May 2012 Ethanol Producer Magazine by BBI International

INSIDE: ADVANCING FEEDSTOCK PATHWAYS MAY 2012

Steel in the Ground

Worldâ&#x20AC;&#x2122;s First Commercial-Scale Cellulosic Plants Near Completion Page 42

ALSO

Ethanol Producers Respond to Tight Margins, Big Supplies

Page 34

Energy Beet Ethanol Projects Moving Forward Page 48

www.ethanolproducer.com

AMERICA, START YOUR ENGINES. American Ethanol is proud to power NASCAR . When No. 3 American Ethanol ®

Chevy driver Austin Dillon takes the wheel, he is racing for America’s energy independence. American Ethanol’s partnership with NASCAR tells our industry’s story to millions of Americans. Find out how you can get involved at AmericanEthanolRacing.com. AMERICAN GROWN. AMERICAN MADE. POWERING NASCAR.

The NASCAR American Ethanol™ logo and word mark are used under license by the National Association for Stock Car Auto Racing, Inc. and Growth Energy. Austin Dillon and Austin Dillon’s autograph are trademarks of Austin Dillon. All trademarks and the likeness of the No. 3 race car are used under license from their owners. NASCAR® is a registered trademark of the National Association of Stock Car Auto Racing, Inc.

Right Feedstock. Right Value.

More Ethanol per Bushel

Measuring the Results

Pioneer QualiTrak® System

Access to grain markets 24/7

® TM SM , , Trademarks and service marks of Pioneer Hi-Bred. DPPSM is a service mark of Farms Technology. All purchases are subject to the terms of labeling and purchase documents. © 2011 PHII. ENDUS021973P238AVAR1

Better Grain Quality DPPSM Grain Desk

contents

features 34

MAY issue 2012 VOL. 18 ISSUE 5

DEPARTMENTS 6

Editor’s Note

First-Gen Adjustments, Second-Gen Developments By Susanne Retka Schill

7 Ad Index 10 Events Calendar

PRODUCTION

Reining in Production: Hunkering Down as Margins, Supplies Rebalance First-quarter margins tight due to seasonal pressures, other factors By Holly Jessen

CELLULOSIC ETHANOL

Steel in the Ground

First cellulosic ethanol plants near completion, including one in Italy By KRIS BEVILL

12 View From the Hill

Ethanol: Increasing

National Security By bob dinneen

14 Drive

Upcoming Conferences & Trade Shows

Solution to Today’s Energy

Crisis is Here Today By tom buis

16 Grassroots Voice Beware of Dog

By Brian Jennings

18 Europe Calling

Looking Beyond the

Obvious By Rob Vierhout

20 Business Matters

FEEDSTOCK

PATHWAYS

Plans advance to use well-known, but little-used feedstock By HOLLY JESSEN

Three energy grasses evaluated: energy cane, giant reed and napiergrass By ERIN VOEGELE

Energy Beets: Who Will Leap First?

Advancing Pathways for Advanced Feedstocks

About getting certified to export ethanol to Europe By Antje Grzesik

64 PROJECT DEVELOPMENT Iowa Partners to Develop Cellulosic Projects

EPA 114 Information Requests By Todd Palmer and Anna Wildeman

22 Business Briefs 24 Commodities Report 72 Marketplace

68 ENERGY Energy Management: Project or Process?

Planning to achieve 10-20 percent energy savings By Jaron Vande Hoef

Secretary of Agriculture outlines Iowa advantages By Bill Northey

Ethanol Producer Magazine: (USPS No. 023-974) May 2012, Vol. 18, Issue 5. 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.

4 | Ethanol Producer Magazine | MAY 2012

Ethanol Producers Field

28 Distilled

CONTRIBUTIONS 60 SUSTAINABILITY EU Requires Sustainable Biofuels

INSIDE: ADVANCING FEEDSTOCK PATHWAYS MAY 2012

Steel in the Ground

World’s First Commercial-Scale Cellulosic Plants Near Completion Page 34

ALSO

Ethanol Producers Respond to Tight in Margins, Big Supplies

Page 34

Energy Beet Ethanol Projects Moving Forward Page 48

www.ethanolproducer.com

ON THE COVER

M&G’s 13 MMgy cellulosic ethanol facility is nearing completion in Crescentino, Italy. PHOTO: Mossi & Ghisolfi Group

editorâ&#x20AC;&#x2122;s note

First-Gen Adjustments, Second-Gen Developments

save the date

Susanne Retka Schill, Editor sretkaschill@bbiinternational.com

2013 event

The ethanol industry broke some records early this year: record ethanol stocks were reported in the first quarter as well as a record spread between ethanol prices and gasoline for blending, with ethanol more than $1 lower. Those record numbers, plus negative margins and the looming

APRIL 8-10, 2013 Minneapolis Convention Center Minneapolis, MN

NETWORKING OPPORTUNITIES

blend wall, raise the question of what it might mean for the industry. Associate Editor Holly Jessen sets out to learn what the industry is saying and reports what she learns in her production feature starting on page 34. While no one has a crystal ball and many express concerns that the ethanol industry needs to make adjustments, all agree the industry has become much stronger in the past five years, since the 2008 downturn, and is applying the lessons learned. As the first-generation ethanol industry reaches maturity, the cellulosic ethanol industry is readying its commercial debut. In this issue, EPM Associate Editor Kris Bevill takes a closer look at several projects expected to begin producing cellulosic ethanol later this year, including a 13 MMgy facility nearing completion in Crescentino, Italy. Guido Ghisolfi describes the approach his family-held Mossi & Ghisolfi Group is taking to cellulosic ethanol. For other advanced biofuel developers, a major hurdle to overcome is getting the feedstock of choice approved for the renewable fuel standard. Associate Editor Erin Voegele discusses the work underway to approve the pathways for three such grassy feedstocks: napiergrass, giant reed and energy cane. Jessen interviews several developers of yet another feedstock. While adding ethanol production capacity to sugar-producing plants has been a model in Brazil and Europe, the North American developers Jessen speaks with are looking at energy beets.

SPEAK. EXHIBIT. SPONSOR. ATTEND. Contact us: 866-746-8385 service@bbiinternational.com Follow Us: twitter.com/biomassmagazine

For industry news. 6 | Ethanol Producer Magazine | MAY 2012

AdIndex

EDITORIAL Susanne Retka Schill sretkaschill@bbiinternational.com

EDITOR

2012 International Fuel Ethanol Workshop & Expo

ASSOCIATE EDITORS

2012 National Advanced Biofuels Conference & Expo

2013 National Ethanol Conference

Holly Jessen hjessen@bbiinternational.com Kris Bevill kbevill@bbiinternational.com

COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

2013 International Biomass Conference & Trade Show

ACE American Coalition For Ethanol

Aggreko

Jaci Satterlund jsatterlund@bbiinternational.com

Agra Industries

GRAPHIC DESIGNER

Ashland Hercules Water Technologies

BBI Consulting Services

PUBLISHING

BetaTec Hop Products

CHAIRMAN

BrownWinick Law Firm

Buckman

CHS Renewable Fuels Marketing

CIT

Cloud/Sellers Cleaning Systems

CPM Roskamp Champion

Matthew Spoor mspoor@bbiinternational.com

Ethanol Producer Magazine

EXECUTIVE ACCOUNT MANAGER

Fagen Inc.

Freez-it-Cleen

Gamajet Cleaning Systems, Inc.

ART ART DIRECTOR

Lindsey Noble lnoble@bbiinternational.com

Mike Bryan mbryan@bbiinternational.com

CEO Joe Bryan jbryan@bbiinternational.com

VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com

SALES VICE PRESIDENT, SALES & MARKETING

Howard Brockhouse hbrockhouse@bbiinternational.com

SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com

ACCOUNT MANAGERS

53 & 76

Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com

CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com Marla DeFoe mdefoe@bbiinternational.com

Senior Marketing Manager

EDITORIAL BOARD Mike Jerke, Chippewa Valley Ethanol Co. LLLP Jeremy Wilhelm, Cilion Inc. Mick Henderson, Commonwealth Agri-Energy LLC Keith Kor, Pinal Energy LLC Walter Wendland, Golden Grain Energy LLC Neal Jakel Illinois River Energy LLC Bert Farrish Lifeline Foods LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP

Himark bioGas ICM, Inc. Inbicon

Indeck Power Equipment Co.

Interra Global Corporation

INTL FCStone Inc.

Lallemand Ethanol Technology

Nalco

Perten Instruments, Inc.

Phibro Ethanol Group

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) 746-5367. 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 sretkashill@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/ or space.

Please recycle this magazine and remove inserts or samples before recycling

Hammertek

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John Nelson jnelson@bbiinternational.com

Growth Energy

36 5

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Genencor, DuPont Industrial Biosciences

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WINBCO

MAY 2012 | Ethanol Producer Magazine | 7

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EVENTS CALENDAR

June 4, 2012 Minneapolis Convention Center Minneapolis, Minnesota

It's not a "black box" but it performs magic in ethanol plant efficiency improvement using 2010 technology. The

R3 Fusion SPaCeR™

patented ethanol recovery system will increase your plant's production, efficiency, and profitability by removing significant concentrations of ethanol in your CO2 scrubber water. Additionally, it produces three times higher ethanol volume rates combined with drastically lower energy costs as compared to obsolete 1940's condenser technology. Our patented technology has no capital investment required, is fully automated, remotely monitored, and uses no chemicals, membranes, or filters and can be used in all plant types. Contact us today to find out how R3 Fusion's SPaCeR™ technology will

convert your CO2 scrubber water ethanol into profit!

Mark Beemer President Ethanol | R3 Fusion Company | mbeemer@r3fusion.com www.r3fusion.com | 816-225-5455 (phone) | 913-261-9910 (fax)

Essential Knowledge & Connections for Ethanol Professionals The Ethanol Industry 101 Seminar will serve as a oneday, in-depth survey of the history, science, production and market basics of the ethanol industry. Populated by some of the industry’s most recognized professionals, this seminar will serve not only to bring you or your new employee up to speed on “must know” information about the ethanol industry, but will also provide a forum to meet respected industry representatives and network with them and fellow seminar attendees. (866)746-8385 | www.fuelethanolworkshop.com

International Fuel Ethanol Workshop & Expo June 4-7, 2012 Minneapolis Convention Center Minneapolis, Minnesota

Evolution Through Innovation Now in its 28th year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-tobusiness environment. As the largest, longest running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine. (866)746-8385 | www.fuelethanolworkshop.com

Algae Biomass Summit September 24-27, 2012 Sheraton Denver Downtown Hotel Denver, Colorado

Advancing Technologies and Markets Derived from Algae Organized by the Algal Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. Register today for the world’s premier educational and networking junction for all algae industries. (866)746-8385 | www.algaebiomasssummit.org

National Advanced Biofuels Conference & Expo November 27-29, 2012 Hilton Americas - Houston Houston, Texas

Next Generation Fuels and Chemicals Make plans to attend the 2012 National Advanced Biofuels Conference & Expo in Houston, Texas. Understand the latest techniques being developed in the industry and continue building relationships that last. Contact a knowledgeable account representative to reserve booth space now. (866)746-8385 | www.advancedbiofuelsconference.com

10 | Ethanol Producer Magazine | MAY 2012

Protect your productivity.

You know that bacterial contamination affects yield. A recent study shows that infections can decrease yield up to 27%*. LACTROL® from Phibro Ethanol Performance Group controls troublesome bugs. It keeps your plant running better and longer between CIP treatments. LACTROL is the proven solution to maximize yields and productivity. It keeps input costs down by helping you squeeze more ethanol out of every kernel of corn. No wonder LACTROL is used in more ethanol plants than any other antimicrobial. ® Prevent, protect, and produce. Take microbial control seriously; make sure your plant knows about LACTROL . Contact your Phibro Ethanol Performance Group Sales Specialist at 800-223-0434.

LACTROL

*5-year study by USDA-ARS National Center for Agricultural Research, Peoria, IL © 2010, Phibro Animal Health Corporation. LACTROL is a registered trademark of Phibro Animal Health Corporation and its affiliates.

view from the hill

Ethanol: Increasing National Security By Bob Dinneen

America’s addiction to foreign oil has had a significant impact on our economy and our national security. The millions of barrels of petroleum imported to the United States not only cost billions of dollars, they also require putting military lives in danger protecting the fuel supply lines. The only effective strategy for improving U.S. energy security is in reducing the nation’s oil dependence. At 10 percent of the U.S. fuel supply, used in 97 percent of the nation’s gasoline, ethanol provides a domestic, renewable alternative to imported oil. In 2011, the use of 13.9 billion gallons of American ethanol helped reduce the need for imported oil by 485 million barrels. That is roughly equivalent to 13 percent of total U.S. crude oil imports, saving the American economy $49.7 billion. Reducing oil import dependency has been a national security priority and policy objective since the 1970s. Yet, only since 2005, the year the renewable fuel standard (RFS) was first enacted, has the U.S. seen a reversal of the long-term trend of increasing oil import dependence. During this time frame, America’s oil

12 | Ethanol Producer Magazine | MAY 2012

demand has decreased while imports have fallen from 60 percent to 45 percent, in large part due to the increase in domestic ethanol production. In 2010, U.S. oil imports fell below 50 percent for the first time since 1997. Without ethanol, without the foundation of the RFS, our oil imports would have been 52 percent last year. Maintaining critical policies like the RFS is essential to increasing our national energy security. While gasoline demand is currently at its lowest point in more than a decade, prices at the pump continue to run up due to the increasing cost of crude oil. Nevertheless, prices of gasoline would undoubtedly be higher without the enormous contribution of ethanol in our fuel. A study by Iowa State University and the University of Wisconsin found that in 2010, domestic ethanol production helped lower gasoline prices by 89 cents per gallon. That means the average American household spent $800 less on gasoline than would have otherwise been the case. The researchers also found that for the first decade of the 21st century, growth in ethanol production and use helped keep gasoline cheaper by an average of 25 cents per gallon. As such, American drivers saved an average of $35 billion annually on gasoline purchases from 2000 to 2010. The Energy Information Administration recognizes the contribution ethanol has made to increasing national security stating, “increases in domestic biofuels production…played an important role in moderating import dependence.” EIA also says ethanol growth since 2005 is

“helping to displace traditional hydrocarbon fuels and so reducing petroleum import needs.” Ethanol presents the U.S. with a critical opportunity to expand domestic energy production and reduce imports. Today, ethanol is the only commercially viable renewable fuel alternative we have to imported oil. The future of energy independence, and of our security both abroad and at home, is taking place right here, right now, every day, in ethanol plants across this great nation. Author: Bob Dinneen President and CEO of the Renewable Fuels Association (202) 289-3835

A GLOBAL UNDERSTANDING

A GLOBAL UNDERSTANDING Ethanol is a global industry, and it takes a company with a worldwide reach to understand it. Thatâ&#x20AC;&#x2122;s INTL FCStone, Inc. and its subsidiaries. Whether your operations are centered in Brazil, Europe, Australia, China or the United States, we can make your world a little easier to manage and understand. With deep roots in agribusiness, we have a wealth of resources to help you cope with uncertainty and price volatility in grain, energy, ethanol, and other renewable fuels. With customers in more than 100 countries around the world and wideranging expertise in interest rate and currency risk management, weâ&#x20AC;&#x2122;ve got you covered no matter where you are or what you need.

FCStone, LLC Renewable Fuels Group West Des Moines, Iowa 2829 Westown Parkway, Ste. 100 renewablefuels@fcstone.com 800.422.3087, ext. 3728

www.intlfcstone.com Commodity trading involves risks, and you should fully understand those risks before trading.

DRIVE

Solution to Today’s Energy Crisis is Here Today By Tom Buis

The driving season is upon us, and Americans across the country are again feeling the pain of skyrocketing gas prices. Whether it is going to work, school or a well-earned vacation, out-of-control gas prices have a tremendous economic impact on our nation’s motorists and our economy. Unfortunately, this time of year also brings us what is fast becoming an unwelcome American tradition—digging even deeper into family finances to pay for filling the tank with record-priced gasoline. Gas prices are well above $4 a gallon, and in some states could be more than $5 by the summer. High gas prices mean higher transportation and food costs. Yet we have the solution to high gasoline prices right under our noses, in the form of clean, renewable ethanol—an alternative fuel that delivers higher octane to motor fuel and sells at a buck less a gallon than gasoline on the commodity exchange. By increasing blends of ethanol into motor fuel, we can reduce overall prices at the pump. Growth Energy is committed to working with all our partners in the

14 | Ethanol Producer Magazine | MAY 2012

industry, including fuel retailers, to deliver E15 to the marketplace. E15 gasoline has been approved by the EPA for all vehicles built since 2001—or more than 80 percent of the vehicles on the road today—after exhaustive, rigorous engine and emissions systems testing. Many retailers and fuel providers are already stepping up to the plate to help lower gas prices by registering to sell E15. While there is some reluctance by retailers to offer E15, mostly as a result of scare tactics by Big Oil, we need to continue to urge the adoption of E15 all across this great nation. E15 can replace up to 7 billion gallons of gasoline, create over 130,000 jobs, improve our environment and offer savings to consumers at the pump. Not only does E15 save consumers at the pump, at 113 octane, ethanol presents a unique opportunity to increase engine performance with higher-octane fuels, which is an important goal as U.S. automakers manufacture more highcompression engines to increase fuel performance. Growth Energy has already begun the effort to open the fuels market and give Americans the fuel choice they deserve. In the fight for public opinion, Growth Energy’s American Ethanol partnership with NASCAR has shown fans across the country that if ethanol is good

enough for NASCAR’s racecars, it’s good enough for your street cars. NASCAR made the switch to E15 and is nearing two million miles with the fuel without incident. Ethanol is not a “someday” solution to our current energy crisis. It is here today. The American ethanol industry has extra capacity that can be used today and, with the development of cellulosic ethanol from biomass feedstocks such as corn cobs or other waste, we can produce enough ethanol right here in America to displace all of our imported oil. But as long as we allow our fuels market to remain captive to foreign oil, our nation will be continue to be exposed to oil shocks—similar to 2008—whenever Iran sends boats in the Strait of Hormuz, or oil companies reduce refining capacity, or China puts another million cars on the road. All these things are out of our control, and any one of them will mean that our nation will continue to be held captive to foreign oil. This must change. Author: Tom Buis CEO, Growth Energy (202)545-4000 tbuis@growthenergy.org

GRASSROOTS vOICE

Beware of Dog By Ron Lamberty

They say the reason a little dog doesn’t back down from a big dog in a fight is that dogs don’t have mirrors. The little dog knows he’s looking at another dog, and in his mind, he’s just like that dog. For the same reason, a German shepherd will recoil at the site of a Shih Tzu. The big dog doesn’t know he’s the big dog. Sometimes, it’s good to not know that you’re not the big dog; sometimes it helps to take a look in the mirror. Each spring, the American Coalition for Ethanol invites our members to gather in Washington, D.C., for a couple of days on Capitol Hill, talking to elected officials about the importance of ethanol to our nation’s fuel supply. In preparation for this year’s event, we held up a mirror to our industry, convincing our members to size themselves up and recognize the scale of ethanol and beneficial impact it has on our country. We work in an industry where the big dog looks at himself in the mirror all day, every day—in that kind of mirror that makes things appear larger, and taller and with bigger shoulders. That view is also

16 | Ethanol Producer Magazine | MAY 2012

the one they use in their advertising and “studies,” and it’s the one they bring to Capitol Hill when they tell Congress that if they just continue to let the Big Dog eat, Big Oil will protect us from everything. Well, everything but high gas prices, pollution, high consumer costs from expensive transportation . . . But I digress. What ACE saw in the mirror when we looked at the ethanol industry was that, although we’re not THE Big Dog, we are A Big Dog. Consider these examples: The Bakken Oil field is a big deal right now—lots of jobs, lots of oil. If you took all of that oil and made it into gasoline, and then added U.S. ethanol to it, you’d have E85. In other words, U.S ethanol plants provide four times the auto fuel that the Bakken field can produce right now. At its expected peak, gasoline from Bakken oil will be less than half ethanol’s volume right now. Keystone XL pipeline and the Arctic National Wildlife Reserve are also projects put forward as solutions to our nation’s energy and employment woes. Those will each carry—at their expected peak— 700,000 barrels of oil a day. That’s very good. That would make 5 billion gallons of gasoline each. Those two, combined with another project the same size, would be about as big as ethanol (assuming no growth in ethanol the 10 years it would take those projects to get to full speed).

We took those facts to the hill, and shared them with friend and foe alike, and told them that they were absolutely right when they passed the renewable fuels standard—and that they should continue to support it. We mentioned that ethanol is a buck cheaper than gas right now, and that E15 would be about 15 cents less than unleaded gasoline, if everyone who was holding it up would let this medium-sized dog out of its kennel. Most importantly, we reminded them that we are doing all of it without subsidies. We don’t eat like the Big Dog eats. The object in your rear view mirror is about as big as it looks. Woof, woof. Author: Ron Lamberty Senior Vice President, American Coalition for Ethanol (605) 334-3381 rlamberty@ethanol.org

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OUR ADVANCED BIOFUEL TECHNOLOGY WORKS DAY AND NIGHT TO IMPROVE YOUR BOTTOM LINE. “ The Highmark IMUS™ technology is unlocking the door to the advanced biofuels market.” - Steve McNinch, CEO of Western Plains Energy Highmark’s patented† bioRefinery technology is used to build digesters that utilize open-pen feedlot manure, food processing and municipal waste. This enables you to hook your ethanol plant up to a bioGas plant to form an Integrated bioRefinery™, allowing you to: · meet or beat EPA and LCFS benchmarks (ask about IMUS™) · increase ethanol output by up to 10% (ask about EIEP™) · cut all your gas and electricity costs www.HighmarkBioGas.com

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Europe Calling

Looking Beyond the Obvious By Robert Vierhout

For the average nonEuropean it is difficult to understand why in Europe so many passenger cars run on diesel instead of gasoline. Knowing that trucks, buses, ships, trains and planes all need diesel to get propelled, you could expect that the preferred fuel for lighter modes of transport would be gasoline. The logical result: Europeâ&#x20AC;&#x2122;s supply and demand for fuels is not in balance. We are rather short on diesel and long on gasoline. The unbalanced tax structure on fuels is making the situation worse by the day. By subsidizing diesel, drivers will not move away from diesel cars. As the diesel price at the pump stays well below the price of gasoline, there is no direct visible incentive to change over to gasoline engines. Take as an example the country where I live, Belgium. Why do 9 out of 10 passenger cars run on diesel? More miles per gallon and lower costs per gallon are all good for the consumer. But at macrolevel there are some real negatives: less income for the state (lower taxes); more environmental costs to adjust the supply shortage and shipping massive volumes of diesel from Russia to Europe; increased health costs as there is an increased

18 | Ethanol Producer Magazine | MAY 2012

risk of heart and respiratory diseases due to more polluting particles in the air. Looking at the total picture, the case for stimulating diesel is not that obvious at all. As long as regulators refuse to change the dynamics of the fuel market, however, the situation for gasoline demand will continue to decrease. In almost every EU member state we see consumption of gasoline going down. Even in an ethanol/ gasoline-loving country like Sweden, diesel cars are becoming more popular by the day. Of course, the decrease in gasoline consumption is not just due to an increased number of diesel drivers; it is also partly the result of gasoline engines finally becoming more fuel efficient. Also, the fact that smaller cars are getting more popular for economic reasons means less fuel consumption. For the ethanol sector, this is potentially a worrying development: less gasoline volume obviously means less ethanol blended in. So, is it possible to change the tide and still get more ethanol into the motor fuel stream? Besides the obvious, but contentious change in taxation structure, there are options such as promoting E85 and going from E10 to E20/25. These higher blend solutions will not be hailed by the oil industry as great solutions. Promoting E85 is most likely a kind of horror scenario for the oil industry. An E20 scenario is possibly a more palatable solution. Due to expected indirect land use change implications, the environmental

performance of biodiesel is now under scrutiny. More ethanol use could then compensate for the reduced use of biodiesel. But there is another solution: getting ethanol into the diesel fleet. This option would kill two birds with one stone: countering the effects of less gasoline demand and contributing to closing the gap in diesel supply. In Europe, there is a good example of such a way forward. The Swedish truck company, Scania, has shown for a number of years that it is possible to have diesel trucks/ buses running on ethanol. A mixture of 95 percent hydrous ethanol and a few chemicals (ignition improver, lubricant additive, corrosion inhibitor) will run in a converted diesel engine. In the Swedish city of Stockholm, over 400 buses use this engine and fuel, in what is viewed as a very successful project. Scania has plans to roll out more of these engines in the rest of Europe. To my mind this could be a clear win-win situation: more ethanol, less dieselâ&#x20AC;&#x201D; looking beyond the obvious. Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

business matters

Ethanol Producers Field EPA 114 Information Requests By Todd Palmer and Anna Wildeman In the past several months, EPA has issued Clean Air Act Section 114 Information Requests to numerous ethanol production facilities across the country, seeking information concerning all aspects of their operations.

These requests generally seek historic performance and specification data for different processes, including scrubbers, thermal oxidizers, boilers, dryers, flares, storage tanks and loadout equipment. Some requests appear to highlight venting of pressure relief valves and header connections on certain processes. Due to the nature of these requests and EPA’s broad enforcement authority, it is essential that these requests be taken seriously and that facilities respond to the agency’s requests in a timely fashion. Failure to do so can result in fines up to $37,500 per day of violation. In issuing a Section 114 Information Request, EPA may be trying to develop a regulatory scheme for an industry, pursuing enforcement action against a particular company for violations of the Clean Air Act, or simply trying to understand how an industry handles some operational or technical issue. Regardless of the agency’s intended use of the information it collects, companies receiving a Section 114 Information Request are advised to seek legal counsel prior to responding. Section 114 of the Clean Air Act provides EPA broad authority to request information from any person who owns or operates an emission source, who manufactures emission control or process equipment, or any other person the 20 | Ethanol Producer Magazine | MAY 2012

agency believes can assist in achieving its regulatory or enforcement objectives. Section 114 also authorizes EPA to require the recipient to audit processes, install emission monitoring equipment or perform stack testing. EPA has similar authority to request information pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act and the Resource Conservation and Recovery Act. The agency has been known to ask for information on numerous topics. The range of topics is often dictated by the agency’s intended use of the information. For example, if the agency is seeking to pursue enforcement action, a Section 114 Information Request may ask for specific information about a facility’s operational history, recent equipment installations and emission monitoring data. Although addressed to one facility, such requests are often issued on an industry-wide basis, indicating EPA has targeted that industry for a regional or national “enforcement initiative” on a particular regulatory topic. On the other hand, if the agency is seeking to develop a regulatory scheme, a request may be geared toward manufacturers or suppliers of equipment for a particular industry, and may ask for information about the type, size and operational needs of an industry’s standard equipment and process lines. Importantly, EPA has been known to use information from manufacturers or suppliers—including the names of facilities at which certain equipment has been purchased or installed—to assist in enforcement initiatives. Section 114 Information Requests often require the recipient to gather and produce information and data that can

be years, and sometimes decades, old. All such requests will include detailed instructions for how requested information is to be organized and produced and what, if any, additional narrative explanation is required by the agency to provide context for the data it is receiving. EPA requires that a response be certified by an individual as true and complete. It is essential to remember that, unless it is deemed confidential business information (CBI), everything submitted to EPA becomes subject to Freedom of Information Act requests by the public. Although a person can request certain information be treated as CBI, such a request must be properly substantiated. As such, any information gathered for submittal to EPA must be carefully reviewed to ensure that submittal to the public agency will not waive any other confidentiality, such as attorney-client privilege or work-product. Aside from data gathering, Section 114 also authorizes EPA to perform on-site facility inspections after receiving consent from the owner or a warrant from a court. Note that many ethanol facilities have been issued Title V air permits that effectively grant EPA consent. EPA inspectors may refuse to undergo site-specific safety training prior to the inspection and could consider such demands as a denial of access to the facility. Authors: Todd Palmer, Attorney, Michael Best & Friedrich LLP (608) 283-4432 tepalmer@michaelbest.com Anna Wildeman Attorney, Michael Best & Friedrich LLP (608) 283-0109 ajwildeman@michaelbest.com

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business briefs People, Partnerships & Deals

Scott Thurlow has been named president of the Canadian Renewable Fuels Association, replacing Gordon Quaiattini who stepped down from the position last year. A lawyer, Thurlow most recently served as vice president with Temple Scott Associates, where he provided strategic government relations New Canadian Leader advice to businesses CRFA’s new president, Scott Thurlow brings and nongovernmental first-hand experience associations. “Renewin government affairs, having able fuels are already served as director of a significant part of parliamentary affairs fro the former Minister of Canada’s energy mix,” Natural Resources in Thurlow said. “I look Canada. forward to collaborating with the CRFA’s membership to help them work with all levels of government to promote the use of renewable fuels.” Marcos Jank announced in late March that he will step down as president of UNICA, the Brazilian Sugarcane Industry Association. He will remain in the position until a successor is chosen. Jank joined UNICA in 2007 and led a major reform of the organization’s objectives and strategy. Under Jank’s leadership, UNICA’s international work played a key role in two major achievements, according to the organization: the U.S. EPA’s 2010 decision to designate sugarcane ethanol as an “advanced biofuel,” in recognition of its documented ability to sharply reduce CO2 emissions compared to gasoline; and the expiration at the end of 2011 of the 54-centper-gallon tariff. Pinnacle Engineering has opened a new office in Omaha, Neb., with Matt Henry transferring from the company’s corporate office in Minneapolis to lead the office. Henry is responsible for air quality permits, stack test management and annual compliance services for the renewable energy market. 22 | Ethanol Producer Magazine | MAY 2012

Robert Anderson has joined legal firm Faegre Baker Daniels LLP as a partner. With 30 years of experience helping corporate clients in the energy industry on a wide range Energy Practice of finance and project Coming from the San development efforts, he Francisco office of Foley & Lardner, Robert will lead the renewable Anderson joins Faegre energy practice area of Baker Daniels to lead the firm’s energy, rethe renewable energy practice. sources and clean tech industry group. With the merger of Faegre & Benson and Baker & Daniels in January, the firm has more than 800 legal and consulting professionals working in the U.S. and internationally. Shawn Easterly has joined Memphisbased Buckman Laboratories Inc. as its new energy center specialist working exclusively with ethanol plants. Buckman offers a wide range of water Hands-on Experience treatment products and Shawn Easterly has experience in services for the ethanol training, operations industry, and with the and troubleshooting at ethanol plants, addition of Easterly’s including five years with ICM Inc. working on the expertise, the company startup of numerous is expanding its techplants. nology and services. Most recently, Easterly was with New Age Cryo where he provided energy center consulting services as well as dry ice cleaning in ethanol plants. Blake Moret, senior vice president, control products and solutions, Rockwell Automation, was elected vice chair of The Manufacturing Institute board of trustees. “The institute is playing an important role developing our manufacturing workforce, and maximizing the impact of technical innovation,” Moret said. “We have an opportunity to link related activities between in-

dustry, centers of learning and government agencies.” Jim Suetholz has been appointed as the central United States sales manager for Stedman Machine Co. He has more than 17 years of experience in capital equipment sales in the mining, steel and Stedman Sales Jim Suetholz is the various other heavy new sales manager for industries throughout Stedman Machine Co. North America. His in the central U.S. responsibilities include selling crushing equipment and size reduction systems in the central U.S. Novozymes CEO and President Steen Riisgaard was named the 2012 George Washington Carver Award recipient for innovation in industrial biotechnology by BIO’s industrial and environmental section. The award honors the vision of George Washington Carver, an originator of the “chemurgy” movement who, more than a century ago, achieved world renown by combining agriculture and science to produce everyday biobased products, changing the nature of farm economics and sustainability. Industrial biotechnology is the modern-day equivalent, combining biotech innovations with renewable biomass to create solutions that can revitalize manufacturing and energy, according to BIO. Abe Hughes and Bob Casper have joined the board of directors of Growth Energy. Hughes is the vice president North America for New Holland Agriculture. Casper is the president of Ethanol Products LLC, a subsidiary of Poet Ethanol Products. Growth Energy represents 75 U.S. ethanol producers and 63 associated companies in its advocacy efforts to promote emission reductions, create American jobs and strengthen national security through increased use of ethanol.

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Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 746-8385, or email it to sretkaschill@bbiinternational.com. Please include your name and telephone number in all correspondence.

Following a 36-year career at Archer Daniels Midland Co., John Rice is retiring. Rice joined ADM in 1976 as a tax accountant. In 1993, he was elected a vice president of the company, and subsequently served as president, North American oilseeds and food oils; and senior vice president, global corn processing, bioproducts and food. In 2005, Rice was elected executive vice president, global marketing and risk management; and in 2007, he was named executive vice president, commercial and production. In 2010, Rice was named vice chairman, office of the chairman, a role designed to apply his expertise to an expanded set of strategic challenges including extracting value from existing assets and driving operational excellence. An electrical designer at Epic Systems Inc., Angela Schwartz received the Epic Way Award at the company’s annual meeting. Founded in 1995, Epic is a multidiscipline engineering and fabrication firm providing turnkey solutions for modular process plants and systems and other packaging and manufacturing systems.

per-year demonstration facility in Boardman, Ore. The Grand Conceptor is the highest recognition given by the ACEC for engineering excellence. Perten Instruments is celebrating its 50 year anniversary. Founded on the commercialization of the now, world standard falling number method to determine sprout

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damage in grains, Perten is at the forefront of testing and analysis of grains, grain products, feed and food production and provides both functional and compositional forms of analysis. Today’s systems include analyzers for in-line/on-line devices, interfacing to plant systems and automation.

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commodities Natural Gas Report

Drilling activity responds to low prices March 23—With natural gas prices trading well below replacement cost, it’s not surprising that the natural gas production community has reduced drilling from roughly 1,000 active rigs in September 2010 to under 700 today—a 30 percent drop in the past 18 months. With a lag between drilling and production, we have not yet seen the impact. Moreover, we expect the rig count to continue dropping as long as the value of natural gas stays low. When production will drop and by how much is uncertain due to several factors. First, horizontal drilling and fracturing technology has improved dramatically and each new well is producing more gas and each rig can drill more wells per year. As such, the traditional relationship between rig count and production no longer holds. Note in the chart, that even as the rig count dropped

By Casey Whelan

during 2010 and 2011, production increased. Second, there continues to be significant drilling activity in liquid-rich and oil-prone formations since the value of crude and liquids remains very high and the value of natural gas does not drive drilling decisions. A heavy liquid or oil-prone well will have roughly onethird the production of a dry gas well. Continued drilling in those formations helps natural gas supply and production, but likely will not keep up as gas-prone drilling continues to drop. We expect the market will be well supplied in the near term. With prices under

$2.50 per MMBtu, the active rig count will continue to drop and eventually production will also begin to tail off. When that happens, prices will again move up.

Corn Report

Dwindling Argentine corn crop prospects boost markets March 26—The mid-March corn market sustained a rally on reduced prospects for South America corn and soybeans. A dwindling soy crop in South America pushed soybean markets higher as continued reports of China’s need for corn advanced that commodity. The USDA did not make any changes to Argentina’s corn production in its March supply/demand report and Brazil’s corn production was actually placed at 62 million metric tons (mmt), up 1 mmt from the previous estimate, although many analysts continue to reduce their projections. The USDA also did not change the U.S. corn supply and demand, leaving carryout at 801 million bushels despite traders’ expectations for a decline. Outside influences continue to impact daily market dynamics. China’s economy and expected growth in feed grain consumption 24 | Ethanol Producer Magazine | MAY 2012

BY JASON SAGEBIEL

keeps the market supported. Argentina and FSU-12 Corn Production (mmt) 40 In addition, the trade keeps a FSU-12 Argentina close eye on ethanol margins 35 and corn basis. The March 30 30 quarterly stocks report was 25 expected to reveal whether rationing has occurred among 20 feeders and the first report for 15 the 2012-’13 marketing year 10 released the same day to reveal planting intentions. 5 The accompanying chart 0 illustrates that corn produc82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 tion in the former Soviet Union countries (FSU-12) has exceeded Argentine production. Higher corn ceed Argentine exports this year. Remember, prices have encouraged expansion and al- there are other regions of the world that can lowed nontraditional corn producing regions fill the deficit from a poor Argentine crop. to prosper. FSU corn exports could even ex-

report

Regional Ethanol Prices Front Month Futures (AC) $2.292 REGION

SPOT

RACK

West Coast

$2.42

$2.58

Midwest

$2.28

$2.40

East Coast

$2.35

$2.61 SOURCE: DTN

Regional Gasoline Prices

DDGS Report

DDGS exports pick up as domestic demand stays steady BY SEAN BRODERICK March 26—DDGS rallied in March, partly in tandem with corn futures movement, but more as a result of increased export demand. At least three bulk vessels destined for China traded, and South Korea stepped back into the bulk market after a long hiatus. The Chinese boats are slated to arrive before the Ministry of Agriculture’s June 28 decision on the anti-dumping case, which raises the question whether those boat buyers know something that we do not. All of this has kept the barge market tight, especially in the nearby slots. Container demand continues to comprise much of the exports, with sales to places like Vietnam and the Philippines. Domestically, demand is steady. But with milk prices lagging, hog margins

sharply down and poultry using more feed wheat, the only animal sector with decent demand is cattle, and that has been tempered by unseasonably warm weather. Plant margins are poor and maintenance downtimes in April will not be shortened, which should temper supply. The railroads have been moving cars at near-record velocities, causing issues at plants with too many cars in their yards. We are seeing more corn oil being extracted, which is creating ration challenges, especially for hogs and poultry. We are sure to see active futures movement, which will create opportunities for plants to lock in DDGS prices at a good percentage of the value of local corn.

Front Month Futures Price (RBOB) $3.385 REGION

SPOT

RACK

West Coast

$3.40

$3.44

Midwest

$3.28

$3.35

East Coast

$3.23

$3.18 SOURCE: DTN

DDGS Prices ($/ton) MAY 2012

APR 2012

Minnesota

location

203

195

MAY 2011 210

Chicago

222

215

218

Buffalo, N.Y.

225

230

220

Central Calif.

258

260

250

Central Fla.

232

228

224 SOURCE: CHS Inc.

Corn Futures Prices Date

(May Futures, $/bushel)

High

Low

Mar. 26, 2012

6.56

6.37 1/4

Mar. 19, 2012

6.75 3/4

6.62

6.63 1/2

Mar. 25, 2011

7.17 1/4

6.88 1/4

6.89 1/2 SOURCE: FCStone

Cash Sorghum Prices ($/bushel) LOCATION

Ethanol Report

Ethanol losing ground on gasoline prices BY RICK KMENT March 26—Although ethanol and gasoline prices moved higher in March, the pace of posted gains in the two markets was a night and day difference and the underlying reasons completely separate. While demand is expected to bounce higher through the upcoming spring and summer driving season, ethanol values are mainly focused on the cost of production and narrowed down to the overall price direction of corn markets. Gasoline prices, on the other hand, have had to do much more with overall global and domestic demand, as well as political unrest through the Middle East. Uncertainty whether Iran supplies will be available in the near future keep both crude

and RBOB prices strongly supported. In March, ethanol futures prices increased 9 cents per gallon and RBOB increased nearly 40 cents and the price spread between the two was around $1.0903 per gallon. This means that ethanol futures were trading at more than a $1 per gallon discount to the RBOB gasoline market. The only time there has been a wider price spread was in June 2008, when ethanol was priced $1.097 cents under the gasoline market. The uncertainty of supplies of gasoline and the currently growing ethanol stock levels continue to keep the ethanol market subdued despite corn prices trading near $6.50 per bushel.

MAR 23, 2012

FEB 17, 2012

APR 1, 2011

Superior, Neb.

6.14

6.07

6.45

Beatrice, Neb.

6.09

6.12

6.56

Sublette, Kan.

6.22

6.15

6.47

Salina, Kan.

5.91

6.14

6.57

Triangle, Texas

6.47

6.34

6.81

Gulf, Texas

6.84

6.75

7.31

SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

LOCATION

MAR 16, 2012

MAR 1, 2012

APR 1, 2011

NYMEX

2.35

2.46

4.36

NNG Ventura

1.91

2.41

4.34

CA Citygate

2.34

2.75

4.26

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production

(1,000 barrels)

Per day

Month

End stocks

Jan. 2012

938

29,063

21,753

Dec. 2011

960

29,772

18,261

Jan. 2011

920

28,524

20,672

SOURCE: U.S. Energy Information Administration

MAY 2012 | Ethanol Producer Magazine | 25

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distilled

Total Capacity U.S. Starch/Sugar

Twice a year, Ethanol Producer Magazine publishes an updated Fuel Ethanol Plant Map, which includes information about both existing ethanol plants and projects under development. The latest plant map— mailed with the May issue—shows a steady, small increase in capacity among U.S. ethanol plants. A year ago, the map showed 14.31 billion gallons in capacity, which grew by about 3 percent by the fall map, and by another 3 percent from fall to this spring―it now shows 15.19 billion gallons. To clarify, this number includes idled plants, a few of which have been idled for well over a year. Plants stay on the map until it has been verified the facility has been dismantled. Much of that capacity creep is occurring in the 10 top producing states, which saw a 330 MMgy increase in capacity from spring to fall ’11 and another 201 MMgy increase from last fall to this spring, a 2.7 percent and 1.6 percent increase respectively. The total increase from a year ago to last fall was 436 million gallons and from fall to this spring, 439 million gallons. From the 2011 spring map to the 2012 spring map only two ethanol plants came online. Both Aventine Renewable EnergyMount Vernon LLC and Hereford Renewable Energy LLC are plants for which construction had been halted and started up again. The remaining capacity increases can be accounted for as ethanol producers ratchet up production numbers with efficiency gains. The list of U.S. plants under construction went though some changes from the fall plant map to the current plant map. Aventine’s Aurora West facility was listed as under construction. The plant was completed but not commissioned, and as construction is no longer active at the site, it was flipped to the proposed plant list. Of the three remaining starch/sugar plants on the under construction list, AltEn LLC and Aventine/Riverland Biofuels facilities, both previously operated, are now under new ownership and work is ongoing to upgrade and restart them. Renewable Energy Technologies LLC, on the other hand, a 2.2 MMgy beverage, food processing waste-to-ethanol facility is a brand-new facility expected to come online this summer. Archer Daniels Midland Co. takes the lead in top ethanol producers once again, reporting 1.72 billion gallons of production capacity. ADM doesn’t report individual plant capacities, so the plant map reflects a total number rather than individual plant capacities. ADM’s capacity includes its rather substantial maximum wet mill capacity, where presumably a large portion of the starch fraction is converted to products other than ethanol. Given that unknown ADM fuel ethanol number, Poet LLC will most likely continue to carry the standard as the nation’s largest dry mill ethanol producer at 1.699 billion gallons. Third largest is Valero Renewable Fuels at 1.2 billion gallons and fourth is Green Plains Renewable Energy at 740 MMgy. If you add the capacity of the 78 ethanol plans 28 | Ethanol Producer Magazine | MAY 2012

Gallons (In Billions)

Capacity Creep

EPM map cites 6 percent capacity gain from spring 2011

Ethanol News & Trends

1.55 1.5 1.45 1.4

Woody Biomass Corn Stover, Cobs 1.35 MSW Spring '11 Fall '11 Spring '12 Energy Grasses Switchgrass Straw Cellulosic Feedstock Choices Sorghum Woody Biomass Corn Stover, Cobs MSW Energy Grasses Switchgrass Straw Sorghum

Diversified Feedstocks Unlike first-generation ethanol plants, no one feedstock stands out in the list of operational, under construction and proposed cellulosic ethanol plants in the U.S. and Canada. SOURCE: Ethanol Producer Magazine

Starch/Sugar Feedstock Choices For U.S. Plants Under Development

Corn Only Corn plus Cellulosic Other Grains (some with corn) Sugarcane, Sweet Sorghum

King Corn Corn dominates the list of ethanol plants using the first-generation sugar and starch conversion process, and even dominates among proposed plants, many of which are considering corn plus cellulosic feedstocks. SOURCE: Ethanol Producer Magazine

run by the top 10 producers, it comprises half the U.S. ethanol industry’s capacity, or 7.54 billion gallons. Corn still leads the pack in first-generation ethanol plants under development, feeding 861 million gallons of corn-only plants and another 250 million gallons using corn and stover and other cellulosic feedstocks. In cellulosic ethanol project development, all forms of woody biomass lead the feedstock choice at 174 MMgy of the existing, under construction and proposed projects on the spring map, or roughly 42 percent. Corn stover and cobs and municipal solid waste are the next most popular at about 20 percent each, or 80 MMgy and 78 MMgy respectively. —Susanne Retka Schill, Holly Jessen

distilled

E85 loyalty

Economist finds buyers willing to pay more Research showing consumers are willing to pay a premium for ethanol was published in the March issue of the Journal of Environmental Economics and Management. Soren Anderson, a Michigan State University economist, calculated that when ethanol increased 10 cents per gallon above the price of gasoline, there was only a 12 to 16 percent decrease in demand. Frankly, Anderson was surprised at what he found. “I was expecting to see a sharp reduction in sales of E85 the moment that the price rose above the price of gasoline on an energy-adjusted basis,” he tells EPM. “But this doesn’t seem to be happening. Instead, it appears that many E85 buyers are willing to pay a premium for the fuel, and some fraction of these buyers continue to buy the fuel, even when its price rises above that of gasoline.” Anderson developed a model based on information gathered in Minnesota from 1997 to 2006, during which nearly 5,000 monthly observations of ethanol prices and sales volumes were made at more than 200 retail gas stations. The economic analysis is one of the first to examine the way in which consumers value ethanol, Anderson says. Previous analysis assumed consumers viewed the two fuels in the same way, with ethanol and gasoline considered perfect substitutes after adjusting for the lower gas mileage of ethanol. The findings have economically significant implications for policy decisions affecting cellulosic ethanol, he says. Looking ahead to 2022, he calculates that the cost of producing cellulosic ethanol will be considerably higher than the projected cost of gasoline. “If consumers treat gasoline and ethanol as perfect substitutes, only buying the fuel that gives them the lowest fuel cost per mile, then fuel retailers will need to price ethanol at or below the price of gasoline for consumers to buy ethanol,” he says. This means, he adds, that producers will lose money in an attempt to comply with the renewable fuel standard (RFS)—unless cellu-

losic ethanol is subsidized or consumers are willing to pay a premium for the fuel. Despite the encouraging results of his study, Anderson concludes it wasn’t enough to justify the ethanol blending mandates contained in the renewable fuel standard. “This reduces substantially the simulated efficiency cost of an ethanol content standard, since some households choose ethanol without large subsidies, mitigating deadweight losses,” he says, adding that mandating ethanol blending is expensive. Another consideration is the amount of emissions ethanol actually reduces, a topic he notes is hotly debated. Ethanol industry supporters, on the other hand, point to the role of the RFS in moderating gasoline prices, reducing imports of foreign oil and supporting growth of the advanced and cellulosic biofuels sectors. On March 27, a coalition of eight groups, including

the Renewable Fuels Association and Growth Energy, sent a letter to Congressional leaders urging them to reject attempts to reduce, waive or eliminate the RFS. They pointed to a Center for Agriculture and Rural Development study that found that in the decade from 2000 to 2010, ethanol reduced gasoline prices an average of 25 cents per gallon, saving consumers $34 billion yearly. The groups also partially credited the RFS with reducing oil imports below 50 percent for the first time in 2010. Finally, they pointed to the need to bolster the second-generation biofuels industry still in its infancy. “Efforts to amend or reform the RFS would send a chilling signal to a marketplace just when the advanced and cellulosic biofuels industries are on the cusp of commercial production to help meet this nation’s energy independence and security needs,” the letter says. —Holly Jessen

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distilled LaborDependent (7%)

Researchers Delve into Enzyme Costs

Raw Material (28%)

FacilityDependent (48%)

It is commonly assumed lower in literature In order to decrease enzyme or cellulase costs for lignocellulosic biofuel, such as woodto-ethanol production, two important factors need to be considered, according to a paper published in the April edition of Biotechnology and Bioengineering. â&#x20AC;&#x153;The cost of cellulases is not clear in the literature and should be more widely available,â&#x20AC;? Daniel Klein-Marcuschamer, one of four researcher authors tells EPM. â&#x20AC;&#x153;In addition, research must be done to either lower the enzyme loading, or increase the yield of ethanol at the biorefinery.â&#x20AC;? Klein-Marcuschamer, the director of technoeconomic analysis at the Joint Bioenergy Institute, joined researchers from Lawrence Berkeley National Laboratory, Sandia National Laboratories and the University of CaliforniaBerkeley, in publishing â&#x20AC;&#x153;The Challenge of Enzyme Cost in the Production of Lignocellulosic Biofuels.â&#x20AC;? The cost contribution of enzymes is a subject of debate, with some calling it a â&#x20AC;&#x153;major barrierâ&#x20AC;? and others assuming the cost

of enzymes will decrease with technological advances. For this paper, researchers said â&#x20AC;&#x153;the vast majority of the literature to date has significantly underestimated the contribution of enzyme costs to biofuel production.â&#x20AC;? They concluded that significant effort must be put forth to lower the cost of enzymes, and therefore, the total cost of biofuel production. The paper examined steam-exploded poplar as a feedstock for cellulase production. â&#x20AC;&#x153;Steam explosion is a pretreatment process in which the biomass is put in contact with highpressure steam, and when the pressure is released, the lignocellulosic components are rendered labile to attack by the cellulases that the fungus [such as Trichoderma reesi] produces.â&#x20AC;? Klein-Marcuschamer says. â&#x20AC;&#x153;As the fungus â&#x20AC;&#x2DC;eatsâ&#x20AC;&#x2122; the poplar, it produces an excess of cellulases that can be harvested for selling.â&#x20AC;? After calculating the cost per kilogram of enzyme production, the researchers conceptualized the cost per gallon contribution of

Transportation (1%) Utilities (10%)

Waste Consumables Treatment (4%) (2%)

Cost Analysis Breakdown of the annual operating cost of the designed enzyme production facility. Nearly half of the cost of production is associated with capital investment, including depreciation, insurance, maintenance and other costs. SOURCE: â&#x20AC;&#x153;THE CHALLENGE OF ENZYME COST IN THE PRODUCTION OF LIGNOCELLULOSIC BIOFUELSâ&#x20AC;?

enzymes for a corn stover-to-ethanol process. With typical enzyme loading of filter paper unit per gram (FPU/g) of cellulose the researchers calculated a cost range of 68 cents to $1.47 per gallon of ethanol produced. If, on the other hand, enzyme loading was reduced to 5 FPU/g cellulose, the range was calculated at 34 cents to 73 cents per gallon of ethanol. Other studies pegged enzyme costs as low as 10 cents per gallon of ethanol produced to 40 cents per gallon. â&#x20AC;&#x201D;Holly Jessen

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Closing the Books on EPIC

Nebraska producers receive final incentive payments Sept. 30 marks the official sunset of Nebraska’s long-running Ethanol Production Incentive Credit fund, but ethanol producers in this second-largest ethanol producing state have already earned all of the credits available for the year, essentially ending the program months in advance. The EPIC fund housed a series of three ethanol incentive programs, the last of which has been paying qualified producers 18 cents per gallon of ethanol produced, capped at 22.5 million gallons per year per producer, since 2003, delivering nearly $180 million to the 10 plants that came online between 2003 and 2008. Funds acquired through grain checkoffs provided half of the money used for the ethanol incentive program; the other half came from the state’s general fund. The goal of the EPIC fund was to encourage companies to establish ethanol facilities in the state. Steve Sorum, ethanol project manager at the Nebraska Ethanol Board, says the program achieved that goal. “It was very successful, partly because it was so timely,” he says. “It was in effect in the building boom of the mid-2000s, so there were companies that were looking to build plants, and Nebraska provided an incentive that made it attractive.” Payments provided through the EPIC

fund allowed those producers to amortize their projects during a time when acquiring financing was difficult otherwise, he says. While many believe the corn ethanol industry has matured to the point of no longer needing financial incentives, Sorum says there is no doubt that the end of EPIC will affect the cash flow of Nebraska’s producers, noting that producers received anywhere from $14 million to $22.5 million over the course of the program. There are no plans currently to create a new corn ethanol incentive program in Nebraska, but Sorum says there has been discussion by the industry and legislators to form a program focused on cellulosic biofuels production. “Because Nebraska has a well-established ethanol structure, it would be perfect for the new era of plants,” he says. Other Midwest states appear to have similar intentions. Last year, Minnesota also ended its ethanol producer incentive program, after providing incentives to corn ethanol producers for nearly 20 years, but wasn’t ruling out the possibility of forming a new program for cellulosic producers. Sorum admits that because state revenues have been down in recent years, locating funding for new programs will be difficult, but because the corn ethanol industry has been such a success in states like Nebraska, legislators may find a way to make it work. “Ethanol has become an $8 billion industry in Nebraska over the past 30 years and more than half of it happened in the last 10 years,” he says. “It’s been a great addition to the economy in this state and I think it sets the tone for possible future programs.” —Kris Bevill

distilled

Looking Down on the Future

Researchers employ satellites to analyze feedstock potential An analysis recently conducted by researchers at the University of Montana utilized NASA satellite data to evaluate the bioenergy potential of the U.S. and found that farmers would need to plant biofuel crops on 80 percent of cropland or on 60 percent of current pastureland in order to produce 36 billion gallons of biofuel by 2022 as required by the renewable fuel standard (RFS). The research also suggests, however, that if technologies to produce biofuel from waste feedstocks can be commercialized, currently available agriculture and forestry residues can be utilized to meet up to 80 percent of the total 2022 RFS mandate. University of Montana doctoral student Bill Smith led the research and co-authored a paper on the findings, titled, “Bioenergy Potential of the United States Constrained by Satellite Observations of Existing Productivity,” which was published in the American Chemical Society’s Environmental Science & Technology journal. He says that while there have been multiple other studies conducted to evaluate the potential of bioenergy production in the

U.S., the NASA algorithm used by his group, combined with other meteorological data focused on climate and water constraints, offers a more complete and accurate estimate of the landscape’s true production potential. “What’s different about our analysis is we have this explicit data for every square kilometer of the U.S., versus a lot of previous studies that use plot-level measurements that are fairly localized and have to use methods to extrapolate to different areas,” he says. “Some of those studies take into account biophysical factors (how they change across various landscapes), but others don’t do that as well, so you get a wide range of bioenergy potential estimates.” The researchers made several assumptions when conducting the analysis. One assumption was that crop yields will remain at their current levels. Smith says this assumption was made based on previous studies that compared current productivity rates to natural productivity and found that nature produces the maximum potential. “Even with all of our current human management, agricultural productivity is gen-

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32 | Ethanol Producer Magazine | MAY 2012

erally less than natural productivity,” he says. “There are exceptions, usually because of irrigation. If you irrigate in an arid climate, you get production higher than what’s natural. [But] our thinking for things like irrigation and fertilizer were that these two factors, particularly in the U.S., are already nearing a point of unsustainability.” Other researchers contributing to the project included co-authors Cory Cleveland, assistant professor of soil sciences at UM, and Steve Running, director of the university’s Numerical Terradynamic Simulation Group and Regents professor of ecology. While the results of the analysis indicated that the biofuels industry is on the right track by targeting residues for feedstocks, Running cautions that it is important to continue to focus on establishing attainable production goals. “While we encourage the appropriate use of agricultural residues, forest slash and beetle-killed trees for bioenergy, the nation needs realistic targets of the capacity for bioenergy production that would not compete with food production,” he says. —Kris Bevill

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PRODUCTION

Pulling Back Green Plainsâ&#x20AC;&#x2122; 120 MMgy ethanol plant in Bluffton, Ind., is one of nine faculties owned by the company. Although the facilities were not identified, two of Green Plains ethanol plants reduced run rates by 30 percent in response to tight margins and ethanol oversupply in the first quarter of 2012. Photo: GREEN PLAINS RENEWABLE ENERGY

34 | Ethanol Producer Magazine | MAY 2012

PRODUCTION

Reining in Production ― Hunkering Down as Margins, Supplies Rebalance The ethanol industry went from booming business to tight and even negative margins in the first quarter By Holly Jessen

The year 2011 turned out to be a good one for ethanol producers. Even with high corn prices the industry was profitable, especially in the fourth quarter, bolstered partially by record exports. Then, in December margins tightened dramatically, and ethanol stocks began to build, setting the stage for a whole new landscape. As a result, margins were ugly in February and were shaping up pretty poorly in March, said Mike Chisam, president and CEO of Kansas Ethanol LLC, a 55 MMgy plant in Lyons, Kan. On the other hand, the good news is that margin structures can change for the better as rapidly as they fall, he added.

Production Reductions

In early February, ethanol industry giant, Green Plains Renewable Energy Inc., announced it was slowing production at two of its nine ethanol plants. Although the company didn’t specify which plants reduced run rates, it did identify those plants as the most inefficient facilities. Todd Becker, president and CEO of Green Plains, told EPM the company was evaluating the situation on a daily basis, determining if it needed to cut back at additional Green Plains plants, as well as when to return to full production. “It will last as long as we need to keep them lower, relative to the earnings power in those plants,” he said. Green Plains was arguably the most notable example of an ethanol producer reacting to tight ethanol margins and high ethanol stocks by reducing run rates. While a handful of other ethanol plants also announced production reductions, experts agree many others were quietly doing the same without making the information public. “Everybody has got to at least be thinking about doing MAY 2012 | Ethanol Producer Magazine | 35

PRODUCTION

Weekly Ethanol Production 1,000

80 70

950

1,000s Barrels/Day

900

40 850

30 20

800

Non-Midwest 1,000s Barrels/Day

Midwest

12/4/2012

11/4/2012

9/4/2012

10/4/2012

8/4/2012

7/4/2012

6/4/2012

5/4/2012

4/4/2012

2/4/2012 3/4/2012

1/4/2012

12/4/2011

11/4/2011

9/4/2011

10/4/2011

8/4/2011

7/4/2011

6/4/2011

5/4/2011

4/4/2011

2/4/2011 3/4/2011

1/4/2011

12/4/2010

11/4/2010

9/4/2010

10/4/2010

8/4/2010

7/4/2010

750

6/4/2010

10 0

Non-Midwest

Peaking Production EIA data shows that ethanol production peaked in January and then dropped slowly as producers reacted to an oversupply in the marketplace. SOURCE: ACCENDANT PARTNERS

it,” said Donna Funk of Kennedy and Coe LLC. “Some are just at the point to take action quicker than others, due to different philosophies.” While Kansas Ethanol LLC didn’t slow its production rates, the company did stra-

tegically go into its three-day spring maintenance shutdown early. And, Kansas Ethanol wasn’t the only one to make that move, Chisam said. The decision to shut down at the end of February instead of in March, as usual, came about because ethanol produc-

tion was exceeding demand. “Ethanol plants just aren’t helping themselves by continuing to crank out product and putting it out in the marketplace,” Chisam said. Although a 20-day supply of ethanol is less than 17 million barrels, ethanol stocks were well above that number at 22 million barrels in February and early March, according to information from the U.S. Energy Information Administration. The March 9 report showed that stocks went from what was at that time a high of 22.1 million barrels back down to 22 million barrels. As of the March 16 EIA report, however, stocks shot back up to a new all-time record of 22.7 million barrels—equivalent to a 27-day supply. Ethanol production averaged 896,000 barrels per day as of Feb. 24, 906,000 barrels per day as of March 2, 892,000 barrels per day on March 9 and 893,000 barrels per day as of March 16. Rising ethanol stocks started at the end of 2011, when inventories were thin and margins were very attractive, prompting ethanol producers to churn out as much ethanol as possible. “When that environment changed in terms of demand, the industry was slow to react,” said Steve McNinch, CEO of Western Plains Energy LLC, a 50 MMgy plant in Oakley, Kan. “The industry had record pro-

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PRODUCTION

Weekly Ethanol Stocks 10,000

25,000

9,000 8,000

20,000

6,000

15,000

5,000 4,000

10,000

3,000 2,000

5,000

1,000 0

East Coast

Midwest

Gulf Coast

Rocky Mntn

West Coast

Rising Stocks East Coast, Midwest and overall U.S. ethanol stocks rose dramatically from the first of the year, according to EIA data. SOURCE: ACCENDANT PARTNERS

US 1,000s Barrels

7,000 1,000s Barrels

duction levels the last week of December the first week of January, at a time of extremely low demand.” Independent of the “gross oversupply” of ethanol, the first quarter of the year is traditionally a time of tight margins for the ethanol industry. Gasoline demand, and therefore demand for ethanol for blending, slumps after the holidays and doesn’t typically pick back up again until the summer driving season hits, McNinch said. So what’s the difference between this first quarter and other first quarters? It’s all about contrast. “We are running at about the same [profitability] level as we were last year at this time,” said Rick Kment, a Telvent DTN biofuels analyst. “We saw almost the highest margins ethanol have seen in recent history through the fourth quarter of 2011, so the challenge for ethanol producers is not that we are totally out of line from where we were in the past, but it was such a significant shift from where we were only three months ago,” he said in late February.

PRODUCTION

Biofuels BenchmarkingTM Annual Grind Margin $0.90 $0.80

$0.84

$0.70 $0.60

$0.65

$0.63

$0.50

$0.53

$0.48

$0.40

$0.48

$0.30

$0.36

$0.32

$0.29

$0.26

$0.20

$0.10

$0.48

$0.47 $0.38

$0.37

$0.09

$0.00 2007

2008

2009 Average

Leaders

2010

2011

Laggards

Margin Performance Christianson & Associates track the difference in grind margin between industry leaders and laggards participating in their benchmarking program. Figures for 2012 were not yet available at press time as data is collected quarterly. SOURCE: CHRISTIANSON & ASSOCIATES

Kment saw that reflected in the Neeley biofuels hypothetical 50 MMgy ethanol plant, an internal company model used to gauge the health of the ethanol industry. DTN uses cash prices it tracks for corn and ethanol at the rack to calculate net profitability using various assumptions. The hypothetical ethanol plant has no capital debt and would most closely represent an older ethanol plant that started operating before the ethanol bust, he said. While no two plants are alike, the hypothetical plant on paper does give DTN a good measurement tool. In October and November 2011 the hypothetical model showed a net profitability of 65 to 70 cents, he said. Compare that to the end of February, when the figure had dropped dramatically to a negative 27 cents in net profitability per gallon of ethanol, with a corresponding net operating profit of 4 cents. As of close of markets March 14, the numbers were changed for the better at negative 18.7 cents per gallon net profitability and a net operating profit of 13 cents per gallon. That trend is likely to continue into spring and summer, said Scott McDermott, partner with Ascendant Partners Inc. “Once ethanol stocks come down over the next several months, the ethanol price will likely find more support as gas prices continue to rise, which will eventually result in better ethanol

production margins,” he said in mid-March. “We are not out of the woods, but there is light at the end of the tunnel.” Another potential release of the margin pressure valve for ethanol producers is the next corn crop. If the early growing season looks good, it could be a predictor of a healthy corn harvest. “If it appears to be abundant, I think you will start to see corn prices come down, which will immediately help margins,” Funk said.

What’s Gas Got to Do with It?

The New Year also brought with it a widening spread between gasoline and ethanol prices. As of the third week in November, reformulated blendstock for oxygenated blending (RBOB) and ethanol futures were virtually the same, Kment said. By the end of February RBOB was trading for $3.04 and ethanol $2.26—a 78-cent price spread. That gap continued to widen as gas prices kept rising and by close of markets March 14, $2.30 ethanol futures and $3.34 RBOB futures pushed the price spread to more than $1. That attractive price spread has been promoting discretionary blending in the U.S. at the same time as export demand is also high, said Sander Cohan, analyst at ESAI Inc., which offers energy consulting services to ethanol producers and others. Those fac-

PRODUCTION

tors will continue to send a strong signal for ethanol in the marketplace. “What’s interesting is that although the prices will favor it, the demand for ethanol is limited by a weak gasoline market and also by limits on discretionary blending,” he added. It’s not just a short term situation, either, McDermott said. Average annual gas demand is down more than 10 percent from peak demand in July 2007, according to EIA figures. In addition, projections are that gas demand will drop another 0.34 percent this year and will also be down slightly in 2013. Although most experts agree low gas demand is a bigger factor, a rush to blend ethanol at the end of 2011—before the sunset of the Volumetric Ethanol Excise Tax Credit—did have an impact. “It’s not the major factor, but I think it’s a factor,” said Ron Lamberty, senior vice president with the American Coalition for Ethanol. Also the owner of two retail gas stations in South Dakota, Lamberty says he has definitely heard of cases where blenders were purchasing larger amounts of ethanol to ensure they’d get the 54-cent tax incentive before it went away. For some the gamble didn’t pay out. “As it turned out, the price of [ethanol] dropped enough that if they bought it early or middle December they probably lost money on the deal,” he said. In order to take advantage of VEETC, blenders needed two things: to also be a fuel retailer, and to have plenty of storage capacity. Before VEETC expired, Internal Revenue Service-issued guidance said that blenders who sold their own fuel could collect the tax incentive when it was blended, even if it wasn’t physically at a retail fueling station, Lamberty said. That kind of vertical integration is what gives some ethanol producers a distinct advantage over others, said Don Roose, president of U.S. Commodities, a West Des Moines, Iowa, brokerage company that advises ethanol plants. Ethanol plants operated by petroleum companies, such as Valero Energy Corp. and Murphy Oil Corp., can continue to blend ethanol to meet blending requirements, even if margins tighten up at their ethanol facilities. Nonvertically integrated ethanol plants, on the other hand,

have to take a look at other options, such as throttling back on production levels.

Crystal Ball

Although there’s no crystal ball guaranteeing the future, many experts believe the ethanol industry will make it through current tough times. Tight margins for two or three months—especially following strong margins in the late third and fourth quarters— won’t be enough to cause huge distress in the industry, says Green Plains’ Becker. Kment agrees. “From all appearances now, this is more of a controlled risk management issue, versus a total panic in the market, so I think that’s going to continue to help to stabilize the market long term,” he says. It’s possible there could be a few bankruptcies and it could lead to more consolidation in the industry, Funk says. But it won’t be anything like what happened in 2009. Most ethanol plants today are better situated financially to survive a period of tight margins, having paid down debt. Back in 2008, when corn prices shot up, and in 2009, the time of multiple bankruptcies, there were more brand-new plants that were thinly capitalized and heavy on debt. “Some of them were plants that probably never should have had money loaned to them to start with,” she says. As the industry continues to mature, Kment predicts more ethanol plants will model themselves after the ebbs and flows of the animal packing industry. While that industry is producing constantly, rates fluctuate based on seasonal demand, to maximize profits and minimize losses. He believes the ethanol industry will begin to develop its own model of this, rather than running at full production rates year round. The industry will also begin to take a longer-term approach to its contracts for ethanol and distillers grains, depending on seasonal patterns. “I do expect that to be a little bit more of a fluid movement in overall demand than what we have seen in the past,” he said.

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Cellulosic Ethanol

Nearing Completion By late February, many components of M&Gâ&#x20AC;&#x2122;s 13 MMgy cellulosic ethanol facility in Crescentino, Italy, had been installed, including the reactors for fermentation and hydrolysis (shown far right), beer columns and the lignin boiler and electrical plant generator (center left). Photo: MOSSI & GHISOLFI GROUP

42 | Ethanol Producer Magazine | MAY 2012

Cellulosic Ethanol

Steel in the

Ground The largest cellulosic ethanol plants in the world are ready to prove their mettle By Kris Bevill

Guido Ghisolfi is a confident man. A chemical engineer by trade, at 55, he’s already spent three decades leading research and development (R&D) activities at Italy-based Mossi & Ghisolfi Group, a $3 billion per year chemical firm that ranks as one of the world’s largest PET producers (a polymer used in plastic bottles and other products). M&G, which Ghisolfi describes as a family group (Mossi and Ghisolfi are his mother and father), also happens to be constructing the largest cellulosic ethanol production facility in the world to date through its subsidiary, global engineering, procurement and construction company Chemtex. The facility will be mechanically complete this summer and won’t begin producing until the third quarter of this year, but Ghisolfi says he already knows the process will work and will be cost-competitive with first-generation ethanol, and he’s ready to guarantee it. “Chemtex is ready to sell plants,” he says. “Come and see the plant and I’ll sell you one. If you want to buy one now, I’m more than happy to sell you the technology with a guarantee, and I can tell you how much it costs.” How is this possible? Ghisolfi traces M&G’s path toward cellulosic ethanol back to 2004, when the company acquired Chemtex from Mitsubishi Corp. Along with Chemtex came corn ethanol technology it had acquired from Delta-T Corp., which brought ethanol into Ghisolfi’s interests. He began to examine the existing U.S. ethanol industry and quickly concluded that while corn ethanol production was an acceptable practice in the U.S., the process would not be viewed as positively in Europe, where food versus fuel concerns were more widespread. So M&G decided to explore other technologies to produce ethanol in a feedstock agnostic environment from strictly nonfood biomass. The firm also realized immediately that the technology would need to be cost-competitive with first-generation ethanol and other fuels. “We did our homework and the family was faced with a not simple situation, that is to say that there is a solution, but the ticket we have to pay to enter into this development path is a very expensive ticket,” Ghisolfi says. The company determined the risk was worth the cost, and M&G invested more than MAY 2012 | Ethanol Producer Magazine | 43

Cellulosic Ethanol

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44 | Ethanol Producer Magazine | MAY 2012

$200 million to fully fund its cellulosic ethanol activities, including technology development, the establishment of a pilot plant, developing biomass supplies to properly feed the technology, and, finally, the construction of a 15-20 MMgy production facility. Of the handful of cellulosic ethanol developers making their way toward commercial cellulosic ethanol production, M&G is the first to make it this far with no outside financial support. Ghisolfi says it is because the company has self-financed everything that it has been able to make such significant progress in a short amount of time. â&#x20AC;&#x153;We were not slowed down by lack of funds or the need to raise capital,â&#x20AC;? he says. â&#x20AC;&#x153;Once the family had decided to invest a considerable amount of money, we could spend our money according to our initial plan.â&#x20AC;? That plan includes the commercialscale facility in Crescentino, Italy, designed to process 40,000 tons per year of biomass, but expected to process up to 60,000 tons per year, which means the plant could produce up to 20 MMgy of cellulosic ethanol when fully operational. Locally obtained rice straw, wheat straw and Arundo donax will serve as the facilityâ&#x20AC;&#x2122;s primary feedstocks, but the trademarked Proesa process technology developed by Chemtex is feedstock agnostic, a quality which Ghisolfi says will be key to the technologyâ&#x20AC;&#x2122;s wide-ranging success. â&#x20AC;&#x153;We can make cellulosic ethanol starting from any biomass, any grass, any straw,â&#x20AC;? he says. â&#x20AC;&#x153;You can run a week with rice straw, a week with corn stover, a week with wheat straw, without changing hardware and without changing enzymes. This gives a lot of flexibility because you can get different types of biomass from the area around the plant depending on the season [and] the cost.â&#x20AC;? The pretreatment portion of the Proesa technology is also lenient compared to other processes being developed, negating the need to create uniformly sized pieces of biomass, for example. Ghisolfi likens the process to boiling spinach. â&#x20AC;&#x153;When you throw the spinach in the pot, you donâ&#x20AC;&#x2122;t measure the size of the spinach,â&#x20AC;? he says. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s the same thing here. You donâ&#x20AC;&#x2122;t need particular pre-handling of the biomass [to make it] one inch by one inch or two inches by two inches.

The biomass can be cut by hand or by machine, cut roughly or precisely, depending on the process used by the local farmers.â&#x20AC;? The Proesa technology itself is described by Ghisolfi simply as being composed of â&#x20AC;&#x153;a piece of iron that turns.â&#x20AC;? He stresses that the process is low-temperature and doesnâ&#x20AC;&#x2122;t require the use of acids or chemicals. There are also no requirements for rare earth metals, which means the overall cost is lower and the potential deployment area for the technology is larger, he says. The company is partnered with Novozymes to use its enzymes in the production process but, because the technology is chemical-free, Ghisolfi says fewer enzymes are required to be used, which lowers the cost. The only coproduct produced as a result of this process is lignin, according to Ghisolfi. At Crescentino, the company has invested $50 million to construct boilers to translate that lignin into 15 megawatts of power, enough to serve the production facility with leftover available to sell to the local utility. Because power prices are high in Italy, Ghisolfi says it was easy to determine that adding on that aspect of the project would be a worthwhile investment. Itâ&#x20AC;&#x2122;s an optional component, however, so he expects that not everyone will be willing to up the cost of their project by one-third to produce power. He points out that without the boiler costs, the Crescentino project is on track to produce ethanol for about $5 per gallon, and he expects that price to continue to go down with each consecutive plant that is built. Ghisolfi hopes to soon see the Proesa technology at use in the U.S., but M&G doesnâ&#x20AC;&#x2122;t plan to operate any of the facilities. Last October, M&G formed a joint venture with TPG Capital and TGP Biotech to create Beta Renewables. The new company, led by Ghisolfi as CEO, was created exclusively to license the Proesa technology. The company is taking over ownership of the Crescentino plant, but the goal is primarily to use the plant as a showcase for the technology. â&#x20AC;&#x153;This is a plant that is large enough to be economically viable, but it will be a demonstration plant,â&#x20AC;? Ghisolfi says. â&#x20AC;&#x153;The next plants, we want to license, not build.â&#x20AC;? Ghisolfi sees the most immediate de-

Cellulosic Ethanol

mand for second-generation technology to come from first-generation ethanol producers and blenders in the U.S. who are seeking ways to meet the federal renewable fuel standard’s call for increased amounts of cellulosic biofuels. However, because the Proesa technology produces C5 and C6 sugars, the possibilities for end products are broad and applicable to anyone wanting to produce cost-efficient sugars. Ghisolfi predicts that by about 2014, a second wave of customers will come into view, consisting of companies that are already attempting to ferment sugars to produce everything from butadiene to acrylic acid. “So far, everybody went to Brazil because they thought there are cheap sugars in Brazil,” he says. “We hope we can make them change their minds and stay in the U.S. because we can deliver cheap sugars in the U.S. as well.” Currently, sugars can be had for about 22 cents a pound at the international level. Ghisolfi says he can beat that price by half, producing sugars using Proesa technology for 10 cents per pound. He admits his claims are met with skepticism, but he is firm in his estimates and says Beta Renewables has already begun to forge partnerships with chemical producers. Around July, when the Crescentino plant begins to continuously produce ethanol, the process will be further proved and the build out can begin in earnest,

he says, although he willingly admits that there will soon be others in the same position. “I would be very happy to be the first, or one of the first, players in the market,” he says. “But I don’t pretend to have all of the market for me. If they want to buy from someone else, they will, because there will be someone else relatively soon. [But] we have a lot of skin in the game as Chemtex. We bought the plant, so we know how much it costs. I can show steel to people. We’re not talking about a hole in the ground. And if someone is, allow me the term, dumb enough to invest $100 million in the R&D for several years and $150 million into a plant, it means that this is going to be working.”

Indian River Bioenergy Center

The first U.S. plant planning to begin operating at a commercial-scale is the Ineos New Planet Bioenergy LLC facility, dubbed the Indian River BioEnergy Center, located near Vero Beach, Fla. The plant will produce 8 MMgy of ethanol and 6 megawatts of power using locally sourced municipal solid waste and vegetative waste, including some waste citrus, beginning in the second half of this year. In mid-March, the project was still on track to be mechanically complete by April and expected to meet the U.S. EPA’s expectations of producing about 2 million

gallons of cellulosic ethanol this year. Last year, Ineos Bio received a $75 million loan guarantee from the USDA for the Indian River project, helping to alleviate some of the risk associated with being one of the first-ofits-kind projects, but Ineos has also invested heavily in the project and has a lot at stake in making it work. “When it comes down to it, the thing that’s completely in our control is commissioning this unit and getting it up and running and producing ethanol, and that has to be our primary focus at this moment,” says Ineos Bio CEO Peter Williams. Calls from the petroleum industry to dismantle the cellulosic biofuels portion of the renewable fuel standard are not increasing the pressure to produce, he says, adding that the time will soon come when those renewable identification numbers (RINs) will become available to them.

Fiberight

Other facilities on the U.S. EPA’s anticipated producer list for cellulosic ethanol this year include demonstration-scale facilities operated by ZeaChem Inc. and KL Energy Corp as well as American Process Inc., which is nearing completion on a 800,000 gallon per year facility in Alpena, Mich., which will utilize wood hydrolyzate from a nearby hardboard manufacturing facility as its feedstock.

MAY 2012 | Ethanol Producer Magazine | 45

SOURCE: INEOS BIO

Cellulosic Ethanol

Right on Track The Indian River BioEnergy Center project, shown here in March, continues to progress on track and on budget, according to Ineos Bio, and will produce measurable amounts of cellulosic ethanol this year.

Real-time DDG/DDGS Analysis

s )N LINE .)2 ANALYSIS FOR PROCESS CONTROL s -EASURE MOISTURE AND NUTRITIONAL VALUES s /PTIMIZE MIXING DRYING BINNING 5SED BY LEADING COMPANIES AROUND THE WORLD 2EAD MORE AT WWW PERTEN COM DA

The company expects to begin operating the facility in about a month. The only other cellulosic producer expected to contribute to the RFS this year is also the only cellulosic ethanol producer that owns an existing commercialscale facility. Fiberight LLC purchased a former corn ethanol plant in Blairstown, Iowa, several years ago and has been slowly modifying it to produce ethanol using MSW as a feedstock. CEO Craig Stuart-Paul says that work continues today, and he doesnâ&#x20AC;&#x2122;t expect Blairstown to produce this year, but Fiberight will begin producing batches of ethanol from its demo plant in Lawrenceville, Va., by June. Fuel produced in Virginia will be marketed by Protec Fuel Management LLC to the U.S. Navy. In March, the company was carrying out some process modifications to increase efficiency and conducting small revisions to ensure it receives a $25 million loan guarantee offered by the USDA in January. Stuart-Paul says the â&#x20AC;&#x153;post-Solyndraâ&#x20AC;? environment has prompted the USDA to require more proof of process at a smaller scale before granting loan guarantees to commercialize, so therefore more emphasis is being placed on operating the demo plant at a precommercial scale for the short term. That streamlining process is expected to be finalized in June, approximately. In March, Stuart-Paul wasnâ&#x20AC;&#x2122;t ready to guarantee that Fiberight could produce all of the 1.6 million gallons of ethanol expected by the EPA this year, but said meeting the agencyâ&#x20AC;&#x2122;s target is not his primary concern. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re in a position now where we want to do this right; we donâ&#x20AC;&#x2122;t want to blow it,â&#x20AC;? he says. â&#x20AC;&#x153;We will have some production, but the thing is, there is actual steel going into the ground now, weâ&#x20AC;&#x2122;re among them, and there will be gallons produced.â&#x20AC;? According to Stuart-Paul, the number of gallons produced is less important than the fact there will be actual production this year. â&#x20AC;&#x153;Once those first few plants begin producing and can produce successfully â&#x20AC;Ś look at what happened in the corn ethanol industry. Once those first few plants produced, you had a massive increase in the amount of overall production nationwide. Everyone was waiting for the first ones to come online.â&#x20AC;? Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 kbevill@bbiinernational.com

Instruments Ad_DDG_DA7300_3rdEP | Ethanol Producer Magazine |.indd MAY1 2012 46Perten

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Feedstock

High Yielder A field of energy beet hybrid grown by Betaseed Inc. in Anchorage, Alaska, yielded an impressive 40-plus tons per acre in four months. Photo: STEVE LIBSACK, BETASEED

48 | Ethanol Producer Magazine | MAY 2012

FEEDSTOCK

Energy Beets: Who Will Leap First? North American sugar-to-ethanol strategy differs from Brazil’s, Europe’s By Holly JesseN

The technology isn’t the issue. Clear examples of ethanol production from sugar beets and energy beets already exist.

And, yet—despite the potential of the feedstock—North America has yet to see a full-scale beet-to-ethanol production facility built. However, there’s been some exciting progress lately. North Dakota-based Green Energy Group is resolutely moving forward with a plan to build multiple 20 MMgy dedicated energy beet plants in the state. The quest began in 2007 and took some big leaps in early 2012, when it received $1 million in funding from the North Dakota Renewable Energy Council and other sources, says Maynard Helgaas, president. Around the same time, North Dakota State University, which has been assisting with the project, submitted an energy beet ethanol life-cycle analysis to the U.S. EPA in an effort to get it qualified as an advanced biofuel. The group has its first location selected, although it hasn’t been announced yet, and hopes to begin processing ethanol by fall 2014. “It wouldn’t take us long once we complete our research to get the most efficient processing out of energy beets— then we will build the plant,” Helgaas tells EPM. Green Vision Group’s vision is ambitious—they want to build least 12, possibly 16, energy beet-to-ethanol plants in North Dakota. When asked if that’s feasible, Cole Gustafson, chair of NDSU’s department of Agribusiness and Applied Economics, points to the growth of the corn ethanol industry since 2004. At that time, it might have seemed out of range to imagine more than 200 U.S. ethanol plants, but that’s exactly what happened—and it can happen for energy beet ethanol too. “It certainly is a possibility,” he says. “It’s going to take us several years to get there.” More than 3,000 miles due east, Canadian company Atlantec BioEnergy Corp. is building a 79,000 gallon a year energy beet demonstration plant in Cornwall, Prince Edward Island. The plant is expected to begin production of ethanol in July, says Ron Coles, vice president of agricultural resources and public relations for the company. The company is working with some North American groups interested in its closed-loop technology, which includes anaerobic digestion of the leftover beet pulp for power production. In the meantime, others are waiting and watching, holding off until someone else is successful. “It’s kind of that idea of who moves first, who takes the first leap,” says Carl Christian Radinger, owner of Putsch Group, in a telephone call from Germany. “You know, everybody is waiting for somebody to do it to see

MAY 2012 | Ethanol Producer Magazine | 49

Beet Opportunity Officials of the Canadian government and Atlantec BioEnergy display artist renderings of the research and development facility now under construction in Canada. Ron Coles, vice president of Atlantec BioEnergy, is second from the left.

PHOTO: KARLA ROSE HANSON

PHOTO: ATLANTIC CANADA OPPORTUNITIES AGENCY

Feedstock

How Sweet it is Maynard Helgaas, president of Green Vision Group, speaks at the site of a test plot of energy beets in Oakes, N.D. The field is irrigated.

how the economics really are, not just on paper. There needs to be a reference plant.” Steve Libsack, director of business development and strategic accounts for Betaseed Inc., says the same thing. “It’s a little bit of a chicken and egg situation in that until the first plant is up and going, it’s a little blurry,” he says, adding that willing project developers and investors are needed.

Compare, Contrast

In Europe, some food-grade sugar producers have added ethanol production to their sugar beet processing plants, much like the Brazil sugarcane model, Radinger says. He and his colleagues at Putsch, manufacturer of beet processing equipment, couldn’t think of a single, dedicated, energy beet ethanol plant in Europe. Instead, the most common overseas use for energy beets is on-farm biogas production, an attractive option due to high energy prices. Interest for U.S. ethanol production, on the other hand, is more focused on energy beets. Gustafson just doesn’t see U.S. sugar producers adding on ethanol production. For one thing, North Dakota’s proposed energy beet-to-ethanol plants will utilize a more efficient processing technology than existing sugar production facilities, he says. Still, it is technically achievable, and becomes more feasible if 50 | Ethanol Producer Magazine | MAY 2012

FEEDSTOCK

there are changes to the U.S. sugar program. In that case, granular sugar producers could conceivably convert or augment food-grade sugar plants. “It certainly is a possibility,” he says, “especially if we see changes in national farm legislation.” In other words, it could be done, but it’s not likely, Betaseed’s Libsack agrees. For one thing, there’s not a whole lot of room for expansion in areas of the U.S. where sugar beets are already in production. By going the energy beet route, competition for land can be avoided. At least one U.S. company is targeting sugar beets, but without following the European model exactly. This spring Iowa-based Energae LP signed a purchase agreement for the idled Alchem ethanol plant in Grafton, N.D., and said it would upgrade the plant for dedicated sugar beet-to-ethanol production, possibly by fall. The energy investment group was working to get sugar beet producers on board and was confident it could secure enough feedstock for the 10 MMgy plant, said

Jerry Krause, general partner in Energae, in early March. He didn’t discount energy beets altogether but pointed out that sugar beets were already an established crop in that area. So what’s the difference between sugar beets and energy beets? Clearly, either one works for ethanol production. To produce table sugar, producers are looking for sucrose, sucrose and more sucrose. Energy beets, on the other hand, contain multiple sugars, meaning sucrose as well as glucose, fructose and other minor sugars, called invert sugars, Libsack says. To create energy beet hybrids, plant breeders like Betaseed, a wholly owned subsidiary of German company KWS, select for traits such as high sugar yield, not just sucrose production. Another difference has to do with the front-end processing equipment needed to remove stones and clean the beets. This isn’t as rigorous as is necessary for sugar beets, which ultimately end up in sugar shakers and birthday cakes. The company, which operates as Putsch USA in Asheville, N.C., also makes

equipment for slicing sugar beets or mashing energy beets as well as juice filtration.

High on Sugar

Betaseed’s energy beet trials are being conducted around North America and prove there are many areas where energy beets would thrive, Libsack says. “We’ve literally had trials from Nova Scotia to southern California and from Alaska to Florida and I really haven’t found a place that I can’t grow beets,” he tells EPM. The company has been working with groups looking at energy beet production in the northern states of North Dakota and Minnesota, as well as areas such as Kentucky, Florida and Mississippi. In southern areas, energy beets can be grown as spring and/ or winter crops. For example, the Mississippi Delta Region has been identified as an area where energy beets can be grown as a winter crop without displacing or replacing any current crops. “We believe that the beet can be harvested on a year-round basis, weather

MAY 2012 | Ethanol Producer Magazine | 51

Feedstock

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an ideal place for energy beet-to-ethanol production. â&#x20AC;&#x153;This region has the lowest cost of producing sugar, nationwide,â&#x20AC;? Gustafson says. Green Vision Group is focused on producing low-carbon ethanol, starting in the field all the way to actual production. That means Wide Open Spaces This 2009 map shows sugar beet, corn and sugarcane encouraging farmers to production areas. Although critics point to high sugar beet prices in the U.S., planting energy beets in areas where sugar beets arenâ&#x20AC;&#x2122;t produced would be feasible, says Carl utilize farming practices Christian Radinger, owner of Putsch Group. Green areas show sugar beet producing that reduce nitrogen and country, yellow is corn and red is sugar cane. chemicals used in the SOURCE: AMERICAN SUGAR ALLIANCE field, Gustafson says. Itâ&#x20AC;&#x2122;s also why they plan to permitting, to give us a year-round supply of build smaller-scale ethanol plants, so all feedfeedstock,â&#x20AC;? he says, adding that Betaseedâ&#x20AC;&#x2122;s parstock supplies are within a 20-mile radius. ent company KWS has a patent-pending techAs a crop, energy beets increase soil nology for beet storage. â&#x20AC;&#x153;It isnâ&#x20AC;&#x2122;t for storage health due to a deep tap root and are tolerant of a sugar beet for sugar productionâ&#x20AC;&#x201D;weâ&#x20AC;&#x2122;ve looked at that for years and it simply doesnâ&#x20AC;&#x2122;t of drought and alkaline or saline soils, Helgaas workâ&#x20AC;&#x201D;but for energy beets for ethanol pro- points out. As a feedstock for ethanol production, high yields are a big attraction. Energy duction, the beet is very, very stable.â&#x20AC;? Green Vision Group and NDSU are fo- beet trials conducted in North Dakota demcusing on energy beets because they believe onstrated yields ranging from a high of 37.8 it will produce a truly green fuel, and they are tons per acre on irrigated land, to 25.2 tons confident the EPA will agree and bestow the per acre on dry land. Overall, the group excoveted advanced biofuels designation. The pects about 75 percent of the land utilized to group believes North Dakota, in particular, is produce energy beets to have at least some irrigation and average yield of 32 tons would LOVELL

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add up to 1,000 gallons of ethanol production in just one acre of land. In other words, energy beets have the power to produce about double the amount of ethanol in one acre, when compared to corn, he says. Another facet of the projectâ&#x20AC;&#x2122;s attractiveness is the efficiency of the ethanol production process it will utilize. As an example, Gustafson points to the partnership with Heartland Renewable Energy of Muscatine, Iowa, which brings a technology to the table to build a â&#x20AC;&#x153;self-propelledâ&#x20AC;? ethanol plant. The engineering and consulting firm has a patent for a process to create spray powder, which will be used to produce up to 70 percent of the plantâ&#x20AC;&#x2122;s thermal needs. Stillage from the fermentation process will be spray driedâ&#x20AC;&#x201D;put through a nozzle at high pressure to evaporate water and produce a dry material, he says. Besides ethanol, energy beet ethanol plants produce other valuable coproducts, including animal feed from the leftover beet pulp, much like distillers grains. â&#x20AC;&#x153;What we are also very excited about is the positives of producing renewable chemicals from these sugars in addition to biofuels,â&#x20AC;? Gustafson says. â&#x20AC;&#x153;We have to see what the marketplace is, thatâ&#x20AC;&#x2122;s part of the research that we are addressing right now.â&#x20AC;? Author: Holly Jessen Associate Editor, Ethanol Producer Magazine (701) 738-4946 hjessen@bbiinternational.com

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pathways

Growing a Giant USDA researchers collect samples from giant reed in California. PHOTO: USDA Agricultural Research Service

54 | Ethanol Producer Magazine | MAY 2012

pathways

Advancing

Pathways for

Advanced

Feedstocks

EPA evaluates energy cane, giant reed and napiergrass By ERIN VOEGELE

The approval of new feedstock pathways under the renewable fuels standard (RFS2) is critical to the developing cellulosic ethanol industry. The addition of new pathways expands the library of biomass crops available for conversion into RFS2 compliant biofuels and using approved feedstocks is the only way producers can generate renewable identification numbers (RINs) for the resulting fuel. The approval of specific feedstock pathways is also critical to financing a project, since investors may be less willing to support a project that relies on an unapproved feedstock. On Jan. 5, the U.S. EPA issued a direct final rule regarding pathways for three grassy biomass crops—energy cane, giant reed and napiergrass. The agency also published a parallel proposed rule for the pathways on the same day. According to the EPA, it published the direct final rule without a prior proposed rule because it viewed the addition of these new RFS2 pathways as noncontroversial. The EPA explained the new pathway determinations did not require new agricultural sector modeling and involved relatively straightforward analyses that largely relied on work that had already been completed as part of the RFS2 final rulemaking. In the direct final rule, the EPA also noted that the pathways would become effective March 5 unless the agency received adverse comments or a hearing request by Feb. 6. The EPA did receive such comments, and on March 5 published a notice in the Federal Register officially withdrawing the direct final rule. Several public comments are posted to www.regulations.gov in regard to the direct final rule, some in support of the new pathways, others critical. Robert Bendick, director of U.S. government

affairs at the Nature Conservancy, posted a critical comment on behalf of the National Environmental Coalition on Invasive Species. The comment noted that the rule would approve renewable fuel pathways for plant species that are listed as noxious weeds and/or are considered invasive species in the U.S. “EPA has not considered how this rulemaking will affect the introduction or spread of these species, nor has it taken action to avoid or minimize these effects,” Bendick said in the comment. However, the EPA’s withdrawal of the direct final rule does not mean that the pathways will not be amended to the RFS2. Rather, it will complete the rulemaking process using the parallel proposed rule it published for the pathways. According to the agency, it intends to address all comments in a subsequent final action. The agency also noted that it will not institute a second comment period on the action. While the pathways for energy cane, giant reed and napiergrass will be delayed, the research community and biofuels industry are continuing the efforts to bring the advanced feedstocks to commercial fruition.

Developing the Crops

The USDA’s Agricultural Research Service is diligently working to improve and develop advanced biofuel feedstocks, including extensive work with napiergrass, energy cane and a wide variety of other bioenergy crops. According to Jeff Steiner, ARS national program leader for Biomass Production Systems, no matter what feedstock an ARS research program focuses on, a primary goal is to reduce inputs while increasing yield. Specifically, ARS researchMAY 2012 | Ethanol Producer Magazine | 55

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pathways

ers work to reduce the use of nitrogen and water. In addition, the research programs also focus on improving the traits of these crops for use by the biorefining industry. “The real twist on the whole thing is to try to design the feedstocks so that they are friendly to specific conversion technologies,” he said. Regarding the ARS’s work with napiergrass, Steiner notes ARS researchers are looking at a full systems approach to developing napiergrass as a biomass crop. The work, he continues, is led by research geneticist Bill Anderson in Tifton, Ga. “[Anderson] is particularly looking at breeding for higher yield and improved production efficiencies along with genetic components that would enhance the conversion ability of the crop into biofuels,” he says. While the ARS is continuing work to further improve napiergrass, Steiner says there are varieties of the crop that are ready for commercial deployment. “One of those is called Merkeron,” he continues. “That material is actually in pretty good shape.” In dryland conditions, the variety can achieve yields of 8 to 10 dry tons per acre and with some irrigation, the yield can be pushed to 15 dry tons per acre. The high-yielding, lesser-known napiergrass biomass crop is attracting interest, according to Steiner. “We have cooperative research and development agreements with specific companies that are interested in the materials,” he says. “We are working closely with them. They are helping to set the quality standards for their conversion processes to optimize their systems. We work in that with them, as well as with the general materials to improve yields, reduce input costs and so forth.” The ARS is also working with energy cane. Gail Wisler, ARS national program leader for horticulture and sugar crops, notes that the department’s work on energy cane originated with its sugarcane program. “In order to improve sugarcane for disease resistance, adaptability to different soils and cold tolerance [our researchers] need to—by necessity—bring in a wide variety of parents for crossing,” she says. “In that process, we used to throw out [resulting varieties] that were very high in fiber and low in sugar. Now, of course, it turns out that many of these sorts of byproducts of the sug-

PHOTO: USDA Agricultural Research Service

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Full of Fiber Energy cane is essentially a high-fiber, lowsugar variety of sugarcane.

arcane industry have been released for initial exploration with the energy cane world.” As a result, the ARS has expanded research into energy cane. According to Wisler, promising varieties of the feedstock have been released. They have been trialed in more northern locations, and have done very well, she said. While Louisiana is the northern-most region of the world that currently grows sugarcane commercially, Wisler says that preliminary trials of energy cane have been conducted as far north as North Carolina. While work is clearly progressing with both feedstocks, Steiner stresses that it is important to understand there isn’t a single biomass feedstock that is going to fit the needs of the entire biorefining industry. Rather, different feedstocks will be more appropriate for cultivation in certain regions and conversion with specific technologies. “It’s going to be how do you optimize these systems based on their agronomy, their production ecology, how it fits into the production cycle of existing crops, as well as how does it fit into the businesses plans and operation plans of the biorefineries that utilize them,” he says. Regarding the potential for some biomass crops to be invasive, Steiner points out that any crop—not just biomass feedstocks— could cause some detrimental side effects or unintended consequences, whether biological, environmental or economical. The key will be

pathways

to grow each biomass crop in the most appropriate environment. For example, there are some regions in which a crop like giant reed might prove invasive, but there are also other locations where it might not cause any unintended consequences. Napiergrass is most appropriately grown in USDA plant hardiness zones 8A, 8B, and 9, as growing it in those zones will help ensure the crop doesn’t flower. According to Steiner, it may also be possible to manipulate a particular crop genetically to minimize or eliminate those problems.

Industry Perspectives

PHOTO: National Renewable Energy Laboratory

EdeniQ Inc. is one biorefining company planning to employ energy cane as one of its feedstock sources. While EdeniQ CEO Brian Thome notes that his company’s near-term development and scale-up plans are focused on the use of agricultural residues, it has also had excellent results converting energy crops, such as energy cane and switchgrass, into cellulosic ethanol. The addition of new feedstock pathways represents significant benefits to future cellulosic biofuel projects. “We have spent significant time working with energy cane as a

Bigger Biomass USDA researchers collect samples from giant reed in California.

feedsock for our process,” Thome says. “We have not spent time working with giant reed or napiergrass, but expect similar excellent performance. The approval of new feedstocks [under RFS2] provides EdeniQ and its licensees greater flexibility in the planning of future commercial projects.” Thome also notes that additional pathways are important to the industry as a whole. “The financial incentives provided by cellulosic RIN credits, enabled by these pathway approvals, are critical for the cellulosic ethanol industry to justify the considerable investment of the resources needed to develop, scale-up and commercialize new technologies,” he says. While the EPA’s work on these three new bioenergy feedstocks is a step in the right direction, there are still many feedstocks that are in earlier stages of the pipeline. According to Thome, additional approvals for feedstocks and pathways will provide the industry with greater flexibility, which enables more attractive economics for commercial opportunities. Brooke Coleman, executive director of the Advanced Ethanol Council, adds that the approval of new feedstock pathways are a critical component of the investment discussions cellulosic ethanol companies are currently having. According to Coleman, his organization would like to see the EPA prioritize and fast track the fuel pathway proposals for feedstocks clearly associated with projects that will be the first to come online with commercialscale production. Some of these feedstocks include municipal solid waste and dedicated hardwoods, he says. Companies that are nearing commercial production need the EPA to send a signal to the market regarding pathway approvals for their respective feedstocks, Coleman adds. “Those pathways need to be fast tracked because if the development plans get ahead of the pathway certification, then you have arrested development that creates a feedback loop into all of the other problems that they are having,” he says. Ensuring that the first commercial producers of cellulosic ethanol are able to generate RINs for their fuel will help negate some of the pushback against the RFS2’s cellulosic volume targets. Author: Erin Voegele Associate Editor, Biorefining Magazine (701) 540-6986 evoegele@bbiinternational.com

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SUSTAINABILITY

CONTRIBUTION

Protection of areas with high biodiversity

Social standards

Sustainable cultivation

Important sustainability requirements

Protection of carbon rich 2 areas

ISCC Principles Principle 1: Biomass shall not be produced on land with high biodiversity value or high carbon stock. High-carbon value areas shall be protected. Principle 2: Biomass shall be produced in an environmentally responsible way. This includes the protection of soil, water and air and the application of Good Agriculture Practices. Principle 3: Safe working conditions through training and education, use of protective clothing and proper and timely assistance in the event of accidents. Principle 4: Biomass production shall not violate human rights, labor rights or land rights.

GHG savings

Principle 5: Biomass production shall take place in compliance with all applicable regional and national laws and shall follow relevant international treaties.

Principle 6: Good management practices shall be implemented.

EU Requires Sustainable Biofuels How U.S. ethanol producers can become certified By Antje Grzesik

The U.S. has been a net exporter of ethanol since 2010, when more than 350 million gallons of ethanol going to overseas markets, according to the Renewable Fuels Association. In 2011, U.S.

exports reached nearly 900 million gallons, with the European Union one of the top destinations. The EU has a target of deriving 10 percent of transportation fuel from biofuels by 2020. Thus, ethanol consumption in the EU will increase significantly in the future. The

EU 27 Annual Biofuels Report published by USDAâ&#x20AC;&#x2122;s Global Agriculture Information Network states that the consumption of ethanol for conventional and advanced fuels in the EU will reach 1.498 billion gallons in 2011, whereas only 1.271 billion gallons will be produced domestically. The gap has still to be covered by imports. During 2011 and 2012, Germany and France remain the main markets, and Germany will import 30 percent of its ethanol consumption.

RED Basics

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s). 60 | Ethanol Producer Magazine | MAY 2012

The EU Renewable Energy Directive (Directive 2009/28/EC) establishes a common framework for the promotion of energy from renewable sources in the European Union. In the area of biofuels and liquid biomass for electricity and heat production, the EU set sustainability requirements for renewable fuels to qualify as meeting the mandatory renewable energy targets. With the RED in effect since Dec. 5, 2010, member states must transpose the directive into national legislation. Last July, the EU Commission approved seven certification schemes that companies can use to verify sustainability claims. The national legislation in Germany is based on certification by voluntary certification schemes. The directive requires the use of sustain-

SUSTAINABILITY

able biomass seeking to prevent companies from converting forest, peatlands or biodiverse grassland for the production of biomass for the use in biofuels for the EU market. Carbon-rich areas or areas with a high degree of biodiversity are not allowed to be used for the production of biomass for biofuels or liquid biomass for heat and power generation. If the land use has been changed after January 2008, biomass from this area cannot be certified as sustainable. Furthermore, an RED requirement states that biofuels must achieve a reduction in greenhouse gases (GHG) of at least 35 percent in comparison to fossil fuels. Beginning in 2017, the GHG emission savings target rises to at least 50 percent, and in 2018 the target is at least 60 percent for biofuels and bioliquids produced in installations in which production started on or after Jan. 1, 2017. U.S. ethanol producers exporting into the EU can show that they fulfill these sustainability criteria by being certified under the frame-

work of one of the certification schemes for sustainability and GHG emissions approved by the EU Commission. The EU recognized schemes can be used in all 27 member countries. The seven schemes approved by the EU Commission are Bonsucro EU, Greenergy, International Sustainability and Carbon Certification, Bioenergy Sustainability Assurance (RBSA), Roundtable on Sustainable BiofuelsEU RED, Roundtable on Responsible Soy-EU RED (RTRS) and 2BSvs. The RBSA, Greenergy and 2BSvs are company- or industry-driven schemes. The roundtable initiatives include Bonsucro EU, certifying sugarcane in Brazil; RTRS, targeting soy from Brazil and Argentina; and ISCC, a global multi-stakeholder scheme for all kinds of biomass. The roundtable initiatives include social and ecological criteria that exceed legal requirements. It should be noted, however, that Bonsucro EU as well as 2BSvs are only partially approved and not recognized for biodiverse grassland, one of

the basic requirements of the EU RED. Furthermore, it is not possible to do individual GHG-calculations within these schemes.

Getting Certified

Fully operational since early 2010, ISCC is an international certification system for sustainability and GHG emission savings that can be applied for all kinds of biomass and bioenergy. It was developed through an open stakeholder process involving associations, corporations, research institutions and nongovernmental organizations (NGOs). As a forum for stakeholder dialogue, the association was inaugurated in Berlin in January 2010 and today has 60 members. The member list includes companies such as Archer Daniels Midland Co., Cargill Inc., Bunge, BASF, Bayer and associations like European Bioplastics, Bundesverband Bioenergie, Canola Council of Canada, as well as research institutions like the Kiel Institute for the World Economy and NGOs like the WWF. U.S. members include

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MAY 2012 | Ethanol Producer Magazine | 61

SUSTAINABILITY

the Illinois Corn Growers Association, Degart Global LLC and the Morgan Stanley Capital Group Inc. ISCC can be applied to demonstrate sustainability in the bioenergy sector and additionally on a voluntary basis for food, feed or chemical applications. Around 1,200 companies from 52 countries are already using it. In the U.S., several ethanol producers already seized the opportunity and became ISCC-certified. A full list of certificate holders is available on the ISCC website (www.iscc-system. org).

Principles, Process

62 | Ethanol Producer Magazine | MAY 2012

ISCC comprises six principles with respective criteria and does not only aim at the prevention of ecological shortcomings but also at the safekeeping of adequate working conditions and the protection of health of the employees on farms. The verification of the six principles is carried out by the assessment of databases, maps, satellite images, the assessment of internal documents, interviews of personnel, management and stakeholders, as well as visual inspection of company facilities, storage facilities and infrastructure. Biofuels have a production chain with many links, from farms to distribution of the fuel. Biomass is also transformed into other intermediate and/or final products. Evidence concerning sustainability needs to be documented regarding the raw material and/or intermediate products used. To ensure the fulfillment of sustainability criteria throughout the whole production process, ISCC has developed a transparent procedure that can be verified by independent auditors. ISCC is cooperating with 17 officially recognized international certification bodies, such as TĂ&#x153;V, SGS and Control Union. A full list is available on the ISCC website. The process starts at the First Gathering Pointâ&#x20AC;&#x201D;the company collecting sustainable biomass such as an agricultural cooperative or wholesaler buying biomass. All delivering farmers must provide self-declarations of sustainability, of which a predefined sample will be audited. Group audits of farms are also possible. The auditorâ&#x20AC;&#x2122;s task is to verify onsite that the actual processes match the documentation. Once a certificate is issued, the First Gathering Point can sell and export

the certified products to certified wholesalers. The next stage is the certification of the companies doing the biomass conversion to biofuels or other renewable fuels. The certification process can be extended up to the end product reaching the final customer. In the EU RED, a mass balance method is laid down as the chain-of-custody method to ensure traceability along the entire supply chain. Mass balances use records allowing a quantitative accounting and traceability at all stages of the production and delivery of sustainable biomass. The accounting ensures that the incoming quantity of biomass does not exceed the outgoing quantity. The certification process also covers the calculation of GHG emissions along the supply chain including both generated GHG emissions and GHG abatement in comparison to the use of fossil energy. This includes emissions from biomass production, conversion processes and transport. The EU RED includes default values for different biomass and biofuel options. Additionally, ISCC offers individual GHG emission calculations for different supply chains. These individual calculations are getting more and more important.

Opportunities

Sustainability certification is now the norm for exporting ethanol into the EU. In the German biofuels sector, for example, only certified biofuel can be used to meet the quota. There also is a potential for premium prices on certified products. It is a safe assumption that sustainability criteria will apply to other sectors in the future and that voluntary certification makes sense in order to satisfy increasing consumer demand for sustainable products. Sustainability certification of biomass and final biobased products also represents a huge opportunity in general: For the first time, ecological and social standards can be established in the global raw materials markets. It is important to seize this opportunity. Renewable energy producers can lead other sectors in achieving sustainability for future generations. Author: Antje Grzesik System Management, ISCC System GmbH +49 221 37998487 info@iscc-system.org

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h^ tĂƚĞƌ ^ĞƌǀŝĐĞƐ ƉƌŽĚƵĐƚƐ ĂƌĞ ƐŽŵĞ ŽĨ ƚŚĞ ŵŽƐƚ ĞīĞĐƟǀĞ ĂŶĚ ƵŶŝƋƵĞ ƉƌŽĚƵĐƚƐ ŝŶ ƚŚĞ ŝŶĚƵƐƚƌǇ͘ KZΡ ŝƐ ĂŶ ĞŶŚĂŶĐĞŵĞŶƚ ĂĚĚŝƟǀĞ ƉƌŽǀĞŶ ƚŽ ŝŶͲ ĐƌĞĂƐĞ ƚŚĞ ƌĞŵŽǀĂů ŽĨ ĐŽƌŶ Žŝů ĨƌŽŵ ŵĞĐŚĂŶŝĐĂů ƐĞƉĂƌĂƟŽŶ ƐǇƐƚĞŵƐ Ăƚ ĚƌǇ ŵŝůů ĞƚŚĂŶŽů ƉůĂŶƚƐ ŵŽƌĞ ĞĸĐŝĞŶƚůǇ ĂŶĚ ǁŝƚŚ ůĞƐƐ ƉƌŽĚƵĐƚ ƚŚĂŶ ŽƚŚĞƌ ƐŝŵŝůĂƌ ƉƌŽĚƵĐƚƐ ŽŶ ƚŚĞ ŵĂƌŬĞƚ ƚŽĚĂǇ͘

PROJECT DEVELOPMENT

CONTRIBUTION

Logistic Challenge A big issue for the Iowa Value Added Agriculture Support Team has been to aid cellulosic developers in working out supply chain logistics. PHOTO: Iowa Department of Agriculture and Land Stewardship

Iowa Partners to Develop Cellulosic Ethanol Projects

Incentives, research capabilities, workforce development among advantages Iowa offers By Bill Northey, Iowa Secretary of Agriculture

When it comes to offering a place for cellulosic ethanol producers to prosper, Iowa rises to the top of the list. The state lends key assistance on a number of different fronts. From research support to the crucial infrastructure ethanol producers need for operations, state government in Iowa is a willing partner to companies making sig-

nificant capital investments and creating wellpaying, high-quality jobs. As the nationâ&#x20AC;&#x2122;s top corn-producing state, Iowa leads the U.S. in raw biomass production to fuel the biorenewables industry, with the ability to harvest 15 million to 20 million dry tons of biomass each year. That makes Iowa a natural location for cellulosic ethanol companies looking for a reliable source of feedstock. In cases where corn stover is used as the feed-

stock, it takes an organized effort to develop and nurture the supply chain, something that partnerships in Iowa have helped build for cellulosic ethanol producers locating operations here. The concentration of raw materials in Iowa also helps the state lead the way in developing value-added, biomass-based fuels and chemicals.

Developing State Government Partnerships

With Iowaâ&#x20AC;&#x2122;s choice to be a leader in developing the biosciences, biofuels and biopro-

PROJECT DEVELOPMENT

cessing sectors, comes attentiveness to their needs. Iowa offers a number of potential partnerships with state government to help cellulosic ethanol developers. Those partnerships could include assistance with the following: • Tax incentives. • Research. • Feedstock supply chain. • Specialized workforce. • Finding plant efficiencies. • Energy sources. • Infrastructure.

port for the credits over the years when federal research credits have fluctuated. Iowa’s High Quality Jobs initiative, administered by the Iowa Economic Development Authority, is another potential source of tax incentives for cellulosic ethanol producers. Qualified companies can earn tax incentives to help offset the costs of locating, expanding or modernizing a facility in Iowa. Incentive packages are flexible to meet the needs of compa-

nies and can include tax exemptions, credits or refunds. Businesses must meet wage threshold and other requirements to qualify. Research is another advantage. Iowa State University, located in the central Iowa community of Ames, has provided significant support to help build a thriving biofuels industry in the state. The BioCentury Research Farm is just one of the many research centers at ISU that are supporting the groundbreaking

And, when cellulosic ethanol companies are looking for air and water permits for their facilities or are facing other regulatory issues, Iowa’s state government is more focused than ever on making it easier for them to proceed through the regulatory process so they can get on to doing business. To make the most of partnerships with state government in Iowa, it helps for cellulosic ethanol developers to identify what assistance they might need as they explore locations. A special Iowa working group, made up of state and federal officials, the Iowa Farm Bureau Federation and other organizations, can help provide technical and financial assistance to value-added agricultural businesses. The Value Added Agriculture Support Team has a history of working with ethanol projects and others to add value to Iowa commodities. The biggest issue VAAST has worked on in the area of cellulosic ethanol producers is the logistics of moving cellulose—in most cases corn stover—and building the kind of structure that rewards farmers enough to pay to harvest it and, in turn, transport it.

Iowa Advantages

One significant advantage Iowa offers qualified cellulosic ethanol producers is its refundable Research Activities Credit for research and development (R&D) investments. The state is one of only a handful that offers a refundable research activities tax credit. Credits may be paid in cash directly to the company when its tax liabilities are met. It is just one of the ways Iowa rewards innovation by companies investing heavily in R&D and in creating cutting-edge advantages in biofuels and other industries. Iowa has been consistent in its supMAY 2012 | Ethanol Producer Magazine | 65

PROJECT DEVELOPMENT

progress in biofuels. The BioCentury Research Farm assists corn ethanol plants in becoming more efficient and expanding into advanced biorefineries that produce not just fuels, but products that include industrial chemicals, food, feed and biomaterials. Its focus spans the whole system—from plant genetics to biofuels production. ISU’s BioCentury Research Farm partnered with ethanol producer Poet LLC to study the effects of corn stover harvest on soil quality as Poet’s plant in Emmetsburg prepares to produce up to 25 million gallons of cellulosic ethanol every year. Research found that 1.5 to 2 tons of corn stover per acre can be safely harvested. The study is just one recent example of how Iowa state government—in this case one of its public universities—is able to team up with private industry to advance the next generation of biofuels. The BioCentury Research Farm has

worked with DuPont Cellulosic Ethanol to develop a supply chain of feedstock corn stover including harvesting, storing, and transporting it. DuPont’s 25 million gallon cellulosic ethanol plant to be built nearby in Nevada, Iowa, is expected to use 300,000 tons of feedstock every year. The research farm is also where start-up Avello Bioenergy, founded by ISU students, is building a demonstration plant to produce petroleum replacement products for precommercial testing. The company’s bioasphalt is being used on a demonstration bike path in Des Moines. Another important research effort at Iowa State University is the Bioeconomy Institute, which brings together efforts across the university to advance the use of biorenewable resources in producing fuels, chemicals, materials and energy.

W e ’l l g e t t h e j o b d o n e . K e e p you r p l a n t ru n n i ng a t p e a k e f f ic i e nc y. We ’ v e g o t t h e r igh t t e a m a n d e qu i p m e n t f or a l l you r i n du s t r i a l c l e a n i ng n e e d s . ( 888 ) 549 -1869 w w w.premiump l ant s er v ice s .com

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Because of the cluster of biofuel companies and entities doing groundbreaking research, Iowa has a skilled workforce in this area. Besides its public research universities, the state is home to a strong network of community colleges that can partner with private industry to train workers. The Iowa Bioprocess Training Center operated by Indian Hills Community College was designed especially to meet the training needs of the value-added agriculture and bioprocessing industries and works with companies that include Cargill Inc. A convergence of biofuels companies and research makes Iowa a natural place for innovation to bloom. Iowa can count more than 40 existing ethanol plants, many biodiesel plants and two commercial-size cellulosic ethanol plants coming online—as well as the cuttingedge collaboration being done at the BioCentury Research Farm The development of coproducts that can make ethanol production more efficient and cost-effective—such as biochar in field applications, or other products in livestock feed production—is another Iowa advantage, with ISU providing the research capacity. What started out as highly sophisticated wet-mill corn processing plants has grown into a number of additive industries helped by government incentives. In particular, Iowa’s research activities tax credit is something that has been a benefit for companies in this area. It all adds up to create a cluster effect of expertise. Businesses with various skills are brought together where they can learn from each other, perhaps be each others’ customers and discover something in their own businesses that could be beneficial to another, creating value to their operations. Cellulosic ethanol projects have unique needs that must be met in order to get their operations off the ground. The state of Iowa, its research entities and other interested groups in the state can lend support to making those types of projects happen. The state of Iowa stands ready to partner with cellulosic ethanol and next generation projects planning on bringing innovative projects and high-quality jobs to Iowa. Author: Bill Northey Iowa Secretary of Agriculture (515) 281-5321 agri@iowaagriculture.gove

HY DROBL A STING I INDUSTRIA L VACUUMING I SURFACE CHEMICA L CLE ANING S ANDBL A STING I TUBE BUNDLE AND HE AT E XCHANGER CLE ANING

66 | Ethanol Producer Magazine | MAY 2012

Workforce, Innovation

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ENERGY

CONTRIBUTION

PHOTO: Interstates Engineering

Energy Management: Project or Process?

Commitment to continuous improvement helps small steps become 10-20 percent savings By Jaron Vande Hoef

For industrial processing facilities, energy costs are usually among the top three operating costs, making it a prime area to focus efficiency efforts. Production costs like labor and input costs are somewhat fixed, whereas energy expenses can be reduced without sacrificing production capacity or qual-

ity. Finally, the risk of increasing energy cost is higher than ever before. Just look at these 2003 statistics from www.energystar.gov to understand why: â&#x20AC;˘ Global demand for all energy sources is forecast to grow by 57 percent over the next 25 years. â&#x20AC;˘ U.S. demand for all types of energy is expected to increase by 31 percent within 25 years.

â&#x20AC;˘ By 2032, electricity demand in the U.S. will grow by at least 40 percent. To meet this demand increase, new power generation equal to nearly 300 1,000-megawatt power plants will be needed by 2030, and to pay for these new power plants, energy costs will increase. The good news is that companies can reduce overall energy consumption to impact the bottom line. Opportunities to capture energy management savings are real. If we look at buildings and industrial facilities as a single component

ENERGY

of energy use in the U.S., we see some dramatic numbers. The total number of buildings and industrial facilities in the U.S. has grown to over 5 million with an annual energy cost estimated at $202.3 billion. It is further estimated that at least 30 percent of the energy consumed in these buildings is done so either inefficiently or unnecessarily. Certainly there is both reason and opportunity for energy management. Anyone with a home appliance is sure to have heard of Energy Star. Energy Star also has a program that focuses on buildings and industrial plants. It has developed focus groups, key performance indicators, and best practices for specific industries, such as corn refining, food processing, petrochemical manufacturing and oil refining. Energy Star’s seven-step system has helped many industrial facilities achieve 10 to 20 percent savings on energy costs. With electricity bills easily exceeding $100,000 per month for a large processing facility, a conservative 10 percent savings results in annual savings of $120,000 in electricity cost alone. Good energy management is a process. Single projects will reduce energy costs, but without a process in place to keep them down and monitor them, the costs will creep back up. The metaphor of low-hanging fruit applies. Basic, quick and easy energy reduction projects produce immediate energy savings, but that low-hanging fruit will grow back time and again, if there is not a process to prevent it from doing so.

7-Step Energy Star Program

There are three things to do first when making a commitment to continuous improvement, the first of the seven steps. Consider appointing an energy director—one with a personal passion for energy management— to take the lead in setting goals, tracking progress and promoting the energy management

program. This person is not necessarily a technical expert, but should understand all aspects of your business and how energy management will help achieve both financial and environmental goals. Depending on the size of the organization, the energy director role could be full time or part time. It is common for a facility manager, lead process engineer or a plant manager to fill the role of energy director. Outside consultants could also support this role. With the energy manager identified, form a dedicated energy team to execute the facility’s energy management activities and ensure integration of best practices across the facility. Include individuals from all major areas of the facility. Then, institute an energy policy to serve as a vision statement and provide a foundation for future decisions. This policy is the base for setting performance goals and for integrating energy management into the organizations’ culture and operations. The second step in the Energy Star program is assessing performance, which requires reliable information. Think about the desired level of detail when considering which data to track. For example, do you want to look at overall service entrance metering for natural gas and electricity or, is submetering specific areas better? Account for all energy sources and uses and gather two years of monthly data, both cost and quantity. In addition, collect facility and operational data such as hours, production, units produced, weather history— anything impacting energy consumption in the two-year time period. The data may be needed to be normalized, especially if multiple facilities are to be compared. Normalization factors include climate zone, facility size, weather history, hours of operation, product type, etc. Establish a system to store and track the in-

formation using any number of tools from a simple spreadsheet to an energy management software package. Utility companies are one resource for such tools. Evaluate the tools for the level of detail, the ease of use and maintenance and ease in reporting. With data in hand, use it to establish baselines, using metrics that effectively express good energy performance for a facility. This might be per square foot or per unit of production. Evaluate progress using benchmarks such as past performance, performance at other facilities, industry averages, etc. Another approach is to benchmark against best practices, a more qualitative approach. Analyze trends, developing a use profile to measure peaks and valleys. Identify areas of high-cost energy use, and identify data gaps. From a qualitative standpoint, gather information and opinions about lessons learned. Ask others what they believe to be the energy ‘hogs.’ Review policies and procedures to determine if energy management is addressed in all areas. Technical assessments and audits are commonly out-

Compressed Air Systems

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Lighting

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Self-Generation

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Reduce Air Leaks Reduce Pressure Add Monitoring System Replace with Other Sources

Recommissioning Heat Recovery Ventilation Fans

Turn off Lights! Lighting Controls Replace Ballasts & Lamps with Efficient Models Convert HID to Fluorescent

Proper Sizing Premium-Efficiency VFDs Pump System Maintenance Impeller Trimming Avoid Throttling Valves Replace Belt Drives

Piping Insulation Free Cooling Door Seals Geothermal Cooling Compressor Controls Systems Automatic Condenser Purging

Cogeneration Back-Pressure Turbines Solar Wind

Boiler Process Control Reduce Excess Air Boiler Maintenance Heat Recovery Steam Trap Monitoring

Action Items

MAY 2012 | Ethanol Producer Magazine | 69

ENERGY

sourced. External advisors often have greater potential to see things overlooked by those close to the process. They also have perspective of other industries and facilities that could help improve your facility. Setting goals is the third step in the Energy Star program, taking your energy management program to a working level using information and research you have assembled to create tangible working goals. First consider

the scope of the goals. Are the goals for the entire organization or a specific facility? What time periods are addressed? A short-term or annual goal may be quite different than a longterm goal. Focus on making specific goals, estimating their potential for improvement and tie it to a defined amount of energy reduction. Some examples of goals would be to reduce energy consumption relative to output by 10 percent or by a specified unit of measure-

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ÂŠ 2012 Ecolab USA, Inc. 70 | Ethanol Producer Magazine | MAY 2012

ment such as Btu, or to achieve a 20 percent improvement in energy performance within five years.

Action, Implementation

With goals in place, step four is to create an action plan. Use results from any technical assessments and audits to help identify action items and establish a monitoring system. Ensure the right people are in place and given the responsibility to meet the stated goals. Action plans can include repeated energy audits to build momentum and improvement ideas. The implementation phase in step five is where a program succeeds or fails. Many great plans end up gathering dust on a shelf somewhere. A good implementation plan includes a good communication plan. Identify key audiences, determine the information they need and how to reach them. Celebrate small wins to maintain momentum. Invest in training to help people understand and implement energy changes. When personnel performance is tied to energy goals, and environmental responsibility is included, people respond. The process continues in step six with regular progress evaluations. A formal review compares results to the action plan, prompting performance reassessments and the updating of goals and action plans. Be sure to share it with others in your company, and do not allow lessons learned to be missed or overlooked. Use what you have learned to establish best practices. The final step recognizes it is important to let people know that progress is being made. Look for both internal and external outlets for celebrating accomplishmentsâ&#x20AC;&#x201D;a great motivator for employees, and a great public relations tool to help outside people understand just how important your company thinks it is to care for the environment. Energy management is a continuous process, not just a single project. It is realistic to save 10 to 20 percent on energy bills through hard work that pays off with better margins and profit. It takes time to address any complex issue. Now is the time to get started before energy costs increase even more. Author: Jaron Vande Hoef, P.E. Senior Project Engineer, Principal, Interstates Engineering jaron.vandehoef@interstates.com

EPM MARKETPLACE Ag Products & Services Equipment Mole Master Services Corporation 740-374-6726 www.molemaster.com

Associations/Organizations Growth Energy 202-545-4000

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Yeast Fermentis-Division of SI Lesaffre 800-558-7279 www.fermentis.com

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Fabrication Agra Industries Inc. 715-536-9584

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72 | Ethanol Producer Magazine | MAY 2012

Fagen, Inc. 320-564-3324

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Hoffmann, Inc. 563-263-4733

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Wolf Material Handling Systems 763-576-9040 www.wolfmhs.com

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Environmental Air Resource Specialists, Inc. 970-484-7941 www.air-resource.com ERI Solutions, Inc. 316-927-4294

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MAY 2012 | Ethanol Producer Magazine | 73

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www.himarkbiogas.com

Ethanol Production Existing Producers Louis Dreyfus Commodities 402-844-2680 www.LDCommodities.com

Finance 27815 State Route 7, Marietta, OH 45750 USA 800.322.6653 â&#x20AC;˘ Fax: 740.374.5908 E-mail: info@molemaster.com â&#x20AC;˘ www.molemaster.com

Parts & Services ICM, Inc. 877-456-8588

www.icminc.com

Productivity Enhancements ICM, Inc. 877-456-8588

www.icminc.com

Safety ERI Solutions, Inc. 316-927-4294

+ )+ *(& ' ($ #'%* '% ' * &% &%$# &

Size Reduction-Shredders Vecoplan, LLC 336-861-6070

erisolutions.com

www.VecoplanLLC.com

Reach your customers Your Solution. Advertise Today.

EPM MARKETPLACE

74 | Ethanol Producer Magazine | MAY 2012

Hoffmann, Inc. 563-263-4733

ERI Solutions, Inc. 316-927-4294

erisolutions.com

Lender Representatives NEAtech, LLC 303-906-6235

www.netatechllc.com

www.VecoplanLLC.com

Legal Services

Storage-DDGS

Size Reduction Shredders Vecoplan, LLC 336-861-6070

Engineered Solutions for Silo Cleanout Problems Worldwide.

Insurance

Attorneys

www.hoffmanninc.com

Structural Fabrication Agra Industries, Inc. 715-536-9584

www.agraind.com

Tanks Agra Industries, Inc. 715-536-9584

www.agraind.com

Greenwich Blackhawk Prof. Corp. 310-393-2200 www.greenwichblackhawk.com