re only in the second period of a very long game. But just like the shouts of U-S-A, U-S-A, U-S-A could be heard echoing from the rafters in the 1980 Olympics, our rallying cry remains “Don’t Mess with the RFS.” Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835
12 | Ethanol Producer Magazine | FEBRUARY 2014
DRIVE
We’ve Notched Some Wins, Will Face More Hurdles By Tom Buis
2013 was a very interesting year. Starting out, the potential for a good year was grim. We had just come out of a tough 2012 where we experienced the worst drought in decades, negative margins for the longest period ever, declining exports, very high ethanol stocks and declining consumption of fuel domestically. The economic picture changed dramatically, however, beginning late in the first quarter. Ethanol supply and demand achieved a better equilibrium, farmers planted a record corn crop and fuel consumption increased as gasoline prices declined. We also witnessed increased export demand. The end result was a very good year economically for our industry. While 2013 was a good year economically for ethanol, the policy challenges were a mixed bag. We witnessed the huge resources of Big Oil, and Big Food put a full court press on Congress to repeal the renewable fuels standard (RFS). A multimillion dollar campaign was launched by our critics blaming ethanol for everything imaginable— from driving up gas prices, destroying the environment to causing world hunger. None of it was true, but Big Oil and large multinational livestock and poultry companies used every trick in the book to blame ethanol. National TV and newspaper ads, op-eds, press conferences—they tried it all. They even tried to blame ethanol for a shortage of chicken wings during the Super Bowl. While none of the critics’ claims were based on facts, it did have an impact. First, the critics’ attempts to repeal the RFS in Congress were rebuffed when we had the opportunity to present the facts to Congress. The House Energy and Commerce Committee, which is dominated by oil interests and other critics of the RFS, failed to take action, which resulted in a huge win for ethanol and other biofuels. The law was not changed.
While it was a huge victory in Congress, we were dealt a devastating blow by the U.S. EPA, which proposed to cut the volumes for 2014 mandated by the RFS. Nobody saw this one coming. Spooked by Big Oil’s false claim that higher RIN (renewable identification number) prices would result in big price increases to motorists, the administration basically bought Big Oil’s line and proposed drastic changes for 2014. Though the suggested EPA rule caught us by surprise, we were able to quickly fight back. We testified in formal hearings and, with your support, were able to rally a huge number of responses from farmers, producers and consumers like you, who all felt it was important that the EPA and the Obama administration understand the importance of keeping the RFS statutory requirements in place. Our combined efforts were truly amazing! In late January, the comment period for the EPA ended, and we now await the final rule to be announced later this year. We are confident that the EPA will recognize that changing the RFS will negatively impact our nation. As we all know, the unaltered RFS is a win for all Americans. It reduces our dependence on foreign oil, improves our environment, revitalizes our rural economy, and saves consumers money at the pump. Our industry is a modern success story—one unrivaled in our nation’s history regarding energy production. This is why Big Oil is fighting so hard against ethanol; they know we can produce an alternative fuel that is cheaper, cleaner and better for our nation. Though we still face a tough fight with some regulators and Congress throughout the next year, we will win. Stay informed and involved about the latest issues the ethanol industry faces and our future successes at GrowthEnergy.org. Together, we will continue to grow this amazing fuel, and keep our nation moving forward. Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org
14 | Ethanol Producer Magazine | FEBRUARY 2014
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GRASSROOTS VOICE
EPA’s Un-depth E15 Un-analysis
By Ron Lamberty
By now, most of you have had an opportunity to read some form of the U.S. EPA’s “2014 Standards for the Renewable Fuel Standard program (RFS2): Notice of Proposed Rulemaking.” Most of us probably read
the summary of the bill and have focused on “the numbers” and the impact that EPA’s proposed reductions would have on our industry. But for those who have had the time to plow through the text of the entire proposed rule, I wonder how many stopped to reread and re-reread the section of the rule that appears to be the crux of EPA’s nonsensical argument that “you can’t get there from here.” Following in-depth discussion of EIA projections, which show that gasoline use is much lower than what was projected, but which ignores the fact that EIA’s projections were based on gas prices that were a buck lower than what they are now, EPA barely mentions the one fuel that could force gas prices down while at the same time helping obligated parties reach their required volume obligation: E15. If people don’t like the price of gas or E10, and if ethanol is cheaper, it stands to reason they might give lowerpriced E15 a try. That would force gas prices to compete, wouldn’t it? Yet, in one very brief section, a little more than halfway through the proposed rule, EPA gives only brief mention of E15. Four or five paragraphs contain 14 total mentions of E15 (compared to 136 times that the word gasoline is used in the rule), saying, essentially: We don’t think anyone is going to buy E15. EPA went to great lengths to analyze potential E85 demand, but it sounds like their E15 investigation was akin to “some guys told us it’s probably not gonna work.” Or maybe they found some stuff on the Internet. In fairness, what they actually said was: “For the purposes of this proposed rule, we have assumed that all
16 | Ethanol Producer Magazine | FEBRUARY 2014
gasoline-powered vehicles and FFVs [flex-fuel vehicles] would use either E10 or E85.” EPA offered no explanation of where those assumptions came from. They want credit for approving E15, saying, “EPA has taken a series of regulatory steps to enable E15 to be sold in the U.S. in 2010 and 2011…” and “EPA issued partial waivers to enable use of E15 in model year 2001 and newer vehicles,” but don’t seem to be aware that oil companies subsequently issued a total denial of station owners’ ability to sell E15 for drivers to use in those vehicles. EPA takes a see-no-evil stance on oil industry lawsuits, phony “studies,” a well-funded smear campaign against E15, enormous Big Oil lobbying outlays and oil companies’ outright ban on the sale of E15 at branded stations. EPA summarizes its E15 un-depth un-analysis saying, “However, based on information currently available to the agency, the volume of E15 being supplied in the market to date has been very limited.” In other words, “the guy said” there isn’t much E15. Can the agency really not find anyone to tell them why the volume of E15 “has been very limited?” Oil refiners have created a self-fulfilling prophecy: There are no E15 sales because they do not allow E15 sales. Oil companies have not done a single thing to meet their obligation to sell greater volumes of renewable fuels, and EPA is inexplicably preparing to reward their belligerence by making the requirement go away. It’s like the Internal Revenue Service lowering someone’s taxes because they’ve refused to pay. Come to think of it, Big Oil’s income taxes are lowered because they paid them to other countries . . . so maybe this shouldn’t be a surprise. Author: Ron Lamberty Senior Vice President, American Coalition for Ethanol 605-334-3381 rlamberty@ethanol.org
Toulouse Mercure Toulouse Atria
April 7–11, 2014 A Tradition of Industry Education For 33 years, The Alcohol School has been educating fuel ethanol and distilled beverage producers in the science of alcohol production. The weeklong programme in Toulouse, France, is designed for lab, plant, and management personnel and is organized around a series of lectures and laboratory demonstrations presented by a faculty of academic, industry and Ethanol Technology Institute experts. The programme will cover the process of ethanol and beverage alcohol production from milling and mash preparation through fermentation and distillation. Enzyme usage, yeast biology, bacterial contamination and control will also be discussed along with other issues currently affecting both industries.
For More Information Registration is limited, with preference given to fuel ethanol and distilled beverage producers. Additional information is available online at www.lallemandbds.com. 6120 West Douglas Avenue Milwaukee, WI 53218 USA +1 414 393-0410 Fax +1 414 358-8012
EUROPE CALLING
Changing the Tide
By Robert Vierhout
Those who have followed the decision making process on the indirect land use change (ILUC) conundrum very closely will probably agree with me that it is difficult to predict the way European decision making will go.
The week prior to the Dec. 12 meeting of the EU ministers of energy, the Lithuanian EU Council president achieved support for a compromise text against all odds in the permanent committee of EU ambassadors (COREPER). The general perception was that the debate among the energy ministers would be a formality confirming the COREPER text. As I followed the live debate, I suspected an unexpected outcome could occur when Hungary expressed its opposition to the compromise. Upfront, four countries had made clear that they would vote against—Belgium, Denmark, the Netherlands and Luxembourg—all for the same reason, that the compromise was not ambitious enough in addressing ILUC. Italy expressed opposition as well, with a similar view. Hungary did not like the compromise text because it felt the proposed change to the Renewable Energy Directive would hamper the country in developing its agricultural sector. Several other Central and Eastern European countries shared this view, although without expressing opposition to the compromise text. Not Poland though. As the last nation to speak at the council meeting, it supported Hungary and said no. The Lithuanian president was taken by surprise. He thought there was a majority in favor of his compromise but there wasn't. The seven countries saying no represented enough votes to block the measure. The stance taken in the council was just mirroring what already had happened in the commission and the European Parliament. There is substantial disagreement on the best way forward regarding the ILUC issue. The result: standstill. The dramatic change to
the bill in the summer of 2012, when out of the blue a cap to food/feed biofuels was introduced along with ILUC factors, backfired. The European Commission could have foreseen this if it had done its homework well. It would have realized how much disagreement there was with its proposal, if it had tested the water by consulting member states and the sector before launching the proposal. Why did the commission push on? Was it lack of clear leadership of the president of the European Commission to say no to a proposal that was controversial even within the commission itself? I think it was. The proposal should never have seen daylight. What next? It is unlikely that the Greek presidency will be able to mend this since it will be very short-lived, due to European elections. Why put effort in a file that cannot be concluded during one’s term as president? Thus the file will be carried over to the Italians in the second half of 2014. But whether they can find the key to resolve the issue will depend on how the newly elected parliament and commission will assess biofuels. Looking at the recent ILUC battlefield I see mainly casualties and no real winners. The European ethanol industry has only a few months time to regroup and rethink its strategy as the discussion on biofuels will continue, whether we like it or not. Even though it has been a tough battle up to now, the ethanol sector has the potential to change the tide. We have been successful in convincing the European Parliament that a separate target of renewable energy in gasoline is needed. It was one of the few amendments that gained enough support to survive the negotiation with the council. We also were able to convince the parliament that a mandatory target for advanced biofuels is a must. We have until this coming June to present the new parliament, the commission, other stakeholders and the media our story that supporting first- and second-generation ethanol is a worthwhile investment. Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org
18 | Ethanol Producer Magazine | FEBRUARY 2014
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20 | Ethanol Producer Magazine | FEBRUARY 2014
BUSINESS BRIEFS People, Partnerships & Deals
Growth Energy has added two new members to its communications team. Ryan Lamke will serve as communications manager, while Courtney Henderson has joined as Lamke communications assistant. Lamke will be responsible for strategic planning, grassroots communications, and managing and coordinating social and traditional media efforts to expand Growth Henderson Energy’s public relations, legislative affairs and membership agendas. Prior to joining Growth Energy, he was an independent consultant providing strategic communications support to various individuals and nonprofits. He has experience working in government and public relations for a variety of companies. Henderson will be responsible for monitoring media coverage of the biofuels industry, as well as expanding Growth Energy’s digital presence through social media platforms. She will also support the overall mission of the communications team and membership of Growth Energy. Henderson previously worked as a digital media consultant. Lamberton, Minn.-based Highwater Ethanol LLC has joined the Renewable Fuels Association. The plant, which began operations in 2009, has a nameplate capacity of 50 MMgy. In addition to ethanol, the facility produces 160,000 tons of dried distillers grains with solubles, some of which goes back to local farmers as wetcake. Highwater Ethanol recently partnered with Butamax Advanced Biofuels LLC to retrofit its ethanol plant to produce biobutanol.
Aventine Renewable Energy has named Lee Olson as wet mill/coproduct area supervisor for its 165 MMgy wet mill and dry mill plants in Pekin, Ill. Olson’s experience in production management includes good manufacturing practices, process safety management, hazmat procedures and processes regulated by the FDA, EPA and OSHA. He spent the previous two years as production shift associate team leader managing the Roquette corn wet-milling plant in Keokuk, Iowa. He also previously served as production supervisor at Valero Energy Corp. ethanol plants in Welcome, Minn., and Bloomingburg, Ohio, and was a boiler operator and energy center supervisor at Patriot Renewable Fuels in Davenport, Iowa. Maple Energy plc has announced that Ricardo Vega Llona and Eduardo Andrés Beffermann Córdova will serve on its board of directors as nonexecutive directors. Llona has served as a senator in the Peruvian congress and as a member of the Integration Advisory Council of the Peruvian government’s Ministry of Industry, Commerce, Tourism and Integration. He has also served as the executive director of the Investment Promotion Agency and the Export Promotion Fund. Córdova serves as portfolio manager at Bancard, and investment holding company based in Chile, and was previously vice chief financial officer of Bancard. Just Energy Group Inc. has sold Belle Plaine, Saskatchewan-based Terra Grain Fuels Inc. to a group of Saskatchewan businesses. Under the agreement, the purchasers acquired Terra Grain, including all of its outstanding debt, for a nominal purchase price. Just Energy will be released from all of its obligations to service providers to Terra Grain under letters of credit and guarantees. The transaction closed Dec. 24.
Proterro Inc. was issued U.S. Patent No. 8,597,914 by the U.S. Patent and Trademark Office, protecting its biosynthetic sugar-making process. The company’s photosynthetic microorganisms and its genetic code were already protected by U.S. Patent No. 8,367,379, a composition of matter patent covering the sequence and assembly of discrete genes of engineered cyanobacteria and the cyanobacteria themselves. The new patent protects the entire process of making fermentable sugar, from introducing the microorganisms into the photobioreactor through isolating the sugar.
Mascoma Corp. has announced that its consolidated bioprocessing technology has been used to produce more than 1 billion gallons of renewable fuel. The achievement is a key milestone for its MGT yeast products, including TransFerm and TransFerm Yield [plus]. The U.S. EPA has appointed Francesca Grifo as its new scientific integrity official. In her new role, Grifo will coordinate and carryout the agency’s scientific integrity policy. She will also chair a standing EPA scientific integrity committee. Grifo has many years of experience in scientific research, academia and scientific policy. She most recently served as a senior scientist at the Union of Concerned Scientists. BioPower Operations Corp. has announced that its wholly owned subsidiary Global Energy Crops Corp. entered into a 50-50 joint venture agreement with Alternative Green Today LLC to license the joint venture’s intellectual property for the production of cellulosic biofuels. Targeted companies will include oil companies, sugar companies and other producers of ethanol and transportation fuels. Global Energy will manage the joint venture.
Deinove has announced Jacqueline Lecourtier will chair and lead the deliberations of its scientific advisory board. She is an engineer with École Lecoutier Nationale Supérieure des Industries Chimiques (French Higher National Institute of Chemical Engineering). She spent 25 years with the French Institute of Petroleum—New Energies, where she served as scientific director from 2006 through 2011. She led the the Agence Nationale de la Recherche from 2006 to 2012. Superior Tank Co. Inc.’s bolted steel water tanks for fire protection were awarded certification from FM Approvals. The designation ensures the product meets or exceeds seismic standards, wind loads, FM property standards, municipal water utility requirements, ISO compliance, engineering specifications, material quality and National Fire Protection Agency standards. Superior Tank offers a variety of custom-sized tanks for storage of water used in fire suppression and municipal potable water distribution. China New Energy Ltd. has won contracts with Visontai Bioetanol Fejlesztő Korlátolt Felelősségű Társaság and Helvéciai Biouzemanyag Termelö es Kereskedo Kft to develop two corn ethanol plants in Hungary. The first project is expected to reach full commercial production in 2016 and will have the capacity to produce 150,000 liters (39,625.81 gallons) of ethanol per day. The development timeline for the second project is dependent on Viscontai and Helvécia reaching fundraising milestones. Once complete, that plant will be capable of producing 300,000 liters of ethanol per day.
FEBRUARY 2014 | Ethanol Producer Magazine | 21
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FEBRUARY 2014 | Ethanol Producer Magazine | 23
COMMODITIES
Prices & Market Analyses
Natural Gas Report
Natural gas prices reach an upper boundary Dec. 23—A cold start to the winter heating season increased home heating demand beyond seasonal norms, depleting inventories at an above-average rate. Consequently, the remaining inventory has become more dear, near-term pricing has risen and the futures market has moved from a slight contango to backwardation. The prompt NYMEX contract traded near $4.50 per million Btu (MMBtu) for most of December. The effects of increased heating demand were reflected acutely in national storage levels. Inventory peaked Nov. 11 at 3,834 billion cubic feet (Bcf), a comfortable surplus to the five-year average of 3,776 Bcf. Depletion occurred rapidly, culminating in an all-time record single week withdrawal of 285 Bcf on Dec. 13, bringing stored gas volumes to 3,248 Bcf, a 7.4 percent deficit to the five-year average. The three-week stretch of cold not only supercharged withdrawals, but also wreaked havoc with supply. Subzero weather in the Rockies and subfreezing temperatures in Oklahoma and Texas froze off production from some wells. At the peak of the cold, the research firm Bentek estimated that as much as 3 Bcf of supply was unavailable. Between constrained supply and spiking demand, prompt NY-
by Ben Strauss
MEX natural gas prices broke out of a 13-week range from $3.50 to $3.80, to test and exceed April-May highs. Although prompt and spot prices have risen, deferred futures have been less sensitive to the recent demand spike. This near-term volatility combined with longerterm stability is indicative of a supply-demand scenario where longterm supply and demand balances are looser than the short-term. Although continued cold would lead to elevated demand levels, a key reason that prompt and long-term prices have not run higher is electricity generation. If NYMEX prices were to rise above $4.50 per MMBtu, natural gas would no longer be competitive in certain areas. Analysts from SNL Energy and Goldman Sachs estimate 1 Bcf per day of natural gas demand for power generation would drop out of the market if prices exceed this threshold. Heating demand from an excessively cold winter could be the catalyst to break through this resistance, but the weather forecasts, and present storage balance are not sufficient to warrant that type of price move at this time.
Corn Report
More comfortable corn carryout-to-use ratio projected Dec. 23—The grains complex has been tiresome compared to the whirlwind proteins of late. A big carryout looms in corn, and demand from China has been in question. Nonetheless, the lack of cash movement led to historically strong harvest basis when considering production nears 14.0 billion bushels and a carryout of 1.792 billion bushels. The December USDA report increased corn for exports and ethanol production by 50 million bushels each. Corn for exports is projected at 1.450 billion bushels compared to 731 million a year ago. Ethanol demand is projected at 4.950 billion bushels as compared to 4.648 billion a year ago. Feed demand is still expected at 5.20 billion bushels, up 867 million from a year ago. Therefore, feed and ethanol coproduct demand is expected to increase, all the while animal grain consuming units are not increasing at the same rate. Thus domestic meat production should increase and/or more coproduct should be exported through the remainder of the marketing year. The end corn carryout-to-use ratio should be 13.7 percent versus 7.4 percent a year ago. The accompanying chart illustrates that with high-dollar corn, the market was able to find other feedstuffs, but is the number this year too high, too fast? Any demand reduction will see carryout increase, weighing heavily on the market. 24 | Ethanol Producer Magazine | FEBRUARY 2014
by Jason Sagebiel
World corn carryout rests comfortably at 196.62 million metric tons (mmt). This compares to 164.41 mmt and 165.19 mmt the last two years, respectively. Demand will be influenced by China’s handling of genetically modified corn and corn products and South America production, which had favorable December weather.
Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.912 Region
Spot
Rack
West Coast
2.495
2.650
Midwest
2.200
2.400
East Coast
2.275
2.980
DDGS Report
SOURCE: DTN
Container, truck logistics drive by Sean Broderick DDGS market dynamics Dec. 23—As Christmas approached, logistics were the primary market driver in the DDGS market. Whether in railcar turn times, empty container availability or even truck availability to move the product, transportation is affecting prices. Destination rail markets are very strong because of the reduced velocity of railcars, especially when buyers have been running a “just in time” pipeline. For those plants that do have cars available, they have been able to get some great netbacks by selling into those markets on both coasts, and into the Southwest and Mexico. Container markets had been the price driver the past couple of months, but we have seen supplies of them slow as of late. The holiday rush is behind us, and the reduced velocity of railcars slows
movements to the container ports. Truck availability had been an issue all fall, which hampered product movement into container yards when containers were actually available, and now that containers are tight, we have seen local truck markets weaken again. There has been some slowing of plants as ethanol movements have slowed as well, and plants got full, but that is impacting supply of DDGS only in select markets. Buyers have been using DDGS primarily for its protein value, as worldwide, protein meals have been expensive. What the new year brings in the protein world is sure to affect DDGS pricing, which, as a percentage of corn, is at the highest levels of recent years.
Regional Gasoline Prices ($/gallon)
Front Month Futures Price (RBOB) $2.837 Region
Spot
Rack
West Coast
2.738
2.804
Midwest
2.633
2.627
East Coast
2.778
2.837 SOURCE: DTN
DDGS Prices ($/ton) Location
Feb 2014
Jan 2014
Feb 2013
Minnesota
215
210
240
Chicago
245
245
270
Buffalo, N.Y.
250
220
252
Central Calif.
287
288
308
Central Fla.
281
274
292 SOURCE: CHS Inc.
Corn Futures Prices
(March Futures, $/bushel) Date
High
Low
Close
Dec 22, 2013
4.34 1/4
4.27 1/2
4.33 1/4
Nov 22, 2013
4.32 1/4
4.27
4.29 1/4
Dec 20, 2012
7.05
6.87 1/2
6.96 1/2 SOURCE: FCStone
Cash Sorghum ($/bushel) Location
Ethanol Report
Ethanol prices take wild ride in December by Rick Kment
Dec. 23—Ethanol prices saw a wild price shift in December leading to additional uncertainty through the ethanol and corn markets. Lack of active support in the corn market has kept corn prices hovering between $4.15 to $4.30 per bushel in the futures market. There’s been additional pressure in many cash markets due to the availability of corn following harvest. Uncertainty about political support in ethanol markets is creating some additional market movement in the front month futures prices. The biggest factor in the wild ride of ethanol futures, which moved prices more than 30 cents lower through the month of December only to regain most of the losses back by the end of the month, is grow-
ing ethanol supplies and production levels. After hitting a record low inventory level since 2010, when weekly inventory records were first collected, inventory levels rebuilt strongly based on increased production by ethanol plants. This move to higher production levels comes at a time when holiday demand remains good. But this is creating concern for many traders as to how far prices will fall once demand slows following the holiday season. With corn futures hovering close to $4 per bushel, it is unlikely that ethanol markets will see significant reductions over the near future, but this could limit long term support, and create even greater impact in the industry infrastructure.
Dec 19, 2013
Nov 25, 2013
Dec 28, 2012
Superior, Neb.
4.19
4.20
6.64
Beatrice, Neb.
4.01
4.00
6.54
Sublette, Kan.
4.18
4.19
6.73
Salina, Kan.
4.34
4.35
6.74
Triangle, Texas
4.23
4.22
6.97
Gulf, Texas
5.33
5.30
6.98
SOURCE: Sorghum Synergies
Natural Gas Prices ($/MMBtu) Location
Dec 26, 2013
Oct 30, 2013
Dec 26, 2012
NYMEX
4.45
3.56
3.30
NNG Ventura
4.76
3.69
3.38
CA Citygate
4.62
3.88
3.63
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production (1,000 barrels) Per Day
Month
End Stocks
Oct 2013
903
27,995
15,771
Sep 2013
852
25,564
16,040
Oct 2012
806
24,976
18,626
SOURCE: U.S. Energy Information Administration
FEBRUARY 2014 | Ethanol Producer Magazine | 25
DISTILLED
Ethanol News & Trends
Plants change ownership FTC reports on status of domestic ethanol industry
5
Ethanol Production (Jul-Jun)
2002 Ethanol Capacity (Jul-Jun) 2012 Report 2013 Report
10
2012 Report 2013 Report
15
2012 Report 2013 Report
20
Volume of Ethanol Blended (Jul-Jun)
After 2002
report, the updated 2013 analysis shows that the level of concentration in the industry has remained largely unchanged. The report also indicates that demand for ethanol increased from July 2012 through June 2013, with 12.8 billion gallons of ethanol blended. During the prior 12-month period, approximately 12.7 billion gallons of ethanol was blended in the U.S. While domestic ethanol production decreased between the 2012 and 2013 reports, production capacity increased slightly.
2002
After 2002
2002
After 2002
After 2002
The Federal Trade Commission has published its annual report on the status of U.S. ethanol production, finding that the market for fuel ethanol continues to remain unconcentrated. The report estimates that 158 firms are either currently producing ethanol in the U.S., or are likely to begin producing within the next 12 to 18 months. According to the FTC, there has been a lack of market concentration in the industry since it first began publishing its annual ethanol report in 2005. When compared to the 2012
Billion Gallons
Several ethanol plants changed ownership in late 2013. During the final quarter of the year, Green Plains Energy Inc. announced that it completed the acquisition of two 110 MMgy ethanol plants previously owned by BioFuel Energy Corp., including the Pioneer Trail Energy plant in Wood River, Neb., and the Buffalo Lake Energy facility in Fairmont, Minn. The plants were purchased from an entity comprised of BioFuel Energy’s lender group. Another plant in Minnesota is also expected to be under new ownership soon. The shareholders of Central MN Ethanol Co-op voted in late 2013 to approve an asset purchase agreement for the sale of CMEC’s 54 MMgy ethanol plant in Little Falls, Minn., to U.K.-based biochemical producer Green Biologics. The two companies first signed a letter of intent in September. The transaction is expected to close in late this year. In Wisconsin, the Fox River Valley Ethanol plant resumed operations during the fourth quarter. Ace Ethanol LLC purchased the 52 MMgy plant from Utica Energy in August. The facility had been idle since September 2012.
Nearly Static Stats Number of Firms Producing Ethanol or likely to do so within the next 12 to 18 Months (as of September)
154
2012
156
2013 0
50
2012
Largest Producer’s Share of Domestic Capacity
0
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26 | Ethanol Producer Magazine | FEBRUARY 2014
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150
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2013
200
DISTILLED
DSM, Dong Energy demonstrate improved yields Royal DSM and Dong Energy have demonstrated the combined fermentation of C6 and C5 sugars from wheat straw on a commercial scale. The combined fermentation resulted in a significant increase in ethanol yield per ton of straw. The demonstration took place at Dong Energy’s Inbicon demonstration plant in Kalundborg, Denmark. The facility was reconstructed in 2013 to enable the mixed fermentation of C6 and C5 sugars. A two-month test demonstrated that mixed C6 and C5 fermentation using DSM’s advanced yeast yielded 40 percent more ethanol per ton of straw than traditional C6 fermentation. "In this test the mixed fermentation of C6 and C5 sugars has been proven on a 270,000 liter industrial scale with a similar yield as obtained on a 1 liter laboratory scale. This is an impressive scale-up and it improves the possibilities of deployment of the Inbicon technology in combination with advanced yeast from DSM,� said Jan Larsen, head of research and development at Inbicon.
RFA comments on rail car safety proposal The Renewable Fuels Association recently submitted comments to the U.S. Department of Transportation in response to the Pipeline and Hazardous Materials Administration’s advanced notice of proposed rulemaking (ANPRM) on the rail shipping of hazardous materials. In its comments, the RFA encouraged the DOT to look into the underlying causes of derailments, such as rail construction and maintenance, rather than focusing exclusively on the retrofit of current DOT-111 railcars. “Rather than focusing exclusively on railcar design, a more prudent approach
would be to invest in initiatives that address these root causes and keep the railcars on the tracks,� said Bob Dinneen, president and CEO of the RFA in his comments. “Such initiatives should include improvements in inspection and track maintenance protocols, utilizing available technology to assist in reducing human error (e.g., positive train control), and improved communication systems for rail operations. These types of actions would provide a better costbenefit ratio and help stop the derailment incidents from occurring at all.�
Tank Car Quantities 335,000 228,000 92,000
Number of Active Tank Cars in U.S. Fleet (pressure and nonpressure)
Number of DOT-111 Tank Cars
Number of DOT-111 Tank Cars used to move Flamable Liquids, such as Crude Oil & Ethanol
SOURCE: ASSOCIATION OF AMERICAN RAILROADS, "RAILROAD TANK CARS," NOVEMBER 2013
Vecoplan builds turnkey systems that process biomass to be used in biorefining applications. Our systems can be used to shred and process corn stover, switchgrass, bagasse, or any other type of biomass. They are used in the production of cellulosic ethanol and other second-generation biofuels. Vecoplan systems provide application specific shredding, stone & metals removal, screening, separation, conveying, loading & unloading, storage, and metered feeding of biomass prior to its conversion to advanced biofuels. Contact us or visit our website today, to learn more about our biomass prep systems.
YHFRSODQOOF FRP FEBRUARY 2014 | Ethanol Producer Magazine | 27
DISTILLED
Biochemtex to open a cellulosic plant in NC
Government officials in North Carolina announced that Biochemtex will locate its new cellulosic biofuel operations in Sampson County, N.C. According to information released by N.C. Gov. Pat Mccrory’s office, the company will operate in the state as Carolina Cellulosic Biofuels. Biochemtex is a company in the Italy-based Mossi Ghisolfi Group. The proposed 20 MMgy facility will take in locally grown energy crops, agricultural residues and wood biomass as feedstock and utilize Proesa technology, a process commercialized by Beta Renewables, which is a joint venture of Biochemtex, TPG and Novozymes. “Biochemtex is excited to bring our Proesa technology platform and our partners to eastern North Carolina," said Guido Ghisolfi, CEO and owner of Biochemtex. “We’ve already engaged with regional farms and farmers for the supply of energy crops and we see great opportunity for growth and additional projects where regional infrastructure matches need.”
IGPC Ethanol first Canadian producer to adopt ICM’s Gen 1.5 Technology Aylmer, Ontario-based IGPC Ethanol Inc. has signed a letter of intent to be the first Canadian adopter of ICM Inc.’s Generation 1.5 technology, a corn-fiber-to-cellulosic ethanol process. The technology will introduce cellulosic ethanol production capacity to IGPC Ethanol’s grain-based ethanol plant through the addition of ICM’s Fiber Separation Technology building block onto the facility’s current ICM Selective Milling Technology platform. Once the FST and SMT platforms are in place, the Generation 1.5 technology can be added.
According to ICM, its platform technologies can provide a way for corn and other grain-based ethanol plants to not only enhance efficiencies and diversity coproduct opportunities, but also serve as building blocks to advance toward the next technology. Development of ICM’s Generation 1.5 technology was funded, in part, by a U.S. DOE Bioenergy Technologies Office contract that the company was awarded through the American Recovery and Reinvestment Act of 2009.
Cycling Cellulosic In Existing
Pretreatment
Starch-to-Ethanol Biorefinery Existing Infrastructure Roads Labor Water
Hydrolysis
Corn/Grain Sorghum
Railroads Electrical Natural Gas Service
Ethanol/ Cellulosic Ethanol
Ethanol, Bio-Oil DDGS/Protein Food Products
Your plant needs are unique...your process treatment options should be just as unique! West Agro Executive Brands releases DeLasan CMT™ a patent pending process treatment used to control bacteria during fermentation. In addition to micro-biological control, benefits of a DeLasan CMT program can include: • Improved ethanol production: DeLasan CMT helps control lactic and acetic bacteria and reduces glycerol production. The result can be higher ethanol production per bushel of corn. • Alternative to antibiotic treatments: DeLasan CMT controls bacteria during the initial fill stage of the fermenter. As a result, no other products are needed to control bacteria. • Cost effective: Because DeLasan CMT is effective at very low dosage rates, the program cost is normally less than the cost of antibiotic treatments. • Benefits distillers grains: DeLasan CMT has a short half life and breaks down into food ingredients. Unlike other products used to control bacteria, DeLasan CMT contains no non-food components that can carry through into distiller grains or other food by-products. • Easy to feed and test for: DeLasan CMT is added directly into the corn mash. No premixing is required. The control test is a modified total chlorine test already in common use. • Complete consumption: Unlike some treatment products, DeLasan CMT is completely consumed in the fermenter. It contributes no sodium, chloride, or sulfate to the backset. It does not harm yeast when used at recommended levels. • GRAS status: DeLasan CMT is “Generally Recognized As Safe” for distillers grains. • No need to rotate antibiotics: Bacteria do not develop resistance to DeLasan CMT. As a result, bacteria resistance concerns are reduced. Contact your Executive Brands West Agro representative for more information.
28 | Ethanol Producer Magazine | FEBRUARY 2014
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DISTILLED
A report published by consulting firm E4tech shows that biofuels and vehicle efficiency will be essential in helping the European transportation sector reduce greenhouse gas (GHG) emissions to meet decarbonization targets. It provides details on what could be achieved in terms of a sustainable biofuels supply and how those biofuels could be integrated into the vehicle fleet. The study estimates that biofuels could deliver a 12 to 15 percent energy
Downside of Delay
1.5% 1.2% 0.9% 0.6% 0.3% 0.0%
contribution to transportation fuel by 2030, resulting in an 8 percent reduction in GHG emissions. The report also predicts that advanced biofuels could grow to comprise at least 20 percent of the biofuels market by 2030, with potential even greater in later years. The report, titled “A Harmonized Autofuel Biofuel Roadmap for the EU to 2030,” was commissioned by a consortium consisting of Daimler, Honda, Neste, OMV, Shell and Volkswagen.
1.30%
E20 After 2030
Raízen Energia Participacoes S/A has begun construction of a $100 million commercial-scale cellulosic ethanol facility in Brazil using Iogen Energy’s advanced cellulosic biofuel technology. Iogen Energy is a joint venture of Raízen and Iogen Corp. The 40 MMly (10 MMgy) facility will be located adjacent to Raízen’s Costa Pinto sugar cane mill in Piracicaba, São Paulo. The plant is scheduled to begin operations in the fourth quarter of this year. “This announcement is just the beginning of our partnership with Iogen,” said Vasco Dias, CEO of Raízen. “We believe Iogen has the most robust, well-proven, and competitive technology platform in the cellulosic ethanol business and, after this first facility is complete, we plan to combine Iogen’s cellulosic ethanol with seven more of our sugar cane production operations. We see tremendous potential for this technology in meeting the world’s growing demand for cleaner and more sustainable fuels, and we anticipate a long and profitable future.”
Report: Biofuels, vehicle efficiency necessary for Europe to meet GHG reduction goals
% GHG savings relative to fossil fuel baseline
Construction begins on Brazilian cellulosic plant
0.85% E20 after 2030
E20 in 2025
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UNDER THE CANOPY: Good & Quick station owner Charlie Good offers an unconditional guarantee on his E15, meaning that the station stands behind the quality and suitability of the fuel when it is used in 2001 or newer vehicles. PHOTO: CHARLIE LITCHFIELD
30 | Ethanol Producer Magazine | FEBRUARY 2014
MARKET
The
Curb Appeal
of E15
Station owners are starting to see the retail allure of gasoline containing a third more ethanol than today's standard blend. By Chris Hanson
FEBRUARY 2014 | Ethanol Producer Magazine | 31
MARKET Sandwiched between com- and non-ethanol gas had existed peting gas stations in Nevada, before. As much as investing in blender Iowa, Good & Quick station pumps required vision, installing E15 repatience. Good had to wait through owner Charlie Good started of- quired the government shutdown in September to fering E15 and higher ethanol receive his registration to sell E15 from the blends to his customers in No- U.S. EPA. Sales of E15 started slowly but have vember, making space for the increasing, Good says. After implenew selections where only E10 been menting the fuel and upgrading his facility,
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Smaller stations that have been hurt by the large chains might see E15 as a marketing tool to pull customers away from bigger competitors. he says gas sales have been up roughly 8,000 gallons per month. “For this time of year, for my sales to be going up, I can attribute probably 2,000 to 3,000 gallons of that each month to E15, E20, E30 and E85,� he says. To put wary consumers at ease, Good offers what he calls an “unconditional guarantee,� meaning that the station stands behind the quality and suitability of E15 when it is used in model-year 2001 or newer vehicles. In addition, Good & Quick installed new tank and gas line monitoring equipment, giving Good and his customers greater confidence in the accuracy of the station’s blends. Those assurances, however loose, are paying off. “In the beginning, I would sell 20 or 30 gallons a day, but the last three days have been 150 to 160 gallons a day,� Good says. Funding incentives administered by industry trade groups were a major driver behind upgrading the fuel pumps that blend higher amounts of ethanol. Early on, Good recognized that enhancing his station with renewable fuel access would cost about a quarter of a million dollars. That financial hurdle might have been a show stopper had supports not been available. “I found out that Iowa Corn Growers, Renewable Fuels Association of Iowa and the biodiesel people will give you a percentage back to help promote the product,� Good says. “So I looked into that and found I could get $100,000 back.� An additional government grant also helped fund approximately 25 percent of the unsubsidized portion of the project, which totaled $31,000. Recouping more
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BIDS FOR THE BLEND: In North Dakota, PetroServe USA made a move to E15 because its customers demanded it. “People wanted to get a little bit more ethanol and they wanted to get a little bit lower-priced fuel,” says Satrang. “We definitely had people asking for it.” PHOTO: ALANA WILHELM
than $130,000—or about half of the total cost of installation— was enough incentive for Good to forgo his original plan of simply upgrading his pumps with traditional fuel choices—E10, midgrade, and premium—and instead install blender pumps. “That was a huge factor on whether I would or wouldn’t have done it,” Good says. “I’m a little, independent guy. I’ve got two of the biggest convenience store companies in the United States [nearby], and I’m kicking their butt. But I’m doing that because I’m offering things they don’t offer.”
If more independent station owners use E15 as a marketplace tool to compete with larger gas station chains, Good predicts the larger stations will take notice and make the change as well. “If I can be the leader—and the renewable fuels people helped me be the leader by subsidizing me and helping me with equipment costs—what have I got to lose? Nothing,” Good says.
Northern Exposure
In the frigid plains of North Dakota, Petro Serve USA began its adventure with E15 in September when it introduced the
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ĚǀĂŶĐĞĚ ŝŽĨƵĞůƐ Θ ŝŽĐŚĞŵŝĐĂůƐ
FEBRUARY 2014 | Ethanol Producer Magazine | 33
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blend at three stations in Bismarck. The event featured Gov. Jack Dalrymple and was covered by local radio and television stations. The media buzz around the newly available fuel helped ramp up sales and set a precedence for future openings, says Kent Satrang, CEO of Petro Serve USA and a veteran fuel marketer of 35 years. Within a week, the fuel appeared at a Petro Serve station in Fargo, N.D. A week later, it was available at another station, then another, each week until six stations offered the higher-octane blend. In addition to providing a diverse consumer fuel choice, the decision to implement E15 was due to market demand. “People wanted to get a little bit more ethanol and they wanted to get a little bit lowerpriced fuel,” says Satrang. “We definitely had people asking for it.” Continuing to build the market and infrastructure for E15 by working with station owners is certainly on the minds of ethanol industry leaders. The Renewable Fuels Association is building its new infrastructure program to develop a type of one-stop shop for retailers wanting to know what options are available and how to move forward with higher and midlevel ethanol
'If there is no incentive or punishment for the oil industry to comply with the RFS, it will try to control as much of the fuel supply as it can.' blend access. “That can be connecting the dots on incentives, linking them up with the appropriate equipment manufacturers,” says Robert White, director of market development at the RFA. There are more options currently available for retailers than what was offered in the past, White says. For instance, some companies offer a type of trade-in program that could allow retailers to obtain older dispensers, but those pumps would be compatible with midlevel blends or E85 blends.
Market Growth Variables
Predicting the growth of E15 station availability remains difficult. Adoption rates from major station owners can certainly affect how the overall market will respond. White references Murphy USA’s opening of the first E15 station in Arkansas as an ex-
ample. The retailer operates roughly 1,180 stores across 23 states. “They’re going to do what I call a ‘pilot project’ first to just test the waters,” White says. “But it’s an example of new people showing interest, because they know E10 worked and people made a lot of money because ethanol was cheaper than gasoline when they introduced E10.” Even if just one major retailer implemented E15 pumps, the number of stations that use the fuel could jump from roughly 60 to 1,200, White says. “It’s very hard to predict that, but unless something crazy comes along, you are going to see E15 and E85 continue to expand. And the rate of expansion will be determined by EPA’s decision in the coming months,” he adds. As of mid-December, one of the largest uncertainties is the U.S. EPA’s proposed changes to the renewable fuel standard (RFS). Consternation over the awaited decision affected renewable identification number prices and has hundreds of station owners debating what decisions to make in the coming year, White says. “That’s the biggest issue,” says Ron Lamberty, senior vice president of the American Coalition for Ethanol. If there is no incentive or punishment for the oil industry to comply with
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INDEPENDENT INTROS: Many branded retail stations are still preventing or restricting station owners from offering E15, even though the U.S. EPA has approved the fuel for all 2001 and newer vehicles and nearly every major automaker is rolling out new vehicles designed for it. PHOTO: CHARLIE LITCHFIELD
the RFS, it will try to control as much of the fuel supply as it can, he adds. Branded station restrictions and summer Reid vapor pressure (RVP) rulings are two other big variables that affect E15 market growth predictions. Most of the branded oil companies prevent or restrict station owners from offering the higher ethanol blend under their canopies, Lamberty says. It’s possible to split away from branded station agreements to sell E15, but usually not without facing monetary challenges, he adds. Summer RVP rulings additionally affect projections for E15's rollout. As long as E10 gets a 1-pound waiver and E15 does not, it would require station owners to switch between E10 and E15 during the summer months, Lamberty explains. “Getting that thing resolved one way or another is another big issue, even for independent stations,” he says.
Opaque, Crystal Ball
Although a multitude of variables will affect the speed and direction of E15 implementation, experts from ACE, the RFA and Growth Energy agree that the E15 market will gradually continue to improve with more independent implementation and consumer adoption. “I think we’re hearing from a lot of the independents that they are going to take different NOT MUTUALLY EXCLUSIVE: Good & Quick installed E15 in combination with blender pumps that offer E20, E30 and E85, all without sacrificing E10. PHOTO: CHARLIE LITCHFIELD
FEBRUARY 2014 | Ethanol Producer Magazine | 35
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spots and put it in and see how it works,” Lamberty says. He predicts independents will first put the fuel in a few pumps to test the waters. Then, more retailers will add E15 as an option, depending on what happens with ethanol and gas prices in later years. “The only thing you need in a town to get E15 in there is someone who does it successfully,” Lamberty says, adding that one station’s success with E15 will spur
other local stations to pursue it to stay competitive. Smaller stations that have been hurt by large chains might see E15 as a marketing tool to pull customers away from bigger competitors. Chains that have multiple stations will respond more slowly than owners with one or two stations, Lamberty says. “The independents are going to move first. Then they’ll sort of force the hand of larger
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independents and eventually the branded competitors,” he adds. Once the fuel is in the marketplace, consumers will see E15 as a safe, cost-effective fuel, which will lead to its implementation in other markets, says Michael Frohlich, public affairs associate with Growth Energy. “I don’t think you’ll see an exponential explosion, but I think you will see a steady progression throughout the Midwest,” he says. “In three years, I think you would see it more on the coasts and other areas and throughout the country, outside of just the Corn Belt.” After getting federal EPA approval of Growth Energy’s proposed Green Jobs Waiver in 2012, hurdles at the state government level may also cause pronounced stints of growth in E15 accessibility. “As states begin to navigate it, I think you will see some spurts of growth in concentrated areas once states approve it that are regionally close to the Corn Belt, where it is easier to find higher blends of ethanol,” Frohlich explains. Predicting in which states E15 will appear next is also difficult. However, seeing the fuel reach larger metropolitan areas, such as St. Louis or Chicago, might yield faster growth and larger usage, Frohlich says. “I think that’s where some of the keys are for breaking through the introductory stage where people are just starting to get to know E15,” he says. “If the retailers are truly given the option, and the market continues to be favorable to ethanol at a price point, you are going to see continued expansion. The rate of expansion will be determined ultimately by the EPA,” White says. Author: Chris Hanson Staff Writer, Ethanol Producer Magazine 701-738-4970 chanson@bbiinternational.com
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A LOT HAS BEEN ASKED OF CORN.
The commodity crop has countless uses that continue to beg for more advanced trait technologies. But all bioengineering breakthroughs to date have focused on making a better grain for the masses. None have looked beyond the harvest to develop commercial corn for a specific purpose. That is until now. Enogen® trait technology was developed specifically for dry grind ethanol production. Each kernel of Enogen corn contains alpha amylase enzyme, distinguishing it from commodity corn. This trait eliminates the need to add a liquid alpha amylase during starch conversion. And it produces a drastically lower slurry viscosity than liquid amylase, which opens the door for efficiency gains across the entire ethanol plant. One of these gains is an increase in throughput. Tests have shown a 10% average boost in throughput thanks to higher solids loading during liquefaction and fermentation. Higher solids loading also means higher concentrations of alcohol per fermenter and higher yield potential. Total input consumption can decrease operating essentials
like water and natural gas. Taken together, UNSURPRISINGLY, THOSE WHO HAVE these gains let plant managers adjust USED IT ARE IMPRESSED. their operating levels to either maximize Western Plains Energy trialed Enogen output or stretch yield—a comforting ability corn in 2010, and it took little time for to have when market demand fluc- the crew there to believe in its potential. tuates. Yet there’s still more to be had “I was skeptical that we would see much for benefits. But that all changed about a from such a low slurry viscosity. half hour after we started grinding [it],” “We virtually went from said Plant Manager Chris McMillan. “The running oatmeal in our tanks results were immediate,” added CEO Steve McNinch. “We virtually went from to running lemonade.” running oatmeal in our tanks to running —Steve McNinch, CEO lemonade.” And they aren’t the only ones Western Plains Energy impressed by the performance The indirect benefits it offers are not only of Enogen corn. undeniable, but audible as well. Upon first use the one thing that plant managTom Willis, CEO of Conesers have noticed is a change in pitch as toga Energy Partners LLC, Enogen corn flows through cook. It’s a saw its impacts at his comlot quieter. Pumping a more fluid mash pany’s Bonanza BioEnergy makes the plant operate more smoothly, facility during a trial in 2012. which can lead to lower overhead costs. “Enogen corn can create true All said and done, total production costs value for [us],” he says. “It can go down by almost will go directly to our bot10%.1 And plant mantom line. We’re in a very agers have definitely competitive business, and noticed that. we feel this product will be a powerful contributor in saving us pennies, which add up quickly over the course of a year.”
1 Based on 2007–2012 Syngenta Trials. © 2014 Syngenta. Enogen,® the Alliance Frame, the Purpose Icon and the Syngenta logo are trademarks of a Syngenta Group Company. Syngenta Customer Center: 1-866-SYNGENT(A) (796-4368). www.FarmAssist.com MW 11CR3009-SS-R 5/13
Joe Williams, Laboratory Manager of “Part of our dream and vision when we Quad County Corn Processors, has an built this company was to add value back even loftier opinion of it: “I think Enogen to production agriculture, to be able to has the potential to change the face of return value back to our producers locally. the ethanol industry.” Right now, his With Enogen corn, there is no need to colleagues are seeing that potential come compensate for yield drag and the value to life in their plant. “It’s a game-changer goes directly to the farmers, and that’s in the profitability of Quad County,” important to us,” adds Willis. according to Maintenance Manager Rex Rimmer. “We have 93 pumps in Alan Bennett, a farmer and shareholder our plant. So if you can drop the energy with QCCP explains, “[they] needed to consumption a few kilowatts per pump improve energy efficiency anywhere [with a lower slurry viscosity], it could they could in the plant. And [they] were turn into hundreds of thousands of dollars spending money on [liquid amylase] in energy savings over the life of the enzymes, but it made more sense to grow project.” Production Manager Charlie those enzymes in the corn and pay the Voss says that overall, “it has been like farmers a premium.” And farmers are an upgrade to the plant just [from] using quick to see the mutual benefits. “It’s a win a different corn.” The crew at QCCP is for me and it’s a win for the ethanol plant,” also happy to see benefits unfold outside claims Mike Missman, who grew Enogen of their plant. Engineer Travis Brotherson corn for a trial at Golden Grain Energy. “I acknowledges that “the money we would see the benefits of that amylase trait in an have normally paid for liquid amylase [is ethanol plant and it really makes sense that now directed] into the local community by [they] should be using this product.” going back to the growers who produced THERE’S NOT MUCH HASSLE TO MAKE Enogen corn for us.” ALL THIS HAPPEN.
COMMUNITY MATTERS TOO.
Every bushel of Enogen corn that an ethanol plant needs is supplied by a local farmer. In exchange for producing alpha amylase enzyme for the plant, growers are paid a premium price for their grain above market rates, essentially investing the money that is normally spent on liquid enzymes back into the local economy.
Plant managers can start using Enogen corn by simply obtaining a license directly from Syngenta—a trial is not necessary. Or, they can opt to run a plant trial, which typically takes 90 to 120 days. And that process is as incredible as the grain itself.
When a trial begins, the Enogen team works with the ethanol plant to complete
a technical assessment and lay out the trial details. If separate grain blending capabilities are not available at the ethanol plant, then the Enogen team has a simple solution. It’s called the Mobile Metering System.
“I think Enogen has the potential to change the face of the ethanol industry.” —Joe Williams, Lab Manager Quad County Corn Processors
Custom built onto four lowboy semitrailers, this system arrives on-site in separate sections. A trained crew from J&D Construction follows in tow, ready to assemble the rigs into one efficient unit that is capable of storing the needed bushels of Enogen grain and milling them for inclusion. From there it’s a turnkey system. The MMS broadcasts a wireless signal to sync itself with the plant, and then it meters ground Enogen corn directly into the stream coming from the plant’s hammer mill. Whether a plant has grain blending capabilities, or needs the versatility of the MMS, a trial is easy to integrate. Plus, a mobile lab is brought on site to provide state of the art analytical support. Whether plant managers decide to run a trial, or become a licensee right off the bat, they first have to call 1-877-4-ENOGEN or visit Enogen.net. But after that, it shouldn’t take long for the power usage to drop and the extra ethanol to flow.
The best way to make more energy is with less energy. Enogen ® trait technology is the only genetically modified output trait in corn developed specifically for ethanol production. The trait helps produce more ethanol per bushel and helps increase efficiency throughout the entire ethanol plant. And since it first hit the market, this unique grain has been exceeding the expectations of plant managers and growers alike.
See how it works. Look for featured videos at Enogen.net.
PROFILE
In Defense of Ethanol ICM’s Steve Vander Griend digs into the details of ethanol’s bad rap. By Susanne Retka Schill
Getting his start as an take into account ethanol’s properties, and airplane mechanic, Steve thus misrepresents the renewable fuel’s performance. Vander Griend understands the importance of octane. Curious Test Fuels
The antiknock properties of octane enhancers are critical to keeping lightweight airplane engines running smoothly. Yet, given other hurdles, ethanol has some difficulties as the octane booster of choice for aviation fuels. At ICM Inc., Vander Griend, technical manager of fuel and engine technology, has relied on his background in engines and fuel performance to immerse himself in understanding ethanol’s performance, both as a fuel and in the tests used by regulatory agencies and researchers. Vander Griend has spent untold hours reading, scrutinizing and responding to detailed reports from groups such as SAE International and the oil and auto industry-backed Coordinating Research Council. He’s made headway, and friends, at times getting his questions answered— and his papers reviewed—by the technical engineers he’s come to know as colleagues while working on octane and engine projects for ICM. More recently, he’s broadened that work into ASTM International, giving a presentation in December, for example, on how the design of one quick distillation test used to characterize fuels does not accurately PHOTO: NICOLE CONRAD, REDROCK PHOTOGRAPHY
Vander Griend makes it his business to dig into details, and that proclivity makes him an important technical agent for the ethanol industry. He has been highly critical of recent reports that have reflected poorly, and perhaps unfairly, on ethanol. Vander Griend has questioned the findings of a recent U.S. EPA report, EPAct E-89, ordered by Congress as part of the 2005 energy bill to ensure air quality doesn’t backslide as a result of ethanol blending. “The first day it was released, it was almost like getting kicked because it said ethanol raised every emission,” Vander Griend recalls. The test appears comprehensive, with 27 fuels and 18 vehicles used in over 1,000 tests. But in examining the study closely, Vander Griend learned that unique—and questionable— fuels were used in the tests. All of the E0 fuels used for comparison with ethanol blends were specially formulated and only three of the 27 fuels used were below 90 octane. They were designed, he points out, to make sure ethanol wouldn’t improve emissions in the tests. And octane, ethanol’s primary contribution to cleaner burning fuels, was not one of the five parameters tested. The engine durability study that the CRC released last year, which is touted as demonstrating that E15 harms vehicles, is another example of manipulated tests, according to Vander Griend. “They added
PROFILE
ethanol to a regular gasoline for the E15 and E20,” he explains. “But the E0 they used is not the same E0 they use to splash blend E15 and E20. They actually used a premium E0. Then, right in their report, they say they used three times the legal limit of detergents.” In other words, Vander Griend says, the specially formulated fuel was designed to optimize the E0 perfomance.
Fundamental Questions
His work on understanding the technical world of fuels and ethanol began about four years ago when ICM posed two questions, explains CEO Dave Vander Griend. “We needed to understand for the benefit of the ethanol industry as a whole: What does the auto industry want? If they could be king for a day, what kind of fuel do they want? And No. 2: What do the refineries do? How do they formulate, and why?” He describes his younger brother as a very focused individual, “digging in and doing the hard work behind the scenes to see where ethanol fits, and asking, ‘Why are we getting pushback from EPA for no logical reason?’” Steve Vander Griend says that discussions with the auto industry have been eye-opening. When asked about ideal fuels, many auto engineers have indicated that they are open to higher ethanol blends. As Vander Griend did his research and talked to engineers, he learned that the sweet spot for maximizing ethanol’s octane in gasoline would be E30. Among his collection of papers is an extensive magazine article from 2000 in The Nation that describes how ethanol was the oxygenate of choice back in the 1920s to address engine knocking. The article describes the oil industry’s successful campaign to replace ethanol, the production of which they could not control, with lead. The exposé by Jamie Lincoln Kitman, “The Secret History of
They were designed, to make sure ethanol wouldn’t improve emissions in the tests. And octane—ethanol’s primary contribution to cleaner burning fuels—was not one of the five parameters tested. Lead,” lays out the people and companies behind the profitable 50-year use of lead, a fuel additive known to be toxic for centuries. Even though questioned from the start, lead wasn’t banned in fuels until the Clean Air Act was passed in the 1970s. Many of the same strategies used to keep lead in fuel are still being used today to keep aromatics in use and ethanol in question. The continued use of carcinogenic aromatics and the health hazards from the ultrafine particulate matter content of gasoline used today are every bit as worrisome as lead was decades ago, Vander Griend says. He serves as chairman of the technical committee for the Urban Air Initiative, which seeks to educate the public on the health hazards of noncompliance with the Clean Air Act and pressure the EPA to follow through with the program. “We need to go back to the 1990 amendment to the Clean Air Act where it said you need to reduce aromatics to the greatest extent possible, or go to the MSAT 2007 (Mobile Source Air Toxins) rulemaking where they got the octane wrong and said there was no replacement for aromatics,” he says. The ethanol replacement is there, and the justification for continued use of aromatics that was based on oil prices below $30 a barrel, no longer applies. “We’re trying to bring this out in the open, but this is an area I don’t think some people want discussed,” he explains.
“What is the value of adding more ethanol to E10 today? In our view, the data is there. We have plenty of SAE papers and fuel journal papers,” he continues. The challenge is to be sure ethanol gets fair treatment in the studies and modeling used to examine fuel emissions and air quality, and to cry foul when it is not. Vander Griend has been able to get his point across to many of the engineers he’s talked to about the questionable ethanol tests, he reports. Now, he’s trying to understand how to address the world of fuel regulations. He freely admits to not being an engineer, but says that can be an advantage. Many times, the experts in their specialties aren’t asking the questions that he is, as he tries to understand why tests come up with such different answers. “I can show you tests where ethanol’s particulate matter is higher and tests where it is lower.” Some tests are most definitely manipulated, he says. His challenge has been to show and explain just how that happens, quickly leaving the nontechnical person in the dust, and sometimes even engineers. A recent example, he says, was at the ASTM meeting where he did a presentation on distillation tests. When done correctly, ethanol is put on a level playing field, but when done using the typical set points, ethanol is automatically, and Vander Griend adds unfairly, discounted. After his presentation, he says, an auto industry fuels specialist approached him. “He said, ‘Now I understand what you’re talking about.’” “That’s the hard part,” Vander Griend says. “I wish more people understood that we haven’t been treated very fairly in certain arenas, in certain testing.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com
FEBRUARY 2014 | Ethanol Producer Magazine | 41
Proud to be the voice of the ethanol industry for over 30 years. Since 1981, the Renewable Fuels Association has proudly served our members as the voice of the ethanol industry, delivering the landmark legislative, regulatory, and tax policy victories that helped create the industry we enjoy today. And our work continues. From our industry-leading technical and research expertise to our market development activities that continue to expand opportunities, we owe our success to all of our ethanol producer members.
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FLEX FUEL
MOUNTING MODELS: The one-millionth truck built at Toyotaâ&#x20AC;&#x2122;s San Antonio, Texas, manufacturing plant, a flex-fuel-available 2014 Tundra, rolls off the line in late 2013. The pickup's engine was made at the automaker's Huntsville, Alabama, factory. PHOTO: TOYOTA MOTOR COMPANY
44 | Ethanol Producer Magazine | FEBRUARY 2014
FLEX FUEL
Weighting
On the Line
With the federal FFV production incentive being reduced, America's production of E85capable cars, light trucks and SUVs may slow. By Tom Bryan
When Coleman Jones, General Motors’ principle octane scout, took the stage at last year’s National Ethanol Conference and summed up the automaker’s strategy for meeting federal emissions and fuel economy standards in four sentences, he spoke volumes about the uncertain future of flex-fuel vehicles (FFVs) in America. “We’re going to have better power trains,” he said. “We’re going to have engines with direct injection, and downsize boosted. We’re going to have transmissions with more gears and more efficiency. We’re going to have better vehicles that are lighter, have lower drag, lower rolling-resistance tires and lower electrical consumption. We’re going to use the alternatives mentioned in the greenhouse gas rule, and those are electricity and natural gas.” Jones then quipped, “That strategy represents long hours of forecasting and modeling by many specialties within General Motors.” And just like that, the snippet of Jones’ presentation related to GM’s future U.S. fleet was over. Gone in 30 seconds without a word on FFVs. Jones spent his remaining 15 minutes off-theme, trekking through the consumer-driven rise of ethanol-capable vehicles in Brazil. It burned time and sent a message. He said—without saying it—that people who make cars answer to people who buy cars. Brazil is saturated with ethanol-capable vehicles because Brazilians, and their government, want ethanol-capable vehicles. In the United States, conversely, too few Americans demand FFVs and the sole incentive for their production is, practically speaking, about to sunset. At the start of 2014, GM and other automakers are still tightlipped about the future of America’s E85-capable vehicles. Jones passed on an opportunity to talk to EPM in mid-December, even while he chaired an
FEBRUARY 2014 | Ethanol Producer Magazine | 45
FLEX FUEL
SOUPED UP: Ford is investing $200 million in its Cleveland engine plant to support huge demand for its top-selling vehicles with EcoBoost engines, which are not currently available in an FFV version. The factory also makes 3.6-liter V6 FFV engines. PHOTO: FORD MOTOR CO.
ethanol-related ASTM subcommittee meeting in Tampa, Fla. And he wasn’t the only automaker rep with little or nothing to say about the future of flex fuel. Ford, too, declined. Mercedes-Benz balked through press time and Volkswagen didn’t respond. Toyota and Honda talked, but the first produces only a few U.S. FFVs and the latter none at all. “All the autos are being extraordinarily careful these days in making public statements about their future FFV intentions,” says Brian Jennings, executive director of the American Coalition for Ethanol. Outwardly, though, it’s business as usual. U.S. automakers bullishly rolled out FFVs for 2014, continuing to offer dozens of E85-capable models as they concurrently upgrade their fleets for E15. GM, which offers more E85-ready automobiles than any original engine manufacturer (OEM) on the planet, is making 16 model-year 2014 FFVs for the general public and an additional four FFVs for its fleet customers. “We’re committed to alternative fuels and believe biofuels are the most near-term solution to reduce petroleum dependence and carbon dioxide emissions,” Jones said in a brief written statement to EPM. In fact, none of Detroit’s Big Three—GM, Ford and Chrysler—show tangible signs of slowing down on FFVs, yet. More than 50 current-model FFVs are on the market—a record number—but with more
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FLEX FUEL than 300 cars, sport utility vehicles and light trucks on American showroom floors, it represents just one-sixth of the window-stickered fleet. And now, just as more E85 pumps are starting to spring up in high-population regions of the U.S., the ongoing production of FFVs is in total jeopardy.
Collapsing Credit
For more than a decade, auto manufacturers have been offered an attractive incentive to make FFVs. That, in turn, has allowed them to offer the big, powerful vehicles Americans want—sport utility vehicles and light trucks—without paying heavy fines for failing to comply with U.S. corporate average fuel economy (CAFE) rules. The program has been so effective that the sheer momentum of the incentive has, at times, compelled Big Three manufacturers to make more FFVs than the incentive credits. But now, a new CAFE rule, finalized in mid-2012 and set to kick in with the rollout of 2017 models, does away with credits for FFVs as they are currently known. The rule, instead, re-establishes the credit in a way that rewards “real-world” tailpipe emissions gained from the actual use of E85 and midlevel ethanol blends, rather than FFV sales alone. But just one automaker—GM—is even potentially capable of tracking ethanol use in its vehicles, and none of them like the alternative formula EPA has worked up to keep
BRIDGE BUILDER: E85 use could help the nation surmount the E10 blend wall while the E15 market develops. PHOTO: CHARLIE LITCHFIELD
FLEX FUEL FFV credits marginally relevant. Both options force automakers to bet on ethanol use rising, and that may compel some of them to put their compliance money on less risky plays in the next few years. The options are unworkable, says Kristy Moore, vice president of technical services at the Renewable Fuels Association. “They’re going to place a condition on a manufacturer that says, ‘We’re only going to give you an incentive to build FFVs if you can prove to us that your FFVs are actually running on E85 some of the time.’ There is no government agency or any other reliable entity even tracking how many gallons of E85 are sold, manufactured, delivered and used. That’s not a valid option. There is no mechanism to do that. They’re asking for the impossible.” It’s clear, however, that EPA is more unwilling than unable to make future FFV credits easy to get and attractive to pursue. The agency had been signaling that the era of favorable treatment of FFVs was coming to an end, and it ultimately became a slow train the ethanol and auto industries saw coming but could not stop. The final regulation, commonly called the CAFE/GHG rule, is formally titled “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards.” It became law in late 2012 and takes effect with the introduction of model-year 2017 vehicles. Bridging regulations for 2016-’19 model-year vehicles brings the rule into play with 2016 model-year vehicles. The auto industry designs automobiles three to five years in advance, however, so the makeup of 2015-’17 model year vehicles is already decided. The RFA and other ethanol trade groups waged a well-mannered war of words with the EPA while the agency worked in tandem with the Department of Transportation’s National Highway Traffic Safety Administration on the new CAFE/GHG rule. The auto industry, too, protested the relative dismantling of FFV credits. During the rule’s public comment period, both industries submitted a breadth of critical feedback, all aimed at convincing EPA that the continuance of FFV credits is vital and complementary to the U.S. renewable fuels standard (RFS), which calls 48 | Ethanol Producer Magazine | FEBRUARY 2014
for 36 billion gallons of biofuels by 2022. To the EPA, however, harmonizing federal incentives for both ethanol production and the vehicles that can use E85 looked like double-dipping, and pleas to preserve the existing FFV credit structure ostensibly fell on deaf ears.
FFVs Not On Short List
The new CAFE/GHG rule sets progressively stricter fuel economy and emissions standards for model years 2017 through 2025, until ultimately attaining 54.4 miles per gallon and cutting tailpipe emissions nearly in half. It’s an extension of current CAFE/GHG rules that dictate fuel economy and emissions standards for 2012-’16 model-year vehicles. Compliance with the new rule won’t come cheap. Automakers will have to invest in new power trains and a host of advanced technologies and components. The cost of those changes will be passed on to consumers, but EPA and NHTSA project that fuel savings will far outweigh higher vehicle costs over the next decade. Automakers characterize the new CAFE standards as being somewhere be-
Creating Opportunity Since 1851. BIG VEHICLES, BIG DATA: GM makes more FFVs for the U.S. market than any other manufacturer. In the near future, E85-capable automobiles like this 2015 Chevrolet Suburban (above), might track ethanol consumption via OnStar diagnostics, which could be monitored and recorded at the automaker’s 10,000-square-foot technical center in Warren, Michigan (left). PHOTOS: GENERAL MOTORS
tween highly challenging to barely attainable. “We’ve got a real challenge ahead of us. A real challenge,” Toyota’s Matthew Kevnick said at last year’s National Ethanol Conference. The new CAFE rule includes a host of targeted incentives to encourage the early adoption of specific advanced-vehicle technologies, but FFVs are not on the short list. Instead, the low-hanging credits are saved for what EPA calls “game-changing” technologies: electric vehicles, plug-in hybrids, fuel cell vehicles and even natural gas-powered cars and light trucks. The new rule does offer an FFV incentive, but it’s based on emissions reductions from actual ethanol use. EPA made a detailed case for doing away with the existing FFV credit, saying the cost differential between an FFV and a conventional gasoline vehicle is small, and that few FFV owners fuel up with E85. In essence, the agency decided that indiscriminating subsidization of FFV production had not yielded enough environmental bang for the buck. And they made a change.
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Track E85 or Accept ‘F’
At the start of 2014, just 18 months from the rollout of 2016 vehicles, it continues to be unclear which, if any, automakers intend to pursue FFV production in the years ahead. Industry observers say they can only guess what the ultracompetitive Big Three are planning beyond the vehicles already under development. “Are the auto manufacturers going to be making FFVs beyond 2015? We don’t know. We just don’t know,” Moore says. “If they are, at this point, it may only be because the vehicle engineering, design and setup is already done. Beyond that, it is highly questionable. And that’s because EPA has placed questions on manufacturers that no one has answers to.”
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FEBRUARY 2014 | Ethanol Producer Magazine | 49
FLEX FUEL Those perplexing questions, Moore says, pertain to tracking E85 use, or—in the likelihood that it can’t be done—using the EPA’s unpopular “F factor,” or weighting factor, for ballparking how much ethanol is used by a typical American FFV annually. GM, with its exclusive OnStar system, could use vehicle diagnostics to record fuel sensor readings and determine how much ethanol is being consumed by its vehicles. “But that’s one technology from one automaker,” Moore says, explaining that there is no government agency or private company currently measuring E85 use. “No one tracks ethanol gallons consumed,” she says. “We can’t tell the EPA how many gallons out there are E85 versus E10, E15 or E30.” If GM chooses to track ethanol use in its FFVs, EPA would determine whether the automaker’s data is adequate and how the results should be weighted for credit. With E85 tracking improbable for other OEMs, each is currently determining if EPA’s F factor will yield a large enough
incentive to justify future FFV production. Moore and others call EPA’s weighting formula “funny math,” but no one is laughing about what F represents. An EPA draft guidance letter released early this year to give automakers direction on FFV credit calculation, announced that the F factor will be a multiplier of 0.20, or 20 percent of the emissions savings attained by using E85. Currently, automakers receive a much more liberal incentive for FFVs; they get a generous “50/50” weighting that imagines the vehicles are fueling with E85 half the time and then, crucially, exempts everything but the gasoline from the emissions tab. The math is complicated, but automakers contend that the new system could reduce the existing FFV credit by about 97 percent. Last spring, the RFA urged EPA to use a higher weighting factor and consider the consequences of disassembling the existing FFV credit. “We believe the CAFE/GHG rule will frustrate the goals and intent of the [energy bill] and significantly compli-
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cate compliance with the [RFS],” the trade group said, calling many of the agency’s assumptions inaccurate. EPA closed the door on comments in April and, nine months later, appears to be standing firm.
Production Guesswork
During its protest of the weighting factor, the ethanol industry also urged EPA to take a more conservative approach to estimating future FFV production and sales volumes. In 2006, GM, Ford and Chrysler each committed that FFVs would make up half of their light-duty vehicle output beginning in 2012. “While the automakers have made substantial strides toward honoring this commitment, foreign automakers have thus far chosen not to produce large volumes of FFVs despite the current availability of generous compliance credits,” the RFA said. Corporate average fuel economy is weighted by the types of vehicles an automaker sells. So OEMs that sell mostly small, fuel-efficient cars have had less incentive to utilize CAFE’s existing incentives for FFVs. Honda, for example, has never produced an FFV for the American market and Toyota has produced FFVs in only a few models, such as the Sequoia SUV and the Tundra full-size pickup. “If foreign automakers aren’t building FFVs under the current credit regime, it seems unreasonable that they would increase FFV production when the credits are made much less attractive or are eliminated,” the RFA advised EPA. While Volkswagen is offering a number of FFVs for the U.S. market in 2014, most of its foreign counterparts are not. Toyota engineer Matt Kevnick says OEMs are frustrated with the EPA for not “picking up the mantle” and providing clear direction on ethanol, octane and FFVs. “Without that, we haven’t been able to plan or develop our strategic directions,” he says. “And now it’s really late to be trying to make a decision on these things.” Last February, Stuart Johnson, a senior manager at Volkswagen, said the German automaker committed to making FFVs because of the substantial credit that’s currently available. “They finally did something to get the nontraditional FFV manufacturers into the game,” he said. “And the reason
FLEX FUEL we’re doing it—I’ll be blunt about it—is the substantial credit from now until 2016. It’s worth it for us to provide those vehicles. But beyond that, if there is no market pull or credit available, we’ll stop making those cars.” Likewise, Ed Cohen, Honda’s vice president of government and industry relations, suggests that if the Japanese automaker isn’t pursuing FFV credits now, it certainly won’t be under the new rules. “The credits never motivated us to build FFVs,” he says. The disinterest of many foreign OEMs, and the guarded apprehension of their domestic counterparts, means robust U.S. FFV production in the future is dubious. The RFA estimates that FFVs will account for less than a quarter of total vehicle sales in 2020—not half, as EPA assumes. In the near term, sales could be even lower. For example, the U.S. Energy Information Administration projects FFVs will make up less than 10 percent of total vehicle sales between 2016 and 2019, in part because of the phasing out of CAFE credits. Accurate sales projections matter, the RFA says, because government FFV estimates influence the strategic development plans of every automaker. Under the new rules, FFVs have the potential to be more valuable to one automaker if fewer of its competitors make them.
Moore says, it wasn’t only the RFA that advised a weighting factor of 0.4 to 0.6. “The autos, the ethanol industry, corn growers and the U.S. Department of Energy all studied this and agreed on what that utility factor should be,” she says. “[An F factor 0.4 to 0.6] would generate enough incentive for OEMs to continue to produce FFVs. But EPA appears unwilling to address it.” The CAFE/GHG final rule was published to the U.S. Federal Register more than a year ago, but Moore considers it unfinished, and she believes opportunities to improve the rule’s treatment of FFVs may still exist. Kevnick agrees, explaining that
EPA and NHTSA, authorized by two different laws to create fuel economy standards and GHG emissions rules, respectively, are obligated to harmonize their treatments of the final rule. NHTSA’s role is authorized by the statutory requirements of the energy bill and EPA’s part is defined by the Clean Air Act. To make sure everything is synced up, the final rule calls for a “robust and comprehensive” midterm review. Kevnick, who represents Toyota at the Alliance of Automobile Manufacturers—an important international table of OEMs—says there’s an outside chance that the midterm review may create a window
Appropriate Weight?
Critically, the RFA said, EPA needs to raise its ethanol production estimates and revise its assumptions about the timing of E15 market penetration. “Automakers— and the associations that represent them— continue to discourage [E15] use in their vehicles,” the RFA said. “We fully expect that E15 will one day be as common as E10 is today, but in the meantime, EPA should err on the side of encouraging greater production and use of FFVs.” Ultimately, the RFA told the EPA to raise its F factor to 0.4 to 0.6, and lock it in through 2019 to keep FFVs rolling off assembly lines in the near term. “We believe an F factor in this range is justified,” the trade group told EPA. Several months after receiving industry suggestions, EPA hasn’t indicated that it intends to jump on any of them. Importantly,
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FEBRUARY 2014 | Ethanol Producer Magazine | 51
FLEX FUEL of opportunity for renewed dialogue about FFV credits. “It might give everyone another bite at the apple,” he says.
Need Pull, Want Carrot
Ideally, most agree, future production of FFVs should be predominantly driven by consumer demand. Iowa State University’s Bruce Babcock, along with coauthor Sebastian Pouliot, recently authored a policy brief stating that E85 has never been priced low enough to save FFV owners money. Their model shows that if E85 were priced at “fuel-cost parity” with E10, then ethanol consumption via E85 alone would be 1.65 billion gallons per year. If E85 were priced to generate a 20 percent reduction in fuel costs to consumers, then ethanol consumption would increase by 3.6 billion gallons per year. Automakers agree that, without a strong government commitment to FFVs, consumer interest in E85 has to rise, and fast. “FFVs worked very well in Brazil because customers wanted them,” Jones said during the question-and-answer period of last year’s NEC automaker panel. “Here in
the United States where I have been doing this job for seven years, I have received one complaint that a customer wasn’t able to get the vehicle as an FFV. Clearly, we have a different market. But as a business, if we’re going to build something that costs us more, and that we can’t price at the customer, somebody has to demonstrate some interest.” Cohen agreed. “If we hear our customers say they want E85, then they’re going to get flex-fuel vehicles,” he said last year. “But … we haven’t heard it yet. We’re obviously toughening up our vehicles for the approved fuels—E15—but until we hear our customers ask us for E85, it’s not high on our list.” Johnson concurred that FFV production is not a consumer-driven manufacturing decision in the U.S. “We’re not getting customers telling us, ‘We’re not buying your car because you’re not offering an FFV,’” he said. “In Sweden that happened. There was a market [pull]. Our dealers were complaining that they were losing market share because we didn’t have an FFV product to sell. That’s not the case right now in the U.S.”
And Kevnick echoed, “We can produce dynamic products but if the customer doesn’t want them, it benefits no one.” Bill Woebkenberg, a technical and regulatory affairs rep for Mercedes-Benz, was also on the automaker panel at last year’s NEC. He agreed that consumer pull for FFVs is critical. But he also said that it’s too early for the government to pull the plug on the existing incentive. “We need a carrot,” Woebkenberg said. “We need a carrot to ensure us that there is a reason to produce these vehicles. We all know, as engineers, that ethanol is a good fuel. It’s powerful stuff. But there’s got to be a reason to use it, and that falls on the lap of EPA. They hold the keys to something that cost them exactly nothing, and that’s called credits. We spend all the money up front, but they can provide something to us that is powerful. So until that happens, and until the fuel supply is established … there is stagnation in flexible fuel vehicles.” Author: Tom Bryan Editor in Chief, Ethanol Producer Magazine 701-738-4916 tbryan@bbiinternational.com
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Q&A
E85 Pump Pros Propel Fuels and Protec Fuel share similar names and the goal of making America’s highest ethanol blend pervasive in high-population, FFV-dense regions of the country. Questions by Ron Kotrba
Despite the regulatory uncertainty beleaguering the expansion of higher-level ethanol blends and the future production of flex-fuel vehicles (FFVs) in the U.S., at least two American installers of E85 pumps are going fullthrottle with their plans to grow the market. Florida-based Protec Fuel Management LLC is focused on pump installations in the South, Southeast, and Mid-Atlantic, while California-based Propel Fuels Inc. builds E85 access in the West. Steve Walk, vice president of Protec, and Matt Horton, CEO of Propel, spoke with EPM in December.
How many FFVs are on the road today? Walk: Roughly 15 million. Horton: The number is growing by more than 2 million each year.
GOLDEN OPPORTUNITIES: Headquartered in Redwood City, Calif., Propel Fuels Inc., has installed more than 45 E85 pumps since the company was founded in 2004. Keeping its market strategy close to home, Propel wants to build E85 access mainly in California and Washington.
What percentage of the Big Three’s new vehicles are FFVs, and what percentage of the time are American FFV owners filling up with E85? Walk: About 50 percent of the Big Three’s vehicle models are now offered in an FFV. Around 10 percent of FFV drivers use E85, in my estimation. Horton: The U.S. Energy Information Agency estimates that nearly 2.47 million E85-capable vehicles were made available in 2012—the highest number ever.
Why are E85 pumps mostly found in the Midwest and relatively uncommon in high-population areas on the coasts? Walk: Minnesota has the most E85 dispensers, while states like California, Florida and Texas have the most FFVs. Horton: Midwest states are leading agriculture producers, as well as major ethanol producers, and they have provided many incentives for the installation of E85 pumps. In addition to being further from ethanol production, retailers in urban areas also find that it can be more costly to build and permit fueling infrastructure in population centers. With stations in the Bay Area and Los Angeles, Propel has found that higher costs can be offset by far greater volumes, if accompanied by the right marketing practices.
56 | Ethanol Producer Magazine | FEBRUARY 2014
Q&A By how much has the E85 market grown over the past five years, and how much growth potential is in each of your targeted markets? Walk: The market has grown by around 30 percent each year, in my estimation. The growth potential in the South and Southeast are great. Florida and Texas have the second-and third-highest FFV concentrations in the country—California is first—yet those states only rank as average in E85 station offerings. The growth and opportunity is tremendous. Horton: The market for expansion is endless. Our primary focus is in California, with a target of 200 stations over the next few years.
What is necessary to grow the E85 market, and where are the greatest opportunities? Walk: Aside from the FFV concentrations and having station locations centered around them, the greatest opportunities for Protec are in Georgia, Florida and Texas. Future U.S. DOE grants and cost-share programs would be helpful. Horton: Customers are ready. We see very strong acceptance and loyalty towards renewable fuels, with more than 50 percent of our customers using renewables exclusively. In addition to the development of fuel technology, there must be a commitment in this country to building the infrastructure for higher blends. This requires steady policy and a combination of private and public funding to support the expansion of renewable fuel.
What barriers to market growth exist, and how are your companies helping overcome those obstacles? Walk: The barriers are mostly education—education on the benefits of ethanol, the benefits of E85 fuel as compared to gasoline, and the benefits of reduced emissions and tailpipe exhaust. That, and correcting misinformation about ethanol in general, is important.
TALLAHASSEE TO TEXAS: Based in Boca Raton, Fla., Protec Fuel Management LLC, has been a leader in the E85 market since 1998. The company has now installed more than 200 pumps across the South, Southeast and Mid-Atlantic.
Horton: Our greatest challenge is meeting customer demand for additional infrastructure. While we’ve had good success implementing E85 in California, prominent barriers still include vehicle availability—E85 retailers rely on automakers to continue offering FFVs—and funding for infrastructure. By building more E85 stations, we’re making it easier for automakers to continue to build FFV models, and we continue to see automakers adding FFVs to their lineups for 2014 and beyond (there are more than 50 new vehicles in 2014 alone).
How does your company promote E85 to FFV drivers? Walk: We supply brochures, handouts, flyers, website support and proper dispenser graphics and displays; and we partner in education and marketing efforts. Horton: Any time we open a station, it’s often the first time that community has had the chance to use renewable fuels. We’ve had to rethink traditional fuel marketing, and work on providing a highly visible platform to introduce the renewable fuels to a mainstream driver base. We do a great deal of education and outreach to encourage trial. Once drivers have a chance to try E85, they stick around.
FEBRUARY 2014 | Ethanol Producer Magazine | 57
BUSINESS MATTERS
Growing the Market for E15, Midlevel Blends, Exports By Donna Funk
For several years, the ethanol industry has been under increasing scrutiny in social and news media, especially from its detractors. Recently, the comment period concluded for
the proposed federal 2014 Renewable Volume Obligations that call for decreased biofuel use. With seemingly more critique than compliments, it appears ethanol leaders might have to reset their philosophical views to something different than in the past. We all understood the renewable fuels standard (RFS) would someday be up for review. Recent discussions with the U.S. EPA have largely centered on reducing the mandatory amount of ethanol originally scheduled in the RFS that should be consumed in the U.S. fuel supply. It’s been a wake-up call of sorts and a challenge to the industry to show the product’s value, increase education as to the benefits of ethanol (health, environment, energy, etc.) and not solely rely on growth of the E10 market. Win or lose in the EPA RFS discussion, ethanol leaders must put their best foot forward and get ahead of the curve. This means upping our game in market development. One of the best ways to get ahead of the curve is to work with a local retailer to carry E15. If you haven’t considered this or pushed for this goal, it’s a shame. Working with a retailer means helping them understand the true value of the renewable fuel. Many times it’s not just the owner of the gas station who needs the education but also the other suppliers in the entire value chain. The retailer is limited to what his customers are asking for and what the “major” will allow, if it’s a branded station. During conversations, ask the retailer for higher blends and at the same time ask the “major” to allow stations to carry higher blends. Consumers should make the ultimate decision of what fuel to purchase and we don’t want their options to be limited or made for them.
58 | Ethanol Producer Magazine | FEBRUARY 2014
When a retailer carries E15, it also ensures relationship building that can grow the local market. Consumers will relate to the value of ethanol once it is more readily available to put in their vehicles. Engaging in social media or other public relations tools is also key to market development for E15. Posting success stories or customer comments can help break down misinformation and share why a higher blend of ethanol is a good thing. Without investment in market development, a local plant is putting its future in the hands of someone else. There is a positive story to tell and no one is better to tell it than the industry’s own ethanol leaders. This isn’t a fight you should leave for someone else to fight for you. The continued safety of our nation, success of the industry and well-being of your plant and investment depend on all of us doing our part and becoming totally engaged. The reality is we are faced with a 10-percent blend wall and less-than-stellar growth in gasoline demand. If ethanol is the lowest-cost, lowest-priced carbon molecule available in the world, then the industry should also take advantage of export markets. Kennedy and Coe LLC anticipates growth in these markets this year and we have clients who are exporting to many countries around the world. It’s another leg of market development that can determine how much impact ethanol can truly have in the U.S. agriculture and rural economy. Consult your financial services partner to polish your market development strategy and let’s bring the ethanol industry into 2014 with a new approach for the future. Author: Donna Funk, CPA Kennedy and Coe LLC 800-303-3241 funk@kcoe.com Contributor: Greg Krissek Manager, Kennedy and Coe LLC gkrissek@kcoe.com
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Kernel of Opportunity: Corn Fiber-to-Ethanol By Steffen Mueller
In testifying at the U.S. EPA hearing in early December, I said that the renewable fuels standard revisions in 2007 (RFS2) contributed to the biofuels industry’s “uniquely high rate of technology innovation and technology adoption.” In light of this
fact, any adjustments to the renewable volume obligations will certainly stifle emerging technologies that could transform our transportation fuel supply. First on my list of those technologies is corn kernel fiber conversion to cellulosic ethanol. This technology alone holds the potential to produce more than 1 billion gallons of cellulosic ethanol at existing dry-grind plants. This would go a long way towards meeting the cellulosic targets set by RFS2. Cellulosic ethanol production at dry-grind plants also holds the potential to further reduce the greenhouse gas emissions from ethanol production, which are already significantly lower than those of gasoline. Shortly after the passage of the Energy Independence and Security Act of 2007, the National Corn-to-Ethanol Research Center started development of corn kernel fiber-to-ethanol technologies. Initially, NCERC worked on advancing fiber characterization and pretreatment technologies, then followed up in 2009 with work on the fermentation process. This work was supported with experimental enzymes from Novozymes. In parallel, private technology providers have also advanced the technology, which is now entering commercialization. The current state of the technology would produce approximately 10 percent more ethanol at a dry-grind facility from fiber in the corn pericarp and corn flour using regular unmodified yeast (S. cerevisiae). If genetically enhanced yeast is used, pending regulatory approval, the yield increases could top 15 percent. Some variable costs and longer fermentation times should easily be compensated for by the prospects of cellulosic RIN (renewable identification number) payments under RFS2. The resulting technology pull is exactly what the policy instrument intended to achieve. With the cellulosic RIN, though, comes a certain amount of risk to the producer and the RIN buyer. Both parties need to ensure that the RIN is generated validly, since the cellulosic (D3 RINs) and 60 | Ethanol Producer Magazine | FEBRUARY 2014
corn ethanol (D6 RINs) are produced concurrently. In a discussion with an obligated party active in the RIN market, the party said that while his company neither bought nor sold D3 RINs, he knew of another that tried to sell D3 RINs in the marketplace. Potential buyers questioned the validity and almost refused to acknowledge the existence of cellulosic fuels. The historic availability of cellulosic biofuel waiver credits has created an alternative to purchasing D3 RINs. Because of the hesitance of the market to accept the D3 RINs during the initial emergence of cellulosic fuels, RIN integrity standards seem paramount to the value and marketability of these RINs. Several companies provide quality assurance plan (QAP) services for RINs and many already have a risk management plan in place with the EPA for QAP of cellulosic ethanol RINs. The key components of the plan are to differentiate the feedstocks and processes used for cellulosic ethanol and to monitor the quantities of feedstock used and the quantities of cellulosic ethanol produced. These quantities are then compared to the yield tolerances of a particular facility’s process and footprint. The QAP program should, and must, have a way to differentiate the amount of ethanol produced from cellulosic feedstock and starch-based feedstock at an ethanol plant. In a program developed by Genscape Inc., devices monitor plant infrastructure such as pumps and other equipment to differentiate types of processes. Also, monitoring of volumes of reagents used may be required to further validate the process. To make sure the fuel leaves the facility, the QAP includes transportation monitoring as well. Using technologies to monitor plant infrastructure reduces the need for onsite verification visits, and third-party confirmations are performed to assure downstream contracts for the fuel. To help the producer, a QAP provider can act as an RFS2 partner. The QAP provider helps make sure the correct reporting, recordkeeping and registration components are in place and that RIN generation practices are valid. Several QAP providers also have services to help streamline the registration process for facilities that want to incorporate a pathway for cellulosic fuels. The EPA has also proposed in its “Pathways II” rule published in June 2013 that corn kernel fiber be considered crop residue,
MONITOR AND MEASURE: Genscapeâ&#x20AC;&#x2122;s EPA-accepted quality assurance plan is a RIN verification system that monitors the quantities of feedstock, enzymes and reagents used in the ethanol production process. QAP methods include in-tank sensing, infrared imaging, clamp-on flow meters and pump sensors. Transport of feedstock and other products can be monitored through counting, visual imagery and radio.
which is already an accepted feedstock category for cellulosic ethanol. On a side note, the proposed rule also indicates that corn stover would also qualify as crop residue for cellulosic ethanol production, clearing the stage for more cellulosic ethanol from the corn plant. Currently operating dry-grind ethanol plants hold the key to large-volume cellulosic ethanol production using corn kernel fiber-to-ethanol conversion technologies. While the technology is readying commercialization, the industry must ensure that RIN
integrity standards support the marketability of D3 cellulosic RINS. This, too, can be achieved using monitoring technologies that reduce the need for onsite verification visits. Author: Steffen Mueller, PhD University of Illinois at Chicago, Energy Resources Center and Genscape Inc. muellers@uic.edu Contributors: Sabrina Trupia, PhD, NCERC Susan Olson, PhD, Genscape Inc.
FEBRUARY 2014 | Ethanol Producer Magazine | 61
TECHNOLOGY
SEEING SPOTS: Some ethanol plants use fluorescence microscopes to detect bacterial infections and maintain yeast health. The microscopes allow technicians to see a mosaic of greens and reds that indicate the type and amount of cells in a sample. PHOTO: LALLEMAND BIOFUELS AND DISTILLED SPIRITS
Going Small for Big Gains Fluorescent microscopy provides colorful insights on bacteria and yeast. By Chris Hanson
Microscopes have long been the ethanol industryâ&#x20AC;&#x2122;s gateway to miniature worlds of bacterial infection and yeast concentration.
Standard light microscopes are currently used in labs to count yeast cells and identify bacteria strains, but the processes can take as long as four days to complete. Fluorescent microscopes and automated counters are working to reduce that time, however, and provide a more accurate picture of the tiny organisms that impact ethanol production. Fluorescent microscopes work by, first, staining cells with primarily green or red nucleic acids. The chemicals in the
62 | Ethanol Producer Magazine | FEBRUARY 2014
green acid penetrate living and damaged cell membranes, while the red acid stains dead or dying cells. The sample is placed on the stage, a small platform near the front of the microscope. When the microscope is turned
'One of the advantages of using the fluorescence microscope is it gives you an immediate indication of live or dead bacteria in your system, whereas an ordinary light microscope will only indicate if bacteria are present.'
on, ultraviolet light hits a dichroic mirror to reflect specific light wavelengths down to the specimen, which in turn causes the cells to glow. The image is then picked up by the objective lens, goes through the dichroic mirror and light filters to produce what is seen in the eyepiece. What the researcher observes is a mosaic of greens and reds that can help indicate what type and how many cells are in the sample. Researchers at Lallemand Biofuels and Distilled Spirits use fluorescence microscopes to troubleshoot primarily in the fuel and beverage industries. â&#x20AC;&#x153;One of the advantages of using the fluorescence microscope is it gives you an immediate indication of live or dead bacteria in your system, whereas an ordinary light
TECHNOLOGY microscope will only indicate if bacteria are present,” says Francois van Zyl, technical service team leader at Lallemand. “With this we can conduct complete hygiene checks when a problem arises with short response times, usually between one to three hours. It is also of great use to have monthly hygiene audits incorporating bacteria counts using a separated calibration.” In addition to examining possible bacterial infections, fluorescence microscopes are able to inspect yeast cultures. “Having this equipment is also helpful when looking at yeast health or identifying wild yeast in your system,” says van Zyl. While examining yeast health, researchers are able to study yeast budding sequences, maturity stages and budding scars, he adds. “This requires different sampling methods with an applicable stain. It is also of great use when we audit CO2 scrubber systems for potential wild yeast, but not limited to this vessel,” says van Zyl. Going beyond the fluorescence microscope, some developers use the technology to create automated cell counters. Nexcelcom Bioscience LLC develops its Cellometer which can examine yeast samples. “Traditionally, people use some sort of manual enumeration technique and a microscope to look at cells and try to determine concentration and viability. It’s very tedious and subjective process and it takes a lot of time.” explains Peter Li, CEO of Nexcelcom. Over the years, Nexcelcom received input from interested parties that led to the development of an automated system that can be user friendly and produce reliable data quickly and accurately. Although the Cellometer is primarily used for life sciences, such as drug research, it does have implications for use in the biofuel industry. The implementation of fluorescent microscopy technology in the ethanol industry is relatively limited. One of the obstacles of getting the technology to the ethanol lab is the price tag, Li says. He says some customers felt other models were too costly, which led Nexcelcom to develop more budget-friendly models, such as the Cellometer X2. “We feel it’s
more suitable for people’s budget and the reason we did this was we are able to do some cost reduction on our side and to make a product that will perform well with less cost,” he says. “The fluorescence microscope is a very versatile tool that can be used in real time to identify and correct potential issues within the production facility, thus saving time, money and avoiding costly infections,” says van Zyl. Li hopes that by offering a more costeffective product, it can benefit the ethanol
industry. “The way we use the Cellometer to measure yeast cells viability, especially in the corn mash samples, has been very effective,” he says. “So if we can be helpful to the industry that would be great.” Author: Chris Hanson Staff Writer, Ethanol Producer Magazine 701-738-4970 chanson@bbiinternational.com
FEBRUARY 2014 | Ethanol Producer Magazine | 63
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