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Will ethanol E85 catch on in the US? Will we Live Green and Go Yellow?

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  • seniorjoseseniorjose Posts: 277
    (and now for the rest of the coal fired Ethanol plant article)

    "It just made great economic sense to use coal," says Brad Davis, general manager of the Gold-Eagle Cooperative that manages the Corn LP plant, which is farmer and investor owned. "Clean coal" technology, he adds, helps the Goldfield refinery easily meet pollution limits - and coal power saves millions in fuel costs.

    With 97 ethanol refineries pumping out some 4 billion gallons of ethanol, the industry expects to double over the next six years by adding another 4.4 billion gallons of capacity per year. Tax breaks as well as concerns about energy security, the environment, and higher gasoline prices are all driving ethanol forward.

    The Goldfield refinery, and the other four coal-fired ethanol plants under construction are called "dry mill" operations, because of the process they use. The industry has in the past used coal in a few much larger "wet mill" operations that produce ethanol and a raft of other products. But dry mills are the wave of the future, industry experts say.

    More plants slated for Midwest, West

    Scores of these new ethanol refineries are expected to be built across the Midwest and West by the end of the decade, and many could soon be burning coal in some form to turn corn into ethanol, industry analysts say."It's very likely that coal will be the fuel of choice for most of these new ethanol plants," says Robert McIlvaine, president of a Northfield, Ill., information services company that has compiled a database of nearly 200 ethanol plants now under construction or in planning and development.
  • seniorjoseseniorjose Posts: 277
    By Reuters

    Published: June 15, 2006, 8:08 AM PDT

    "Ethanol"

    Alternative-energy buzz drove ethanol maker VeraSun Energy to a dazzling market debut on Wednesday, but investment strategists are skeptical about the chances to turn a fast buck in an energy form that remains largely a mystery to many Americans.

    Speaking at the Reuters Investment Outlook Summit in New York, strategists said that if crude oil prices were to slump, the wild bets that investors have put on ethanol's future could breed the kind of pain that stung Wall Street when the Internet bubble burst in 2000.

    "There's a substantial amount of risk there," said Ed Keon, chief investment strategist at Prudential Equity Group.

    "There was a time when all kinds of alternative-energy sources looked like the great next thing, and then oil prices came down. It's very hard to say what the investment potential in some of those things will be," he told the summit.

    Made primarily from corn and sugar cane, ethanol is blended with gasoline, helping to reduce emissions and petroleum usage.

    Since President George Bush's call for the United States to end its "addiction" to foreign oil in his State of the Union address earlier this year, ethanol, or ethyl alcohol, has become the talk of the market as investors look for new areas to put their cash.

    Soaring crude oil prices have also helped fuel the buzz, which has sent even smaller ethanol stocks into a frenzy.

    Year-to-date, shares of California's Pacific Ethanol, which counts Bill Gates, the world's richest man and chairman of Microsoft, among its investors, have more than doubled.

    Meanwhile shares of Archer Daniels Midland, the largest U.S. ethanol producer ahead of VeraSun, are up 57 percent, compared with a 2.9 percent gain in the shares of Exxon Mobil, the world's largest publicly traded oil company.

    VeraSun's market debut on Wednesday marked one the year's best-performing initial public offerings, according to analysts. But just as the stocks tied to ethanol have soared sky-high, so would expectations for the companies to deliver real returns.

    Strategists said ethanol was largely an untried energy form which could spell some disappointment if crude oil prices were to fall back sharply from their current level of about $70 a barrel. And with global commodity prices swinging wildly amid fears about a potential slowdown in economic growth, the risks could prove even greater.

    "According to some studies, ethanol is very inefficient to produce. It costs you more to produce than you actually get," said Tobias Levkovich, Citigroup's chief U.S. equity strategist.

    "(Ethanol) gets sexy again when you have higher energy prices. These are hot stories at any point in time. They (become a) fetish, and if I see lots and lots of stories written about it, it scares the heck out of me."

    Story Copyright © 2006 Reuters Limited. All rights reserved.
  • seniorjoseseniorjose Posts: 277
    Aylmer gets ethanol plant

    Thu, June 15, 2006

    Facility will be set up with help from the province

    By LONDON FREE PRESS STAFF

    AYLMER — Aylmer will become the site of a new ethanol plant, with the help of $14 million from the province.

    The provincial government announced here this morning it would invest $32 million to help companies build three new ethanol plants to be located in Aylmer, Hensall and Cornwall.

    The province has also said it will kick in $60 million a year to help operate the three plants, as well as plants in Chatham and Collingwood.

    The fuel-from-corn facility in Aylmer is the idea of the Integrated Grain Processors Co-operative, a farmers' collective aiming to swing the area economy towards renewable fuels.

    The provincial funding is part of the $520-million Ontario Ethanol Growth Fund.

    By 2007, all gasoline sold in Ontario is to have at least five-per-cent ethanol blend, resulting in cleaner emissions.
    The provincial requirement is particularly welcome in Southwestern Ontario, which is one of Ontario's top corn-producing regions and which also boasts a huge Commercial Alcohols ethanol plant in Chatham.
  • seniorjoseseniorjose Posts: 277
    Is Ethanol Worth the Hype?
    By Ryan Fuhrmann, CFA
    June 15, 2006

    If you recall the movie Back to the Future, nutty professor Dr. Emmett Brown, a.k.a. "Doc," created a time machine capable of driving back and forth in time. During one of his trips back to the future, Doc invented an automotive fuel source capable of blending and transforming fruits and veggies from a Cuisinart into a petrol equivalent. According to Doc, "The way I see it, if you're gonna build a time machine into a car, why not do it with some style?" He was probably talking more about the DeLorean sports car body, but the Cuisinart was definitely a classy feature.

    The future for today :) Maybe some day there'll be a plethora of time machine companies, all of which will gladly offer shares to investors to allow them to participate in jaw-dropping sales growth while also subsidizing company development costs and years of operating losses. Until that time, we'll have to settle for the developing investment craze of ethanol companies, which are capable of turning crops such as corn into an alternative fuel source -- kinda like that Cuisinart from Back to the Future.

    The current crazePart of the growing ethanol hype is yesterday's share offering of VeraSun (NYSE: VSE) to the public at $23. VeraSun is the second-largest producer of ethanol in the U.S. The company plans to use the stock proceeds to build more ethanol plants and expand market share. Imagine that. The stock opened at $28 and shot to $30 by the close of the market for a 30% gain on the day. Great Scott! No wonder investors want in on the action.

    And shares of Archer Daniels Midland (NYSE: ADM) have nearly doubled this year as investors discovered it's the largest producer of ethanol in the United States. Soon-to-be-public companies include Aventis Renewable and Hawkeye Energy. There will be no shortage of ethanol IPOs as long as investors willingly snap up the shares.

    The issues with ethanolClearly, there are merits to producing ethanol and using it as an alternative to oil-based gasoline. It would most definitely benefit domestic farmers with a huge new market to sell corn into. It would also reduce American dependence on oil from the geopolitically charged Middle East.

    On the flipside, it's unclear whether ethanol is, or will be, more affordable than gasoline. The issue is further complicated by factors such as subsidies provided to ethanol producers and fluctuating oil prices. If oil were to return to $20 a barrel, for instance, SUVs might even revisit their heyday. There's also a rather critical debate as to whether more energy is actually expended to create ethanol than is spent using it as a fuel source. And what about concerns that ethanol might damage engines and clog up filters? In other words, there are quite a few issues yet to be worked out.

    Berkshire Hathaway weighs inThere's no better illustration of these issues than a summary of Charlie Munger's and Warren Buffett's thoughts on the subject at the May annual Berkshire Hathaway (NYSE: BRKa) meeting in Omaha, courtesy of fellow Fool Rick Casterline's copious note-taking.

    Question: What is your opinion on the economics of ethanol as a fuel additive and as a potential investment? Should I be looking at that industry?

    WB: Charlie and I don't know enough to answer that latter part. We've been approached many times, but we're trying to figure out the economics of an ethanol plant. It will depend on many factors, such as government policy and a lot of other variables we're not good at predicting. It's also a very hot area for investors right now, and our general experience is that we don't participate in things that are hot and easy to raise money for. I have a son who is head of the Ethanol Board in Nebraska. When he starts making more money than me, I'll reconsider. There's no question that usage will grow, but generally speaking, agricultural processing firms have not earned high ROICs. Look at Cargill, ADM. It has not been a great business. Ethanol could prove to be an exception, but I'm not sure how you gain a significant competitive advantage with any particular ethanol plant.

    CM: My attitude is even more hostile than Warren's. I have just enough knowledge of thermodynamics left in me to suspect that it takes more fossil fuel energy than you can get out of ethanol, and that's a very stupid way to solve an energy problem. [Laughter]

    The Foolish bottom lineIn summary, there will be a substantial amount of money made and lost by companies and investors alike as they wrangle over ethanol and its market potential. Cynicism aside, ethanol has promise. If the economics become compelling, the industry has the potential to greatly benefit oil-dependent domestic and international economies, as well as the environment. But from an investment perspective, until that promise develops, the Foolish investor would be wise to passively watch this one unfold from the sidelines.
  • fireball1fireball1 Posts: 30
    The last I heard, there was no such thing aS "clean coal" technology. The stuff is flat-out dirty.
  • fireball1fireball1 Posts: 30
    It had better be cheaper! A lot cheaper to win over drivers!

    Mid-Nebraska, today: Regular unleaded, $2.79 a gallon; E-10, $2.85. Add in the mileage efficiency differences, and I can't see how anyone would fill 'er up with E-10 in this neck of the woods.
  • seniorjoseseniorjose Posts: 277
    Will Ethanol plants continue to make money if costs go up?
    The Blade, Toledo, Ohio - May 22, 2006

    The country's fascination with ways to curb oil imports has ethanol-producing plants springing up throughout the country. The corn-fed refineries making fuel for cars and pickup trucks are expected to be quite profitable this year and next, but after that, they may not be money machines, experts said. Some plants bring in a 30 percent return on investment, and others are in the lower double digits, experts said. But some have much more modest profits.

    The ventures can be risky. With hefty investments of $80 million for a 50 million-gallon-a-year plant to $140 million for twice that size, recouping investment takes more than a couple of years. Success depends on location, corn prices, ethanol prices, fuel prices, and other factors, they say.

    Jeff Ehlert, president of Great Lakes Ethanol LLC, which is building a 50 million-gallon plant near Blissfield, Mich., said his plant's profit projections are rising now as higher gasoline prices prompt demand for more ethanol and gasoline suppliers use ethanol to replace a harmful fuel additive called MTBE. But Mr. Ehlert fears that profits will "be bouncing all around" over the long term. "It should be real good for the next few years, but after that we don't think it will be as good," he said.

    Thomas Byrne, head of Byrne & Co. Ltd., of Preston, Minn., which has helped develop more than 30 ethanol plants, said "the thing to remember is it's a commodity-based industry. Sometimes it's going to be good, sometimes it will be bad." Of nearly 100 plants operating in the United States, most were built to turn profits when the price of ethanol delivered to a terminal market, such as Chicago, hits $1.30 to $1.35 a gallon, Mr. Byrne said.

    A year ago, ethanol terminal prices were down to a $1 to a $1.20 a gallon, and some plants lost money, he said. But with ethanol prices at the terminal hovering between $2.70 and $2.90, some plants now are swimming in profits. And Mr. Byrne said he's bullish on ethanol and bets that prices will never go down to $1.20 again. "The plants right now are very profitable if managed right and in the right location," he said.

    Mr. Byrne said those high profits are based on plentiful low-priced corn, which has been the case the last several years. But the price of corn has been working its way up. And natural gas, an ethanol plant's second-largest expense, also is getting more expensive. Over the long term, those two factors could cut profitability, he said.

    Feed corn is a critical fuel source, so a plant typically can have an annual purchase expense of $70 million or more. If a corn shortage sends prices up quickly and ethanol prices drop, perhaps because of lower gasoline prices, what looked to be a sure profit can drop, Mr. Byrne said. "The problem is, your bottom line can change by $100 million pretty quickly either way, and that's pretty significant."

    But for now, profits are high. "If you have a 50 million-gallon plant and ethanol hits $2.30, you've made $50 million. Your returns now are very, very good," Mr. Byrne said.

    A typical 50 million-gallon plant stands to make additional millions. Distillers' dried grain - the byproduct from distilling the starch from corn during the ethanol process - can fetch $12 million to $13 million. Cattle farmers buy the product. Carbon dioxide, another byproduct, is worth about $2 million to bottlers and dry-ice makers, Mr. Byrne said. A plant's payroll and maintenance total less than $2 million annually.

    Alex Samardzich, chief executive of Ace Ethanol LLC, which runs a 40 million-gallon plant at Stanley, Wis., said local agricultural issues greatly affect a plant's profits. "Sometimes there's too much corn, sometimes not enough. What you'll find is with profitability, it ranges across the board," he said.
  • seniorjoseseniorjose Posts: 277
    Mid-Nebraska, today: Regular unleaded, $2.79 a gallon; E-10, $2.85. Add in the mileage efficiency differences, and I can't see how anyone would fill 'er up with E-10 in this neck of the woods.

    I filled up today here in Cedar Rapids, Iowa at $2.69 a gallon for E10 89 Octane. 87 octane gasoline was $2.79. Just think of it as kicking the oil cartel dictators in the rump! Drivers don't neeed to be "won over."
  • gagricegagrice San DiegoPosts: 28,850
    "It just made great economic sense to use coal,"

    I really was not preaching to you, it was to the church of Zero Emissions. Coal is not horrible compared to years back. To some it is bad news. To anyone that thinks a car should be PZEV or banned it is a disaster to use coal for anything other than a Christmas stocking.

    You probably don't care if they use bunker oil to fire the furnaces of the ethanol stills. I would be surprised if this does not put all the out of business bootleggers back to work.
  • seniorjoseseniorjose Posts: 277
    The last I heard, there was no such thing aS "clean coal" technology. The stuff is flat-out dirty.

    Clean coal technology has been around since the 1960s -- if you build the scrubbers in like almost all regulations state. I watched the local (New Jersey) Owens Corning plant shift from no scrubbers in 1964. From being a terrible "smokestack" industry, it was turned into a very good neighbor with no particles in the air. the difference is dramatic and since it is an old technolgy by now, it can work. The coal smokestacks that belch like the steel plants of turn-of-the-century Pittsburg steel mills is long gone into history.
  • I thought E10 was the new standard fuel? They replaced 10%MTBE with 10%ethanol. Maybe it's just another CA only piece of legislation but I though it was national. E85 would be a completely different mix.

    There is a lot of opinion and passion in this thread..that is good. I guess as long as we move from foreign oil dependence and being held over the barrel by oil companies that is good. I hope we put out many alternative fuels and break the cycle. Competition, in general, is great for the consumer.
  • seniorjoseseniorjose Posts: 277
    American Coalition for Ethanol Releases Results of Fuel Economy Study

    Sioux Falls, SD (August 24, 2005) – The American Coalition for Ethanol (ACE) today released the results of its recent Fuel Economy Study, a pilot study that researched the fuel economy, cost per mile, and driveability of various blends of fuel, including unleaded gasoline, E10, E20, and E30.

    “As ethanol production and use continues to expand from coast to coast, increased public discussion and media attention have often turned to a debate over ethanol's fuel efficiency,” said Ron Lamberty, ACE Vice President / Market Development. “Because there was very little scientific information out there, ACE commissioned a pilot study to determine whether there are variances in gas mileage between ethanol blends and gasoline.”

    The research tested unleaded gasoline, a 10% ethanol blend (E10), a 20% ethanol blend (E20), and a 30% ethanol blend (E30) in three late-model vehicles. The Chevrolet Impala, Ford Taurus, and Toyota Camry were not flexible fuel vehicles, and no modifications were made to them for this research. Care was taken to eliminate any human inputs that might render the tests unscientific, including the use of a computerized data logger and strict controls on the vehicles, fuel, and terrain.

    The test was conducted by Allen Kasperson, a Fuel Research Specialist and instructor with more than 30 years of experience training automobile and truck technicians at Lake Area Vocational Technical Institute in Watertown, South Dakota. The study also examined an E10 blend that had been denatured with iso-pentane and soy biodiesel, a denaturant combination that Kasperson had studied and found to have lowered the fuel's reid vapor pressure (RVP). While the RVP tests in this study were inconclusive, the blend did perform better than unleaded in most tests.

    Read full results of the study
    Miles per gallon
    The three vehicles averaged only 1.5% lower mileage with E10, 2.2% lower mileage with E20, 5.1% lower mileage with E30, and increased mileage of 1.7% when using the specially denatured E10 blend.

    Cost per mile
    Although the MPG of ethanol blends was slightly lower than the unleaded, the cost per mile of operation was generally lower. Also, the higher the concentrations of ethanol, the lower the cost per mile. Using the study's average MPG, E10 is less expensive per mile than unleaded until ethanol's cost is nearly 30 cents above unleaded. On a $20 bill, drivers can travel up to 15 miles farther on ethanol-blended fuel than on straight unleaded.

    Driveability
    Contrary to statements commonly made by vehicle manufacturers and technicians, no warning lights were displayed at any time while operating on any of the fuel blends. The data logger used for the research monitored all systems and detected no malfunction indicator lights (MIL), diagnostic trouble code lights (DTC), or emissions DTCs.

    Also, it has been assumed that in older model vehicles the oxygen sensor could not recognize fuel with ethanol content higher than 10% and therefore caused a malfunction indicator light to be displayed. In all vehicles used, the car's computer seemed to have the ability to adjust the air/fuel ratio normally with ethanol blends even beyond the standard 10%.

    The study cautioned that motorists should not use fuel with concentrations of ethanol higher than those recommended by the vehicles' manufacturers, but called for more research to determine if those fuels should be approved for use in standard, non flexible fuel vehicles.

    “If drivers want to save money at the pump as gas prices reach new record highs, this pilot study confirms that ethanol is the fuel of choice,” said Brian Jennings, ACE Executive Vice President. “Using ethanol is like money in your pocket, and you feel good about filling up on this homegrown fuel because it comes from America's farm fields, not the oil fields of the Middle East.”

    “The bottom line is that, in addition to offering higher performance and lower emissions, ethanol-blended fuel is easier on the pocketbooks of American motorists,” Lamberty said.
  • This is the link from seniorjose's post.

    http://www.ethanol.org/

    Why did they do E10-E30 in non FFV vehicles and not compare costs per mile of E85 in FFV's? I'm always wary of information provided by "unbiased" sources on a lobbing website.
  • gagricegagrice San DiegoPosts: 28,850
    I'm always wary of information provided by "unbiased" sources on a lobbying website.

    Maybe that is where the good news about ethanol resides. We have actually strayed from the original topic. That is as you have mentioned E85 is the subject on the thread. And whether it is good for the country made from Corn (yellow). I'm sure if they had tested a FFV with E85 it would not have looked real good for the guys selling this boondoggle. So they go with mixtures that would void your auto warranty using anything stronger than E10. I actually am not anti ethanol. I am anti mandate and mega farmer.

    As this report indicates less corn will be available next year. That drives the price of ethanol above the current $3.50 per gallon. If we are only worried about the guy with the FFV no big deal he can buy regular gas and tell ADM to buzz off. With the E7-E10 mandate for all regular unleaded. It will drive all gas prices even higher.

    With the 3.8 million acre decline in plantings that was indicated in the March intentions, a trend U.S. corn yield would produce a crop about 900 million bushels below potential 2006-07 utilization

    Iowa corn projection
  • tpetpe Posts: 2,342
    I thought E10 was the new standard fuel?

    That's impossible since the amount of ethanol produced only accounts for 3-4% of our fuel consumption. E10 has significance in that all gasoline burning cars can use E10 without voiding their warranties. I suspect that every gasoline burning car could also run on E85. Its just at some point the corrosive nature of ethanol would eventually cause problems for those vehicles not designed for this fuel.

    I hope we put out many alternative fuels and break the cycle. Competition, in general, is great for the consumer.

    I agree. We all want energy independence. Allow the market some say in what is the best approach. Minimize politics. Ethanol cannot be separated from politics.
  • tpetpe Posts: 2,342
    I recently read an article expressing that OPEC is concerned with the current emphasis on exploring alternative fuels. They feel like a price of 50-55 dollars per barrel would be consistent with their interests of maximizing profit and perpetuating oil economies. I'm not sure what this has to do with the ethanol discussion, but I find it interesting. Specifically its the fact that although OPEC would like for oil prices to be cheaper they are no longer in the position to make it happen. To me that is an indication of a system that is strained very close to capacity. I personally hope that gas prices stay high because I welcome the increased R&D into alternatives that it has spurred.
  • I stand corrected by tpe. I mixed cars built currently to run on 10% ethanol without damaging effects with E10.
  • fireball1fireball1 Posts: 30
    Environmental Defense, July 2004:
    "Anyone who has spent a day outdoors in a bustling city, near a construction site or a factory is unlikely to forget the black sooty grime washed off at the end of the day. Technically known as particulate matter (or PM), soot is spewed out in the black smoke billowing from tailpipes and smokestacks -- from factories and power plants, diesel-powered trucks, buses, ships, boats, locomotives and tractors. But sooty particles are more than just a nuisance -- they are one of the nation's most pressing public health problems.

    Particulate pollution is a mixture of soot, smoke, and tiny particles formed in the atmosphere from sulfur dioxide (SO2) and oxides of nitrogen (NOx) pollution. Sooty particles are most dangerous when very small as they can penetrate deep into the lungs (and the lungs are not effectively able to expel them), where they cause serious health impacts. Children are especially vulnerable because their lungs are still developing. Breathing in air heavy with tiny particles can be dangerous even over a short time; because these particles are so minuscule, they can enter the circulatory system and damage blood vessels.

    Coal-fired power plants are a big contributor to the problem. "Power plant smokestacks are public health enemy number one for their contribution to deadly particulate pollution across the eastern United States," said Dr. John Balbus, a physician and head of Environmental Defense's health program. "Particulate pollution contributes to tens of thousands of premature deaths annually, heart attacks, strokes and asthma attacks."
  • fireball1fireball1 Posts: 30
    May 25, 2006

    GOVERNOR ANNOUNCES MAJOR INITIATIVE TO REDUCE MERCURY EMISSIONS


    Proposal Would Protect Public Health and the Environment by Cutting Mercury Emissions from Coal-Fired Power Plants by 90 Percent

    Governor George E. Pataki today announced a new State proposal to reduce harmful mercury emissions from coal-fired utility power plants by approximately 50 percent from current levels by 2010 and 90 percent by 2015.

    “Mercury emissions from coal-fired power plants can have severe environmental and public health impacts, and we must take aggressive steps to control these harmful emissions and reduce the presence of this pollutant in our air and water,” Governor Pataki said. “By adopting these new standards, all coal-fired power plants in the State would be required to use pollution control technologies to significantly reduce their mercury emissions. This initiative is another example of New York’s leadership in improving air quality and protecting our natural resources, and will help to ensure a healthy Empire State for all to enjoy.”
  • fireball1fireball1 Posts: 30
    Citizens for Pennsylvania's Future:

    Toxic mercury pollution from (coal-fired) power plants threatens the health of women and their babies. More than 600,000 women of childbearing age nationwide have amounts of mercury in their blood over the level set as safe by the Environmental Protection Agency and the National Academy of Sciences. Unsafe levels of mercury in mothers' blood and breast milk can interfere with the proper development of babies' brains and neurological systems and can lead to learning disabilities, attention deficit disorder, problems with coordination, lowered IQs and even mental retardation.

    Pennsylvania power plants are the second biggest emitters of toxic mercury pollution in the country. The Fish and Boat Commission has issued advisories that cover every lake, river and stream in the state that warns people to limit eating fish caught here.
This discussion has been closed.