The U.S. produced a record 14.7 billion gallons of corn ethanol last year, notwithstanding the dispute over the federal biofuels mandate and perennial jostling with the oil industry for market share. “The business of ethanol is rooted in octane,” says Bob Dinneen, head of the Renewable Fuels Association. “The world motor fuel market is short on octane and ethanol is the lowest-cost source of octane available.”
In a review released at RFA’s annual conference, and in a keynote speech, Dinneen said the industry was in good shape despite tight margins. For the first time in years, ethanol costs more than gasoline, eliminating a long-time selling point for the biofuel.
“The world is octane-short and, with a blending octane rating of 113, ethanol offers more engine knock resistance per dollar than any other gasoline additive on the planet,” Dinneen said in his speech. Petroleum-based octane enhancers are costly and can damage the environment, while ethanol “is cheaper, cleaner and carbon neutral,” he said. Automakers will need higher-octane fuels in the future to meet mileage and clean-air targets, said Dinneen. “In a competitive octane environment, everybody wins.”
RFA is among ethanol and farm groups that are challenging in court the EPA decision to effectively set the corn-ethanol mandate at 14.5 billion gallons for this year, which is 3-percent less than envisioned in the 2007 law that created the Renewable Fuels Standard. The oil industry argued the gasoline market was saturated with biofuels at the traditional 10-percent blend rate for ethanol. The EPA halved the target for cleaner-burning “advanced biofuels.” Dinneen said, “EPA’s revisionist RFS policy would result in biofuels cannibalizing biofuels” and deter investment in the industry.
Some 836 million gallons, or 6 percent, of U.S. ethanol was exported in 2015, roughly the same amount as in 2014. “Clearly, we need to further develop the market for exports,” said Dinneen.
By RFA’s count, there are 214 biorefineries in the country with a combined capacity of 15.5 billion gallons a year. Iowa, the No. 1 corn state, leads the nation with 44 plants, followed by Nebraska with 26 plants. Together, Iowa, Nebraska, and Illinois account for half of ethanol plant capacity.
When the biofuels boom began a decade ago, there were forecasts the industry would spread beyond the Midwest and diversify in feedstocks. Second-generation biofuels are years later than expected in development. Foodmakers and livestock feeders complain that competition from ethanol plants drive up their costs, and eventually those of consumers.
A University of Missouri think tank says its review of 170 ethanol studies published from 2010-15 indicates that when ethanol demand rises, “between a third and a half [of] the total volume of additional corn required for the increase in corn starch ethanol is met with new production, with the other part presumably associated with reductions in other uses of corn.”
Livestock output declines a bit, according to the literature review by the Food and Agricultural Policy Research Institute, and ethanol displaces gasoline somewhat.
When researchers calculate the impact of ethanol demand on land use, they use varying definitions of cropland and forest land, said FAPRI. “The range of estimates that we find reinforces the uncertainty of indirect land-use change caused by changing biofuel quantities and the associated GHG [greenhouse gas] emissions.”
Separately, the USDA said higher productivity on the farm reduced total energy use per bushel of corn by 8 percent per bushel from 2005-10. In a statement, Agriculture Secretary Tom Vilsack said, “The bottom line is today more energy is being produced from ethanol than is used to produce it, by factors of 2-to-1 nationally and by factors of 4-to-1 in the Midwest.”