During my recently concluded vacation, the faithful Honda and I ventured deep into southwest Kansas.
It’s hard not to notice two major ethanol plants along the way – one just northeast of Pratt, the other near Liberal. About $300 million, I’d guess, in the latest alternative fuels technology.
And not a solitary thing going on at Pratt, where a motionless cache of tanker cars stands guard. The only thing missing was buzzards.
The Liberal plant’s operational, and it’s got that trademark weird smell that reminds me a little bit of roast beef.
Where do you think the ethanol industry is headed? Is it a viable alternative fuel? Or are the steep start up costs and oil’s volatility a recipe for bankruptcy?
19 Comments
It is not viable. The energy it takes to produce ethanol = the energy it provides.
As much as folks hate carbon-based fuels, the bottom line is that coal and oil have a ton of energy packed within them.
The ethanol amusement ride we’ve been on has been absolutely stupid.
If it is based in fertilyzed irrigated corn it is not viable. If it can be based on biomass it CAN be viable.
I worked in the industry for 4 years. The cost to make Ethanol is mostly corn and natural gas. (Distillers grains cover the natural gas cost. The price of ethanol on the NY Mercantile Exchange is the real puzzle to me. It is sometimes higher than unleaded gas and sometimes lower. The only correlation I see is that it reflects a price that allows the Ethanol Plants to barely make money. In other words, the ethanol price follows the price of corn and natural gas rather than gasoline and rarely is high enough to make the plant really proifitable.
The energy argument is meaningless. Ethanol plants have reduced the energy usage quite a bit over the years. People should look at its manufacturing cost versus gasoline price. The higher gasoline prices rise, the more attrtactive ethanol is.
I remember hearing Dave Vander Griend, the founder of ICM in Colwich, comment that if oil ever fell to $50 a barrel, his business was jeopardized.
Obviously, it did and it was, as ICM has laid off hundreds.
However, I still wonder about the staggering start-up costs of these plants and the resulting debt service. I wonder if the initial plant costs need to become more reasonable before ethanol production will take off.
Bill – it has been noted before that our good “friends” (sic) in the House of Saud (closely related to the House of bin Ladin BTW) will periodically cut prices of crude to undercut alternatives and keep us addicted. Thus the need for a substantial import duty on oil.
Interesting, isn’t it?
I don’t know about conspiracy theories and oil. I tend to think the price goes as high as speculators will drive it – and the current economic recovery will be jeopardized if the government continues to let the speculators roam unchecked.
Bill – we have seen OPEC increase production levels when prices get high enough to foster development of alternatives. A quarter-century ago I was involved in coal liquification research (both direct and indirect via Fischer-Tropsch). We had a number of interesting processes in development. Then, in the mid-80s OPEC cut prices.
The same thing has happened to independant oil producers here in KS. Marginal fields can be profitible at higher prices. However, when it looks like they will take off OPEC does the same.
Yes, speculators are a big part of the story – especially today. However, ever since the embargo of the 70s OPEC has learned how to play the game BIG TIME.
Please explain how biomass will work, when corn does not.
corn/ethanol diverts a potential foodstuff to ethanol production. Thus there is a significant feedstock price – including irrigation and application chemicals.
“Biomass” is a general term for anything with cellulose – grass clippings, corn stalks, kudzu, etc. The idea here is that waste by-products become the feedstock and so the cost is low or zero.
That said I will raise an aspect of the “law on unintended consequences”: Much of the ‘ag waste’ is better plowed back under as a soil amendment. If we strip the soil too bare we increase the rate at which it becomes depleted.
bth, if a significant import duty is added on oil would we not see price increases for virtually everything we consume? Then when the alternative programs reach fruition the prices would naturally adjust back down? I don’t see that happening.
I am quite interested in your thoughts on straight diesel. Europe seems to really be making significant advances here, primarily Audi, Peugeot and VW. It appears to me that this is a realistic possibility with cars having excellent HP, torque and averaging well over 50 MPG.
Autombile racing is an excellent test-bed for these programs (Diesel powered cars have won LeMans the last 2 years, Formula One with Kinetic Energy Recovery Systems-KERS, IRL with Ethanol), and I would prefer to see the new technologies proven on the track in plain sight, FWIW.
I could not agree with you more on “unintended consequences”. Spot on.
jerry – of course it would – at least on its face. Keep in mind, however, that we are going to be raising revenus somehow and that also increases costs/prices. So, revenue collected from this fee could offset revenues we must get elsewhere from the ecoomy.
Diesel is an interesting issue. I think that the improved efficiency is largely due to higher compression. One problem however – if we significantly alter the mix of fuels demanded in the marketplace (gasoline vs diesel) can the refineries adjust?
BIOdiesel is also an interesting possibility. As with ethanol I’d like to see it from ‘garbage’ – discarded cooking oil, turkey guts, etc. In fact; might ‘downed’ cattle and pigs be a feedstock for diesel? Right now they are a serious disposal problem.
I had really high hopes with a company called “Changing World Technologies” that installed a facility over in Carthage taking all of the chicken offal from Tyson and converting it to pure oil. Unfortunately their efficiencies have not matched their promises…yet. I hope one day it does, because its applications seem endless.
I always thought diesel was made at all refineries and it went through additional steps to become regular gasoline. I never understood why it cost more for diesel when it was easier to make.
I’m not at all in favor of adding duties to the cost of oil. We get into that “unintended consequences” situation again.
jerry – when you do a ’straight run’ distillation you get various fractions. The diesel fraction is one of those. Diesel does not like aromatics of branched hydrocarbons. So, there is a balancing act. If demand for any fraction exceeds its proportionate supply then the cost of that fraction will increase. Diesel used to be cheap compared to gasoline – before diesel cars became popular.
jerry – I see that today the Ford chairman says the US government needs to take steps to ensure fuel price stability. Note that he said STABLE – not just cheap. With over half of our liquid hydrocarbon fuel coming from overseas how can that be done? I submit that the only way is with a floor – not a ceiling. That is, some sort of import fee that will result in a high but manageable price. That would then incentivize efficiency/conservation and reduce consumption. That might even reduce how many dollars we give Osama bin Ladin.
Yes – it will be a hard sell. However, in the long run it will be beneficial. It would also encourage development of alternatievs including hydrogen and electric vehicles. However, as long as the Houses of Saud/binLadin can periodically undercut alternatives and lull us back into our Hummers our addiction (Bush’s word) to their product will continue to grow.
In a response that I am quite sure will not go over real well…
There are a couple of countries that we should enter into a firm fixed oil pricing agreement at reduced market prices for the next 50 years in exchange for their freedom and their wealth.
I call it a return on our investment.
a) What countries?
b) At what cost to maintain our military garrisons?
We tried that when we installed a dictator (the Shah) to rule Iran. It didn’t work out too well.
The fact is jerry – such arrangements have not worked out too well over the years.
If we want hydrocarbon-based fuel then coal-to-liquid makes more sense than colonizing producing countries. Two routes:
Direct via SRC (solvent refined coal) which leads to a feedstock for high-octane gasoline.
Indirect via coal gas/syn gas/Fischer Tropsch which leads to clean high-cetane diesel.
These are the technologies I worked on a quarter-century ago at Gulf Oil. We found that a cobalt carbonyl based catalyst was rather effective at producing straight-chain alkanes from syn gas.
Oh, I don’t know. Saudi Arabia, Kuwait, Iraq for starters.
Our “military garrisons” have been there for 60 years. They will be there another 60 whether we like it or not.
Side question: Regarding a nuclear reactor. Let’s say Wolf Creek gets closed. How long does that facility stay “hot”? How long until we could level it and safely put homes on the site?
The process would largely be to gut it of most of the ‘hot’ stuff and then entomb in concrete. However, being on the conservative side I would not build homes there for a number of reasons. I might, however, consider developing most of the site as an industrial zone.
As for the garrisons – it will take a LOT more troops to secure all of the infrastructure from attacks by citizens of the country. Just take a look at what is going on in Nigeria.